Episode #004 – The Multiple Close Model: How to maximize your online return

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 in deals online. Outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.

Dan: Hello everybody, welcome to this episode of the REI Marketing Nerds podcast. As always, this is Dan Barrett here from Adwords Nerd. Super happy to be with you here today. Sipping some ice coffee, it's sort of a rainy, gloomy day here in Connecticut, it's the perfect time to cuddle up with a hooded sweatshirt and talk about marketing, which is why we are here. Actually this week's episode is going to be interesting. We are getting a little bit off the marketing path and I want to talk a little bit about more of the investing side of your real estate investing business, I'm talking about the kinds of deals you are doing. This isn't something I usually talk about, because honestly it's like not my realm of highest expertise, and generally I'm really, really focused on that lead generation side, that's what I do. I want to talk about this because no one really talks about it, and it is increasingly important. I see the importance of this more and more as we do lead generation for investors, as I work with investors, as I talk to investors, hand out on message boards and all that stuff, I really see the impact these decisions have on the long term success that you have in your investing business. I want to dig into this, and I want to dig into the multiple close model. I'm going to tell you kind of an uncomfortable truth here, which is that no matter how awesome your marketing is, even if you are invested heavily in something like pay per click marketing or you want to be invested in that channel, no matter how awesome you are at it, when the channel gets expensive, your lead costs go up. So before we get to the multiple close model, we need to take a second and understand market pricing online. This is, I think, really illuminate some issues that you might be having or you might be seeing people have, because there's a lot of confusion about how this works.

I want you to think of online leads. We'll talk about pay per clicks, that's the one that this applies most directly to, but it's also true even in direct mail, and it's true in search engine optimization, all that good stuff, but we'll stay in the pay per click world, that's easiest place to understand. Online leads are going to have a market price, and this market price you can define this as the price the average investor is going to pay when they go and they get these leads from a pay per click channel, whether that's Google Ad Words or Facebook Ads or Bing Ads or whatever you want to. The market price depends a lot on the level of competition in your area. So let's say, I'm going to pick a market at random, let's say you're in Memphis Tennessee. Alright? You are down in Memphis and you are competing, you want to go online, go into a pay per click channels, start generating motivated seller leads. Well the prices you pay when you first get started are primarily determined by how many other investors are competing there, because all these online marketing channels work on an auction model. You imagine if you go to an art auction, like let's say they're selling the Mona Lisa. I don't know why they would be doing that, but let's say they're selling the Mona Lisa. Everyone's like, "I hate this painting. It's too small." They don't want it anymore, they're selling it, and they're auctioning off. You go to the auction because you really like the Mona Lisa. Now if nobody else is at the auction, you are the only one, you can pretty much set your price. Be like, "I'll bet a dollar." They'll be like, "Fine, seems cheap, but no one else bid on it so that's what it is." They bang the gavel, you give the dollar, you get painting. But you also understand that if there are a lot of other people that want to buy the Mona Lisa, and a lot of other people at the auction, and a lot of other people bidding and they're big high and they're bidding hard because everyone wants the Mona Lisa, well then you can't set your own price. Prices are going to go up, the competition drives the cost of the painting up. It's the exact same thing that happens with online advertising, pay per click advertising, where the more investors you have that are bidding on the keywords that you want, the higher the prices tend to go.

No matter how good you are at that marketing, the costs in that channel go up, then your average cost is going to go up, that market price, the price at the average person is paying goes up. Now in every pay per click channel there are systems that allow us to lower your lead cost over time. Because it was just set on competition it would be really hard to, you wouldn't be able to make a difference, everyone would get the exact same result. It would kind of be annoying, really be just a game of who could spend the most money. Systems like Facebook Ads and Ad Words build in systems that allow you to lower your lead cost over time by producing really good ads. So Facebook, this is called relevancy, your relevancy score, in Google AdWords it's called quality score, now these systems basically say, "Hey, if you create a really awesome ad, it's really well targeted, the ad is really cool, people like to click on it, and when they click on it they're happy, I'm going to lower your costs. I'm going to give you a break on the market price." And this is because this is when Facebook and Google get paid. They only get paid with these systems when someone clicks on an ad.

If you run terrible ads that no one clicks, Facebook and Google don't get paid, and if you run terrible ads that make people really upset that they clicked on them, people are going to stop clicking on ads in general. And so long term, even though Google and Facebook, they're giving you discounts on the market price, it works out in their favor long term. So over time as an investor, like when you get started in a pay per click marketing channel, you're generally paying the market price, like whatever the competition dictates. If it's an expensive market, it's expensive, if it's in a cheap market, it's cheaper. Over time you can manipulate those systems of relevancy core, quality score or whatever it is in the channel that you're competing in, and do things like split test your ads, cut low performing keywords or audiences. You can test new landing pages, you basically actively manage and work on your account, and over time your costs will come down. You'll start to get cheaper leads than your competitors, which is awesome. It's one of the things that makes this kind of marketing so much fun and can make it really, really profitable. All that is amazing, but the thing to remember is that you are bringing down the costs, you're getting those discounts off the market price. So even if you have the best marketing in the world, if your market price is significantly higher than your friend that you're talking to online, you're still going to have a higher cost per lead than your friend.

Sometimes I explain this like if you think about, you take the world's best negotiator, like hostage negotiator, I'm picturing like someone with like aviator glasses that are reflective, he's got like a gruff voice and he says, "We've got to get those hostages out of there." Like that kind of person. Maybe that's more of like a Rambo kind of charge there and kill everyone sort of dude. You're picturing what I mean, world's best hostage negotiator. He's going to negotiate a price to release those hostages. Now if you put him into situations, one in which the hostage taker starts the negotiation by saying, "We will release the hostages if you give us $100." Okay? And then in another situation where the hostage taker says, "We will release the hostages if you give us a million dollars." So two very different scenarios. One guy's demanding $100, one guy's demanding a million dollars, but you have the best hostage negotiator in the world. No matter how good they are at negotiating, those processes are going to end up in very different places. I think we can all probably guess, but the people demanding a million dollars are generally going to get more in the end than $100 people. Maybe not, but that's usually the case. If you walk into a store and you're in a haggle with someone over buying like a pair of shoes or a rug and the pair shoes is $50 or $5000, you'd be the world's best haggler, but again you're going to pay more for those shoes that started at $5000. No matter how good you are marketing, your market prices affect how low you can really get your lead cost. Even if you have the best online marketing people doing it for you. Whoever you get working for you it's going to be tough to get like rock bottom price if you're in a really expensive market.

Not to belabor the point if you get this, market prices dictate a lot of what's possible in everybody's market, and that's cool. Now part of dealing with high market prices, part of dealing with the fact that you hate... I'm in a market right now it's super competitive, super hot, people are spending a ton of money on ads, how do you deal with that? Part of it is making sure you make as much money as possible when you do get a lead. Because if you can afford to pay more for leads, because you make more from those leads then your competitors, or you can monetize a higher percentage of those leads, well that puts you in an excellent, excellent position to dominate a market. If someone can consistently pay more to get the same leads and make the same amount of money or more, they are going to eat that market over time. It is practically inevitable.

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Dan: So making more money on the back end is absolutely critically important, and the question becomes how do you do that? How do you monetize the highest percentage of the motivated seller leads you generate? How do you make the most on the back end? And this is where the multiple close model comes in. I would say the folks that we've worked with that have consistently had the highest success rates, I'm talking about, this real world data based on the work that we do with investors, working with real investors in the real world. This is not theory. The people that have the highest success rates with online leads tend to work some variation of the multiple close model, meaning they have multiple ways to close a deal, This could mean that they are doing different types of deals, it could mean that they have different financing structures or whatever it is, but they have multiple ways of closing. They're not looking for a very narrow band of all people that are going to be the only deal that they can do, they've got a wide kind of top of that funnel where a lot of deals can come in.

This means that a higher percentage of all the leads that they generate fit into this "deals I can close category". Let's kind of make this specific, what does this actually mean? What does this actually look like? 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.

Now the retail price thing is the thing that's probably the least common among investors, but it's a huge deal because when you go into the online space, whether you're doing organic or whether you're doing paid, any of the online channels, you're going to generate fair amount of people that want retail price. This is just a fact of these channels because you can't really target people based on the amount of equity they have, and the guy that's so motivated that he needs to sell his house tomorrow at a penny on the dollar, and the person that wants to sell their house ten years from now and it's just idly curious, they both just type "sell my house" on the internet. Very few people are typing in "I need to sell my house at 70 cents on the dollar". If they were I would target them, but they're not generally typing that in. Right? So you're going to get leads that want retail price, that's just the way that it is, and if you have a way of profiting from those leads, you can offer cover your entire advertising budget flat out. You just take care of all your advertising you spend just off these retail price leads, even if you're not generating a lot of them, and that leaves you a lot more room to go big, go aggressive on the leads that you really want.

You don't have to do it this way, I'm not saying this at all, you do not have to do a bunch of different things. If you're just a flipper, you're just a wholesaler, whatever it is, you do not have to do this multiple close model to be successful, and in fact, we work with lots of people right now who're just wholesaling or just doing flips, but the multiple close model is the most flexible model there is, and it makes things a lot easier on you. Makes it a lot easier to generate cash flow, a lot easier to generate positive momentum, it's just a really good way of doing it if you have the ability to do it. But that's not all there is to do in terms of maximizing your return on the back end.

Another way to maximize your return on your online leads is to make sure you are relentlessly following up. I say relentlessly, I don't mean you are harassing people, I don't mean if someone says "Stop calling me." you just call them more, that's what I'm saying. You need to be following up with your leads regularly over long periods of time, and this is the key even if they do not seem motivated. Because anybody that contacted you via email, via phone whatever, no matter what they say, no matter what they say in that moment, they are capable of making the decision of selling you their home, or letting you put their home under contract. They would not be in the situation where they were at all motivated to fill out your lead generation form if that wasn't at least a distant possibility. And because you pay to generate that lead, anything you do after the fact to make that lead into a deal is going to massively change your return on investment that you're getting. It's incumbent on you to do, and that's a $10 word, right, "incumbent". It's something you've got to do. It's just something you've got to do.

So one of the best ways we found a follow up with people long term is to actually spread your follow ups across different channels. You use email, you use phone, you use text, you use Facebook Messenger, you use direct mail, whatever it is. And it's very common for investors to, someone will fill out the form and they'll follow up via email, they'll follow up via phone, they don't get a response, and they kind of get demoralizing, they get dejected. They're like, "Hey, this isn't working." and they leave that person alone, but I'm telling you that, look, people get busy. You can imagine someone in this situation where they are actually really motivated to sell, they're in a situation where you could really help them. You could really make their life better and they go online to search for "sell my house fast" and they fill out your form, and then the second they hit "send" the dog starts barking, the kid wakes up from the nap, the kid is sick, kid is crying, they got to make dinner, they got a clean house, their boss is jumping down their throat. I mean you can imagine the tons and tons of things that can make you forget that you even filled this form out in the first place. They may have been sitting on the couch watching Game of Thrones or whatever is popular on the date this podcast necessarily, but whatever is possible whatever's popular. They're sitting on their playing with their phone and they fill it out and then they get distracted because dragons kind of breathe fire on everybody and they just forget about it.

If you don't follow up with that person you don't give them the opportunity to remember what they did and to get back in touch with. If you're doing emails and they're not responding, maybe they just don't get your emails. Maybe your emails went to junk, maybe they do the thing that I constantly do, which is open an email, read it, think that I'm going to respond to it, and then close it and forget about it. It's almost a little too real. That's a lot of real talk, but this is a real thing. I'll like open the mail and I'll read it, I'll be like, "Wow, I really need to respond to this, I'm definitely going to respond to it." and then I'll close it and I'll forget it ever existed. So following up over different channels, doing an email, then the next week maybe following up on phone and then if the next week following up via text, next week friending them on Facebook, next week sending them direct mail and then going back and doing phone and email. Doing all these things allows you to find the channel that connects with them. The one they are most likely to respond to. I'm very likely to respond to texts. I'm very likely respond to Facebook messages, but I'm much less likely respond to emails. It's just the way I operate. So by going to different channels and following up consistently over time, you really have the chance to blow up the amount of money you are making from the exact same amount of leads, the exact same amount of money you're spending, but you're getting a lot more on the back end. Throw out there a lot, and I really want you to think about it. More than a third of the deals that are done from online leads happen six months after the person initially filled out the lead form or contacted you. I mean six months went by from the time they filled out your form or were your website to the time that you actually are able to close that deal. If you're not following up over a long period of time, you're leaving a ton of potential money on the table. A lot of people are going to ask like, "Well how long would you follow up?" I will tell you follow up forever. Follow up forever.

You can use systems like Investor Views, is a really good one, but there are a lot of a customer relationship management tools, CRMs, out there that will allow you to automate a lot of your email follow up, automate your text follow up, etc. If someone has filled out a lead form for you and they have not directly told you to leave them alone, I would just follow up with them forever. Because the incremental cost to you is essentially nothing. The cost is all to acquire the lead. Anything you can do to maximize the amount of deals you're getting off the back end is something that's going to make things so much easier for you, and is going to allow you to compete incredibly well in very, very competitive markets. I can almost guarantee you if you are in a competitive market right now and you listen to this, the top investors in your market, they're paying pretty much the same thing that you are to get leads, but they are making more money from those leads. And as they say, it's a more marketing cliché, but it's as true now as it is ever been, the fortune is in the follow up.

So think about that guys, think about these two things that are really going to allow you to maximize the amount of money you make online. This is the multiple close model, being able to close multiple types of deals have more than one way you can make money from a lead and having really relentless follow up. Following up on multiple channels over a long period of time, giving people the chance, the opportunity to come back and work with you, despite the nonstop about of nonsense that life throws at everybody.

I hope that was helpful for you guys. Just like every episode, you can go to oldsite.adwordsnerds.com/podcast to check out show notes for this show, as well get a whole bunch of other cool stuff. And if you like this show, we do free trainings in our Facebook group every single week. It's the REI Marketing Nerds Facebook group, go on Facebook type it in, you can find us, or you can go to oldsite.adwordsnerds.com/group. The group is all amazing; it is filled with really awesome investors sharing strategies, tips, tricks, data about what's working for them, there are no sales pitches in there. It's an awesome place to hang out. I hope that was useful for you guys, let me know if you have any questions. Hit me up and I will talk to you guys very soon.