In real estate investing, everything revolves around leads: if you have them – business is good, and if you don’t have them – you double and triple check your lead generation funnel to see what’s wrong. The fact that you deal with multiple channels (direct mail, email, SEO, pay-per-click ads, social media, and others) doesn’t help, either. The more variables at play, the more difficult it becomes to diagnose the problem. This doesn’t mean that it’s OK to lose track of lead streams across different channels or give up on some marketing channels. Rather, it means that you should look for ways to make your process more efficient, no matter how difficult it is to troubleshoot the problem.
Unfortunately, marketing will also cost you some money. When you close deals from the leads that land in your funnel, the return on investment is great and you’ll probably consider the marketing budget as a justified cost in the process. However, if your marketing brings leads, but, for whatever reason, it doesn’t result in closed deals, then you might begin to wonder what’s wrong with the process.
We are addressing this issue below. There are many ways for real estate investors to improve the close rate of leads that are already acquired. We talked to two professionals, the popular real estate investor coach John Martinez and Corey Geary, an REI who is doing 10-15 deals every month even throughout this pandemic, to analyze in-house processes, with a focus on successful closing strategies. Let’s see how they can help you.
Since the end goal is to increase the return on investment for real estate investors, and costs are an important part of that equation, we’ll start by taking a look at lead generation. Is there a way to lower lead costs?
The answer is – it depends. Now, that may not be the answer you expected, but lead costs are influenced by the real estate market you operate in and the marketing channels you use, and there is no workaround for these two factors.
Let’s see how this works with pay-per-click marketing as an example.
In the 4th episode of the REI Marketing Nerds podcast (The Multiple Close Model: How to maximize your online return), Dan talks about market pricing of online ads. He goes into much more detail there, but for our current purposes, we’ll only get into the main points here. In a nutshell, if you are in a competitive real estate market and a lot of investors want to show their ad when people type in a specific phrase in the search engine (for example, “how to sell my house in X”), the lead cost will go up.
You can’t beat this – it’s a basic economic logic: when demand is high, the prices go up. So, if you are in a big real estate market (like San Francisco), more investors bid on the keywords and lead costs are high. And if there aren’t many real estate investors in your market, the cost will be lower.
There is only one exception to this rule of online ads, and it allows you relative leverage against market pricing: if your ad performs well, over time, the costs might be reduced for you. The reduction is a way for the platform (Google, Bing, Facebook) to give you an incentive. Let’s explain this.
It is in the interest of the platform to push those ads that end up being clicked, because the network is paid for each click. So, if your ad is crafted well (it has the right keywords, you’ve split tested great copy, have an attractive design) and when people click on the ad it takes them to the website they are looking for, your ad performs high on what is called a quality score (that’s for Google, on Facebook the metric is relevancy score). And if the quality score goes up, over time, you’ll get a chance to lower the lead cost.
But even in this instance, you can’t get away from the market pricing by a great margin, you’ll simply pay less than the real estate investor next door.
This kind of economics logic applies to all marketing channels. You can’t pay significantly less than what everyone else is paying, as the demand dictates the pricing.
Since lead costs are roughly the same for every real estate investor in the market, a better close rate will make your cost per acquisition lower than that of your competitors. Of course, you’ll have to work on your closing strategies to achieve this.
You’ve invested in those motivated house seller leads, so it’s a shame not to make an effort to maximize the return on investment by improving the way you close deals.
Before we head over to the tips from the interviews with John Martinez and Corey Geary, let us share some industry-specific data you won’t find anywhere else. We work with real estate investors in all markets, and those who have high ROI use the multiple close model. This is how Dan describes this model:
I think the most common variation of this is an investor who can flip houses when they want, they can wholesale deals when they want, and they can work with a realtor, or they have some way of making money off of leads that just want retail price. So they have the ability to flip when there’s a lot of profit to be made, they have the ability to wholesale when maybe there’s profit to be made, but they don’t necessarily want to do the work, and they have the ability to work with leads that want retail price on their home.
In other words, the first closing strategy is to diversify. Don’t bank on only one specific type of deals, because you can’t control the frequency at which these deals will fall into your lap. If you design your system in a way that allows you more options, you are effectively making your day-to-day operations versatile, and you have a multiple close model.
Let’s talk about improving the sales process itself. People have filled out a form on your website or called your business because the idea of selling their home has crossed their mind. They are interested, however, your task is to make the process easy for them so that they feel comfortable going through with it.
The decades-old sales dogma for closing real estate deals is to be aggressive (Always-Be-Closing) and to avoid negative associations (or “No” as an answer) at all cost. John Martinez says that real estate investors should be doing the exact opposite of this.
If there is an issue on the mind of your motivated seller, address it. In his words:
When I look at sales, I’m looking at it this way – I like to ask investors this question, “Hey, if you could read your prospects’ mind – if you were on the phone with the home seller or you were face to face, if you could read their mind, meaning, you know every single reason why they would sell to you or to anyone else, you knew why that was important, how that property was impacting them or what they thought about or their loved ones or whatever, and if you could see in their mind and you knew every reason why they wouldn’t take action – right – they wouldn’t take that next step, scared about not getting the best deal, not knowing where to go next, relationships that could be impacted, different sources of risk and discomfort – if you could see all that stuff, could you close every closable deal?“
Of course, every real estate investor would close the deal if they could read the prospect’s mind. This is a sort of a hint that John Martinez is dropping regarding the closing strategy. Don’t start from the reasons someone would like to sell a house – a motivated seller is well aware of the benefits. Tackle the hurdle that stands in the way of closing the deal, i.e. identify what’s holding them back and address their concerns.
Also, keep in mind that the issue that stands in the way of closing is different for each house seller. So, before you throw a scripted pitch at them, start asking questions and learn why they may be hesitating to sign a contract with you. Resolve their concern before it ruins the transaction.
Great salespersons are the sum total of their business experience – no one was born a perfect real estate investor. There is a lot you can do to become better at closing. You can start by recording and analyzing sales calls, both those that went well and those that didn’t result in a contract.
Professional training can help as well.
We wouldn’t let a guest like John Martinez go without asking him to share some of his secrets on training real estate investors. He said that the best way to understand motivated sellers is to identify with them. That’s how he structures some of his training sessions:
Now, what happens is, as we go through those exercises, salespeople, real estate investors, acquisition agents realize, oh my gosh – those people, they’re not like different than I am, they are me. They react to pressure situations the same way I do. They react to these feelings the same way I do… So we always start each lesson with someone understanding how they’ve reacted in a certain situation, how they feel, and then we translate into buying houses at discount and then we finish up with the easiest part, which is by the way, here’s some training wheels or some simple scripts you can use to accomplish that.
Don’t underestimate the difficulty of role-play training – it’s very hard to change your perspective, especially since in this type of exercise, you are actually swapping places with motivated sellers. It takes someone who has worked with people, like John Martinez, and who is able to take you out of your usual environment for you to actually understand how it feels to call a real estate investor and empathize with your leads.
We can’t talk about closing strategies without mentioning the level of uncertainty that is present in the economy, and in real estate markets in particular. Governments introduced all sorts of laws as a response to the virus. How do you close a deal when you can’t even visit the house that is being sold?
The best way forward for real estate investors is to close as many deals as possible regardless of the downturn in the economy. The goal is attainable, and the type of success Corey Geary (a real estate investor in Arizona) had during the pandemic is proof that when you adapt your closing strategy to the circumstances, your business can stay afloat.
He used a few approaches to close 10-15 deals a month. Let’s check them out:
Even here locally, we’re mainly virtual. We’re about 95% virtual. They’re always saying, Hey, you know, how can you buy my house without seeing? Well, Hey Mr. seller, we buy about 10 to 20 houses a month. Well you know, and what we’re paying just based off pictures and they can make you a fair cash offer just based on pictures, we’ll have them send us the pictures and then, you know, all our documentation is done through E-sign or DocuSign..
We started sending some of our deals out, you know, way under our contract price, just knowing that if we get a buyer locked in, then we’ll go re-negotiate with the seller.
We are also doing our own marketing and sales, and although we are not real estate investors, some of these lessons apply to you. So, revisit your in-house processes as we did. Is there a process in your system that is simply a waste of time? Are there processes that you need to improve?
Often, real estate investors leave deals on the table because of inefficient follow-up procedures. Dan has actually said it in the podcast, more than once, that you need to follow up forever.
It’s only logical: you spend all that money on ads, and you have no control over market pricing in online marketing, so you should be doing your best to close every single lead that enters your system. Yet, when you analyze the way your business works, some of you will find out that you drop the ball on a simple in-house process like follow ups. And the irony is – you are in complete control of your follow-up procedures – you dictate every aspect of them, including:
If you want to improve your closing strategy, take a closer look at your follow up procedures. Those who wish to learn more about our system can listen to REI Marketing nerds podcast #114: The Simple 3-Step Follow Up Formula That Closes More Deals.
When you try to evaluate the performance of an online marketing campaign as a real estate investor, make sure you take into account all of the business processes you use, from lead generation to closing deals. Metrics like cost per lead and the overall return on investment from an ad campaign will effectively change if you improve your closing strategy.
You can start working on your closing strategy by examining the insights by industry leaders like John Martinez and Corey Geary. What they have to say is simple, yet profound. And, you can also use what we share based on our experience with real estate investors that are active in all national markets. Let’s review:
You can have a better-performing real estate investing business by following these winning closing strategies.
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