Because the purpose of business is to create a customer, the business enterprise has two-and only two-basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business – Peter Drucker, entrepreneur thought leader
Three Levels of Lead Generation
Lead generation is where your business starts. If you don’t generate leads that can convert into deals, you have no business. There are three levels of generating leads. Successful businesses will start at level one and move through to level 3 as they grow.
Level 1: Find deals and become a market expert.
Real estate investors generally start out on their own. Finding deals and becoming a market expert usually requires an ambitious person who networks and hustles like crazy. For example, they:
- Drive around town, finding the best neighborhood and learning values
- Network at real estate investor meetings, with agents, contractors and lenders
- Search MLS listings, compile lists of potential motivated sellers and doing some basic marketing such as door knocking and bandit signs
Level 2: Attract deals and maintain expertise.
As the investor puts a few deals under their belt, they will have some cash to grow their business. Now instead of running around chasing deals, they can concentrate more on attracting deals.
This is the phase where marketing programs such as direct mail and digital marketing become viable. The investor can hire their first person in this stage and perhaps ask them to run around town putting up bandit signs.
Meanwhile the investor can spend more time negotiating deals and talking to the increased amount of leads coming in as the marketing campaigns grow and consequently so do the results.
Level 3: Outsource and scale
Level 3 is when the real estate investor’s business is cranking. They have systems and processes in place to make their marketing automatic. Direct mail, emails and other advertising happen without much intervention from the investor/owner of the business. The investor may have so many deals that they cannot possibly talk to all of them by herself. She has trained her team to handle the deal flow, freeing her time to put new systems and processes in place.
Most people want to skip the first two levels and jump straight to level three. We hate to break it to you but if you want to minimize errors and cost, you should start at level one. If you do not take the time to learn your market or do the work yourself, it’s going to be impossible to effectively teach or train someone else to do the job for you. You wouldn’t have the right foundation to build upon to successfully implement level three. The most successful investors are patient and persistent.
To help move through the three stages, let’s look at two ways to help an investor scale.
1. Using Property Lists
At some point in your business, when you have enough finances to invest in marketing, you can absolutely boost efforts by strategically targeting related lists of people. Lists can contain a goldmine of information that will lead to multiple deals.
Investors must remember that if they are able to buy lists, then other investors – your competitors – can buy them too. To win the market, it is always the best option to go against the crowd. Go an extra mile and do what other people are not willing to do.
While other investors are fighting for the scraps of low-hanging fruit, you are going to climb up the tree for the bigger, juicier deals that most people don’t bother with. Always remember one thing when searching for deals using lists – the harder the list is to compile, the sweeter the reward.
Buying Vs Building Lists
Without a doubt, buying lists is a more convenient alternative. It saves you time and effort – or does it? Purchasing a list of leads may just be a waste of money. For example, if you purchase foreclosure lists and send the people on the list postcards or other marketing materials and they end up not being in a foreclosure, at best they will not be interested in doing business with you. You might even receive some angry phone calls with no return on your investment.
Many lists are not completely accurate. List brokers do the best they can, but there may be many addresses are not in the situation advertised.
If you buy the junkiest list then all your costs, including the mailing and time you put in, will be wasted. Your competition may be buying cheap lists as well, so purchasing more expensive lists may be a barrier to entry for the other investors in your neighborhood, as is compiling your own list.
Creating your own list requires more effort but eventually, when your finances allow, you’ll be able to hire a virtual assistant to do it for you. Or advertise for someone to go down to the local government office and create a list for you. Hiring a VA can be very inexpensive and additionally, you will create a higher quality of list for a low cost, especially if you find some deals from the list.
Here are the types of lists you can target:
- Eviction list
- Foreclosures list
- Divorce list
- Code violations/liens
- Quitclaim Deeds
- Power of attorneys
2. Breeding Bird Dogs
Craigslist ads, newspaper ads, business cards, and mail carriers may provide a few deals, but the investment in time may not be worth it. Most people think of a mail carrier as an example of a ‘bird dog’. A bird dog is someone who drives or walks around neighborhoods looking for deals for other people. Traditionally many starting investors will try to hire some minimum wage person to do this for them. Or they find people who walk around neighborhoods for their job such as mail carriers.
The trouble is these people don’t necessarily know what a good deal looks like. They may also be concentrating on something else during the day and not be very motivated to help you out. There are two great ways to leverage other people as bird dogs at low to no cost to find deals.
A. Real Estate Agents
Their job is to basically be a bird dog. They are constantly on the hunt for real estate that sells. Talk to as many agents as you can to find ones that specialize in the kind of buildings you want. Then work out a relationship with them. Don’t try to cheat them out of their fee when they find you a deal, or they will never find you another deal. Just put their fee in as any other expense when you evaluate the deal. They can always negotiate the seller’s price lower instead of their fee.
B. Real Estate Investors
When you go to REI networking meetings or you are a part of a REI club, you can network with other investors who know a thing or two about your specialty. They can both mentor you if you are just starting out, and leverage their network to find you the type of deal you want. Reward them when they come through for you. Spread the word about what you want.
A bird dog is a very effective strategy if you focus on the right people. If you are an experienced investor, by all means, bird dog all you want. As for budding investors, you might want to know all there is to know about abandoned houses before you go around telling everybody that you specialize in abandoned houses. You don’t want to ruin your reputation before you even get started.
- Start by doing everything yourself – Learn the flow of the business first hand. Drive down every street systematically and routinely. Know all there is to know about the business and the area where you plan to invest.
- Leverage other people – As your business grows, start looking for help. Have people such as Virtual Assistants do the lower value work while you concentrate on higher value.
- Ask for help – Don’t be afraid to find a mentor and seek help from experienced investors. Ask them to hit you up when they find a deal or ask them for tips on how to quickly scale your business.
Share your BIG lessons with us!
Got any hard-learned lessons, falters, or good ‘ol fashioned mistakes to warn others about? Share below! We’ll take the best ones and write about them in a future post.