Justin Colby
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Show Notes
Justin Colby is the Co-Founder and President of The Science of Flipping, Omni Investment Group and Phoenix Wealth Builders. The Science of Flipping is a free Podcast on itunes, Omni and PWB are both professional real estate investment companies specializing in purchase, rehab, and flipping of distressed property in the Metro Phoenix Area.
In this episode, Justin shares his story of getting started and struggling through 9 months to get his first deal. He simply didn’t have any money to get started and had to door knock and do things that cost very little.
In starting out this way, Justin was forced to learn the most efficient ways to get deals. This continued as he began using direct mail to generate motivated seller leads.
He shares with us that he had just sent out 47,000 direct mail pieces. So he’s grown over the years but knows what it takes to get started with very little money.
An important fact that he shares is that most direct mail response rates are below 1%. This fact tends to be ignored by most investors just starting out with direct mail to motivated sellers.
They might send out 500 mail pieces and only get 3 calls. This is very disheartening if you aren’t prepared for it. This is the reason we figure more than 80 to 90% of investors discontinue or change their list after only mailing one time!
When starting to send direct mail, you want to send as many as you can afford to send at least 6 times. You’ve got to mail the same mailing list your postcards and/or letters at least 6 times. The reason is that studies have shown that, for direct mail in general, 80% of sales happen after 6 touches.
Don’t be the guy that mails once and quits. Also, don’t be the guy that mails 5 times and quits. They’re almost equivalent.
The guy/gal that mails 6 or 7 times will generate a very disproportionate amount of motivated sellers leads.
Regarding whether to use postcards or letters and first class versus bulk rate or metered, it all boils down to which will be cheaper so that you can mail more pieces. When on a budget, you should always defer to what will allow you to send more.
In this episode, Justin also shares with us what he says in his postcards and letters. This is super valuable information.
We also talk about the A/B test he performed that cost him $15,000 and didn’t show any measurable difference.
Listen to the show to find out what the test was so that you can benefit from his big expense and save some money for yourself.
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Episode TranscriptionWelcome to The Flipping Junkie Podcast. My name is Danny Johnson former software developer turned house flipper, flipping hundreds of houses. Each week we bring you interview, strategies, stories and motivations to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now let’s get to it.
Hey everybody. Welcome back to The Flipping Junkie Podcast. Today I’ve got Justin Colby on the show. He’s a co-founder and president of the Science Of Flipping Omni Investor Group and Phoenix Wealth Builders. The Science of Flipping is a free Podcast on iTunes, a great podcast, Omni and PWB, which is the Phoenix wealth builders, are both professional real estate investment companies. He specializes in purchasing, rehabbing, and flipping of distressed property in the Metro Phoenix Area. He’s got a lot of experience with flipping and we want to talk with him today about doing direct mail on a budget.
So last week we talked with Joe McCall cover a lot of great information on that episode for doing direct mail as a real estate investor, and if you’re not familiar, most of the biggest real estate investors in the country are doing the most volume, the most deals, are using direct mail as their top source of lead generation to do those deals. If you didn’t hear that episode, you certainly should go back and listen to it. It’s episode 41. If you want to check out the show notes page for that episode, it’s flippingjunkie.com/41. You can listen to it on that page or are going into iTunes and listen to it. We also provided some great download gifts in that episode, so you can get those from the show notes page, but be sure to check it out because there’s a lot of great info in there. If you have any questions from that episode or from this episode, by all means go to facebook.com/flippingjunkie and put those in there so we can cover those upcoming episodes. If you’re not familiar with what we’re doing right now on The Flipping Junkie podcast is a series. It’s basically a free training course that’s done week by week with these episodes and I started with the foundation and mindset in becoming an entrepreneur or becoming a house flipper, what it takes to change what you’ve been doing and changing yourself so that you can become an entrepreneur, run your own business and become financially free. So we started with that and then we moved into building your business and your team finding out who the key people that you need to be working with are going to be in building those relationships and getting that started. Now we’ve moved into the part that I find is most fascinating and what I’m most interested in is the marketing aspect of it. It’s finding the great deals. I mean obviously you can’t flip houses or wholesale or build a rental portfolio or any those things if you can’t find good deals that makes sense from an investment perspective. So that’s what we’re covering right now and that’s in this series. Today, we’re going to be talking about direct mail on a budget with Justin Colby. I hope you enjoy the show.
Danny Johnson: Hey Justin, thanks for joining me.
Justin Colby: Not a problem man. Thanks for having me.
Danny Johnson: Yeah, so I’ve given everybody a little bit of background as far as being the president of The Science of Flipping, Phoenix wealth builders and Omni investment group, but would you mind sharing a little bit of your background, how you got started what got you interested in flipping houses and how you got your start?
Justin Colby: Yeah. I think it was as basic as the market was tanking back in ‘05 and ‘06 as we all know. I was a realtor at the time and I realized my income was drastically being affected. I had very good income going into it and I realized that was going to be shortened drastically and so my business partner who is still my business partner and I, we were friends first, and we were just talking about he was selling – he was working for KB homes which is a very large national developer and he was selling insurance for them and he knew he was going to be laid off because there weren’t enough jobs there and so we just kept talking about what the hell are we going to do. My income is going to be drastically cut. He’s going to basically lose his job and we decided we both have a good knowledge of real estate and investing was kind of just getting off the ground. It was just when some reality TV shows were just starting and people were on the internet and YouTube showing some big checks. And we’re like “Dude, we can absolutely do this with our knowledge and our work effort.” It really just got us motivated. We saw the pay checks and we knew it could be done. So I just went all in. I stopped being a realtor altogether in 2007. He basically got laid off and we just went all in, meaning we had no income. So it was a very interesting time talking about trying to do this on a budget. I’m very aware of how to do this on a budget as I struggled for the first year for sure.
Danny Johnson: Yeah. So what was that first year like? How long did it take when you decided to stop being a real term and be a real estate investor and start flipping houses for you to start getting those first deals?
Justin Colby: First deal took me nine months. I had zero dollars coming in. I was sleeping on my buddy’s couch. I lost my $500,000 dollar home I lost my $90,000 dollar Lexus. I lost my $40,000 dollars for the furniture that I paid on credit card because I went from making a very very good income to not having any income. I was at the lowest of the low at that point and my buddy said I could sleep on his couch down in San Francisco and so I did but I had no income. It wasn’t like this luxurious “Oh, you’re in San Francisco.” It was brutal. I was literally eating top ramen. If you wanted to go grab a burger, I couldn’t. I basically have to say, “I’m cool with grabbing a burger but you’re going to have to pay for it.” That was the conversation and it’s not easy to have those conversations especially with a friend who’s letting you stay for free. So it is a brutal time personally because I basically went from having a lot to not a lot. But in that, I found a lot of – I did a lot of soul searching and found the personal development side of what I really have to make it work and I was able to – now I can look back at it during the time it sucks – but I can look back and that’s what I really cut my teeth on. That’s why I am where I am today. I had the fortitude. I had the endurance. I had the grit and tenacity to make it through that time and I think anyone who’s on top or to be perceived to be on top, as I truly believe there’s many people who act like they are but aren’t, we’ve all gone through something similar one way or another and the reason why I believe that we’ve all made it to the level we’re at is simply because we were able to dig down and have the tenacity, the fortitude, endurance to push through those times and there’s good and bad times in everything in life – business, relationships, otherwise. And so to be able to get through those times are as important as anything else. It took us nine months and it is because we had zero dollars to market with, meaning we had to completely do this grassroots door knocking and cold calling. There was no other option. There was nothing. Networking, door knocking and cold calling were the only abilities that we had to get started.
Danny Johnson: Yeah. That’s awesome because you found a way to make it happen even without the money and you touched on it. I think sometimes people maybe just sort of listen to that here and say, “Yeah, okay. It makes sense. He had these rough times and he made it through but really the takeaway from that is if your reason for wanting to get in this business to develop and get financial freedom is not big enough, you’re not going to do what it takes to have to get through all these hurdles in making the business and you had a strong enough reason because of where you were.
Justin Colby: Oh, it was brutal. I grew up in an area that was affluent but my family wasn’t affluent and I had something in me dude. I was like, “Man, I want something better from my life than what I was able to be given as a child.” And I did not grow up without, so there was no woe is me, I was living on a park bench. I don’t have that story, but I know and I knew then that I wanted more from my life period. I was not willing to give that up and to just settle for a mediocre life making mediocre money having a mediocre family and I’m still not to this day. I’m just not willing to settle on it. Maybe that’s part of the reason why I’m still single. I don’t know. But at the end of the day, I will do whatever it takes to create the life that I want to live that I believe, truly believe that, I deserve and I will do whatever it takes and I think a lot of where people fall short is they aren’t willing to make those sacrifices. They aren’t willing to do whatever it takes both in relationships and in business. I just had that in me at that point and I knew I didn’t want to sleep on the couch any longer and it was just all in. The way I like to say it is I committed full out and I figured it out. So you commit full out and figure it out as you go and that’s what I did and that is a necessity to be successful in this business and basically in any other businesses. You got to be all. In relationships, again, I don’t believe you can separate business and personal. I don’t believe it can happen. It comes home with you at night if you have a good day. It comes home with you at night if you have a bad day. Your wife or your girlfriend or your husband or boyfriend are going to want to talk about how was your day. There is no sole and separate business and personal. I would say on all levels of life, relationships-commit. Be all in. Figure it out as you go – business, entrepreneurship, your company – be all in commit. Figure it out as you go. That’s my perspective of how to really become successful.
Danny Johnson: It helps to when your wife or your husband is really into the business as much as you are because then you guys are doing it together, both moving forward towards the same thing, wanting the same things. It’s just awesome.
Justin Colby: Heck yeah, man. And if that is your scenario. God bless you. That is an awesome situation to be in.
Danny Johnson: Great. I think his story really resonates with a lot of people. I share somewhat of a similar story, my background. I didn’t end up sleeping on a friend’s couch but before that and everything we have some sort of a similar background. But let’s go ahead and get started in talking about direct mail on a budget. First of all, were you one of the investors that was maybe chasing some MLS deals in listed properties and got fed up with them decided to switch to the motivated seller market. How did you get into doing direct mail?
Justin Colby: Yeah, it’s funny. So the background to me is we kind of started ass backwards and hopefully that’s okay to say on your podcast, in my podcast is explicit and I can say whatever, but we started flipping before wholesaling. Often people get into this industry to start with wholesaling and then they become fixed and flippers and then go into developing or lending money or whatever. We started with fixing/flipping. The irony of that is I had zero dollars. I’m sleeping on a couch. We started this whole business grassroots is networking, door knocking and phone calls in. Back in 2007 when got started really it was a short sell world, so people are starting to lose their home. The equity is falling out of their home. The sky is falling so we’re dealing with a lot of deals that now are short sells. Primarily people are listing their homes. I was the big thing and so we were working heavily off the MLS at that time. Hence why I think a lot of these took so long because we got a lot of acceptances by the home owner, but not by the bank, and so part of the reason why it took so long is because of that. Every day we’d likely get an acceptance because we were writing so many offers, writing 100 offers a day, I mean we were just going to write anything we could do. We had no money. We were making offers at a home store. So when that finally came to fruition what we realized is there’s better ways to purchase homes because ultimately we started buying from the MLS, we started buying from the auction. But we were missing out this key ingredient which was the direct mail. We still aren’t making a bunch of money and so we didn’t have the ability to do direct mail on a budget or that’s the only thing we could do is do direct mail on a budget. And so we had to figure out who we’re going after or is it just the financially motivated? Is it divorce people? We did this whole thing working with divorce lawyers and probate lawyers and so on so forth. For us it was a matter of we don’t have a lot of money so we’ve got to figure out a way to mail without spending a lot of money and we got to do it to the right people that would give us the best opportunity to get a deal.
Danny Johnson: Right. And so what do you see a lot of newer investors or even experienced investors that are new to direct mail? What are some of the problems that they face when they get into it with a limited budget?
Justin Colby: Yeah. I think what happens is right now and I tell this to – I coach hundreds and hundreds of students and we have our live coaching calls on Wednesdays and so yesterday as a matter of fact I was talking to this was – especially experienced investors that may have found a little success, their main question to me right now is where do I find more deals for newbie investors. Their question is “Where do I find a deal?” What is the best way? Kind of the same question you just posed to me. My answer to that is both the same thing. Get a list and I specifically have a list that I work but my budget is much larger now and be ridiculously focused on pounding that list. So if you’re going after vacant homes, if you’re going after high equity homes, if you’re going after probate deals, whoever you might be going after, do not just send them mail once, do not just send them mail twice. You need to be touching these people five to six times at minimum before you can tell me or have any type of judgment of whether this is a good list or not. If you decide to go with vacant homes, if you decide to go with high equity, if you decide to go with homeowners over the age of 50, whatever the list is and there’s a lot of lists out there as you know, the key here is even if you only have a budget to send out 250 of them, you need to send that out for six straight months because it has been proven in sales and marketing, as an industry not real estate, but sales and marketing you have an 80% higher chance of getting the deal after the fifth touch.
Danny Johnson: And he said 80%
Justin Colby: So you stop on the fourth and I hit him five times. It’s exponential right? So meaning you cannot quit so my answer is the same whether you’re experienced and you’re doing three deals now and you want to figure out how to get it to six or you’re just trying to get your first deal, you need to get the list and there’s a lot of different lists out there. I personally like to have people who have owned their home for as many years as possible. I personally like to try to find age of home. My business partner, Kent Clothier, has a product and software that has just been revamped called Find Motivated Sellers now which is awesome because they give different filters regarding – are the homeowners older in age of 50, are they in financial distress, is the home vacant, is the home high equity, how much equity –those are the filters that I would really suggest you focus on and then you got to hit them six times at a very minimum before anyone can tell me whether that list works or not works and then you got to be realistic. You and I both know the industry standard and direct mail is 1% return. That’s industry wide – Bed Bath and Beyond, who cares right? We, right this very second are getting a call response rate of point 0.35%. Basically we’re just above a quarter of 1% call-back ratio.
Danny Johnson: I was just going to ask, what’s the volume? Because I think as people max out how many letters are sending or mail pieces they’re sending in an area that’s only so big, that drops that number down but how many? What’s the volume that you’re getting that on?
Justin Colby: Well me personally? We just churned up 47,000 mail pieces and I say that humbly. I mean obviously I was living on a couch and all I could do is phone calls because I couldn’t drop any mail. If you’re a new listener, if you’re a newbie, if you’re just getting started, if you have $100 a month that you’re spending on direct mail, you are way ahead of me. I don’t want anyone listening to this and think, “Oh man, I got to send all these?” No, no, no. Let me take a step back and frame this for you. You need to start where you need to start if that’s $100 a month or $500 a month, I would really urge you not to send less than 300 mail pieces a month because just the numbers alone won’t make that worth your time. If you’re going to commit, you then commit and figured it out. Find the budget to send 300 mail pieces a month at a very minimum. You need to hit them six times, so for the next six months you are going to hit these 300 people.
Danny Johnson: What’s the interval there that you typically use in between?
Justin Colby: Well, for that that small of a list I would just send it on the first of each month and then it goes into a follow up when people start calling in. But that’s a totally different subject that we could do a totally different podcast on. The perspective here is I didn’t start out at 47,000 or whatever we just mailed. That wasn’t where I was. You need to start somewhere.
Danny Johnson: And I want to bring up that volume because at the lower, I think people tend to get a little bit better whenever it’s a much smaller mailing like the minimum of 300. I know you’re making the point that typically people aren’t getting 10 or 20 calls from mailing at 100 pieces.
Justin Colby: Correct. The perspective there is if you do get your 1% at 300 mail pieces what is your expectation? Three calls. That is 1% of 300. So that being said, if you get less than 1% do not be shocked. Do not. If you get a half a percent you should be expecting 1.5 calls. It’s just math. Again, that’s why being consistent with your marketing is so imperative because you might not get a call out of your first mailing. You might not get a call at your second mailing. Why I brought up the statistic about 80% of deals get done after the fifth touch is because that’s when you might see more calls actually coming into you. So do not come from a place of being discouraged after your first month or your second month. You really need to commit, be all in and look back in six months and say “Okay, how many calls that I actually get after sending these 300 people marketing?” Don’t go and change your list. Don’t go and change your marketing letter. Don’t change the envelope and think something’s awry. If you are sending 300 the expectation should be three calls a month. That’s your baseline and if it’s not three calls, you maybe get one or you get none, personally after doing this now for eight years, I wouldn’t be overly shocked because you’re really looking for that fifth and sixth touch before people are going to start engaging you with you. Fair enough? I just wanted to hit home with that because when I’m speaking from stage at one of my events or if I’m teaching, people ask me how much I’m selling. Well, I’ve been doing this for eight years and I no longer have a marketing budget. I mean I’ve become successful in my own right and so I don’t want that to be your mindset because there’s a disconnect a lot of times between someone who’s just getting started and someone who is where I’m at. You need to start where you need to start and then grow into that.
Danny Johnson: Yeah. And there’s that temptation. It’s easy to say, “Okay, he told me stick with it. Don’t be trying to change things up. The call volume is not going to be all that great, but to send one or two and then you start to doubt yourself, you start to doubt the advice, you start to doubt this, that, and the other thing you feel you are throwing money away and almost inevitably even experienced people will feel that and stress about it and change things up or stop a mailing list and never experience that jump of calls after the a fifth or sixth mailing to the people.
Justin Colby: There’s no doubt. I started the episode off with you as you have good days, you have bad days, good weeks, bad weeks, there are months where I need to sit my team down and be like “What the hell just happened?” We had a fall off of X or whatever and then there’s months where I’m buying everyone drinks and dinners and “Great job guys” and then there’s those ebbs in flows and at times there can be very big swings. You just got to roll with those punches right, but what I am advising, what Danny advises is we’ve been doing this. We’ve had a lot more experience than most of you and for those of you that possibly have more experience than both of us. Good for you. We’d be happy to help on a different level because this is definitely more likely base towards some newer investors.
Danny Johnson: Yes. Moving along with that, if they want to start with 300, there’s a a ton of list that we can get and maybe some are better than others and next week we’re going to have Tom Krol and we’re going to talk about some lists so that’ll be cool. But for this episode, sticking with the whole budget theme and to make sure that we focus on that, I mean is there any kind of list that you recommend for people that have the smaller budgets that maybe—
Justin Colby: Yeah I would. So I do everything off data and what that means is I want to know where the majority of the buyers are. So I go look for where the majority of the cash transactions, again my business partner, Ken Clothier, has a software called find cash buyers. Now I go in there and I look up per zip code and what zip code has the most cash transactions over a four month period. That’s where I tend to focus my marketing on because I know there are buyers there. It’s one thing to get the deal, but then you need to be able to sell that deal. So once I know the areas I want to be in and let’s just say I have a buyers list because I do, then I would simply say, I want people that have equity so I can negotiate with them. If they have no equity, it’s very difficult to negotiate because ultimately there is no money in it for them. They don’t see the light at the end of the tunnel. I would focus on the zip codes that you have more buyers in where you want to be going after and if you have a smaller list I mean vacant homes are awesome homes and so are out of state homeowners, absentee homeowners because a lot of them don’t want to be a landlord anymore. A lot of them realize this is a good time to sell and they’re tired of fixing toilets and dealing with their horrible property management group and whatever it is. So I would say high equity and vacant are going to be your number one high equity and absentee homeowners are going to be number two. And then if you want to get even more granular and more granular you can start talking about percentages of equity, how long the person owned the home. I want them to have a good tenure in that home and I want someone who just bought the home three years ago. That’s not where I want to focus. So high equity vacant, high equity absentee, in the zip code that you want in you’re going to have plenty. Even if you don’t live in a big metropolis city like Phoenix and you live then in a smaller town, if you’re only able to send out 300 to 500 you should be able to get that with those fillters.
Danny Johnson: Right. And regarding the vacant, I find Driving for Dollars is a lot of times a good list to start with because you’re maybe getting things that other people that aren’t taking the time to do that, they’re just pulling a list off list source the same list everybody else is getting. Yep and they’re finding some properties maybe that other people have missed.
Justin Colby: Yeah and list source is a great tool. I have used list source in the past and you can get very granular there. And so you can talk about the age of the home. That is a good one. I know I specifically want homes built after 1950. I don’t want anything built before 1950 so you can do that. You can say the homeowner purchased the home between the years 1950 and 2004 is where I would tend to focus some time at. Again they purchased the home between those time periods so that way there’s likely a ton of equity. That’s really kind of justifying that. I also, if they still own the home and they purchased the home in 1975, you got to figure they’re kind of getting up there in age. Let’s say they bought it at the age of 26. There’s a lot of years there, so now you’re talking about people who are probably empty nesters, maybe need to downsize, possibly even need to go on an old person’s home, whatever. Now there’s motivation that might not necessarily be financial but it could very well be circumstantial. Those are the types of list. A: The more granular you make this in list source, the more expensive each lead is going to be for you. So I’d really watch that.
Danny Johnson: Yes. You can see a high price per lead, you might want to take off some of those and I noticed that there are different ways to do certain things so it’s like equity percentage versus loan to value or something like that.
Justin Colby: Yeah. Again, if I had some if I’m on a budget List Source is great, but I’m going to keep it pretty open. People who have bought their home in this zip code between 1950 and 2004 because then you’re not going to there’s not a lot of bunch of filters. The leads become less expensive. You don’t have to spend a bunch of money on your list and the reason why in this kind of a shameless plug, my partner Kent built Find Motivated Sellers now is so that people don’t have to pay per lead. They pay a one-time fee to get access to it and he gets updated every two weeks because there was a missing component that people kept having to buy a list and this just gets them the list that gets updated over and over again twice a month.
Danny Johnson: Yeah. It’s awesome. On a budget for the mailings, you said you recommend postcards when you’re on a budget or do you find that letters are worth the extra expense?
Justin Colby: I find letters are worth the extra expense, but here’s the argument. It’s an argument that we could go round and round about. I don’t know if anyone’s ever going to win the argument. It’s an argument about philosophy. Postcards get opened 100% of the time. Like if you see a postcard you can’t go to one of these and then if something catches your eye great. You’re going to read it. If not, it gets thrown away, but it got opened. There’s no argument about it being opened. There’s an argument to say that postcards can work and I’ve used postcards and they’ve worked. I now only use letter. Again I have a bigger budget. I believe that if you do them right people will pay attention to them and you can have a very high open rate. We can go round and round. With a larger budget I would say use letters possibly with a smaller budget, possibly with a smaller budget use postcards.
Danny Johnson: What kind of messages for each?
Justin Colby: My letter says, “Danny, I see you own 123 Main Street. It’s a good time to sell. I’m looking to buy. Give us a call if you are interested in selling your property or very least would like to know the value of your home. We are willing to give you an unconditional premium offer.” So I get a lot of calls because people say what’s an unconditional premium offer? It’s an intrigue. It’s a point of intrigue. They don’t really even understand what that means. So then that opens the door for a conversation for them to meet with my team and so on. On the postcard I would say like urgent or property info or whatever. So people are like, “What is this?” They think maybe they’ve missed paying their property taxes or there’s going to be a new assessment on their home or something that they’re going to take the time to look at. And then on there the message is relatively the same. The postcard that I’ve used in the past, “I see you own 123 Main Street. I’m looking to buy your home if you’re interested in selling” and then I’ve done a couple bullet points saying, “No commissions. No repair costs. No closing costs, Buy as is. Pay cash. Close in seven days.” – to try to highlight some things that would possibly make them ring the phone.
Danny Johnson: Right. And so when you’re talking about including their name and the address you’re basically talking about mailmerge and that’s really big because then it’s speaking more specifically for them and it catches their eye and says, “Hey this is for me because he got this address of this property and on it.”
Justin Colby: Yeah. And if you’re doing your own mailer obviously there’s mailmerge software and stuff like that, I don’t do my own so I can’t speak educatedly about that. If you are using a male house they will do it for you. So if you are doing your own, obviously to look up a couple options as far as mail merging softwares. Danny maybe you know one, but I’ve always used a male house since I even started. I know it’s a little bit more expensive, but I’ve just always felt like it’s not my highest and best use of time to do this and that is the rub. You might spend a little bit more money with a mail house, but you get your time back. So for those that also not only are on a budget, but you’re on a time budget and you got to figure out how to be a father, and a wife, and a husband, you got to make that decision. Are you going to make this a family affair where the kids are stuffing envelopes and you’re doing this as a family or I’d rather be able to spend a little more money and have someone do this. That’s all they do. They’re only focus on doing mail, they are a mail house and it’s best that they do it so that I can have that time and go to ice cream with the kids or go watch a soccer game or whatever.
Danny Johnson: Right. Yeah. We started by doing it ourselves having the kids involved. And it was actually kind of fun for some of it because you could have contests if you had more than one child to see who can hand write the addresses on these envelopes, who can do the most in an hour or something like that or make it some sort of thing where they do and they get an extra allowance or get to go get ice cream like that kind of stuff, but regarding mailmerge, when I used to do that manually that would be with Microsoft Word. You can do that in Microsoft Word. So you have the letter and you have the mailmerge fields and then you just feed it like a spreadsheet of the names and addresses in the different fields that get populated in there. Now I use REIMobile.com our CRM system that does that for you. We have your mailing list and then you have the letters and it just creates a PDF with all of the different letters with everybody’s personalized information in it.
Justin Colby: Nice.
Danny Johnson: All right so moving along with letters and postcards, now what about first class versus bulk rate?
Justin Colby: Again it’s about cost. So first class can be more expensive. Bulk rate is going to be less expensive. People are going to say, “Well, it looks like junk mail.” I get it. If you’re on a budget, it’s going to look like junk mail. That’s my suggestion. I always make the argument if I give Danny five basketballs right under the basket he has a very high percentage of making all five go. So you give me a hundred basketballs at half court, could I possibly make more than five? And the answer is yes. Can Danny any ever make more than five? And the answer is no. And I’d rather take my shots to see if I can make more than five and that’s argument is because you’re saving money you can send more. I’d rather take my chances sending bulk mail and touching more people and possibly getting more thrown away than not.
Danny Johnson: Yeah. I like that. That’s very important and really when you think about direct mail and what it is that you’re doing you’re sending somebody a message telling them that you buy houses. And so in order for them to contact you what do they need to have? They need to have a property that they want to sell. They’ve got to have some sort of motivation to sell it to you and people aren’t walking around for five years every day having this thought in their head that “man, I got to get rid of property” for five years straight it just doesn’t happen. And so when you’re mailing these letters and what he was talking about was like hitting them with multiple mailings is because you want to hit them right when they’re having that thought right when it’s fresh in their mind and right when it’s causing them major stress. And so when you mail more you have more of a chance of hitting them at that right time.
Justin Colby: No doubt.
Danny Johnson: Alright. So do you ever mix up postcards and letters? I know now you said you mostly do letters but in the beginning, earlier on, do you ever recommend doing that?
Justin Colby: No. And I think when people get a bigger budget, you can start playing around with some of these things. We call A/B testing, play around to see if you get a better response rate. One of the things that we’re going to be doing now is I’m going to send a mailer from my company Phoenix Wealth Builders, then I’m going to send in a mailer from Justin Colby, then I’m going to send a mailer from Phoenix Wealth Builders and a mailer from Justin Colby just to see if there’s a return that increases based on whether I’m a company versus a person and to if that plays an effect. But for those that don’t have a budget to play with, not the best use of your money. This is something that we are testing because quite honestly I’ve done – 90 days ago we were doing a test and it cost us $15,000 and I know that sounds like a lot of money and I’m not saying for it to be nonchalant about it, but when you are going to do a test, that test might fail and that test failed and we lost $15,000 and we have to live with that right because it didn’t pan out the way we wanted it to. When you’re going to start doing these tests make sure that you have some capital that, I don’t want to say you’re willing to lose, but if you do lose you’re going to be okay.
Danny Johnson: Yeah. And I know I might be asking a little bit much, but would it be possible to share what that test was or is that something that’s more of you guys are still working on?
Justin Colby: Yes. We basically tested. So how we did is we did a priority envelope versus a normal envelope. So the actual cost per envelope went to $1.50 versus our normal envelope and we hit people twice a month versus once a month. So we had those two tests going simultaneously and it just didn’t pan out. We didn’t find any statistics that said one way was better than another. Was it a total loss? I would say no but it definitely was a loss in terms of we didn’t find anything that we greatly found as important to our business.
Danny Johnson: Right. And so maybe the normal letters you guys were doing well enough to where they open anyway. So I mean the whole purpose behind the priority was just to have a higher open rate. I mean, there was the same message inside of the envelope.
Justin Colby: Exactly right. The only difference was the envelope and so we hit the people. Everyone was hit six times and the only difference was the envelope and the irony is our original mailer actually worked better than the higher dollar mailer in our test and every market is different and everything, so I don’t want to give you the answer “That’s just a better way.” That was just our test and so that’s why I said that is because we were running two marketing campaigns and one basically didn’t pan out and one got one deal I think.
Danny Johnson: And you brought up a very good point too. There’s always a benefit to every adversity and one of the benefits to not having a huge budget getting into this is that you are going to find the things that will give you a better return and it’s going to cost you as much to do it because there’s a tendency for people to have a huge budget that gets started and this don’t really know what they’re doing. They hear somebody say to do something and they blindly do it and they spend a ton of money on it and they lose a ton of money. And whenever you are forced to do it on a budget, you’re not using a ton of money and you’re going to find because –just like Justin said, the markets are different. Even the property values of homeowners that you’re sending mail to is going to be different and they’re going to respond to different things and it’s really up to you to find in your specific area and who you are mailing to what’s going to work.
Justin Colby: Of course. That’s a very important point in terms of “in my area it might work, in your area may not” and vice versa. It might work in your area and in my area it doesn’t work and so take it with, I don’t want to say a grain of salt, that’s not how I want it. Take the information and store the information and have a little bit more insight. But at the end of the day, you need to do what will or won’t work in your market.
Danny Johnson: Right. That’s true. As you start to grow and you get – and that’s the big thing too, it’s like you mail three and even if you’re getting a half a percent call rate and you get 1.5 cost, you might just only get one call maybe two. But how many calls like when you get a great deal somebody calls you, that’s only one call. You could make $20,000 off of that one call and so don’t look at it in terms of why I might just get one call. It might only take that one call. I’m always for making sure that you’re answering the call yourself. When you got started, did you always answer all the calls directly or did you have voicemail.
Justin Colby: Yeah. We answered everything. Our phone would just go and then we went to voicemail because we started getting more busy and we couldn’t answer the phones and now we have a company, an answering service, and then they email us immediately and then have a lead manager who calls the person back immediately, so there’s always someone live on the phone, but again, when you’re sending a lower number that’s not necessary. I would save all your money in that kind of stuff, but you just got to realize you’re in marketing and sales. That’s the game we play. You are marketing and selling, period. You’re not in real estate and as soon as you understand that, I would urge you to go out and buy sales books and negotiating books because that’s really what the business you’re in.
Danny Johnson: Absolutely and I think a lot of people that do really well in this business it’s because they’re fascinated by the marketing aspect of it or get really excited about it because if you’re not it’s kind of hard to keep yourself motivated but just getting that first call will fire you up.
Justin Colby: When you start seeing even the little things start to work it’ll fire you up. Why I love coaching is because those moments I get to see again. I get to relive with our students again. Yesterday we had a student who just sent us a picture of the $12,000 dollar check of the first deal that they got. I remember our first deal. I literally have a dollar bill framed in my office of the first check. That’s awesome when they can send a picture of the first $12,000 dollars that they made with our coaching. I get to relive that over and over again. So those little a first phone calls “Holy shit! This works. Oh my God!” Danny said he it was going to work. Justin said it was going to work, but wait a minute this works. Okay here we go. It becomes real.
Danny Johnson: It’s awesome. And really that should be the first goal. The first goal is not to get a house on a contract, flip it and make a ton of money. The first goal is to get the phone to ring one time.
Justin Colby: Agreed. Agreed.
Danny Johnson: And when you look at it that way it doesn’t seem so daunting and you might fumble that, you might screw up the call, you might go out and look at it and not know what you’re going to offer. But I’ll tell you what, you’re going to learn something from that so that next time you’re going to know what to do.
Justin Colby: Yeah. It’s always the case.
Danny Johnson: So don’t let it keep you from getting out there and trying it. I mean we’ve covered pretty much most of what I wanted to cover. We talked about what kind of list to get on a budget sort of a minimum number of 300. I like that because sometimes people send 100 and it’s just not a big enough number and when you say minimum, it’s not just don’t just send 300 but if you can afford to send maybe 500 go for that.
Justin Colby: I would say absolutely.
Danny Johnson: And an idea of what to expect so that you don’t – that half a percent, 1% response rate so after you mail that first 300 you only get one call you’re not saying, “Oh man I must have got it wrong.”
Justin Colby: Yeah. You didn’t do anything wrong. That’s just what it is, the expectations.
Danny Johnson: Alright. So keep it going. If we to consider what a statistic for that would be like, how many investors send that first mailing and stop what would you say? I’d say it’s probably 80%-90% stop after the first one.
Justin Colby: Absolutely, 100%.
Danny Johnson: So there’s not as much competition as you think. If everybody’s kind of bailing after the first one or changing it up and going after another and you find pretty quickly because I have got rental properties and things like that and I get mail for those because I am an absentee owner with a lot of equity. So I get the mailings and it’s amazing. I hardly ever get more than one piece of mail from the same person.
Justin Colby: Yeah? It’s crazy. Crazy.
Danny Johnson: I hope nobody in San Antonio is listening to this. We’ve got a really competitive market, so it’s even more amazing.
Justin Colby: I see you’re wearing the San Francisco shirt. That’s where I’m from man.
Danny Johnson: I’d live there if I could.
Justin Colby: Right. It is insane.
Danny Johnson: Yeah, it’s a beautiful place. And so we covered all of that and then postcards, do you remember or know what kind of prices people can expect for postcards?
Justin Colby: Like 0.39 cents maybe 0.40 cents per postcard. I think that’s about right. I may be off a little bit it’s been a while since I sent postcards but I want to say it’s 0.39 cents or 0.40 cents or something like that.
Danny Johnson: Okay and when you sent postcards, did you send them through to Click2Mail or did you get them printed and mailed to you?
Justin Colby: Yellowletters.com.
Danny Johnson: And when you said you used a print house for your direct mail for your letters that you use now, are you using just like a local print shop?
Justin Colby: Yeah. I use a local print shop here. He’s great but local and I would really urge you guys once you start growing and sending more mail to use someone local, find someone local. Their name usually says “graphics” in it somewhere more often than not found. So I think this is Arizona graphic something is the name.
Danny Johnson: Yeah. That’s a good point. I’m glad you said that. Yeah. Sometimes you search and you’re wondering like, “What the heck? How come I can’t find any?” Same thing with if you’re looking for a for bandit signs locally. It’s like finding some of the – but anyway, whatever. Alright, I think we’ve covered pretty much what I wanted to cover on the show and I really appreciate you taking the time to talk with us about all of that.
Justin Colby: Yeah, absolutely. It’s been my pleasure man. Hopefully this has been awesome for your listeners.
Danny Johnson: So is there a place that anybody listening, if they want to get a hold of you, how they can get a hold of you?
Justin Colby: Yeah. I have a podcast on iTunes as well called The Science of Flipping. And so if you would like to get a hold of me for any reason at all, you can just go to The Science of Flipping. You can email me and my assistant will answer [email protected] and because of my podcast I’ve been able to interview many people as well. So between myself and a lot of people I’ve interviewed I’d put together just a quick ebook of “The 15 Most Costly Mistakes Investors Make Right Now” and so you can go ahead and download that for free, absolutely free. But I just want people to know that the mistakes I’ve made and others have made to avoid them to not have to do it. Again, [email protected] and just head to the website for the free ebook.
Danny Johnson: Great and I’ll include links to those on the show notes page for this too in case you’re driving and can’t write any of that down, but if you go to flippingjunkie.com/42, you’ll also be able to get those links to go over to his site and get information for himself. Thanks again Justin.
Justin Colby: Hey man, I appreciate it. Thanks for the time Danny.
Danny Johnson: Yeah. Have a good one.
Justin Colby: You too.
Alright. Another great episode and that was Justin Colby and The Science of Flipping podcast is his podcast. Check it out. Justin did a great job sharing a lot of info. I really do appreciate that and we’ll be talking next week with Tom Krol about different mailing lists that you can use so that’ll be interesting. Be sure to tune in for that one. I said the next episode it might be in two weeks, so most likely it’ll be episode 43 but it might be 44. This was episode 42 so if you want to get to the show notes on that one, it’s flippingjunkie.com/42. And be sure to subscribe on iTunes and leave us a rating and review if you’re enjoying the show. It really helps to get more people on here and get it going, get some traction for the podcast. I really do appreciate it and thanks for listening. I know there’s a lot of podcasts out there so I really do appreciate you listening to The Flipping Junkie Podcast. Have a great weekend. I’ll talk to you next week.
