Episode #144 – Running The Numbers In Real Estate

You're listening to the “REI Marketing Nerds” podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords Nerds, a high-tech digital agency, focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition, and live a freer, more awesome life. And, now, your host, Dan Barrett.

Dan: All right, hello everybody, and welcome to this week's episode of the REI Marketing Nerds podcast. As always, this is Daniel Barrett here from AdWordsNerds.com.

As always, if you need help with your online marketing strategy to find more motivated seller leads and deals online, you know where to go. It's AdWordsNerds.com/strategy. We will hook you up. We will tell you what is working. We will tell you exactly what you need to do in your market right now to get more leads and deals online. [01:12.8]

Speaking of leads and deals this week, I want to talk about running the numbers. Running the numbers. I want to talk about this because you guys know, if you've listened to this podcast before, you know that basically all we do every day at AdWords Nerds is help real estate investors find motivated seller leads. That's what we do, right? It's what we're good at. It’s what we do. We focus on pay-per-click marketing. It's very fun.

One of the reasons I love pay-per-click marketing and I love what I do is that there's a number objective measure of success, right? At every step of that process, there are numbers that come at us and there are a variety of ways you can interpret those numbers, but there's some kind of objective measure of success. We're working with investors. We're trying to generate deals. The more deals that we generate, the better that we're doing, right? That's how we think about it. [02:08.5]

But even before we generate a deal for a client, there are a variety of objective measures of success coming down the line, right? What we would typically call a leading indicator, for example, the number of leads generated, the conversion rate of the landing page, the click-through rate if we say, Oh, your average cost per click dropped by 50%. These are all indications of success. They're basically a compass saying, Hey, you're headed in the right direction.

Me personally, I get a lot out of that. I really enjoy that. I'm 41, so I had to think about it for a second, but I'm 41 years old. I'm from a generation that grew up with video games. I grew up playing Mario and playing Link, and playing Dragon Warrior and all these things, and I like seeing the number go up, right? I like seeing my level go up. It makes me feel good. [03:07.5]

It’s one of the things I love about what I do and it's one of the things that I'll typically bring up if I'm talking to an investor and I'm talking about their marketing and I'm saying, Hey, should you get involved in online marketing? Is this a thing you should be investing in? One of the things I'll often say is that something that’s really nice about it is the immediacy of the feedback. You do the thing. You get the feedback, right? Whereas with direct mail, you've got to make the mailing and set it up, and then you’ve got to send it out. The feedback loop is still there, but it's longer. It's a little bit slower, and so if you want that immediate gratification, this was a great marketing channel.

But the reason I'm bringing this up and talking about this is because I had a conversation with my team that was really surprising to me. I'm sitting down with the team and we're going over accounts. We're going over clients that we're working with and we're talking about new people that are doing well, people that need more help. [04:00.5]

I said to my head account manager, “What are the metrics that you think are most correlated with long-term client success, in terms of how long they invest in Google Ads? Is the conversion rate really kind of the canary in the coalmine or is it cost per click, or what's the thing? What he said really surprised. He said he doesn't think that any of the Google Ads metrics are correlated with long-term investment in the channel.

Now, essentially what that means is there's no number in Google Ads that he thinks determines how long someone invests in this marketing channel, and I was really surprised by that. I said, “Look, of course, the better that their account does, the better the lead flow, the lower the cost per deal acquisition, the longer they're going to invest in that channel. Right? That makes sense.” [04:57.1]

He said, “Yeah, it makes logical sense, but it really doesn't work out that way. You can have some clients that are doing incredibly well.” In fact, there's this one client I always think about specifically, he made $100,000 in profits. In profit, after fees, after ad spend all that stuff, $100,000 profit, and he stopped, stopped doing the Google Ads.

I was think about that as sort of an example of a time where rationally it doesn't seem to make a whole lot of sense, and so I asked Justin, our account manager, “What is most correlated with whether someone sticks with this type of marketing or not?” and he said, “How they feel. It purely has to do with how they feel about the process.”

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Now, this was kind of an interesting conversation. We went back and forth. I was saying, no, no, no. Investors are much more rational than that. They're not really emotional. Investing is all about ROI. We're going back and forth. We're having this argument. Not an argument. A spirited discussion, right? [06:30.2]

Anyway, I go about my business. The meeting ends. We put some plans in place for those clients. The meeting ends. I go on and I have a call with another investor, and this is an investor that's working with us and they're a little concerned. They're a little concerned about their ads, so I want to get on and talk it through with them and talk about it. They say, “We're not really getting the lead flow that we expect. We're a little nervous. We're spending all this money,” and I say, “Totally understandable. Let's talk. Let's go through the numbers.” Again, numbers, bringing it back to the numbers. “Let's go through your numbers and figure it out.” [07:00.5]

I say, “Okay, you've had X number of leads.” I forget what it was and I say, “Have you closed anything?” and they say yes. I say, “Okay, great. Wh7 did you end up doing this?” and we put two deals under contract, so there are two months and they put two deals under contract.

I say, “Wow, I'm going to be honest, that's more than I expected based on the tone of our conversation.” I say, “You've spent about $3,000 in ads. Yeah, no joke, $3,000, a lot of money. Totally understand. Spent about $3,000. These deals that are under contract, what do you think you're going to make from them” and say, “Oh, about 30.” This is a client that spent 3,000 and is going to make 30,000. That's a 10X return on investment. But they were worried.

Now, why were they worried? They were worried because whatever expectation they had in their head about what this was all going to be like, it wasn't living up to that. Now, even though they were getting a 10X return on their investment, maybe they thought they were going to be getting 20 phone calls a day, which I will be honest, our approach is primarily about quality leads rather than quantity. We would much rather produce 10 leads and two deals than 20 leads a day and two deals, right? I don't know if that makes sense. [08:16.2]

But in any case, whatever their expectation was, it didn't live up to that. Now in terms of actual results, it was actually better than they had expected. When they were able to sit down and actually look at the numbers, they were able to see that. But I bring this up to say that this is something we all do. We all get emotional about what our businesses are doing. This is totally normal. It's totally understandable.

If you are like me, a business owner, right—you are an investor. I run an agency that works with investors, but obviously we're both business owners—I feed my kids with my business. I pay for my kids’ college or someday. I save for my kids' college with my business. It's incredibly important to me that the business does well, and so it's easy to get emotional and wrapped up in the moment where you feel stressed or you feel tense when things aren't going the way you expect. It's totally normal. [09:12.0]

But the thing that you and I have as business owners that everyday people don't have as they kind of go through their lives is we can run the numbers. We can run the numbers. We don't have to rely on our gut. We don't have to rely on our feelings. We can look at the numbers and say, How am I doing?

When you can do that, you allow yourself to anchor your emotions in reality. My friend, Nick, often says this. He says entrepreneurship and really all of life is purely a matter of who is more connected, more intimately tied, to reality, because if your actions are connected to and intimately tied to reality, you are going to have better outcomes on average than someone who is purely operating in the world of emotion or fantasy. [10:04.0]

I don't think I need to tell you this. I think you know this, but like most things in life, right, we all know things intellectually and, in the moment, we get swept away. Here’s what I want to say. I'm not saying, ignore your emotions or ignore your gut. I'm actually not saying that at all. I think your emotions are an early-warning trigger system that evolution has given us and they're incredibly powerful, so don't ignore them by any means.

But—but, but, but—when you have a strong emotion and sense of stress, sense of anxiety, or even the other way, if you are elated and you feel everything is amazing and nothing could ever go wrong, make sure you also run the numbers, because when you run the numbers, you are ensuring that your actions are closely connected to reality, and that's going to make you successful and more rich, and more wealthy and happier over time.

I hope that makes sense. As always, this is Daniel Barrett from AdWordsNerds.com signing off. Thank you so much for listening to this podcast every week. I cannot tell you what it means to me, and I will see you next week. Cheers. [11:13.4]

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