Note Marketing: The quality of competition is bad

The quality of competition is lousy in the note business. What I want to point out here is that you have an excellent chance at succeeding in the note business by having an acute awareness of this fact.

The vast majority of people entering the note brokering business really have no clue about what it takes to succeed on the marketing end. What’s more, their expectations are completely convoluted. You need to embrace a couple of things:

You are not going to make a killing overnight in this business or any other business. You need to start small and keep building up to a level of steady, consistent results and keep on expanding upon your successful results to increase your business over an extended time period. Marketing is a systematic science that entails proper targeting, expectation levels, methodic follow-up and continual tweaking/refinement of your approach based upon your past results.

Let’s start with expectations. I received this email from Jim: “I sent out 100 mailing s and got no results”.
Jim, your approach, I’m sorry to say is completely inadequate. You’ve got to increase your reach and sample size a thousandfold. You don’t have a snowballs’ chance in hades of getting any nibblers with a puny list like 100 names. You may as well toss your 20 cents per lead and spend it elsewhere or maybe spend it on lottery tickets. You will need to vastly increase your sample size to 1,000 at the very least and, as soon as possible or practicable, get it up to 3.000 mailings in a month. And keep a consistent output level from month to month.

Groups like ours have a tremendous advantage in that we know what our generally expected industry response rates are. You need to embrace the fact that a 2% response rate is considered good in direct mail as an across-the-direct-mailing-industry-regardless-of-business-type benchmark. A lot of people new to the note business have no marketing plan at all and if you’re not going to treat this as a serious game, you will not succeed. Sure, what I want and hope for is for every one of my 3,000 mailinghs to produce a phone call from a motivated note seller.

But, it just doesn’t work that way. The fact of the matter is that, by grand scale average, anywhere from 8 to 25 recipients might respond for every 1,000 ,mailings but I want to expand on “the law of large numbers”. which holds that the larger the sample size, the more consistent and predictable results you can generally expect over time. This is because there are far more mailings of yours out there after several months than after just one month. To illustrate, if two brokers each starting from ground zero mail out an initial 1,000 mailings, one broker might get responses but it’s possible that the other broker could conceivably get zero responses. This is largely because the sample size is so small initially that any consistency in long-term trends have yet to manifest themselves. But, by contrast, if the same two brokers each send out, say, 3,000 mailings each over a period of several months you are likely going to see more consistent, predictable response rates emerging to the point whereby you will be able to make educated projections going forward by analyzing your past results and tweaking your approach.

Granted, there are other factors at play to consider here, such as the quality and effectiveness of your message and the quality of the note holder list you are mailing to. What are you saying to them and who are you saying it to? Is your message even being read? Are you hitting the right buttons, touching on the real need while projecting a high level of integrity and credibility? Moreover, are you making it easy for the note seller to contact you? Is your call to action strong and compelling enough?

Addressing and improving upon these factors are how many experienced note brokers are able to elevate their return rates well above that minimal 2% benchmark.

You also need to realize that—and this is perhaps the biggest key in building up the response rate—follow-up is the single most important thing if I had to pick one. Well, I guess there’ two: the other factor is that the quality of the note holder list you’re using is the number one key and then the message and the follow up are numbers two and three.

If you don’t have a quality list made up of actual private note holders (not bank-held conventional mortgage notes) that is further screened for under 90% LTV, owner-occupied single family homes, date note was taken back, and that the address you’re mailing to being current, you’re then going to get disappointing results. Please be sure to thoroughly screen your note holder list provider because, remember, this is not a television commercial where you are blasting your message out to anybody and everybody. Your list needs to be highly targeted. Think of all the of direct mail you receive at your own home. You have good credit and apply for credit cards, you get regular solicitations from other credit card companies. You buy a home in a given neighborhood and then, after you’ve been there X number of years, you receive solicitations from real estate brokers who work your area, as you are on their list as a potential seller given their stats of how often, on average, people move, and so on and so forth.

By contrast, you’re not going to be solicited by many credit card companies if your credit is less than exemplary, I’m just calling your attention to the kinds of direct mail you yourself receive as a point of illustration. Direct mailing works; these companies wouldn’t do it if it weren’t profitable but they hone their purchased lists carefully and they are not going to waste money targeting non-prospects.

We have a tremendous advantage in the note industry in that we have access to highly targeted note holder lists with the right parameters. If you have the marketing budget, you can reach almost every private note holder in existence. Essentially, we have the ability to buy or broker as many notes as our marketing budget allows.

OK, that’s it for today, be sure to check out my other educational videos concerning note investing and brokering, we’ve been around longer than anyone else in the industry today and there is a wealth of knowledge you can tap into at our website Noteinvestors.com. Bye for now.