Census Tract Mailer Pricing (JJ 662)

Census Tract Mailer Pricing

Transcript: 

Jack Butala:                         Jack and Jill, here.

Jill DeWit:                            Hi.

Jack Butala:                         Welcome to the Jack & Jill Show, entertaining real estate investment talk. I’m Jack Butala.

Jill DeWit:                            And, I’m Jill DeWit. Broadcasting from sunny Southern California.

Jack Butala:                         Today, Jill and I talk about census tract mailer pricing. It’s how I actually, the cuckoo system that I’ve devised, to accurately price SFR mailers.

Jill DeWit:                            Is that your legal term? It’s the cuckoo way Jack gets this done. But you know what I was gonna say, by the way? I think it’s amazing how you do this. I was trying to think about this. I swear, it’s like a third science, I think it’s a third art, and I think it’s a third experience.

What do you think? How’d I do?

Jack Butala:                         I don’t know, you know. I mean, thank you for the …

Jill DeWit:                            Trying to explain it?

Jack Butala:                         I think that’s a compliment, and thank you.

Jill DeWit:                            Yeah.

Jack Butala:                         But I’ll tell you, it all was derived out of necessity. We just weren’t getting the results that we wanted to get for regular pricing. So the way that we priced mail, the way that we priced purchasing land, it’s just not appropriate here.

Jill DeWit:                            Sure.

Jack Butala:                         It’s a totally different animal. So I’ll try to explain it the best I can through this venue.

Jill DeWit:                            Awesome. And I’ll try the best to entertain you, so you don’t fall asleep during this.

Jack Butala:                         I was just gonna say, that’s the thing. I will try as hard as I can to make sure Jill stays awake.

Jill DeWit:                            Yep. There you go.

Jack Butala:                         Before I get into this, though, let’s take a question posted by one of our members on the JackJill.com online community. It’s free.

Jill DeWit:                            Okay. Joe M. wrote, “Hi all, I’ve been exporting comps in Redfin and realtor.com, to determine average days on market for vacant lots in a neighborhood. But I have a feeling there’s a much faster way. Have you noticed a correlation between how long your vacant lots take to sell in comparison to SFRs average days on market in a specific area? Also, what are some of your favorite sites to reference when determining your next target market? Any insight would be greatly appreciated. Thanks, Joe M.”

Jack Butala:                         Joe, this is a perfect question for our topic today.

Jill DeWit:                            Yep.

Jack Butala:                         It’s perfect. I use exactly those two websites, Redfin and realtor. And I use it in conjunction with DataTree. We’re a licensed provider of DataTree information, which is a …

Jill DeWit:                            First American Title’s …

Jack Butala:                         It’s First American Title’s … yeah … data company. And it’s by leaps and bounds … I think, some of the best data available.

So when you use a version of days on market here, in this case from Redfin or Realtor. I prefer Redfin for a bunch of reasons. And you meld it with the data that gets collected by the assessor, and then processed by a world class company like First American, you literally, the result is this … you to remove probably 98% of the risk that you would incur from a real estate investment.

Jill DeWit:                            Exactly. Now you’re talking houses.

Jack Butala:                         Yeah, houses only.

Jill DeWit:                            Now, so his question is, does the house stuff apply to land? Do you ever look at that, Jack?

Jack Butala:                         No, that’s a great question, Jill. The, what he’s talking about is infill lots here. Vacant lots in a neighborhood.

Jill DeWit:                            Right.

Jack Butala:                         And the quality of data is the exact same for SFRs as it is here.

Jill DeWit:                            Okay, got it. So land is land.

Jack Butala:                         If you’re trying to do this …

Jill DeWit:                            Land is …

Jack Butala:                         If you try to apply this to rural vacant land …

Jill DeWit:                            Rural vacant land.

Jack Butala:                         It’s not gonna work.

Jill DeWit:                            Right. Okay, so that was the question. So rural vacant land is one thing. Infill lot, he’s on the right track? Think of an infill lot like a house.

Jack Butala:                         Think of an infill lot like a house.

Jill DeWit:                            Thank you.

Jack Butala:                         It’s priced the exact same way.

Jill DeWit:                            Thank you.

Jack Butala:                         And the research is the same.

Jill DeWit:                            Thank you. Translations by Jill today.

Jack Butala:                         Wow, we could have fun with this. What else could you translate?

Jill DeWit:                            Oh, my goodness.

Jack Butala:                         It would be fun for us to translate stuff for each other.

Jill DeWit:                            Can you imagine? You talking-

Jack Butala:                         ‘Cause that’s what it takes.

Jill DeWit:                            That’s true. You often … you go off on a tangent … and I … so this happens in all of our … most of our … staff meetings.

Jack Butala:                         “What the hell is he talking about?”

Jill DeWit:                            Where I see you, and they’re like, “What?” And I’m like, “Okay, don’t worry about it everybody, I’ll help you. I know what this is, I know what he means.” ‘Cause there, yeah.

Jack Butala:                         Jill speaks Klingon.

Jill DeWit:                            I do. I do, and I’m here to … that’s … I think that’s why you have me on the show.

Jack Butala:                         No, it’s not. No, I think it’s the other way around.

Jill DeWit:                            Oh, okay.

Jack Butala:                         I think I’m your guest.

Jill DeWit:                            Oh, thank you. I love it. Okay, cool. Got it.

Jack Butala:                         So days on market is only, just to answer your … to finish Joe’s question here … ’cause it really does lead into the topic.

Days on market is one thing to look at, but there’s a bunch of other things you need to look at … that I look at, right directly out of Redfin. The number of properties that are listed that month, and it’s all broken down by zip code … how many properties went up for sale in that zip code … and how many properties got sold and closed out. And usually I try to find markets that, or zip codes that more properties have been sold than that got listed.

And then they also give an inventory statistic. And so you wanna look at inventory against the whole number of properties in that zip code. And you have to meld these two data sources to get that. So for instance, there may be 10,000 SFRs, or in your case infill lots … in a given market. And maybe 150 of them sold that month … that’s a very good percentage. You never wanna have a tremendous amount of inventory in a market, you just wanna skip to the next zip code. See what I’m saying? Can you kind of get the picture here? About why all the risk gets completely removed from this, really.

Jill DeWit:                            Exactly. It really does. If you’re not … if you don’t … you know what. this is my thing, too. Why … so many people, I don’t think they’re taking advantage of all the tools and resources that are out there. And I’m like, “Why aren’t you?”

Jack Butala:                         Because they’re sales people.

Jill DeWit:                            Well, no, no. I think its they’re afraid of spending a little bit of money. But I have to just come back and say-

Jack Butala:                         Because it’s hard.

Jill DeWit:                            The money that you spend … well, I don’t even think that. I think it’s money, Jack. I think a lot of people don’t even get out of the gate because they’re like, “Oh, I don’t want to spend money on doing whatever.” You know how much money you’re gonna save in the end, but just investing in the right tools … and cutting to the chase and doing it right? Seriously.

Jack Butala:                         Jill just got, I just realized it just now that …

Jill DeWit:                            What?

Jack Butala:                         You got buried in a little desk in the corner in the studio, with equipment all over the place.

Jill DeWit:                            You noticed this? I’m under a light. I’m like, I didn’t know, you have a nice. I didn’t want to mess with your things.

Jack Butala:                         I just realized …

Jill DeWit:                            So instead of me coming in and rearranging your setup, I just kind of fond a little cubby.

Jack Butala:                         You’re such a trooper, Jill.

Jill DeWit:                            Thank you.

Jack Butala:                         I don’t say it enough.

Jill DeWit:                            Thank you. Yeah, I have the jagged edge in my rib here, of the desk.

Jack Butala:                         I know you do.

Jill DeWit:                            But that’s okay.

Jack Butala:                         It’s a tiny little spot.

Jill DeWit:                            It’s all right, it works.

Jack Butala:                         There’s used equipment all over the place that’s not functioning.

Jill DeWit:                            It’s all good. Don’t worry about me, I’ll be fine. I’m over here. Cord reaches, we’re cool. I’m under the desk.

Jack Butala:                         I know.

Jill DeWit:                            It’s all good.

Jack Butala:                         I wonder if OSHA rules apply to owners.

Jill DeWit:                            Yeah, right? I’m here to tell you they don’t. Like, worker’s comp?

Jack Butala:                         Yeah.

Jill DeWit:                            Owners don’t have to have worker’s comp.

Jack Butala:                         I know, I think we’re okay.

Jill DeWit:                            Yeah, we’re okay. It’s all good.

Jack Butala:                         So you have to take all these statistics, put them all together in a process that makes sense for you. And then choose where you want to send the letters … where you want to send the offers. It makes so much sense to me to do, approach it this way, versus the bandit signs. Or driving for dollars. Or putting up a website … and driving traffic to it for people that wanna sell their houses, and they wanna attract the … fill out a form. This way, it just really cuts 19 steps out of the process. Let the mail do the work for you.

Jill DeWit:                            Bingo.

Jack Butala:                         Today’s topic, “Census Tract Mailer Pricing.” It ties right in to what Joe’s question was. This is the meat of the show. So, Census Tract mailer pricing. I took the liberty of … for all 50 states … putting together a website that’s free for anyone, called, “County Wise.” C O U N T Y W I S E.

Jill DeWit:                            .com.

Jack Butala:                         .com. So if, you just, if the front page of it is the picture of the country. Click on the state that you’d like, and then there pops up all the … a map of all the counties in that state. And if you scroll down a little bit … or click on the tabs on the top … it’ll take you down too something called “Census Tract.” And it’s the Census Tract map of all of that state. And if you click all the way down … imagine that you’re just flying down … or you jump out of an airplane, and you’re going closer and closer and closer to the dot on the map.

Jill DeWit:                            To death? I’m like …

Jack Butala:                         Yeah, maybe.

Jill DeWit:                            Yeah, hello.

Jack Butala:                         It might get that.

Jill DeWit:                            You’re getting closer and faster to the ground.

Jack Butala:                         That might be the …

Jill DeWit:                            Where are you going with that?

Jack Butala:                         Well, that might be the end result of this topic, too.

Jill DeWit:                            Yeah. Geez. Is there a parachute somewhere?

Jack Butala:                         If you’re honing in on the actual census tract that you wanna price. So in any given zip code, we’ll use Scottsdale, Arizona for example. Like 85251. There’s probably 40 or 50 census tracts. So …

Jill DeWit:                            Jack, what’s a census tract?

Jack Butala:                         A census tract is a block, or even in some cases, a half of a block. Like a city block. That for whatever reason the U.S. government says is this tiny little area of statistical data that is different than the census tract next to it. And it turns out, they’re right.

Jill DeWit:                            Maybe they were built … this whole phase was all built in 1950, and the rest of the homes were built in 1990?

Jack Butala:                         Sure.

Jill DeWit:                            Okay.

Jack Butala:                         It could be a master plan, community driven. There’s a lot reasons, and they change.

Jill DeWit:                            Okay.

Jack Butala:                         But here’s the beauty. Data companies like …

Jill DeWit:                            Like control, yeah.

Jack Butala:                         DataTree. Data companies like DataTree and Redfin, they use census tract too. They use that statistical geographical area-

Jill DeWit:                            In their pricing and their estimates?

Jack Butala:                         In all of that.

Jill DeWit:                            That’s cool.

Jack Butala:                         In their data.

Jill DeWit:                            Right.

Jack Butala:                         So you can identify all the statistics we were talking about earlier. Days on market and everything else by census tract. And you can look at the data. And … here’s the net result of census tract pricing is this … we’ve all driven down a street, or driven down … probably live in one … Jill and I live in one for sure. Where … two blocks over, houses are six times more.

Jill DeWit:                            Yeah.

Jack Butala:                         They cost six times more, for whatever reason. In our case, it’s because they’re smack on the ocean. Or some attribute, or some of them may be right on the freeway. So those are less expensive. But for whatever reason, they’re a different value. Census tract pricing … the way that we do it, smokes that out.

Jill DeWit:                            Right.

Jack Butala:                         And so they, it really allows you to have the net-net-net effect, is when you send out an offer campaign, it allows you to really accurately price it … and pricing is everything. How many times have you sent a mailer campaign out … I’m asking you, Jill. And the results come back … and some of them get signed. And some people say … some of the offers get signed just in how you buy the assets … and some people just blow their top.

Jill DeWit:                            It’s hilarious.

Jack Butala:                         And they say, “This is the most ridiculous thing I’ve ever seen. My house is worth six times more than this.”

Jill DeWit:                            Isn’t that funny? It’s hilarious.

Jack Butala:                         So some of it, I take responsibility for. Some of it’s just cuckoo people. But if, anytime you can reduce your mailer costs, increase your yield … and buy more assets on a single mail, the better off we’re all gonna be.

Jill DeWit:                            Yeah, so spend a little extra time and do this. Add this into your pricing strategy … is the whole point.

Jack Butala:                         Yeah.

Jill DeWit:                            Because it’s gonna save you in the end. You don’t want to weigh yourself down with days of nastiness phone calls. And like you said, Jack, which is true. Some of them, they really are off their rocker. They heard someone that, someone who’s done a 100% remodel-

Jack Butala:                         Yeah.

Jill DeWit:                            And added an extra income property on the back … and a garage where there was nothing … and they think their home … and their home … they’re sitting with a two bedroom, one bath, and a carport … and they think their home’s worth the same.

Jack Butala:                         Right.

Jill DeWit:                            I’m like, “Yeah, it doesn’t always work that way.” So … but you can’t explain that. That’s okay.

Jack Butala:                         Right. Right.

Jill DeWit:                            So. But then there’s some that are legitimately like you’re saying. They really are different. Like, it’s funny, just when you said, a strand house versus one on PCH, it might be four blocks … let’s just say-

Jack Butala:                         Right.

Jill DeWit:                            And the pricing is so very different.

Jack Butala:                         This is dramatic. We’re in a dramatic situation right now.

Jill DeWit:                            Really different. Same zip code.

Jack Butala:                         Yeah.

Jill DeWit:                            Same school district. Everything’s the same. Say it might be the same house.

Jack Butala:                         Yep.

Jill DeWit:                            Different dirt.

Jack Butala:                         Different location. Different attribute, yeah.

Jill DeWit:                            Yep.

Jack Butala:                         One’s got an ocean view, and one’s got a freeway view.

Jill DeWit:                            Yep.

Jack Butala:                         And they’re, in this case, in Jill’s case, they’re probably $2-3 million dollars price difference.

Jill DeWit:                            Exactly.

Jack Butala:                         So, and Census Tract will smoke all of that out. If you look at the census tract lined up here in these little ocean communities, these beach communities …

Jill DeWit:                            Right.

Jack Butala:                         The government nailed it.

Jill DeWit:                            Exactly. And then here’s the point, too. Because you don’t …

Jack Butala:                         In a good way, they nailed it.

Jill DeWit:                            You don’t wanna say, “I’m not gonna bother with that. I’m just gonna price it to the expensive property.” Well, that’s great. Now you got all these people that their home’s worth a third of what you just offered, and they’re all signing the letters. They can’t get them back to you fast enough. That’s gonna waste your time figuring that out. Or, then the opposite. “I’m gonna scale it all towards the cheapest ones.” Well then you’re just gonna have a mes there, too.

Jack Butala:                         You’re gonna deal with a lot of hate.

Jill DeWit:                            Yeah.

Jack Butala:                         So, and I’m not saying that doesn’t work, by the way.

Jill DeWit:                            Right.

Jack Butala:                         ‘Cause that is actually how we price rural vacant land. We have members who take that, I call it the shotgun approach …

Jill DeWit:                            It’s true.

Jack Butala:                         Where they just say, “You know what? Everything in 85250, we’re gonna send it out for $175 a foot.” You sell by property.

Jill DeWit:                            It’s like they’re teaching to the dumbest kid, you know what I mean?

Jack Butala:                         But, it still works. You get a lot more hate. There’s a lot more stuff that goes on, but it still works.

Jill DeWit:                            Yeah. It’s different. I don’t know. I think-

Jack Butala:                         So here’s what the hell does all this really mean to you? This is what it means. You send out a mailer … a 10,000 unit mailer, right? You spend $4,000 or $5,000 on postage, which maybe seems like a lot.

If you do it properly, and you purchase a house for every 2,500 units, you purchase four houses. If your spread is correct … and you take a national average … and you’ve marked it up $40,000 grand each … you’ve now made 40,000 times four.

Jill DeWit:                            $160,000.

Jack Butala:                         $160,000 dollars, and you spent about $5,000 on mail.

Jill DeWit:                            Yeah, I think that’s okay.

Jack Butala:                         So do I. But here’s … but follow me on this. Let’s say you do the census tract pricing, and your percentages even go higher.

Jill DeWit:                            Right.

Jack Butala:                         Now you’re … when you add another, for the same amount of money … and a little bit more smarts on your part.

Jill DeWit:                            Exactly.

Jack Butala:                         A little more education. Let’s just call a spade, a spade.

Jill DeWit:                            Right.

Jack Butala:                         You’re just doing it the right way, and you’ve learned how to do it. You add one more asset to that exact same mailer … I mean, it’s almost exponential the return on investment.

Jill DeWit:                            Exactly.

Jack Butala:                         It’s not exponential, but you know … your yield is way … way more efficient and more effective. So, that’s why you’re listening to all of this malarkey.

Jill DeWit:                            Are you really, really, really … really bored.

Jack Butala:                         You know, instead of $160,000 … you’re making $200,000.

Jill DeWit:                            Right.

Jack Butala:                         $200,000 net margin on one single $4,000-$5,000 mailer.

Jill DeWit:                            Exactly.

Jack Butala:                         How hard is it?

Jill DeWit:                            I know.

Jack Butala:                         It’s worth learning and that’s my point.

Jill DeWit:                            See. And, this is the point too. It comes back to my … it’s worth to spend a little money upfront. Do it right.

Jack Butala:                         It’s worth getting the right education and building off of that. And, it’s worth your time.

Jill DeWit:                            Mm-hmm (affirmative).

Jack Butala:                         I would defy anyone to say, “You know, it’s not worth my time to learn how to use this data.” And, learn how to use it from someone who has done it right … who is doing it.

Jill DeWit:                            Right. Exactly. Man …

Jack Butala:                         There is a very small percentage of people like … I don’t know, Bill Gates … who, this probably is not a good use of his time.

Jill DeWit:                            Right. Could you imagine, what if he wanted to be … I know we use this example a lot … like, say you want to be a surgeon. “No, you know what … I don’t need to study under anyone else. I read the books, I got this.” Could you imagine? “I want to figure out my own techniques. No, please don’t help me.”

Do you really want to go to that guy? No. I don’t think so. Or, even a mechanic … “No, I got this. I think I know what it sounds like. I don’t really need to work with anybody that has experience. I’m just going to wing it here.”

Jack Butala:                         Jill and I have a relative who has come to us and said … you know, he’s a really good kid … but, he’s at that age where he’s ready to go to college-

Jill DeWit:                            Yeah.

Jack Butala:                         And, he’s prepping for stuff. He’s prepping for his life. And, he doesn’t know enough yet … just because he’s young … he’s a super bright kid, doesn’t know exactly the right questions to ask. But, the question you should be asking is, “What’s the best use of my time?” … to prep for what I want. And, my question to him is … and it was … it is. “What do you want?”

And, like every single 18 or 19 year old American male on the planet he says, “I want to be rich.”

Jill DeWit:                            Exactly.

Jack Butala:                         Then I say, “This is how you do it.”

Jill DeWit:                            Yep.

Jack Butala:                         I’m not saying he shouldn’t go to college. I’m not saying he should skip all of that other stuff either. But, I’m saying if you really want to efficiently create a really good living for yourself … and, get ahead of the curve and ahead of everybody else. This is a great way to spend 6 months of your life … learning how to do something right … to feed your family for the rest of your life. And, probably generations after that. That’s all I’m saying.

Jill DeWit:                            Amen. Seriously. It’s beautiful. Thank you, Jack.

Jack Butala:                         Well, we’ve done it again. Wasted another … I don’t know, 17 or 20 minutes listening to the Jack & Jill Show. Join us tomorrow where we discuss how lenders can kill closing timeframes. They really extend it way too long.

Jill DeWit:                            Ha, ha, ha … ha. And, they kill other things too. Anyway … and to answer your question … should you have one, post it on jackjill.com. Downlink [inaudible 00:17:55], it’s free.

Jack Butala:                         You are not alone in your real estate ambition.

Jill DeWit:                            That was good.

Jack Butala:                         It was. I think so too.

Jill DeWit:                            I think we answered some stuff. And, our question that led into it perfectly, to talk about the transition from vacant land … to infill lots to houses. There are differences, there are nuances … there’s different things to look at but they all come back to … man, do your homework upfront. Do it right. Get the mail out.

Jack Butala:                         Yeah.

Jill DeWit:                            We threw out these numbers. To some people, they seem big … but, you know what … realistically, they’re not that big.

Jack Butala:                         You know, when we started doing this show a couple of years ago … I was just, I couldn’t get my head around the fact that … some of this stuff is pretty brainy-

Jill DeWit:                            Yeah.

Jack Butala:                         And that, who the hell is going to want to listen to brainy. But, what ended up happening is that people-

Jill DeWit:                            We’re a brainy community.

Jack Butala:                         Yes. It worked out great.

Jill DeWit:                            There are brainy people out there.

Jack Butala:                         And, that’s who we want.

Jill DeWit:                            Mm-hmm (affirmative).

Jack Butala:                         That’s who our customers are.

Jill DeWit:                            Exactly.

Jack Butala:                         They’re super sharp, smart people who aren’t afraid of data … who want to make some dough.

Jill DeWit:                            Exactly. That’s it.

Jack Butala:                         It ended up working well for everybody.

Jill DeWit:                            Exactly. What would you describe it? Super smart, sharp people who aren’t afraid of anything and want to make some dough?

Jack Butala:                         I think that was what it was … to paraphrase, yeah.

Jill DeWit:                            It’s good. I love it.

Jack Butala:                         I think the other common thing they have is that they’re just sick and tired of putting up with the political crap at their job.

Jill DeWit:                            Oh, man. There’s enough out there. I agree.

Jack Butala:                         I know. Man, it’s a mess.

Jill DeWit:                            Hey, share the fun by subscribing at iTunes or wherever you’re listening. And, while you’re at it please rate us there.

We are Jack and Jill [crosstalk 00:19:30]

Jack Butala:                         Information …

Jill DeWit:                            And, inspiration …

Jack Butala:                         To buy undervalued property.

 

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