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.
Dan: All right, hello and welcome to this week's episode of the REI Marketing Nerds podcast. As always, this is Daniel Barrett here from AdWordsNerds.com.
As always, you know where to go if you need help with your online marketing strategy, getting more motivated-seller leads and deals online in your market. You go to AdWordsNerds.com/strategy. My team and I will help you put together an online marketing strategy for your market for free. [01:15.8]
With that out of the way, let’s talk this week. A lot of the times, when I’m thinking of topics for the podcast, I kind of go with what is coming up in the moment, like what is current. A lot of times, I’ll pull from things that we're seeing in the market right now with our clients or pulled from conversations that I have with real estate investors all across the country, and, of course, I’ll go with comments and questions that I get in the REI Marketing Nerds Facebook group, which is a wonderful Facebook group that people gather in and ask questions and so on. You can go there. You just go on Facebook. Type in “REI Marketing Nerds.” You'll find it. [01:51.5]
This week I was thinking a little bit about a question that I got from a consultant. I’m working with a consultant just to kind of pull back the curtain a little bit. I want to improve my own data-tracking capabilities. As you probably know—or maybe you don't, this is your first episode. Welcome—at AdWords Nerds, we spend about $5 million a year on motivated-seller-lead generation for our clients.
We have one of the biggest data sets on Google Search ads for motivated sellers of anyone outside of Google themselves. We've got a lot of data coming in and one of the challenges that we face in our business is how to get actionable insights out of that data, how to use that data in better ways, so on and so forth.
We've kind of outgrown the system that we're using. It still works great, but we're looking for what the next step is. How do we get this ready for artificial intelligence and machine learning and all that fun stuff? I’m looking kind of down the line and I’m saying, all right, it’s a little bit beyond my immediate capacity. Let's bring in a consultant and we're going to work on this stuff. Right, so that's the background. [02:58.2]
I’m working with this consultant and they asked me, “Give me a sense of your clients and I’m talking about real estate investors. I’m talking about the market that they're in. I’m talking about their competition from iBuyers and hedge funds. I’m talking about the rise of content marketing and I’m talking about increasingly competitive ad networks and all this stuff.”
They say, “Okay, okay, tell me the single biggest mistake you think your clients are making.” That was the question, the single biggest mistake that I think real estate investors are making, specifically when it comes to online marketing.
I thought about this for a while, because I’ve talked about different things on this podcast before. You've heard me maybe talk about the transition of real estate, investing from a solution-unaware market to a solution-aware market and the kinds of changes in online marketing that have to happen in order for real estate investors to adapt to that reality. You’ve heard me talk about thinking through the long game and the sort of the long-term thinking, thinking about your reputation in your market, rather than just direct response and all this different stuff. [04:12.0]
But I thought about it for a while and I said the one thing that has been consistent, really consistent, since I started doing this 10 years ago now, the thing that's been really consistent and I think, honestly, it's just a part of human nature, is real estate investors’ tendency to jump from thing to thing. I don't think this is specific to real estate investors. I think everybody kind of has this in some way or another, but for real estate investors, it is particularly damaging and I’m going to explain why.
Now let's go through the life cycle of your average real estate investor who decides that they want to get involved in online marketing. [05:00.7]
All right, so you're a real estate investor. Maybe you're new. Maybe you've done a couple of deals and you’ve got some contracts under your belt. You're feeling pretty good and basically saying, Okay, now is the time, now that I have these basic closing skills in place, I’ve got some knowledge of how the whole contract process is going to go and I’ve done a rehab or two, maybe done a wholesale deal or two. You’ve got some buyers lined up. You say, Okay, now, now is the time that the systems are in line. Now is the time for me to ramp up my marketing.
When investors decide to ramp up their marketing, there is a general process that they go through. Now, this process is changing a little bit because it changes with people's tastes and it kind of changes depending on what the coaches are teaching and what's in the books that are popular. The kind of perceived wisdom changes over time, but the basic process usually should be okay. [06:00.6]
The first thing you do is you get into direct mail. Do some direct mail. You'd maybe start with some postcards, and then maybe you’d do some yellow letters and then whatever. You keep ramping that up until that does really well, and then maybe you would get into SMS or ringless voicemail, right? Text messaging or leaving voicemails for people, and you do that for a while. Then you would get into pay-per-click marketing, what I do, right, online advertising. There's kind of a general way that people go about it. Maybe you get bird dogs. Maybe you're doing door-knocking or bandit signs or whatever.
Now, what's happened is every single step of that process has gotten more difficult. For most new investors, when they go through this process of learning about real estate investing, they are learning from successful investors who primarily became successful in an era where there was much less competition. Much less competition. [07:01.8]
There have never been more real estate investors ever in history than there are right now, okay, so there's a lot of competition, and most of the people that are teaching real estate investing, this is not a knock on them, but their experience is from a period where there wasn't much competition.
The student is given these stories of what to expect when they roll their marketing out, and when they finally get to the point where they're ready to roll that marketing out and they start sending out, let's say, postcards, yellow letters, bandit signs or whatever, they start to do it.
What they get back is not the response that they expect. What they get back is rather than whatever the number they're supposed to be expecting in terms of response rate or callback rate or whatever, they get less than that or they get more angry responses, or they don't get anything, and so there's a mismatch between the expectation and the reality. [07:56.3]
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Now, when this happens, there's a couple of different things you can do. You can stick with it and say, I’m just going to figure it out, or you can say, You know what? This channel is really difficult. I’m going to jump and find a more profitable channel. Right, so we can stick with this channel, dig in, learn it, spend the time, grind it out and get better at it, or we can look for a more profitable solution. In fact, if you study game theory or you study economics, there are whole parts of academia, academic papers and journals and stuff that literally deal with this problem, literally deal with this problem. [09:05.2]
In some sort of journals, this is called the slot machine problem, where if you're sitting at a slot machine and you're pulling the handle and you're pulling the handle and you're pulling the handle or whatever—let's say, you figure out, okay, this slot machine has a 0.05% payout rate or whatever, I don't know what it is, but let's say that's the number—the question is, do you stick there and run out the rest of your time on this one particular machine, or do you move to the next machine and the machine after that in order to look for a machine that has a higher payout? At what point do you stay and at what point do you continue to explore looking for something new?
In computer science, this problem is called explore-exploit. Should the program continue to explore looking for a more convenient and efficient solution or should it just simply exploit the solution that has already landed on? Do you keep pulling the handle of the machine that you're at or do you go look for a machine that's more likely to pay out? [10:12.8]
That was a complicated question. It's a complicated question with a lot of different answers. But remember that our real estate investor, to bring this back to our sort of hypothetical real estate investor, our real estate investor has inflated expectations because of the mismatch between what the coaches have experienced and what the current landscape really is. So, when you get into direct mail and you're expecting, Hey, I’m supposed to get 100 calls back, and you only get 10 or you only get one, or you get none, the immediate urge is to move on to the more profitable channel. There must be something wrong with this channel. I should move to a better one. [10:56.0]
What this leads to is this process that many real estate investors never get out of, which is: they start a marketing channel. They spend a bunch of money. They spend a bunch of time. They spend a bunch of energy. They don't get the results that they want. Then they bail and they go to a different marketing channel, where they spend a bunch of money and they spend a bunch of time and they spend a bunch of energy, and they don't get the results that they want. Then they jump to another marketing channel, and so on and so on, ad infinitum.
Now, the problem with this is that this kind of investor is going to permanently underperform. They are going to underperform the market. They're going to underperform their competitors. Why is that? Because what needs to happen is, for you to make a profitable return on a given marketing channel, you have to learn what works. [11:53.0]
There are a lot of ways to fail at something. There's usually only one or two to succeed at it. So, when you start a marketing channel, it is not very common for you to know exactly what is going to work. Even if you knew what worked, let's say five years ago, guess what? Today isn't five years ago. The housing market is totally different. The population is totally different. The marketing channel is totally different. Legislation is totally different, regulation totally different, taxes totally different. The weather is totally different. Everything's totally different.
I’ve said this before on this podcast, but it's like if I gave you a list of all the most profitable stocks from 10 years ago, could you take that list and make a fortune today? Absolutely not, because the stock market today ain’t the stock market 10 years ago. So, it is very common when you start in a marketing channel that you don't do well.
Now, that in itself is not a reason to cry and explode and say the world is terrible, because what that failure in reality is feedback. It is only by experimentation and testing, and seeing what doesn't work, that we learn what does. [13:09.5]
This difficulty in figuring out the marketing channel is actually good for you if you can stay the course and figure the marketing channel out, because it prevents the majority of your competitors from coming into that channel. If a marketing channel is really, really easy to get started in, that means that competition is going to be high. If a marketing channel is difficult to figure out, that is a barrier to entry that actually keeps your overall competition levels low.
So, the key to making it work in a marketing channel is not necessarily that the minute you turn it on, you are getting a 500 times ROI. The challenge, the key to getting it right in that marketing channel is listening to the feedback that you get and improving over time. [14:01.0]
This is for us, in AdWords Nerds, when my team is working on a real estate investor’s ad account, most of our time is spent on experimentation, feedback, and then applying what we learned, and this is literally all that we do. It's all that we do. Motivated seller leads, real estate investing. That's all we do. Pay-Per-Click. That's it.
Even when we do it, we are perpetually surprised because every market is a little bit different. Every day is a little bit different. Every season is a little bit different. Every investor is a little bit different in terms of their risk tolerance and how they close, and all that other stuff. Everything is always different. The only way you can have long-term success is by listening to feedback and then applying what you learn.
If I had to say what the number one mistake that I see investors make over and over and over again is, it's that they get into a marketing channel; they invest in it; they spend all the money, but then they don't stick around to reap the reward. They don't stick around to apply the feedback. They don't stick around to learn and improve. [15:13.0]
It is only by learning and improving, and only by applying the feedback and only by reaping the rewards of that feedback that we can actually bake a continual return on our marketing investment. That's as true for you as it is for me, as it is for any business.
So, the number one mistake that I see investors make? Jumping from thing to thing. The good news for you is, if you can listen to this and you can internalize this—and it doesn't have to be for pay-per-click marketing. That's what I love. That's what I do. It could be in direct mail. It could be in anything. It could be door-knocking. It doesn't matter—if you can stick with that marketing channel and apply that feedback that you are getting, you will build a competitive advantage that is very, very, very hard for your competitors to deal with. [16:01.0]
I hope that makes sense. As always, this is Daniel Barrett from AdWordsNerds.com signing off. I appreciate you being here every week and I will see you next time. Cheers.
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