Does it Pay to Buy Real Estate Leads? – Tips from our Friends at Follow Up Boss!

May 30th, 2018

This post was originally published by Brittany Ryan on one of our integration partners, Follow Up Boss’s blog. Follow Up Boss is a CRM that helps Real Estate Teams manage their real estate leads.

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Are paid leads really worth it?

For the majority of up-and-coming agents, that’s the $64K question. But get it wrong and it can cost you way more than that.

Our Friends at Follow Up Boss think it’s time to stop complaining about getting “ripped off by Zillow” and start reaching new levels in your real estate business — starting with a frank conversation on what it really takes to win with paid leads.

They asked top real estate agents, brokers and coaches for expert advice on how to make the most of paid leads, including an evaluation of the actual numbers adding up to awesome ROI.

The Pros and Cons of Buying Real Estate Leads

Robert Slack is the Broker-Owner of Robert Slack Fine Homes and has built a successful brokerage on the back of Zillow leads. According to Robert, the biggest pro of paid real estate leads is that they are, “Absolutely the best way to get in front of interested clients on a regular basis and keep a steady stream of clients for agents.”
A steady stream of clients sounds pretty awesome, right?

But when we asked him about cons, this was his answer: “Cost! And 95% don’t work out.”

95%?! Wow. No wonder agents get so discouraged when they get started with paid leads. You’re just gaining momentum in your real estate business and now you’re facing an onslaught of negative replies from unqualified leads. Talk about demotivating.

Real Estate Leads

And then there’s the fear of making those initial investments in your business. If you don’t already have a system in place for working paid leads, the costs and risks associated with buying real estate leads can be devastating to your budding business.

Lee Davenport is an Atlanta-based real estate coach and consultant who has seen her fair share of agents losing sleep over the leads they’ve bought.

“The pro of purchasing real estate leads is to give you some IMMEDIATE action in your pipeline if you are a new or returning agent, particularly if you are someone without a local sphere of influence, an established marketing plan or an existing database of clients. Is this activity the best use of time? Not always, depending on the quality of the lead source, which can make this a con if the lead source is not reputable.”

Lead quality is a major issue. And with real estate leads, it seems that more often than not, you get what you pay for.

Ryan Graham is a principal at the rockstar Graham Seeby Group. Ryan agrees that lead quality is a key part of the formula when thinking about how to make the most of your purchased leads.

“Purchasing real estate leads seems simple enough, but it really is a big nut to crack. You’re either paying small amounts per lead, but it requires large amounts of those leads to convert to sales. So the cost per sale can get high if your conversion rate is weak. Or you’re paying large referral fees on vetted leads, and now your revenue stream is compromised.”

Here’s the bottom line according to Ryan, “Pros – it’s low hanging fruit. Con – most of the fruit has either gone bad, or never ripens in the first place!”

But don’t get too discouraged. Winning agents like Robert and Ryan are regularly using paid leads to generate healthy revenues for their real estate businesses. The first step to make that happen is to stop complaining and simply accept paid leads for what they are, one cog in a well-oiled real estate business machine.

Where Can You Buy Real Estate Leads?

Before launching into paid leads, you’ll need to get a clear view of your options.
Where you buy your leads, how much you spend and the quality of the leads coming in are all important parts of setting a profitable strategy for working your paid leads.

Here are Some of the Most Popular Places to Buy Real Estate Leads:

Bottom of Funnel Leads

Middle of Funnel Leads

Top of Funnel Leads

Keep Your Real Estate Lead Sources Balanced

Barry Jenkins was just named the #2 team in the country with Better Homes and Gardens Real Estate and he drives a major portion of that success with internet leads. The success of Barry’s business is based on the core philosophy of leverage.

“You should have both in your life. You should have sphere, you should have previous clients contacting you and you should buy leads. Because those new leads are potentially previous clients eventually,” says Barry.

Barry breaks it down to an hourly rate to determine whether the lead gen activity is helping him and his team scale. “If we look at our day based on an hourly rate, both internet lead generation and sphere have a cost. If I go knock on a door for 6 hours and my hourly rate is $300 for not-so-hot leads, just contacts that one day will buy, that’s just not worth it. I would never spend $1,800 for 6 cold contacts. So saying it’s free is just not true.”

Real Estate Leads

Barry believes, “Your lead generation needs to be a well-balanced diet.”

For Barry, the ready-to-buy bottom of the funnel leads from portal sites like Zillow and Realtor.com are the steak in well-balanced lead-gen platter. But those leads are too expensive to use to effectively scale his business, so Barry mixes it up with some middle of the funnel leads (think: Ylopo leads as the veggies on your plate) and top of funnel leads from places like Craigslist and Facebook ads.

“I try to give my agents 30 to 50 leads per month, little bit of portal, healthy amount of Ylopo and then my top of funnel leads would be things like Craigslist and Facebook ads who aren’t ready to buy anytime soon but I want my agents to have that because first of all, I need to scale my business and this gives me a way to feed all the mouths on my team. And then of course, previous clients. There’s no doubt about it. If you have 50 people that love you, you have a sustainable business on your own,” Barry says.

Do What Works For You

Lee is all about authenticity.

She believes it’s important to build your business based on what will work for your unique personality, “Just like we cannot make a square peg fit into a round hole without some damage, we have to respect our personalities and ‘play to our strengths’.”

Real Estate Leads

During the research for her doctoral dissertation, Lee studied many of the top 1,000 agents in the US, including all types of introverts and extroverts. While their personalities were all over the map, the one thing they had in common was that they all played to their strengths, instead of trying to get better at things they just weren’t good at.

“For those that do not like connecting with leads who don’t know them and didn’t ask to know them, cold calling is not the best. Thus, these pros would do best with paid leads that allow a warm transfer (meaning the lead expects, wants, AND welcomes some sort of follow-up like a call, text, email, etc.). For those of us that can handle the cold (including the icy rejection), then leads that have a true real estate need, whether or not they are expecting to hear from us, can still be a slam dunk.”

How to Turn Paid Leads Into Revenue

Get Your System in Place

It is entirely possible to build a thriving real estate business based on free lead sources. However, there will come a time when you need to integrate paid leads in order to take your business to the next level.

First, you need to know how to transform those costly leads into real revenue for your business so that you’re not wasting a single dime.

Ryan and his team at The Graham Seeby Group are known for turning a small number of leads into eight-figure revenues. And according to Ryan, it’s all about your systems.

“The best way we’ve found to improve our ROI is be system’s oriented. You must attack paid lead sources both individually, by the masses, and provide value on a consistent and long term basis. That’s not an easy thing to do when you’re talking about 10’s, 100’s, or even 1,000’s of leads per month. You must have many systems in place to make sure you’re calling, texting, emailing, and mailing to these leads quickly, and for a long period of time. AND, the content you’re sending must be relevant and provide value.”

Real Estate Leads

Start creating your system by breaking down your leads based on source and where they are in the funnel (a.k.a. buying or selling journey). The first step to an effective lead management process is to get all your leads flowing into one central source.

From there, you can automate your phone, text, email and even direct mail follow ups using relevant content based on where they are in their home-buying or selling journey.

Nurture Your Leads to Make the Most Out of Your Paid Lead Investment

In the new game of real estate, it’s not enough to be the fastest or best-known. Success is all about building a real and relevant relationship with your prospects over time.

After you’ve connected your paid leads sources to your CRM, it’s time to start thinking about how to nurture them in the most relevant way possible (without having to chain yourself to your desk).

Be Fast + Personal

For hot leads coming in from portals like Zillow and Trulia, fast response times are crucial. Broker-owner Robert Slack from Robert Slack Fine Homes has had incredible success with Zillow leads. According to Robert, “Speed is an absolute must and with Follow Up Boss’s 4-point auto text responder, and instant calls from our call center, we are able to make contact with a high percentage of leads.”

A fast, automatic and personal response for these hot leads is critical to your conversion rate, especially when you consider how many other agents may be contacting them. These days, you not only need to be the fastest, you also need to be the most relevant.

Real Estate Leads

Be Consistent

If you’re not yet ready to invest in a high-octane team of ISAs, you can still win simply by being the agent who is always there.

For top and middle of the funnel leads (and even some of those portal leads who you might have serious quality questions about) the way to win will always be in the long-term follow up. Set up an automated drip campaign based on lead type and timeline. At the end of the day, every lead needs a little time to get to know you.

A great CRM will help you build and maintain a real connection with thousands of leads, without having to sacrifice your personal life or having to guess which leads actually want to hear from you.

How to Calculate Your ROI on Paid Leads

When you start spending money on leads, it’s natural to want to see some immediate action in return. But even with paid leads in the mix, real estate is still a long game.

Number of Deals Closed per Every $100 Spent

If you’re new to the game, Lee recommends sticking with whatever paid lead choice you’ve made for at least a month. Once you’ve given it a real go, take a look at how many deals you closed per every $100 spent.

“For agents new to paid leads, I recommend committing to a program for at least 1 month to personally evaluate the frequency and quality of the leads AFTER confirming from other users their favorable experiences. Facebook, my frenemy due to its access of data, has lowered the cost per lead to as little as $5-10 per lead. Not all lead generation sources will provide leads for that low of a cost but ideally, 1 client (who gets to closing) per $100 spent is fantastic.”

This is a great way to eyeball your ROI and make an informed choice about whether to keep going with a particular approach or lead source.

GCI / Lead Cost

Robert Slack looks at it slightly differently, based on his role as a broker-owner. According to Robert, you should divide your gross commission income (GCI) by lead cost to get your ROI.

This is a classic way to get a real grip on your paid lead ROI, and it’s even how Zillow recommends you do it. As you can see below, conversion rate is EVERYTHING.

Real Estate Leads
Source: Zillow

Revenue-Focused ROI

Another simple way to ensure a steady ROI on paid leads is to stabilize your lead costs and keep the ultimate focus on revenue. For example, rather than buying leads on portal sites like Zillow, Realtor.com or Trulia, Mitch Ribak generates all of his own leads in order to keep the cost per lead as consistent as possible.

“We only capture our own leads and keep the cost to about $10 per lead for acquisition. Of course you then add our ISA program at $10 per lead but it gives you a higher conversion rate. In the end, the amount of money you spend is not relative vs the ROI. I’ll spend a million dollars a month if it gives me $2 million in revenue.”

Fair point.

Real Estate Leads

ROI by Lead Source

If you want to dive in a little deeper to see which sources are really giving you optimal bang for your buck, try Ryan’s approach.

“We break apart all of our paid lead sources. For example, Google Pay Per Click, Realtor.com, Facebook Ads, and plug in services like ReadyChat. We look at our spend per month, per quarter, and per year. We then count the number of leads we receive from the various sources. This gives us our cost per lead. Then we count the number of closed sales from these same sources, and the associated sales volume and Net Commission. This gives us our ROI.”

According to Ryan, “It’s important to know both of these ratios, as well as the conversion differences. It’s also important to understand how these change over time and with increased and decreased spending.”

That’s right. The paid lead game is as dynamic as real estate itself. Whatever approach you choose, you’re going to have to consistently track your progress and adjust your systems for optimal results. Here’s Ryan again:

“The law of diminishing returns is very real. You may find a good source for your business, so you’ll turn the spend up to turn the revenue up. But you better look closely because and some point that ROI will start to drop. It’s at this point that we pull back on our spend, and refocus in other areas. And, ROI will go down over time for any number of reasons. This causes us to either rework our follow up systems, or kill the investment.”

With the right system in place, you can definitely use paid leads as a great way to bring brand new revenue streams to your real estate business.

Ready to watch your conversion rates soar? Try Follow Up Boss today!

Real Estate Leads

This post was originally published by Brittany Ryan on one of our integration partners, Follow Up Boss’s blog. Follow Up Boss is a CRM for Real Estate Teams.

Watch Follow Up Boss CEO, Dan Corkill, compete on BombBomb’s Battle of the Real Estate CRMs by clicking here!

Alli Menor | About The Author

Writing, editing, marketing, social, public relations. Creator of content and lover of baby animals. Background in food and beverage marketing, but proud to now be a woman in tech. Content Marketing Manager, BombBomb. BS, Arizona State University. MPS, the University of Denver.