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A well-built, up-to-date lead list is an essential component of success in real estate investing. Whether you are a seasoned investor or just starting out, the quality of your lead list has a huge impact on how many conversions you’ll get and how much profit you’ll generate.
This guide will focus on the importance of list building in real estate investing and explore the digital innovations that are making successful list building easier than ever. Beginner investors will find this information especially useful.
We’ll cover creating a targeted list of potential investment properties using both traditional methods and digital tools. We will also provide insights into how software like DealMachine can make building and managing these lists more effective and efficient.
What Is List Building?
List building in real estate is pretty much exactly what it sounds like: You, the real estate investor, compile a list or database of prospective leads for investment properties, including several key items of information about each of the potential leads. These will vary depending on your investment strategy, but all real estate lead lists will include the contact details for property owners. You’ll definitely need these—and you’ll want to make sure they’re up to date—because you’ll use your list to contact your leads.
We say ‘‘list,’’ but in reality, a lead list is more of a spreadsheet. The further along you are on your investment journey, the more in-depth and granular your list will be. Beginner investors often start out with generic lists they’ve bought from their local estate agent or pulled from their local county tax office, only to realize pretty soon after that it doesn’t really serve their needs as an investor very well.
Let’s discuss the difference between generic and targeted lists in more detail to better see why the latter is far superior to the former.
Traditional vs. Targeted List-Building Techniques
A good lead in real estate is a lead that is currently relevant. You could have a list of thousands of leads, but if most of them aren’t relevant to what you’re trying to achieve—or worse, are out of date and no longer relevant to anyone—your list is pretty useless and won’t get you that many conversions.
Traditionally, real estate investors would buy property lead lists from their local real estate agents (for a fee), or they would manually compile a list by scouring local tax records. Eventually, looking up property details became easier thanks to the digitization of property records. Traditional list building can also involve scouring online property ads and social media and even simply exploring your neighborhood for properties that are marked for sale.
There are several problems with traditional list building.
First, a traditional list will pretty much inevitably be a generic lead list. What does generic mean here? This means that the properties that are visible to you via this list are the exact same properties that are visible to all other investors in the area. That translates into stiff competition, especially in hot housing markets.
Generic lists are also pretty much always static, which means that they’re out of date almost as soon as you’ve acquired them. This applies especially to pre-bought lists based on MLS data from your local agent.
Think about it: Homes often stay on the market for less than a month in competitive markets; if you get your list two weeks into a month, for example, there is a high chance that a good proportion of those properties will already have sold. Lead generation is an ongoing activity for every investor; the faster you’re able to update your list, the better your conversion rates because you’ll only be going for properties that are actually available.
The other major issue with generic lists is that they don’t let you develop much of an individual strategy as an investor. “Contact everyone” isn’t really a good strategy if you’re approaching a disparate group of people. The majority will not be responsive because whatever you’re offering them won’t resonate.
In business outside the real estate niche, lead lists are also known as audience lists, and this is a helpful way to think about them. Who is your audience? Are you targeting people who need to sell fast due to financial problems? Or is your target demographic people who are motivated to sell for a completely different reason (e.g., downsizing for retirees or upsizing for young and aspiring families)?
One thing is certain: It’s almost impossible to succeed long term without a clear strategy. You need to have a very good idea of who exactly you are targeting and know your demographic and the specifics of your neighborhood. A high-quality, targeted list will always be hyperlocal and include data that are relevant to the exact market you’re targeting.
Here’s where using digital tools to create your list is useful.
Advantages of Using Digital Tools
Digital tools like DealMachine enhance the efficiency and effectiveness of list building through automation and data integration. As an investor, you won’t need to worry about integrating data sets from different sources into your lead list because the tools will do that for you. Although no data set is 100% complete, quality list builders get pretty close, pulling data from county records, MLS databases, online property listings, and more.
Remember: While digital list builders pull from millions of listings across the country, they will only show results that are relevant to your specific search criteria. These will be based on current, not stale data, meaning that you can stay ahead of the competition and approach great leads before investors who only use conventional list-building methods.
A digital list builder like DealMachine updates the list daily. If a property on your current list is sold, it is automatically removed. This way, you don’t need to waste time reaching out to leads that are no longer relevant.
Step-by-Step Guide to Building Targeted Lists
All this said, the best way to build a targeted list will still involve some elements of traditional list building. You’ll just need to be smart about how you use data obtained in the traditional way. A list pulled from the MLS, for example, may still offer you some good insights into your local market—but in this case, you’ll need a larger data set to be able to spot patterns in your local market.
With an MLS list, it’s always best to request data from the past six months. That way, you’ll be able to see where those hyperlocal housing hot spots are by looking at where the majority of sales happened over the last few months.
This is a good starting point for zooming in on a specific demographic. Now, you are ready to make your search even more granular and effective with the use of a digital list builder. A list builder will first have you select your geographical area and then ask you to select your lead search criteria.
These can range from property type (e.g., single-family or multifamily), last known sale price, financial status (e.g., preforeclosure), and other criteria that will help you identify and contact leads that are not visible using traditional tools. For example, you can select “absentee owners” as a filter, which will narrow down your lead search to vacant homes. DealMachine has over 70 filters that help you really drill down into a specific audience.
You’ll also be able to narrow down your viewing area manually, and you can really zoom in on a very specific location here—as small as a couple of blocks.
Once you have your list, you are ready to reach out to your leads. A quality list builder will include an integrated mailing feature so you can start emailing prospective leads with a tailored message right away.
Every mailing campaign is a numbers game. If you are contacting thousands of potentially relevant leads in a single day, you’re just that much closer to conversions than if you are manually contacting a dozen people in the area.
Real-World Success Stories
This is the power of digital tools in action—and there are real-world success stories that prove that it works.
Atlanta-based real estate investor Michael Blanchard recently made $150,000 from just three deals using DealMachine’s list-building tool. He achieved this by going very specific with his investment strategy: investing in mobile homes. Michael’s exact strategy involved buying land for mobile home use, buying mobile homes, and putting them on the land with permanent foundations, which allows him to qualify for conventional mortgages.
On DealMachine, Michael was able to find a combination of options—from tear-down projects where he bought the land and put in a new mobile home to flip projects with existing mobile homes. Michael said that what attracted him to this investing niche was the “simplicity and lack of competition, and lack of barrier to entry” (with mobile homes, you don’t need to qualify for expensive construction loans). The strategy has definitely paid off for him.
Connecticut-based real estate partner investors Michael and Ryan have made over $200,000 using DealMachine leads. They are averaging at least one or two deals per month using the hold/flip strategy and zooming in on vacant homes. One of their most successful deals came after a seller responded to a postcard they sent out “within days of receiving it.” The property was a vacant three-bedroom family home, “and we really like vacant because you’re not inheriting a terrible tenant, and you don’t have to worry about evicting.”
Future Trends in List Building
As with any digital tool worth your time, digital list building is evolving and becoming more sophisticated. New digital tools like data analytics and artificial intelligence (AI) are adding more opportunities to dig deeper into seller data beyond property listings.
Data analytics and AI are refining real estate investors’ lead searches, essentially by looking where traditional data sets do not or cannot look. From local property owners’ social media behavior to their online searches, this type of data analysis can tell an investor a lot about what potential sellers want and care about.
For example, if homeowners in a specific area you’re targeting are concerned about a local school closure, you may choose to talk about this in your mailings. It’s all about offering potential leads relevant information and offering to solve their specific problem. AI can help you not just identify what to target in your marketing campaigns but also help you create personalized copy that stands out to potential leads.
Ultimately, the fuller the picture you can build of your potential lead, the more likely you are to get through with them with a relevant offer. Remember: Digital tools allow you, as an investor, to get through to people in a more effective way.
This article is presented by DealMachine
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.