Have you ever wondered how to create a marketing plan for your real estate investment business?
Well, if you haven't, you should probably get on that.
As a real estate investor, we all know that there are two key components to a successful business. The first component being financing (if our strategy calls for money) and marketing.
Your really splitting hairs determining which activity is more important but for the sake of this post let's go with marketing (because you can produce a profit without financing but you can't produce a profit without marketing)
These two activities are also very difficult to be successful hence why they are the most important activities to find success in.
Every successful marketing strategy has a plan that is well thought out, implemented, tested and executed over a specific time period. Developing a successful marketing strategy gets you half way to success. The other half comes from successful iteration, consistency and commitment.
Let's go over some tips that could possibly separate the successful investor from the "want-to-be" investor.
1) Determine Your Niche
This should be done prior to the development of your marketing strategy. Before we put together our marketing plan, we need to know which niche we are going to focus in. By understanding who you are as a real estate investor, having a clear perspective, point of view and a passion, you will be in a better position to develop a successful marketing plan. The niche that you choose will determine how you approach certain aspects of your plan, your buyers persona, target area, demographic, type of properties etc. So the first step in developing your marketing strategy will be to have a good understanding of your vision as a real estate investor.
Wholesaler
House Flipper
Buy And Hold
Commercial
Residential
BRRRR
Notes
Distressed
Turnkey
Etc..
2) Develop Specific Activities/ Mediums
Before we start to develop our budget, we like to think about how we are going to reach our customers. We like to have a good understanding of the possible activities we can choose from that will best fit our specific niche. We want to have a good breakdown of our inbound marketing (medium) and outbound marketing (medium) and the different activities within each of these mediums in order to develop our plan to reach out customers. The more creative you get with the first step of listing out the potential activities for these two mediums, the better/more creative plan you will put together (possibly separating yourself from the competition). Let's go over a quick working example of this exercise.
Outbound Marketing
Direct Mail
Church Ads
Bandit Signs
Flyers/Brochures
Radio
Television
Vehicle Magnets
Vehicle Wrapping
Business Ad Placements (Diners, Laundry Mats)
Business Cards
Cold Calling
Door Knocking
Inbound Marketing
Website
Paid Advertising
SEO
Lead Magnets (Ebooks, Infographics, White Papers)
Blog
On site Content Marketing
Email Marketing
Social Media Marketing
It will be important to begin narrowing down your inbound/outbound activity list to test and implement after you have created a good starting list to work off of. Remember, the plan that you first put together will be the plan that you test and execute over a certain period of time. You have to stay consistent with your plan and test it over a certain period of time to see the results of the specific plan. What we want to avoid (at all costs) is trying something out once and giving up on it. This results in lack of success and lack of understanding of how marketing truly works.
3) Creating A Marketing Budget
We here this question a lot, how much do we need to spend on marketing to get the results we are looking for?
This is a very subjective question and depends on a couple of variables. The marketing budget/spend for your specific business will depend on your current activity in the business (how much profit your generating or if your just getting started). A simple, short cut tool that some marketers work off of is creating your marketing budget off a % of your total gross profit. For example, if your company generated $100,000 in gross profit (EBITA) you typically will want to spend anywhere from 5-9% of this amount on marketing (for the year).
Let's get a more detailed look into creating a marketing budget. When it comes to creating our budget, we need to know our numbers.
A) What is your average profit per deal?
Now this is going to depend on the niche(s) that you work in. We need to know on average how much money we are going to make on each deal we move forward with. If you are a house flipper, you need to know that you are going to make $20,000 on average per deal. If you are a wholesaler, you need to know that for every deal, you make $5,000. If you are just starting off, study your market, make some phone calls and find out what your competition is making per deal.
B) Average # of leads before you close a deal?
So, how many leads does it take for you to generate before you actually do a deal? For every market & medium this may be different, but for the sake of this post, we want to know the average number of leads you need to produce before you close a deal. If you do not know how many leads it takes for you to produce a deal, it will be very difficult to produce an accurate marketing budget.
C) What is your conversion rate?
So how many mailers do we have to send out to get a lead? Are we sending out 1,000 mailers to get 100 leads, if that is the case we have a 10% conversion rate (would be a great mailer). For our inbound efforts, how many site visitors does it take to produce a lead. Do we need to get 15 site visitors to produce 1 lead (or 15 people to visit our site before 1 person fills out a form)
Let's go over a quick working example.
Let's say that we are house flippers and we average $25,000 per deal in our market. So if we close 1 deal, we are expected to make about $25,000 on that deal. Let's work backwards now. How many leads do we need to generate before we can close that 1 deal? In our example, it takes us 20 leads to do one deal.
So now we know that we need to generate 20 leads to make $25,000.
Now, lets talk about the conversion rate. If we send out 1,000 mailers, on average we are getting about 20 leads. This is a 2% conversion rate.
So this means that we are going to need to send out 1,000 mailers to get our 20 leads to do our 1 deal and make our $20,000 in profit. (Make sense ; )
So let's say that it costs you $2 per mailing piece and you are sending out $1,000 mailers. This means if you want to buy 1 house a month that is going to generate $20,000 in profit, your direct mail budget will be at a minimum $2,000 a month or $24,000 a year.
In this hypothetical situation, you will be spending $2,000 to make $20,000. Now the numbers start to make sense.
This is why we really need to understand our numbers because if we say well I only want to spend $500 on marketing to do a deal, you are going to have a hard time of meeting your potential goals.
4) Determining Your Buyer Persona's
When we market, we need to know who we are speaking to. We need our marketing efforts to be as targeted as possible in order to increase our conversion rates. The better understanding we have of our potential clients, the better spend we will get out of our advertising dollars. For instance, let's say that we are putting together a direct mail effort and we decide to send letters to all residences in a specific zip code. Do you think we are going to get a better response rate when we send to that list or to absentee homeowners with vacant houses who are behind on taxes with 50% or greater equity.
I am no rocket scientist but I am going to guess the second list. This is what I mean by understanding who we are marketing to in order to get the most spend out of our advertising dollar.
So when it comes to creating buyer persona's, this basically means what does your ideal customer look like. When creating your ideal buyer persona, we want to focus on a couple areas:
A) Background
B) Demographics
This will give you a basic understanding of the person that you will want to target your marketing towards. You can create a buyer persona for each one of your specific motivations that you intend on marketing too. For instance, your ideal inherited home deal (buyer persona) may look different from your job loss (buyer persona).
In short, make sure that you understand who you are spending your money on to acquire new customers.
Wrapping Up | 4 Tips To Developing A KILLER Marketing Strategy For Real Estate Investors
Marketing is every bit a science as it is an art. We need to put together a plan that we feel comfortable with implementing and know that we can execute. Every plan and strategy is a bit different, so focus on our key indicators and test and iterate what you put together. Make sure that you stay consistent with your marketing efforts and develop a budget that you can sustain. These 4 tips will give you a one up on your competition when it comes to marketing... One of the most important pieces of a successful real estate investment business.
We would love to hear from you guys. In the comment section below, let us know some tips you may have for developing a marketing strategy that produces results.
HS Property Funds
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