When we mailed our first mailing ever I was really curious what our “close rate” would be. It is easy to find response rates. Yellow letters seem to have a higher response rate than postcards, etc. But I wanted to know how many houses we would buy from each mailing. After all, direct mail is a large investment and I didn’t want to be going into it half-hearted. So, I set out to answer my question, “no really, what WILL our close rate be?”
When I asked this question, it seemed that people would never get too specific. They would give generalizations and often seemingly canned responses. No one ever actually answered that question head on. “It depends on how well you negotiate,” they would often say, or “that part is up to you to decide,” which was never helpful.
Unfortunately, this blog will not answer this question either, however it will explain why no one wants to answer this question. And I may throw in a surprise for you at the end!
People send mail for all sorts of different reasons. A realtor looking for new listings may have a significantly higher close rate than a wholesaler looking to find rentals who may have a higher close rate than a fix and flipper. But even at a fix and flip level, everyone has their own definition of what a deal looks like. Some fix and flippers want to maintain a certain ROI, others a minimum profit margin. Some won’t touch certain zip codes, some might only deal in war zones. Even if two investors did agree on what a deal looks like, one investor might have a robust and highly systematized follow-up process, while the other investor does not. Additionally, one lead could result in a 20 house bulk deal, which could throw your close rate off completely. All of these factors will affect a close rate.
So, unfortunately the answer really is, it totally depends…and it depends on everything. But I will say this: We are a fix and flip company, we buy at 65%-70% of as-is value, we feel like we have a good follow up process, we mostly focus on blue-collar, working class zip-codes, we run conservative numbers and I’m sure we pass on deals that other investors would take. With all of that said, on average, we tend to close 1 house for every 8,000 – 10,000 pieces of mail that we send.