The Ultimate Guide to a Successful Direct Mailing Campaign
So, you want to find an off-market deal? There are countless ways to generate off-market apartment leads, but one of the most common strategies is the direct mailing campaign.
A direct mailing campaign is when you send out a batch of letters to owners with the purpose of negotiating a sales price and putting their property under contract.
The two main aspects of the direct mailing campaign, which will be the focus of this guide, are the list and the letter. Read on for all of the tools you need to create a successful direct mailing campaign from scratch.
Creating a List
Before creating your list, you need to define your investment criteria. Your investment criteria should include factors like the market, property type, number of units and the construction date. Setting your investment criteria prior to creating your list will save you a lot of time, because you will know that every single owner on your list owns an apartment community that aligns with your business plan.
With your investment criteria set, it is now time to create your list. There are many sources that you can use to build your list. Listsource and CoStar are great tools for creating larger lists but they do not send out the letters for you. Postcard Builder and Open Letter Marketing are two full service direct mailing companies where you can create a list, draft your letter and send out the direct mailing campaign all in one place. Local title companies are also a good resource for obtaining a list. And if you are lucky and found the right real estate broker, they can create a list on your behalf, and maybe even send out the letters too!
Regardless of which resource you use, you will create a custom list of properties that meet your investment criteria. And, if you want, you can customize your list even further using hundreds of other factors like the amount of equity the owner has in the property, the demographics, the owner type or status and much more.
Additionally, to increase the chance of finding a seller that is interested in selling, you want to identify motivated owners. These are owners who are motivated to sell their apartment because they are distressed (i.e. have maintenance or capital expenditure issues, tenant issues, management issues, financing issues, tax issues, etc.), they are at the end of their business plan or they implemented a different business plan (i.e. they purchased the apartment for cash flow but didn’t add value to increase the rents).
Depending on your investment strategy, you may or may not be able to create a list of motivated sellers by solely using Listsource or similar list making services. Therefore, here is a list of additional ways to locate motivated apartment owners:
- Driving for dollars: If your target market is local, you can drive around the market and look for apartment communities that are showing signs of distress. Examples would be poor landscaping, obvious deferred maintenance, offering rent specials, broken windows, peeling or fading paint, or an apartment that stands out from surrounding properties. Find the owner’s contact information and give them a call or send them a direct mailer.
- Eviction Court: Locate your local eviction court and obtain a list of apartment owners that are evicting residents. Evictions are a major headache for real estate owners in general, so they may be extremely motivated to sell. Typically, the eviction list is located on the local county’s Clerk of Courts website.
- Building Code Violations: Locate a list of apartment owners who recently received a building code violation from the city.
- Delinquent Taxes: Locate a list of apartment owners who are delinquent on their taxes. Unless you are building a list from scratch, most of the automate direct mailing list providers will allow you to set “delinquent taxes” as a criterion. If you are building a list from scratch, information on the apartments with delinquent taxes can be found on the local county’s Clerk of Courts or Sheriff’s Office website.
- Out-of-State owners: Owning an out-of-state apartment community won’t necessarily indicate a motivated owner. However, there is a higher chance that an out-of-state owner hasn’t maintained the asset or managed the property management company effectively compared to an in-state owner whose apartment community is right around the corner.
- View the Profile Picture on Apartments.com: A creative way to identify motivated sellers of value-add apartments is by looking at the profile picture on the www.apartments.com listing. If the apartment was newly renovated, the owner would show off those updates online to attract residents. If there is only one picture available, that may indicate that the interiors and/or exteriors are outdated. If there are pictures of the interiors and exteriors available, scroll through them to see if the apartment is updated. If the interiors are old, you’ve identified a potential value-add deal.
Those are the six main methods, but other creative strategies include:
- Property owners whose tax assessments went way up this year: Search for an apartment on the local county auditor or appraiser site and locate the annual tax data. Most auditor or appraiser sites will list the annual taxes paid each year. If the taxes paid in the most recent year is significantly higher than the previous year, the owner most likely had a tax assessment. Taxes is one of the largest expenses paid by the owner, so if they had a significant increase, they may be motivated to sell
- Expired apartment listings: Expired apartment listings were listed for sale by a real estate broker and weren’t sold by the end of the period specified in the contract between the owner and the real estate broker. The best way to locate apartment listings that expired is on the MLS. Ask your real estate broker to send you a list of expired listing for the past 12 months.
- Properties that are owned without debt (purchased 20 to 30 years ago): Owners who own apartments free and clear may be willing to sell their property for a lower price, or may be willing to accept creative financing terms, like seller financing. There are a few ways to locate apartments that are owned free and clear. If you are creating a list with a service like CoStar, an automated direct mailing provider or the MLS, you will have the option to apply a filter for apartments that do not have a mortgage. Another approach is to locate the property on the local auditor or appraisal site and compare the “own name” to the “mailing name.” The mailing name is usually the name of the company that holds the debt. So, if they mailing name is the same as the owner name, the property is owned free and clear. Also, you can search for properties that were purchased over 20 years to 30 years ago, because the owner will have likely paid off the debt.
- Health code violators: The local Clerk or Courts website will have a list of all the properties in the county with health code violation.
- Owners facing foreclosure: The list of apartment owners facing foreclosure can be found on the local Sheriff’s Office website.
- Owners late on loan payments: The list of apartment owners who are late on their mortgage payments can be found in the same location as the delinquent taxes list, which is the local Clerk of Courts website.
- Section 8 approved properties: Locate the local city’s HUD website to obtain a list of section 8 approved properties. These properties are likely rented below market rates and, depending on the local regulations, can be converted into regular apartments.
- Properties with liens: A list of apartments with liens can be found on the local Clerk of Courts website. You might be able to use the criteria on ListSource to identify these types of distressed opportunities. But some of these strategies will require extra research – both online and in-person – on your part. If you are struggling to find the owner’s contact information, skip tracing is an effective solution. The top skip tracing services are TLO (the best and most expensive), Locate Plus and Whitepages Premium (least expensive option)
Creating a Marketing Piece
Next, you will create a marketing piece to send out to your list. There are nearly an infinite number of approaches to a direct mailing campaign. Variables include the message, frequency, letter type and color and envelope type and color. The most successful direct mailers A/B test different mailer types to determine which is the most effective. Therefore, select a few different mailer types, send them out to owners and record the success rates of each. Whichever one performs the best, continue sending. For the ones that perform poorly, change a variable and continue to send out and log the success rates. As time goes on, you will find the best combination of variables that results in the highest success rate.
For starters, here are two direct mailing templates:
- Template #1
Dear Recipient Name,
I am the acquisition coordinator for __________. Our portfolio consists of over ______ apartment units, all acquired within the last _______ months. With one of our principals based in ________, we are looking to expand to this area. We are familiar with your apartment complex, (name complex) and we would like to discuss purchasing this property. Please reach out if you would like to discuss further. My email is ______ and my cell phone number is ________.
- Template #2
Dear Recipient Name,
I am interested in purchasing your apartment community. Are you interested in selling?
I currently hold a portfolio of apartments similar to yours and am looking to add more.
Please contact me at your earliest convenience so we can discuss the sale of your apartment community.
Call me directly at _________ or email me at _________.
If you are not interested in selling at this time, please accept this inquiry as the highest compliment to your investment.
I look forward to hearing from you.
The important point you want to get across to the owners is that you are interested in buying their property and that you are an experienced investor who is able to close. If you don’t currently own any properties yourself, leverage the experience of your team. For example, “my property management company manages 1,000 units in the market,” or “my partner (who can be your mentor) controls 1,300 units across the country.”
Screening Calls from Owners
Once you’ve sent out the campaign, (hopefully) your phone starts ringing off the hook. Rather than freestyling, I recommend creating a script that outlines exactly what you will say when an owner calls. An example script is provided below:
Hi. My name is (your name). Thank you for responding to my letter. As I said, I work for a group of investors, (your company name). We were driving your neighborhood and wanted to know if there would be any interest in selling?
Now, you would think that because they called you, they are interested in selling. Unfortunately, some of the callers will, politely or aggressively, tell you that they aren’t interested in selling and/or ask to be removed from all future mailing campaigns.
If the caller is aggressively asking to be removed from the list, politely thank them for their time, hang up and remove them from their list.
If the caller is polite but says that they aren’t interested in selling at this time, find out a little bit more information as to why they won’t sell. Figure out why they aren’t interested in selling with the purpose of trying to identify a trigger or pain point of things that are holding them back. This will help you identify ways that they will benefit from selling the property. One example is to visit the property or perform some online research and make a note of something that stands out, like signs of distress. Then, leverage this information to identify a potential pain point.
For example, maybe you discover that they are an owner-operator who doesn’t like being a property manager. Or they won’t want to incur a capital gains tax by selling. Or maybe they aren’t interested in selling now, but they may be interested in six months. Depending on their response, there may be a creative way to structure the deal so that you can solve their problem.
If they still aren’t interested or you cannot identify any pain points, thank them for their time and hang up. However, you aren’t done yet. Unless they specifically asked you to remove them from future mailing campaigns, the next step is to mail them a follow-up letter saying:
Thank you for your time when we spoke on (date you called). As I said, I work for (your company name). I will follow up on (date) and I look forward to speaking with you then.”
Now, the next time you call them, you can start the conversation by referencing your previous call and the follow up letter.
If they are interested in selling, congratulations. But, you’re only partway there. Now, you need to extract more information from them about the property. At this point, the goal of the conversation is to get the owner to provide you with the trailing 12-month income and expense statement (T12) and the current rent roll. That is the information you will need in order to underwrite the deal and determine a fair offer price.
Regardless of whether the owner says is or isn’t interested, focus on building rapport. During the course of the conversation, make sure you talk in terms of their interests in order to begin building a relationship. If they are interested, this will help you during the negotiation process. If they are not interested, they will remember you when you call back.
Also keep in mind that this is an iterative process. If you’ve never spoken to an owner on the phone before, don’t expect to be perfect at first. Practice, specifically in regards to overcoming their objections, see what works and what doesn’t work, and adjust your script accordingly.
10 Reasons Your Direct Mail Isn’t Working
I asked Justin Silverio, the founder of Open Letter Markeing, “what are the main reasons why a direct mailing campaign would fail?” Based on his experience sending out his own campaigns and working with hundreds of other investors, there are 10 reasons why a direct mailing campaign isn’t working:
- Bad Messaging: Your messaging should be clear and concise. Otherwise, your content will not be read or will be confusing to your prospects, thereby reducing your response rates. Additionally, avoid using messaging that is the same as most other investors in your market; you want to set yourself apart. Finally, make the messaging about the seller, not you. Talk to them about how you will solve their problems.
- Low Quality Lead List: One of the most important aspects of a successful direct mail campaign is the quality of the lead list. If you are mailing to the same prospects as your competition, expect your response rates to be very low. Instead, seek out niche markets that no one else is marketing to. The general rule is that if it takes time to build a particular list, you will have less competition because most other real estate investors won’t take the time to create it.
- No Branding on Mailers: Branding is the number one most important thing that you should be doing and in many cases it’s a missed opportunity in direct mail. People can recall a logo much easier than a name so your chances of a seller remembering you is much higher. It’s a simple detail, but the payoff is big.
- Not Building Trust: One of the most important aspects of closing a deal is to build trust and rapport with the seller. Aim for this from the start with your direct mail by sending professional looking mailers with letterhead and company information. This shows your prospects that you are an actual company and not a fly-by-night operation.
- You’re a Copycat: If you’re mailing the same mail piece as everyone else, what makes you think you’re going to stand out from them? Step away from the copycat syndrome and use something else besides yellow letters or generic postcards. Use a mailer that will stand out and get noticed.
- Only Using Handwritten Letters: When sending handwritten letters, your messaging should be short and to the point. When you only send handwritten letters, you can’t fully explain how you’re able to help your prospect. Therefore, you should always incorporate longer, professional letters into a mailing campaign.
- Handwriting Doesn’t Look Authentic: Using handwritten fonts that don’t look realistic could have a negative impact on your response rates. Most people will read that as being deceptive and not call you back. Be sure to either handwrite your letters OR use a realistic looking font.
- Bad Campaign Sequence: A bad sequence will have a negative impact on your results. It’s important that you stack your letters in a way that build off of each other and create a conversation with your sellers. Provide more information as your campaign moves forward so they can learn more about how you can help them.
- Inconsistency: This is, by far, the worst mistake you can make. Direct mail takes time to build momentum because your prospects need to see you multiple times before most will start to call. You should budget to mail 5-6 times before expecting to see consistent results. Also, buying real estate is mostly situational so if you are not mailing your prospects consistently you may likely miss out on a deal when your prospect’s situation suddenly changes.
- Bad/No Follow Up: I can guarantee you are losing deals if you don’t have proper follow up. Many deals will come from consistent follow up with your prospects who weren’t ready to sell the first time you spoke with them. Make sure you have a system in place to remind you to follow up. A good solution could be as simple as a spreadsheet or calendar or as robust as a CRM.
If you avoid these 10 pitfalls but still aren’t receiving many responses from owners (say after 3 to 4 mailers), another strategy is rather than asking to purchase their property, invite them to your meetup group (or if they are out-of-state, a webinar). Tell them you will be presenting information relevant that will add value to their business. For example, 10 ways to increase the NOI on your apartment building. From there, build a relationship with them so that when they are ready to sell, you are the first person they reach out to!
Direct Mail Case Studies
Click here to read about a six-step direct mailing campaign with a twist – rather than only sending out letters, this investor will text the owner. As a result, he’s been able to accumulate a portfolio of over 300 units!
Click here to learn more about selecting a mailing service, creating a list and the best practices for creating an attractive marketing piece.
Click here to learn about how a fix-and-flip investor created a direct marketing strategy that results in a 57% response rate.
Finally, click here to learn about an direct mailing campaign with a twist – rather than only sending out letter, this investor cold-calls the owners on his list.
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Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.