Podcast

Episode #85 – How the Current Pandemic is Affecting Real Estate Investing

With the current state of the economy, what will happen to real estate investing? Will anybody sell their house anymore? Will everyone sell their house? Can you even meet with leads anymore?

With no end in sight, you can’t sit this one out. Doing nothing means you’re vulnerable to the volatile market. But you don’t have to sit around. You can be proactive. And if you know the hidden benefits of this crisis, you’ll generate more leads, close more deals and build the REI business you want. Even while other investors go on the job boards.

In this episode, you’ll find out how the economics of real estate is changing —and how to profit from it while your competition hides from reality.

Ready to be one of the winners in this crisis? Listen now!

Show highlights include:

  • Why a “peak month” can ruin your business (if you forgot this high school stats principle). ([13:08])
  • How to profit off of your competitors’ panic by doing nothing. ([16:06])
  • The real estate behemoth who “dropped out” of the buying homes–their leads are up for grabs! ([17:12])
  • Warren Buffett’s strategy to get rich from a crisis (do this or someone will exploit your mistakes). ([18:57])
  • The economic problem that makes “experts” lie to you. ([22:11])
  • As long as your answer to this question is yes, you can make money in real estate (don’t stop your marketing yet). ([24:17])
  • 3 reasons to go aggressive in your marketing right now. ([25:33])

To get the latest updates directly from Dan and discuss business with other real estate investors, join the REI marketing nerds Facebook group here: https://adwordsnerds.com/group

Need help with your online marketing? Jump on a FREE strategy session with our team. We’ll dive deep into your market and help you build a custom strategy for finding motivated seller leads online. Schedule for free here: https://adwordsnerds.com/strategy

Read Full Transcript

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. [00:33.5]

Dan: All right. Welcome to this week's episode of the REI marketing nerds podcast. As always, this is Daniel Barrett here from AdWordsnerds.com. Hope you are doing well. Hope you are feeling good. As I'm recording this, we are right in the thick of it folks, the COVID-19 Corona virus epidemic is sweeping the world and it has really started to affect life here at home. I live in Connecticut, that's where my business is situated and you know, as of today, which is a Monday when I'm recording this, all non essential businesses are going into shutdown mode. You know, we're, we're, they're, they're banning any kind of get together pretty much of any kind. It used to be 10 people or less, now it's pretty much just don't get together. You know, schools are closed. It really is a completely unique events. This is, I mean hopefully a once in a lifetime thing that you and I are living through and it's stressful. [01:54.9]

I mean it is stressful. I mean a lot of people are out there saying you know, this and that and you know everyone's got their opinions. But I think no matter where you fall down on this issue, I think it's pretty clear that there's a lot of strain, a lot of stress that goes along with the uncertainty that follows an event like this. And quite frankly, I don't know what's going to happen and you don't know what's going to happen and we just really don't know. But there are a lot of estimates that say could be pretty bad. And I think already as I'm recording this again, the week of March 23rd there's been a pretty dramatic impact on our economy and the stock market and a lot of uncertainty floating around. And so the obvious question if you are a real estate investor is what does that mean for me? [02:44.8]

What does that mean for my real estate investing business? What does this mean for the housing market? What does it mean for my marketing? And so today, that is what we're going to dig into. That is what we're going to talk about and I'm going to share the things that I have access to, the information that I have that I don't think many people have access to. And I'm going to hope that that provides some value and you can sort of add it to the pile as one more piece of evidence, one more thing that you can add to your data set to help you make the best possible decisions. A couple things before we get into it this week, I am going to be frequently updating our blog and our Facebook group with updates on what we see online in terms of what's happening to the volume of seller leads, the total number of sellers searches, what's happening to the big kind of ibuyer competition and stuff like that. [03:38.0]

So if you want to see my more frequent updates, oh, you can go to our blog at AdWordsnerds.com just click on blog and you'll see my latest posts there. You can also find us in the Facebook group so you can go to AdWords nerds.com/group to join the REI marketing nerds Facebook group and I will be going live. I just went live in there this morning, shared the most recent kind of data from the past couple of days and I'll be doing that very frequently there, just trying to keep the community as informed as possible. So again, if you want that's totally free. There's no click through thing, you don't gotta to give me your email or anything. It's just totally going to be free and put out there as a resource. Again, AdWordsnerds.com for the blog or go to AdWords nerds.com/group to join the free Facebook groups and see the stuff that I'm doing there. [04:28.2]

All right, so let's talk about the impact that COVID-19 is having on online marketing for motivated sellers. And what I'm going to do is I'm going to dig into the AdWords Nerds dataset. Now, if, if I'm not sure how much I've really talked about this and hey, if this is your first time listening, you may not have a great idea of who I am and what I do so… I run a company called AdWords Nerds. We're a marketing agency that works with real estate investors. We only focus on motivated sellers and we were really the first agency to do that and we've been around for pre long time, getting close to a decade now and have worked with investors big and small all over the country. So we have a really large dataset from Google ads in terms of what motivated sellers click on what they search for, how that behavior is changed over time. [05:18.3]

And it's very, very hard to get accurate search numbers from Google outside of paying for them in Google ads. There are some kind of like public facing a traffic volume tools, but they all use estimates. They're all really inaccurate and in my experience, so what we're going to do is kind of open up the doors and share our dataset with the world and really talk about what we're seeing. And hopefully that's going to give us kind of a window into how the corona virus is affecting the real estate marketplace, how it's affecting how people sell their homes, etc. Now I will say, of course, as a caveat here, this is such a rapidly changing situation right? Like coronavirus now is very different than coronavirus a week ago, which is a million times different than coronavirus a month ago. And so these numbers are going to change a lot over time and our interpretation of them is going to change a lot over time. So I don't mean to put out wherever I'm going to say to you in this podcast as the only answer, the only interpretation. [06:22.0]

I'm going to share my data, I'm going to share with you what I think it means. But you should always run this through your own filters, right? Your own kind of common sense, your own understanding, your marketplace, right? Like your own experience. All those things are very valid. I just want to put this out there as, as a thing that you can add to your mental toolbox. But I don't mean to say, “Hey, I'm the expert guy and you've got to listen to me”, because I think if anything, what this whole event has really taught me is that a lots and lots of people feel very comfortable weighing in with really high degrees of certainty about things that we really just don't understand. And you know, we all have our, our data sources, right? Whether it's the media or or a certain kind of newspaper, a certain news channel, certain kinds of internet person or, or whatever it is, the place or where we get our information. And we tend to view that as the narrative. [07:19.1]

And I think what this whole event has really taught me is a lot of people who seem very sure about their narrative are just wrong. They are just wrong. And not only are they wrong, they are incapable or unwilling to go back when they are proven wrong, in revise their assumptions or their mental models. And that to me is just, it's just poison. It really is. I am a deep believer in the power of our rational mind and the power of reason to help us make the world a better place. And the absolute core of that belief is the ability to admit when I'm wrong. [08:08.8]

And you know, I, I really believe like we should be happy when we're proven wrong because whenever you're proven wrong, it means your mental model of the world is improving. It is improving you believe something that was wrong before or inaccurate or misguided or whatever it is and now you get the chance to fix that. What a wonderful gift. But it's easy to say it and it's harder to do it right cause you've got to realize that you're wrong. You've got to take that on the chin, right? It's hard on our egos. I mean, look, I'm not exempting myself from this at all. We all do this. So again, I'm not putting myself out there as the word on this. What I am going to try to do is share with you some information I don't think you could get elsewhere. And take it for what it's worth.Like I said, if you frequent updates and movie trying to go live several times a week in the REI marketing nurse Facebook group and on the AdWords nerds.com blog. [09:03.9]

But let's get into this. So how is coronavirus COVID-19 affecting what we see in Google ads in the AdWords Nerds dataset. Well, a couple things and there's a little bit of context that I think you need here. For one, you have to understand a little bit about where we're coming from. 2019 in general was a month, a year that saw decline in the total number of searches and clicks for motivated sellers. Okay. So the total number of searches in general declined month over month from 2019 all the way through the end of December, 2019 and actually October, November, December of 2019, we're pretty poorly performing months in terms of the total number impressions total number of clicks. [09:52.8]

Now we'll say the total number of clicks declined more slowly than the total number of impressions. So there's still a big chunk of like motivated seller people out there that are kind of are the core of any investing business. I don't really see any big evidence that in 2019 that total group declined, but it was more like the people that are kind of on the fringes. The people that were like kind of motivated but not, you know, not really the people who, you know, it's, it's kind of up for debate whether they're going to go, you know, selling on the MLS or selling to an investor, those people saw general kind of decline in 2019. Now the catch to that is that February of 2020 was actually a peak month. In fact, a February was one of the highest home sale rate months of the last two years.And we saw this reflected in the Google ads data. And in fact, I knew this from the Google ads data before I knew anything about the home sale data. [10:51.3]

So the Google ads data, I could see like, okay, you know, the total number of searches had been declining over time in February it peaked to around 4 million searches or 4 million times that our ads were displayed by our clients in February alone. And I should say these numbers are for our clients remember. I don't mean this is the total, I just mean total total number of searches that our clients got in front of. Okay, so 4 million, which is a giant peak. I think we had dripped in December below a million. So significantly, significantly higher. Right? And then same thing with clicks. Clicks actually jumped up higher than impressions. So clicks went up to almost 50,000, so in the month of February, so February was a giant peak, right? [11:36.5]

You can kind of think of 2019 is a slow decline and then bam, we hit, we hit January, February. January is good. February is amazing, okay. So what happened there? Well, you know, I actually had a member of the REI marketing nerds Facebook group bring this up to me, he said that, “What happens in February is that COVID-19 coronavirus starts to hit you in the United States in February. And people just start to internalize a little bit of this anxiety.” Now I will say, you know, the coronavirus was not viewed to be anywhere near as serious in the United States. I would, I would say in general, in February as it is now in March. Okay. So you could take this with a grain of salt, whether this is a good explanation for this, but he was saying, what if people start to internalize some of that uncertainty? They start to do some research on what their options are for selling their house that, you know, might explain some of the increase in impressions.” I think that's actually not a bad explanation. [12:31.7]

So you can almost kind of see the sort of awareness of coronavirus hit the United States reflected in home sales searches, which is really, really fascinating. So you know, February, we see this peak. Now March, we see a slight decline and there's a couple of things to think, keep in mind for this. One, a slight decline from the peak is still significantly better than we've been doing. So March right now is the second best month of the year. Right? So, you know, it's not like we've had a bunch of months of the year, but you know, even though there's a slight decline from the peak, you know, that's still doing really well in terms of impression volume. [13:06.9]

The other thing to keep in mind is that whenever you have a peak month, we expect there to be a regression to the mean by which I say we expect the total number of searches and clicks to be closer to average. It's just like, you know, if you're, if you're a basketball player and you go out and you have an incredible game, you know, career defining game, highest number of baskets or whatever, you expect your next game to be good but not as good as the peak. And so I kind of expected that for March anyway and I think some of that is just statistical in terms of we're regressing on mean, that's kind of what's happening there. So slight decline back in as we go into March, but not huge. [13:43.2]

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Now what's interesting is that we also see prices started ticking off a tiny bit in March. We went up to nationally about $6 and 67 cents cost per click, which is the amount on average that someone that we are paying when someone clicks on an ad that ticked up from about 450 in February so. February we're paying about $4 and 50 cents a click. In March, it takes up to $6 and 67 cents a click. Now again, I want to say this is national average data spread across all our clients. So there are some markets where people are paying $40 a click, you know what I mean? And that's just what they pay. So those markets, they're not $6 and 67 cents a click. It's those markets averaged with every other market in the United States. So if your particular cost per click is higher or lower than the average, it doesn't really necessarily tell you a whole lot. I'm just giving you kind of like the broad picture here, right? But the broad picture shows costs ticking up a slight amount. [15:10.2]

And I actually have a reason why I think that is which I'll get to in a second, but just kind of keep this in mind, right? So like February is an amazing month in terms of volume and really, really low costs. And then we go into March, we see a slight regression to the mean cost starts to tick up a little bit. Impression volume starts to tick down a little bit. Now let's talk about leads, right? So we'll talk about lead volume. And when you look at lead volume, actually lead volume ticks up slightly in March. In fact, the week of March 9th, we add 227 leads. So that's actually higher than it was the week before. It's higher than it was in any week in February, which was this amazing month for us. Right? So we're seeing volume tick down a little bit, cost tick up a little bit, but the number of conversions, the number of leads actually going up. [15:58.7]

So what is happening here, right? And a couple of things are happening that I want us all to keep in mind. For one, there are significant parts of the market that are currently withdrawing their marketing spend and you and I just kind of think of it this way, right? In any situation where there is uncertainty and like I said, there is certainly uncertainty about the coronavirus and COVID-19 and what's going to happen and what's it doing to the economy? There's a ton of uncertainty, right? Well you look at any market driven part of the economy, so let's take the stock market, which is like the most commonly understood one, right? What happens when people are uncertain? They typically take their money out of the market.Okay. You know what happens when investors are not sure what's going to happen in the housing market. [16:48.5]

They tend to take their money out of the market. In this case by withdrawing marketing spend, maybe they're doing less deals or making less offers, whatever it is. Right? And it makes sense if you, if you do less marketing, you're going to make less offers, right? So it's like the two kind of, you know, help each other along not in a good way but, but in a negative way. So how does this affect what's happening now? Well, you see companies like Zillow for example, Zillow just announced that they are completely ceasing all of their home buying operations. So Zillow, do you know, many of you guys know is probably the biggest of the ibuyer companies to sort of venture back Silicon Valley startups that are disrupting the real estate investing space. They've been spending a ton of money on marketing, making tons of deals that can be very disruptive if they're in their market. And then bam, they just stop. [17:40.2]

There's not doing it right, Zillow's not doing it. Then the other companies haven't announced that. But Zillow just publicly announced they're no longer buying homes. My strong suspicion is that a significant number of other companies are doing the same thing. I mean, this applies to some smaller investors as well you know, mom-and- pop investors, remember people get uncertain and they withdraw money from the market. Now here's the thing about markets, you make your money in a market when other people make mistakes, all right? You make your money in a market when other people make mistakes. How do you make money on stock? You buy a stock for less than what it is really worth. So let's say the stock is really worth $5 you find someone who will sell it to you for two and now you just made an unrealized gain of $3 and if you find someone who's willing to buy for what it's worth, now you're $3 richer. [18:37.4]

As a real estate investor, how do you make money? You make money by purchasing a property for less than it's potential worth and then selling it for that amount. I bought the house for $100,000 I put $10,000 worth of repairs and I sold it for 200,000 that is when you make your money. All of those transactions buying the stock buying house, they all hinge on people making mistakes and we all make mistakes, right? But it all hinges. If everyone truly understood, down to a penny, righ, the actual worth of everything that they bought or sold, you couldn't make money in a market, right? You just couldn't do that! Outside of, you know, putting in labor. So this is just basic economics, right? All, all money is made in any market when people make mistakes and when people are uncertain and they get afraid and they get anxious, they make mistakes. [19:34.4]

This is the classic Warren Buffet line. When do you buy stocks? You buy the stocks. When there's blood in the streets, that's when you buy it. So I'm not saying that, my advice is that you go out and you buy all the stocks or anything. But what I'm saying is this is the kind of situation in which competitors withdraw their spend from the marketplace. So how does that affect what we're seeing in Google ads? Well, what we're seeing is for our clients, like for my clients that I manage that pay me every month to have their best interests at heart, right? The fiduciary standard, I've talked about this, I think we did a whole podcast episode on it. When people pay me to have their best interests at heart, right now what I do is I fold the line because what I see is costs going down in the amount of leads going up. So unlike, look, people are still selling their homes, right? As long as my clients can still buy homes, that's my job is to get them homes to buy. So go out and do that. [20:29.8]

Well, what's happening is because there are competitors dropping out of the market, the cost to compete is going down. Well, you can imagine like if you went to the stock market, imagine like the old school stock market where you had to be on the floor to buy and sell and you imagine like have you seen a movie writer or are you, you know, you used to be in that scene you got all people with the paper and they're yelling and they're screaming and there are “Buy, buy, buy, sell, sell, sell.” You don't know they're doing that whole thing. Well, when you can imagine, right? Going to that stock market where it's packed, everybody's trying to buy, right? There's so much volatility. That's one situation. [21:01.7]

If you go again and there's only two people there, that's a very different situation. And when you have way less competition in an environment like that, costs are going to be down. You have way less people to beat you up, way less people to compete with. Costs are lower. So what happens with all these big companies and these mid com middle companies and these smaller companies withdraw their money from the marketplace? Well cost per clicks, which is what we buy in Google ads go down and when the cost per click goes down, we actually end up getting more clicks. There's less competition. So more people fill out the forms. Generally that's what I'm seeing, right? I'm seeing a good chunk, not a huge chunk, not the majority, but a good piece in the market. Just kind of getting freaked out and pulling their money. [21:45.7]
(21:45):

And when that happens, things get better for everybody else. So for my clients, they're staying in the market because I'm like, Hey, everything's actually getting better. My job is getting easier. Right? We're getting you more for the same amount of money you were paying me before. That's great! Now when will that change? Because, look, this is another thing I've noticed and I'm just kind of riffing here, right? This wasn't on my list of things to talk about, but you know, an event like this will really bring out people's self-interest. Okay. And I, so saying like, you know, it's really funny, I did a Facebook post on this where I was like, it's really funny how everyone's take on the coronavirus and what should be done about it aligns perfectly with their own set of incentives, right? So if I'm a restaurant, I think, look, this is all totally overblown and we need to get past this. We need to do herd immunity, right? If I've got like a sick loved one at home, I'm social distancing and I'm wearing the gloves and the mask and everything, right? [22:46.6]

And look, there's nothing wrong with that. Everybody has incentives. But the thing that kind of, I will be honest, it turns my stomach a little bit. It's like when people don't reveal those incentives or aren't self-aware enough to realize that those incentives change how they see reality. So look, here's my incentive. I run a marketing company, right? I do marketing for real estate investors. The fact that I look at this situation and see an opportunity, right? Like you should take that with a grain of salt because I have something indirectly to gain from it. Now, here's the other point, right. Like I also have skin in the game. Meaning that I also take my own advice like I do online advertising for clients every single day. That's how I grew my business. My friend Nicco has calls this eating your own dog food. I use the strategies I use for my clients, for myself and I will tell you for my own business I have not slowed down my ad spending at all. If in fact I've actually ramped it up a little bit. [23:45.7]

So I will say that like here's my skin in the game for you. Look, my incentive is you know to look at this as an opportunity because that's gonna mean, you know people are going to keep marketing. I do really think that the evidence and I hopefully I've made my case here today, the evidence points to that as being the right strategy. I'm telling all my clients to do that and I am doing that. I am following my own advice. I'm not telling you to spend money on marketing and then pausing my own. I am not doing that right. But what I will say is that this is such a rapidly changing situation that I don't really know what's going to happen. And so for me, the thing that really matters is can my clients do deals on the backend? If my clients can still do deals, it doesn't make sense to stop their marketing because they need income now more than ever. If you are worried that it's going to be tight, stopping, your marketing is going to make that worse, not better. Right? Now, the flip side of that is like if I see it such a dramatic, if there's such a dramatic decline in supply, meaning that the amount of leads or the amount of total searches just crashes, it goes down so low that then costs go up because again, basic economic supply goes down. You know, demand is the same. [24:58.0]

That means costs go up. So let's say like cost skyrocket because supply goes down. At that point we might start pulling back some of our client ad spend. But if anything the opposite has happened, meaning supply has gone up and competition has gone down. So for right now at least we're in a really good place. So my strong suggestion is, again, don't take what I say as gospel. Take everything I've told you with a grain of salt. Weigh it against your own mental models, your own common sense, everything you're seeing in your own market. But I will tell you, like at least from my point of view, what the data is showing me so far is that there are still leads in this marketplace. They are cheaper now than they have been. In fact, ours, there's more people you're sitting at home and searching. Then there really has been in years. [25:43.7]

So for me, if you can still close deals, now is the time to market because I don't know what's going to happen. Look, six months from now, I really don't. And you know, for me, I'm like, look, if there are leads and deals and clients out there to be had, I'm gonna lock them up now while I'm still able to, to prepare for later. I hope that makes sense. And I hope this was useful to you. Like I said, I'm posting free updates, sharing all of our data every single week. In fact, multiple times a week at our blog, which is AdWordsnerds.com/blog/ is it advertisers.com/blog let me look at this. I'm going to do this now. It seems like it would be slash blog anyway, just go to AdWordsnerds.com click on blog. It is slash blog. You can find our stuff there, including a complete breakdown of all our data and how it's being affected by coronavirus and COVID-19. I will keep that updated and you can see me go live multiple times a week and talk about this answer questions in our Facebook group, which you can get to at AdWords nerds.com/group or just go on Facebook, type in REI marketing nerds. You'll find us. It's free. [26:49.4]

And I'm in there trying to help as many people as possible and look I'm sure I'll be back talking about this again, but if I can leave you with anything, it would be this. Remember that everyone you hear from has a set of incentives and a set of mental models and set of frameworks that they use to understand the world. And the very beginning of empathy and understanding is understanding that those people have those frameworks, we have those frameworks and those frameworks drastically change how we view the world. And the more we can understand not just how we think, but how other people think, the better we can come to mutual understanding and the better equipped we will be to solve our problems. And look, if I get one last, last, last thing, please stay safe. Stay healthy. I wish you and your loved ones, nothing but good luck. I know we can do this together guys. [27:44.2]

And real estate investors have been through some really tough times before and there will be through really tough times again. But I have met some of the most intelligent, caring and helpful people I've ever met while working with real estate investors. And I have a lot of faith in what we can do as an industry. So I'm going to look at this as an opportunity. I hope you can too, and I wish you nothing but safety and health. This is Daniel Barrett from AdWordsnerds.com signing off. Talk to you next week. Cheers. [28:13.4]

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