Real Math Behind the Number of Needed Offers Sent to Succeed (LA 1555)
Real Math Behind the Number of Needed Offers Sent to Succeed (LA 1555)
Transcript:
Steven Butala:
Steve and Jill here.
Jill DeWit:
Hello.
Steven Butala:
Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit:
And I’m Jill DeWit, broadcasting from pretty Phoenix, Arizona.
Steven Butala:
Today, Jill and I explore the real math behind the number of offers needed to be sent out to succeed. Should I send 100? Should I send 1000? I’m brand new, I don’t know what to do. What’s the real math behind it? I really want to buy a few properties. Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free. If you’re already a Land Academy member, please join us on Discord.
Jill DeWit:
Austin wrote, “Hey, y’all, I’m doing research in an area that is heavy on lakes. The comp data is all over the place, likely due to the variants in attributes. Do you guys sort out and price specifically for waterfront property or mix them up and use one pricing methodology?” Good question.
Steven Butala:
Well, you have two choices here, and you kind of identified both of them. Depending on who you talk to in the Land Academy group or really anyone, they’re going to give you a different answer. But you’re saying, hey, what do I do? What do I do? I look at the data. I look at the mailer I’m about to send out. California’s like this. There’s a lot of waterfront property that’s incredibly expensive. And then if you go one block back, it’s a different price. Two blocks back, it’s a different price. And then three blocks back all the way to Michigan, it’s the same price.
Steven Butala:
So if you’re super concerned about pricing and accuracy, which you shouldn’t be, and I’ll explain why in a second, you’re going to take a microscopic or what I call a rifle approach versus a shotgun approach to pricing all this data. So, dream with me for a second. If you had the time and the patience to look up every property, and we have people in our group who do this-
Jill DeWit:
That’s the problem, yeah.
Steven Butala:
… and price it, every single property, you will fail.
Jill DeWit:
It’s just too much. It’s too much.
Steven Butala:
It’s too time consuming, and you’re removing the possibility of hitting a home run.
Jill DeWit:
It’s personal preference, I think, was really what it is. You can’t line by line this stuff. We’re going to talk here in a minute about the number of mail you should be sending out. You don’t have time to sit and go through 15,000 of them line by line. You’ll be here until December.
Steven Butala:
And it’s not that important anyway. Jill’s going to talk about that in a second. Pricing is not why people sign an offer, and she’ll explain that in a second. So what do you do? You got all this, let’s say Florida canal property, and then inland property. The Florida canal property is twice as expensive as the inland property on the MLS. You follow the methodology of zip code pricing, and you come to an average or a mean of all the data in that data set, and you send everybody an offer at a price that you think is appropriate below retail. So maybe it’s 20% or 30% or 40% or some number like that.
Steven Butala:
What’s going to happen is that the people who own the waterfront property and the people who own the inland property are going to get an offer roughly the same, and they’re going to sign it. Some of them are going to sign it and some of them aren’t. The ones who sign it on the waterfront, you’re going to make a ton of money. The ones who sign it on inland, you’re going to make-
Jill DeWit:
Still good money.
Steven Butala:
… not quite a ton of money, but very good money on the deal as an investment. So pricing is not why people sign offers. People sign offers because you just hit them at the right time and they were having a life event and they want to sell it.
Jill DeWit:
You could also have this. I’m sure you understand what we’re going at. Don’t spend too much time. Don’t hit your head over it. Let it roll and see what happens. Like Jack said, they’re either going to sign it and go, “Okay, we don’t care anyway. Get this off my plate.” Or they might call you back and go, “Here’s the deal. Do you know I am next to the boat dock? I’m next to the X. I’m next to the Y?” And then you can adjust. That’s my main point. Get it out there and then answer the phone, work it when they call back in, if they want to talk about, hey, I got your offer, but this is why mine’s better. I will certainly entertain that, and I might adjust my price too. So it’ll work out in the end.
Steven Butala:
Here’s two extremes. In House Academy, it’s very easy to do 10, 20, 30,000 offers with the help of the Philippines to price each asset because we’ve got the Zestimate and we’ve already got a lot of data about what that asset’s worth. So he’d take the average of those and you calculate how much money you want to make below retail, and you send everybody an offer. That’s the extreme of the rifle approach. The only reason we get away with it with houses is because there’s so much data. If we had all that data with land, it’d be easy. You could do it. With land, the opposite extreme is I’m going to send an offer to everybody in the state of Oklahoma who owns a property between two and a half and five acres for 800 bucks an acre, and I’m going to see what’s going to happen.
Steven Butala:
Up until about 18 months ago, Jill and I built a business doing that, that exact thing. With a little bit more research than what I just described, we would send everybody mail, and we kept food on the table for decades with that. And we still do. We still get offers back for years and years ago that we sent. So those are the two extremes. What I’ve found after a lot of years of doing this is the zip code pricing methodology works the best. You still hit some runs. You’ll still get a great return. The prices are a little bit more accurate. It reduces the amount of hate calls that you get. So that’s the in-between model.
Steven Butala:
Anything beyond zip code, or maybe even APN pricing is obsessive compulsive. And we have people in our group that reach out to me all the time. Here’s what I say to them. You’re on your way to going out of business. You’re obsessing on perfect pricing. This is the topic now. Today’s topic, the real math behind the number of offers needed to send out to succeed. This is why you’re listening. If you’re a technical person and a lot of people in this group are, follow me on these numbers. Maybe even write them down as I go.
Jill DeWit:
I will.
Steven Butala:
Okay. She’s going to do her nails now. I did this for the Career Path.
Jill DeWit:
Back up. This is why we’re talking about this.
Steven Butala:
Go ahead.
Jill DeWit:
Some people have this false sense of what it means to test an area, and I know where it comes from. There’s other people out there that even send 20 letters here or hand-write them and do all these crazy things. So it’s gotten to this point where it’s just ridiculous. I see people sending so little mail that they’re automatically setting themselves up to fail, and it breaks my heart. So that’s why we were talking about this. And Jack on Career Path gave the group some numbers and some spreadsheets we looked at. Here’s why you’re making your life harder. That’s the whole thing, too. The less you send, the harder you’re going to working at these deals, and you’re not going to benefit. So, that’s the backstory.
Steven Butala:
Just this is a 35,000 foot example of why it just doesn’t matter. You need to send more mail. In the left column, you send out 10,000 mailers because you suck at pricing. You suck. On the right column, you’re the greatest pricer there ever was and you send out 1000 letters. Each situation generates three deals. Each deal nets $25,000. So in each case, 10,000 units and 1000 units, you make 75 grand. How much did it cost to make $75,000? In the $10,000 case or 10,000 unit case, it costs 5,000 bucks, 50 cents an offer ish. In the 1000 unit case, it cost 500. Congratulations. I am such a good pricing awesome, amazing PhD person. Let’s look at the math now. $75,000 net on the 10,000 mailer, $75000 net on the $1,000 mailer, subtract the price of the mailer. $75,000 from 5,000, that’s what the mailer cost, I made 70 grand. $75,000 from the $500 cost, I made $74,500. Who the hell cares? How much time and energy and self hair pulling out did it take for me to price all these properties perfectly?
Jill DeWit:
Don’t forget, the calls that came back, I had to struggle to find these deals. I only sent 1000 offers. I didn’t have very many sellers to work with. The 10,000 unit mailer, I had so much coming back at me. I really got to just pick and choose the ones I wanted.
Steven Butala:
Wouldn’t you rather have 80 conversations with people? I know Jill would. A mailer that generates 80 conversations where people say, “You’re nuts. I will sell it for 30 though,” and then we go on and sell it for 50 or 60.
Jill DeWit:
Versus eight. 80 calls versus eight.
Steven Butala:
Sales 101 isn’t in a funnel.
Jill DeWit:
Numbers.
Steven Butala:
It’s numbers.
Jill DeWit:
It’s numbers. It’s just numbers.
Steven Butala:
So now you generated all this interest with the 10,000 unit mailer, and that 10,000 unit mailer’s out there. For decades, you’re going to be taking those calls. Versus generating maybe eight to 10 phone calls with the 1000 unit mailer and doing three deals. I hope that’s so clear because there’s obsessions on pricing.
Jill DeWit:
You’re hurting yourself by spending too much time on the pricing, not getting the mail out and not doing enough mail. That’s it. I know this is sounding like a broken record, like your football coach story, but …
Steven Butala:
Who’s the broken record now?
Jill DeWit:
I know.
Steven Butala:
She’s telling my stories now.
Jill DeWit:
No, but it’s true that on the advanced group, we all have this saying, and it’s what solves all problems?
Steven Butala:
More mail.
Jill DeWit:
Sending more mail. That’s it. We really mean it. Send more mail. I don’t care how off you are. Get the offers out there. And there’s a show we’re going to talk about later this week about what to do with all these. Like, okay, that’s great, Jill. Now my phone’s blowing up. That’s the best problem-
Steven Butala:
That’s what you want.
Jill DeWit:
… you could have. You want to be so overwhelmed with phone calls and things coming at you, that you really get to talk to the people you want to talk to, pick the ones you love and make deals out of them.
Steven Butala:
It’s the very definition of deal flow. If you talk to anybody in real estate, anybody who has done incredibly well in real estate, they will tell you, “We had great deal flow.” You can’t create great deal flow with a thousand mailers with perfect pricing.
Jill DeWit:
It’s true.
Steven Butala:
You can create amazing deal flow with 10,000 mailers that are totally imperfectly priced. And I’m not saying arbitrarily pick a number, throw it at a dart board. I’m not saying that. I’m saying put some time in, a reasonable, pretty relatively low amount of time to do zip code pricing, like we teach, so it’s within, and then test it for a reason like we talked about yesterday. That’s all you need to do. You don’t need to take it any further beyond that. Anybody who I’ve ever spoken with in our group that’s done those basic things, test for reason, price by zip code, get a ton of mail out, does great. It exceeds their expectations.
Jill DeWit:
Totally. Happy you could join us today. Five days a week, you can find us right here on the Land Academy Show.
Steven Butala:
Tomorrow, the episode on the Land Academy Show is called the number one reason you may not be doing as many deals as you want to do. You are not alone in your real estate ambition.
Jill DeWit:
So the show tomorrow is not just about getting the mail out. There’s another reason that you’re not getting the deals, and it’s an easy fix.
Steven Butala:
Jill, I sent all this mail out.
Jill DeWit:
Super easy fix.
Steven Butala:
I got some amazing response, and I-
Jill DeWit:
And no, it’s not answer the phone, but that’s part of it.
Steven Butala:
… I’m emailing everyone back saying, “Okay, let’s do this deal,” and the deals aren’t getting done. What am I doing wrong?
Jill DeWit:
We’ll fix this. Hey, by the way, if you’re interested in learning more about us or what we do, please check out landacademy.com or houseacademy.com. We provide the education, tools and support you need to be flipping property like the pros. We are Steve and Jill.
Steven Butala:
We are Steve and Jill. Information.
Jill DeWit:
And inspiration.
Steven Butala:
To buy undervalued property.
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