Determining Your Preferred Marketing Cost Per Deal

2008-09-19 Word Count: 439 Category: Real Estate

What is your target marketing cost per investment property you buy? What is your maximum marketing cost per deal? And, why should you care?

Here's why. For the most part, real estate deals cost money to find. Spending less to get the same results is better than spending more. Therefore, it makes sense to seek out ways to find as many deals as you can with the least amount of money spent.

If you're doing one deal per month and are spending $2,000 on ads each month, imagine if you only had to spend $1,000 per month to do the same number of deals instead. What would you do with an extra $1,000 every 30 days ($12,000/yr)? Pay yourself? Pay down debt? Or, maybe you'd spend that $1,000 on more advertising and find one more deal every month. Now we're cooking with gas.

Of course, you can and should find deals through marketing methods that cost little or nothing, like networking, publicity, etc. But if you're in a hurry (and considering the time value of money, I would be), you will have to spend money to find deals to do now. This is a business, after all, and businesses need to tell the world they exist—even the huge ones, and especially the small ones.

So what are you willing to spend to find one deal? $1,000? $2,000? $5,000? Heck, I'd spend $100,000 to find a deal (assuming, of course, that I had 1) that kind of cash laying around, and 2) 100% assurance that it would result in a no-money-down transaction resulting in a $2,000,000 cash profit with no risk. Until this pipe dream becomes a reality, though, I'll stick with smaller numbers).

Only you can determine what the maximum is that you're willing to spend to find one deal. It will depend on the following factors, which I will cover in order in the 4 articles to come:

1) How dedicated you are to testing and tweaking new advertising methods to get the most bang for your buck
2) How much money you have available for ads
3) How confident you are in your ability to close deals
4) How quickly you will get paid from your deals

Once you have carefully considered each of these, you will be in a position to know exactly how much your ads should be costing. Then, you can avoid wasting money, and you will also avoid opportunity costs from not advertising enough and missing out on deals.

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Alan Brymer is the creator of The Assistant Who Pays Their Own Salary system. He has been a full-time investor since his first property at the age of 22, and speaks at seminars and events nationwide. Alan's investment company was named by the Utah Valley Entrepreneurial Forum as one of the "Top 25 Companies Under Five Years Old." To read more of Alan's articles and blog, go to www.AlanBrymer.com/blog