What Is The Return On Investment When Buying Real Estate Leads?
By far, the number on question on any investor’s mind is always RIO; and for good reason. As an investor/business owner, when dollars go out the front door, they need to be tracked and the results (return) need to be measured. But why go through all of the tedious work to track every marketing dollar? Is it really worth the time and effort? It’s always worth the extra time involved when the amount of money being spent on marketing is significant (e.g. buying real estate leads).
Do Investors Actually Track ROI on Online Real Estate Leads
The type of investors that normally contact us to inquire about buying our exclusive motivated seller leads that we generate from our site (NeedToSellMyHouse.com), are usually not newbie investors. They’re investors that have been in the business for at least a few years, have put deals together, and are looking for ways to increase their lead flow. Investors that contact us KNOW the ROI on buying leads online, so they never really ask us what the “lead to deal” ratio is, because they already know. They’ve been tracking their other marketing efforts for months or even years, and they KNOW what a good price for a lead in their target market should be.
How We Calculate RIO On Seller Leads
First off, it’s always good to know your “lead to deal” & “avg profit per deal” ratios before even beginning to estimate what your RIO should be with online leads. But how do you find that number, unless you’ve bought them before? No sweat, we’re investors ourselves and we’ve negotiated many deals from online leads for our own business, and we’ve found that it usually takes about 20 quality leads from highly motivated sellers, to land a deal.
So, if you’re paying $100/lead X 20 real estate leads per deal (avg profit per deal $10k)…you’re looking at an RIO of $2,000/$10,000 = 500%. That’s simply outstanding! But keep in mind that your time is worth money and you probably spent much of your own time to work both sides of the deal.
Let’s Sum It Up
The estimates/scenario laid out in the preceding paragraph is fairly common for most investors, especially the experienced investors that know how to take a seller from the first phone conversation to the closing table. Savvy investors track and calculate RIO, they don’t just focus on the cash outlay in an opportunity (e.g. $2,000); rather they look at the potential RIO (500%). These same principles should used to calculate the ROI of direct mail campaigns or any other form of advertising that you do for your real estate business.