Episode #008 – How To Get a Permanent Unfair Advantage In Your Market

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 and welcome to this week's episode of the REI Marketing Nerds. As always, I'm super happy to have you here. I've been sipping iced coffee, it's been sort of a long day. My wife and I had just closed on a new home for us in our kids and we're super happy about that, obviously real estate is on my mind, and I'm taken sort of a detour. If you've been following along with the show, first of all I really, really appreciate it, and if you have gotten value out of the stuff that we've talked about here today or any of the episodes, any of the weeks, if you've ever gotten any value out of this show, please go head on iTunes or Stitcher or wherever you get your podcasts, leave us review, honest review, subscribe to the show, whatever you can do, that helps other people find us which I really, really appreciate.

But I've been following kind of set plan. I've had, like in my head a series of episodes that I want to do, that are going to cover major, major issues that investors face when they get into online marketing for motivated sellers, and I've been kind of going on the list and taking care of those episodes. I'm going to swerve a little bit to the left and I'm going to get into a subject that is very current for me, current for the company, current for our clients, because I think it's so important. Originally I was going to leave this till week 20 or something like that, and I'm going to do it now. I'm going to do it now because it's timely and it's urgent and it's something that I think can have a really huge effect on you if you understand it, you understand how it impacts your business and how to use it in your investing. So let's get into this.

First things first, I want to take a step back and I want to talk a little bit about the investing market that we are in right now. I'm going to date this podcast a little bit because, obviously, if you are from the future and you're listening to this 500 year from now, obviously, I'm sure the real estate market is very different, we all live on Jupiter or whatever. But for right now, when I'm recording this, it's a tough market for investors. It really is. And if you're out there, you've been doing investing for any amount of time, I can almost guarantee that you felt the squeeze a little bit. That's for a variety of reasons. I'm going to pick up the ones that I think are the most important and the ones that you can really use in your own decision making. Obviously, there's a ton of things that go into affecting the real estate market, any given market right in any given moment. Here are the things I've really pulled out as being major drivers of difficulty for investors right now.

The first is that we are just in a national seller's market right now. I mean if you are out there and you're doing motivated sellers, you will have noticed that there are a lot of people that are just content to sell on the MLS, list their house because they know they're going to sell that relatively quickly. In the seller's market, you lose some of the leverage that you get as an investor from offering speed. Speed is one of the major elements of why people work with investors, and so if they can list on the market, get retail value relatively quickly, things just become more difficult for investors. I would say overall, if you look at the national kind of environment, there are probably less truly motivated sellers right now than there have been any time in the last five years. It doesn't mean it's going to continue forever, we're never going to get to a point where there are no motivated sellers, but we're definitely in a tougher market now than we have been. And at the same time, there are more and more investors in this space.

If you look right now at the real estate investing coaching business, so people who teach people how to invest or these companies that are doing big seminars and coming to town, they get couple hundred people and they teach them no money down investing or whatever it is, those businesses, those coaching businesses are booming. They are booming. They're doing record profits, record revenue, and they're having record numbers of students come through those programs and enter into the marketplace. By the way, I'm not saying that's a bad thing, I think it's awesome, I want people to get into investing, I want people to make money, I want people to have that freedom that comes with this lifestyle that we all enjoy. I'm not saying that's a bad thing, but if you are an established investor, you've been in the market for a while, or even just you're new, but you're from the last couple of years, you will have noticed the increased levels of competition. Whether that it's way more people are sending out postcards or yellow letters, whether that's you get to an appointment with a potential seller and they've got three or four other people they're also putting down offers. Actually, this is a really common thing that people will tell me, that they see people making offers in their market where they know they're going to lose money. Like the experienced investor can look at this deal and say, "Look, there is no way these people are going to make money on this deal." They don't know that yet, and so they come in and they make these wild offers and they kind of distort the market. If you are more used to this game or you've been doing deals for longer and you know how to price those things out, you're kind of left scratching your head saying, "How do I compete with people that are losing money?" I think about like people who compete against Amazon.

So that's really tough because Amazon's willing to lose money, and they can lose money for a long time. Most businesses, most investors, you can't lose money for very long. So it puts you in a really, really tough position. So, you have these two major factors. You have the seller's market and you have increased competition from newbie investors. And what that's done is put a real squeeze on the old channels that investors have relied on for marketing. If you look at direct mail, if you look at bandit signs, you look at postcards or yellow letters or whatever you're doing, those channels become really noisy because you think about if you go to a seminar you go through a coaching course and you're learning how to market for the first time, what do they give you? They give you a postcard. They say, "This is the letter that I sent, it works for me, so you send it out too." So those channels get really crowded really fast.

So we've got big seller's market, seller's market nationally, and that's putting the squeeze on investors and you've got a lot of newbie investors coming into the space, that's putting the squeeze on experienced investors, this makes the traditional marketing channels really noisy. So when the traditional marketing channels get noisy, experienced investors go online. And that's been the case for the last three, four, five years. I mean, it's wild to think about it now, but when I first started AdWords Nerds and I just started working with investors, that's like six years ago now, not very long ago. When we got started, most investors hadn't even heard of AdWords. Really nobody was doing AdWords, very few people were doing Facebook Ads. I mean it was really pretty wide open. That is just fundamentally different now, because as those traditional channels get more and more squeezed and more and more noisy and more and more competitive, the experienced investors have had to go online, because they've got to make up that difference. These are people, definitely if you're listening to this and this is you, you're going to know what I'm talking about, you've got staff, you've got people who you got to pay for, you've got overhead, you've got an office, you've got costs. If business starts to dip, if you start to get less leads or those leads start to be more expensive, you've got to find additional channels. You don't just retire. You've got to go find those leads somewhere else.

The answer for those investors has been to go online. They've been going on Google AdWords, and Google AdWords got more and more competitive and then people jumped over to Facebook and Facebook was the big thing and now Facebook is more and more competitive. So we see this process where seller’s market, bunch of newbie investors, that makes the old channels really crowded, that drives the established investors online, and now the online channels are getting really crowded. You see really sharp increase in the cost, you have to spend to get leads in Google AdWords, you see a really sharp increase in the amount of competition on Facebook, and it is tough. These are dangerous times. I did a training recently where I call these "lean times". There's a lot of competition and there's less and less leads, less and less food, whatever metaphor you want to use, to go around. There's more competition and we're competing over smaller and smaller amounts of stuff. and that makes things really, really tough. If you are out there right now and you are investing, you will have noticed this that things are getting really tough really fast.

Now how do you compete in a market like that? I didn't even touch by the way, I do mean get into players like Open Door and Red Fin that are backed by literally billions of dollars of investor capital. Okay? I don't even get into like what they're doing to the market. So how do you compete in a market like that? How do you compete in a market where there are less leads and there is more competition? Where your cost per lead is going up and your profit per deal is going down. How do you compete? Well I spent a lot of time thinking about this last couple months and I've come to the conclusion that what you need is an unfair advantage. And I want to talk about this because I think understanding this is really crucial. I'm going to get into specifically what I mean, I'm going to get into how you build this, but I want to take a second and talk about what I mean when I say "unfair advantage". I think most people when they hear the term "unfair", you have kind of a natural reaction to it. Like we're moral creatures, and most people generally believe in fair play and they believe in equality and all these things, and that's all great. I'm not saying not to do that at all. But if you want to compete long term in a hyper competitive market where things are very hard, you need an advantage over everyone else. Now if it's a fair advantage, in my terminology here, that's an advantage that other people can eventually replicate.

So let's say you design a really good ad. Everybody's sending out the same ads to everybody, everybody is mailing the same stuff to all the same leads and you're like, "Okay, I need to innovate, I need to do something different." So you sit down at your desk and you spend a couple hours just working out the perfect letter. This is like a killer letter, it's never been seen in real estate investing before, the copy is amazing and it's got pictures in there and it's personalized, it's just incredible. You start to mail this out and you get significantly higher response rates than everybody else. You are crushing it. That is an advantage, and it's a fair advantage, meaning that, you know, look, you didn't do anything that no one else could do. Everybody could have sat down at the desk and put in the time, you put in the time and you put in the work and so you got an advantage and you're crushing it and that's awesome. More power to you, everybody needs to do that, not saying that's a problem. But let's be real, let's be real. If you do that what happens two weeks from then? So you sit down at the desk, you do the copy you get the perfect letter, it's amazing, you send it out, you're crushing it, end of week one, you're crushing it. Send it our week two, you're crushing it, end of week two you're crushing it. Now in week three what happens? Well in week three, Joe Blow down the street, your competitor is going to say, "Hey, this dude is crushing it. This lady is doing amazing. This copy she sat down to write is amazing, it is pulling way better than my letters." Is Joe Blow going to just say, "Well I guess I lost, I guess it's time to retire." No. What Joe Blow's going to do is copy the letter.

So this is what happens when you are in a competition with people and you get an advantage and that advantage really works and it really pushes you ahead of the pack. Everybody else will copy you, it's just the way that it is. That's the smart thing to do in their position. I'm sure you agree. So Joe Blow starts to send out a letter and then Mary down the street starts to send out the letter, and pretty soon everybody is sending out your better letter. If everyone sends out the better letter, guess what? No one's doing better than anyone else anymore. In biology, this is called the Red Queen effect. You're a badger and I'm a badger and you evolve claws because claws are awesome and they help you survive and so you start winning, but then I evolve claws. So now we both have claws and now no one's ahead of anyone else. As you start to get advantages over other people, those advantages tend to equalize over time, and no one is any further along than anyone else so that's what a fair advantage is.

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To really survive the kind of times that we are in right now, and not just survive, but massively profit and massively improve, we don't need a fair advantage. what we need is an unfair advantage. And when I mean by that is an advantage that no one else can copy. They can't figure out what you're doing and do the same thing, they can't copy it, they can't duplicate it. It is permanently yours, and therefore does not allow the rest of the market to equalize. If you've ever heard of a book called “Blue Ocean Strategy”, it's a pretty popular business book, I definitely suggest that you check it out. In fact, I'll put a link to this in the show notes, you can go to AdWrodsNerds.com/podcast, that's oldsite.adwordsnerds.com/podcast where you can find this up episode, and I'll have a link to it there. “Blue Ocean Strategy”, really great book. Basically the idea here is that in the ocean you've got these areas where there are lots of fish, really good fish to eat, and lots of sharks tend to congregate there and eat those fish and the water gets all red with the blood and the chum, all this stuff. They call that the Red Ocean, and then over in a different section of the ocean, there's much less of these fish and so there's much fewer sharks, so there's a lot less competition. And if you're like the only shark in this part of the ocean, you can eat to your heart's content, you basically don't have any competition, it's actually much better for you. Okay?

What I'm talking about here with the unfair advantage is the process of turning a red ocean into a blue ocean, because if you have an advantage that no one else can copy, you are playing a profoundly different game than everyone else. So the question becomes, okay, if we're in these really dangerous times, getting cost for leads going up, profit per deals going down, more and more newbie investors in the market, older channels are getting crowded, online channels are getting crowded, how do I get an advantage that no one else can copy, how do I turn my red ocean into a blue ocean, how do I get an unfair advantage?

I'm going to talk about this right now. I'm not going to keep this high level, I'm going to get into this. In my way of thinking there are really three primary ways you can build an unfair advantage, and these apply to a lot of different businesses, but I'm going to apply directly to real estate investing, because obviously that's what this podcast is about. Three major realms, categories that you can build an unfair advantage in. For one you can have brand recognition that so far surpasses your competitors that they're not even really able to ever overtake you. To be perfectly transparent and blunt, that's my strategy for my company, for AdWords Nerds. I want to be the just so predominantly the most well-known, most trusted, best respected marketing company in real estate investing that even though we have competitors, they might as well not even exist. That's my strategy for AdWords Nerds. You can do the same thing in real estate investing. If you're doing TV, you're doing radio, you're all over the place, you've been in the same market for a long time, you can build that name recognition, face recognition, brand recognition to the point where other competitors' advertising is kind of like inconsequential.
The second thing is you can have abilities and skill sets that far surpass everyone else. So if you are able to close at a significantly higher rate than everyone else, that's an unfair advantage, it's very hard to overtake. If you have a system that is just so well thought out and efficient and just incredibly effective, that's very, very hard to overtake because you can just keep the volume up in a way that people can't catch up to. But the problem is with those two, so we have brand recognition, you have skills and systems, abilities. The problem is that if you don't already have those, it's kind of hard to develop them. It's like the old saying where it's like the best time to plant a tree is twenty years ago and today. If I tell you need to have dominant brand recognition in your market, that's all well and good and you might be nodding your head and saying like, "Yeah, of course." but it's really hard to actually go and do that now if you don't already have it.

That brings us to the third type of unfair advantage, which I think is the one that you as a listener of this podcast are most likely to be able to use and apply to your business right now, and that's having access to an audience that no one else has. Because the primary lever we have for improving our performance, specifically online, but I mean this applies to direct mail, literally everything, but let's talk specifically online. The primary lever we have for improving our performance is audience, it's audience, it's always been audience. If you think about the days where there was no online and direct mail was all we had, what was the biggest lever you have to pull to get a better response, to get more deals, to get a higher profit margin per deal? It's the list. Who are you mailing. Are you just mailing every house in your zip code? Are you mailing absentee owners, are you mailing absentee owners of a certain kind of property, that kind of thing. The more finely grained you get in developing your list, the better your direct mail tends to do, and it's exactly the same online. If you're doing AdWords you're talking about keyword selection, if you're doing Facebook you're talking about some kind of demographic.

Now the problem with online marketing is that everybody basically has access to the same audience. If I go on Google and I want to target "sell my house fast", well unless I'm the only person on earth to ever think of that, pretty much every other investor has access to that audience, just like I do. If I run my ads on Facebook and I say I want to target you know men and women aged 35-65 in these five zip codes. Well that's awesome, but every other investor with Facebook account can do the exact same thing. So what ends up happening is that online everybody tends to slam the exact same audiences with very similar ads, and things get really expensive really quickly. So if you can, develop an audience that no other investor has access to, so it's an audience of motivated sellers that only you know about. Like if you were going to get a direct mail lists that no one else knew about, you figured out some weird thing, like people with purple mailboxes are 50% more likely to work with an investor or whatever it is, you figured out some weird criteria, no one else knew about it and you were the only person that could mail that list, well you would kill it. And likewise online, if you found some kind of audience that only you knew about and only you knew how to target and no one else had access to, you would kill it.

That is the definition of an unfair advantage. Essentially what we're talking about here is the ability to skip the competition altogether and get straight in front of motivated sellers all by yourself. Now we can get into some weird technical stuff, like online you can keep this going, because if you have, let's say, access to a list that no one else had access to, you could then optimize that list for conversions and you could retarget just the people that converted or didn't convert or make it look like audiences, and it starts to keep spiraling into itself. You can use the technological stuff to keep building a deeper and higher performing audience. But the technological stuff, honestly, doesn't matter. The core idea here is having access to an audience that no one else has access to. So the question then becomes, of course, how do you do that. And it's different for every channel. It is.

What I've done is I'm going to send you to a series of trainings that I'm doing this week and if you are getting late, don't worry about it, you can go check in out, it's going to be it at oldsite.adwordsnerds.com/unfair, oldsite.adwordsnerds.com/unfair. And I'm going to put that on the show notes, oldsite.adwordsnerds.com/unfair. You're going to be able to pop in your email, I'm going to send you the videos I did on this, because I am doing the in-depth training on exactly how to do this. I've been testing this out with some of our clients, we took some clients we really know, like and trust, people past and present and we ran these what I'm calling "unfair audiences", so audiences that only we had access, that no one else in that market could get access to. We ran these ads to these audiences, we actually ran really boring, dumb ads, and we were honestly kind of shocked by the results that we got. I'm not going to say 100% of people had success because that's never going to be true, but I would say about 80% of the people that we tested this on either got leads significantly cheaper than their market price, or closed way more often, or both. And almost everybody, almost everybody that we ran that test on had at a minimum of two to three times ROI on their ad spend, it was awesome.

I'm so excited about this. I literally had to change the structure of this podcast and I go do these trainings because I'm really, really excited about it. So if you want to get those trainings, like I said oldsite.adwordsnerds.com/unfair, I will show you exactly how to do this and let me know what you think. I think the specifics, the technical specifics that I'm going to get into in those trainings, that's awesome, that's one thing, this core concept, this is going to be true in every market, in every economy for every kind of investing you want to do. So if you can remember the core concept of what is your unfair advantage, you're going to have a real leg up on your competition and be able to survive really, really tough times.

Okay everyone, that's going to be it for this week. Hope that makes sense, and let me know what you think. And as always, if you like this podcast, you've gotten some value out of it, leave us review, really appreciate it, and I will talk to you very soon. Alright. Bye, bye.