In Indianapolis there were 1721 code violations in the last 6 months. Of those houses with code violations 6.8% of those houses were sold in the last 6 months. As a wholesaler or flipper we often spend a lot of money targeting a lot of houses with very low conversion rates. The direct mail response rate average is only 2%. The thought of getting a 2% response rate in any industry should be alarming. On top of that 1/30 responses from direct mail actually turn into sales. That turns out to a 0.0667% conversion rate, yikes! Who would want those odds?
Ultimately you need to send out 1500 mailers to get one deal! Mail alone could cost anywhere from $1500-2400 for one deal. If you consider targeting just code violation leads in Indianapolis e.g. 1721 leads & send out 1721 mailers, that would cost you anywhere between $1721-$2581.50 per mailing(assuming $1-1.50/letter). Let's assume you need to mail for 6 months, your total direct mail expense would be between $10,326-15,489.
Of that money spent you would expect a conversion rate of 6.8% when you target code violation leads, this equates to 117 homes that get sold. The question is are you going to purchase those homes?
If we assume you only purchase 20% of those homes that equates to 23.4 homes. With an average wholesale fee of $7,000, you would make $163,839.20. Talk about a return on investment! If we factor in the cost of $3/lead to acquire those properties your gross profit would be $163,839.20-(1721x $3/lead) = $158,676.20
Conversely using the shotgun approach results in abysmal results, if we use the same numbers as above & you send out 1721 mailers, 6 times. For a total mail expense of $10,326-15,489 You would only expect a conversion rate of 0.0667%(e.g. 0.02 x 1/30). resulting in the purchase of only 1.147 houses. With a wholesale fee of $7,000 you would come out negative & at best with a much higher fee possibly make some money.
Now there is of course a consistency & follow up component to nurture these leads & a big part of your success will be in the follow up. But at least when targeting code violations you are targeting a group that is very likely to sell & statistically shown to sell within 6 months of receiving a code violation. Moreover we are aiming only for the bullseye not the whole dart board which conserves your teams resources & time.
Nonetheless the shotgun approach is very much a numbers game, it can work but as a savvy investor we should not accept a 0.0667% conversion rate. We are better than that! Contact Top Notch Leads today to get started increasing your ROI & closing more deals! Leads starting at $3/lead.