In August of 2020, I bought a neighborhood retail building in Nashville for $435,000
that after we leased it out will bring me a 30.85% cash on cash return. Today I'm going
to show you how I sourced that building and that investment opportunity through direct
mail and how you can do the exact same thing. First, what is direct mail? direct mail is
one of the methods that I recommend you use to find off market commercial properties.
If you're on the hunt for your next investment, it's when you send a letter directly to the
owner of the property in order to see if they're willing to sell the site. Now, there are several
different ways that you can actually do direct mail, postcards, handwritten notes, or letters
that you actually sign in hand address. The most effective and efficient method that I've
found is to actually type up these letters, sign your name, and then hand address on the
envelope, they tend to get the best open rates when the pandemic first hit my team and I
dialed in on the amount of direct mailers that we were sending to property owners in
our area. Since the call stopped coming through the door for the commercial real estate brokerage,
we decided we had to take action and go out and find the deals ourselves. So each member
of the team actually committed to sending 10 letters per day to property owners in the
neighborhood that we had chosen, which happened to be East Nashville, which is how I wound
up finding this investment opportunity. Let me show you the exact method that I use to
source that deal. First, I pulled a list of commercial property owners in the neighborhood
that I wanted to farm in Nashville, we have the metro tax maps where you can source these
you could also use a program like CRS data to source those leads, I then downloaded that
list into a spreadsheet and consolidated that list by property owner entity and mailing
address that way, I didn't send anybody the same letter twice. As I said, everybody on
the team committed to sending at least 10 per day until we got to the end of the list.
And then we just went on repeat and started sending new letters to that same group in
order to keep maximizing the amount of touches that we were doing. Okay, so now that you
know the method that I use to source these deals through direct mail, let me show you
the exact letter that I was sending. And I'll tell you exactly why I think it worked. So
you can see the letter is pretty straightforward. At the top here, I actually have an address
regarding the property that I'm reaching out about if there were multiple sites that fell
under this ownership entity or to this mailing address, I made sure to point out the various
addresses here. You'll note too, that I also opened it up with deer property ownership
entity and commercial real estate, it's very rare that you'll come across a piece of property
that is owned directly in somebody's name. Typically they'll own it in some sort of entity
like an LLC, or an S corp or partnership. So instead of trying to dig in and find out
exactly the right person to address it to I just addressed it right to that entity.
Now in the first line. Since I own a commercial real estate brokerage, I wanted to open up
with the fact of who I am, and exactly what we're looking to do. Since we were farming
a very specific area, you'll note the 37207 zip code, which is in Nashville, I went ahead
and specified that in the letter so that this property owner knew that I was intentionally
sending it to them. And it wasn't just another spam piece of mail. And that second line there,
you'll see that I somewhat reiterate what I say in the first line by telling them that
we have clients that are looking to buy or sell commercial real estate in the area. And
the next one, I tell them if they're looking to sell or lease their property, or just want
a broker's opinion of value, which is a great way to get your toe in the door, they could
reach out to me at any time. Now at the very bottom of this letter is room for my signature.
And I make sure to hand sign in a blue pen one of these letters every single time. But
that's it. I mean, the letter is pretty straightforward. Nothing too complex about it no crazy language
or sales language in there, you'll see that my method is pretty straightforward. I just
actually sent the letters and I think that that's the biggest thing that a lot of people
do not realize or forget about is that sometimes you just got to put that work in. Now once
I have signed this letter, I'll fold it up, put it into an envelope, and I will hand address
every single letter. In my opinion, this is the most crucial step to having a successful
direct mail campaign. Think about it this way, when you get a letter in the mail that
is hand addressed to you the chances that you're going to open that significantly increase
over something that has a sticker on it or is typed out on the envelope. And since very
few pieces of mail are being sent nowadays, your letter is sure to stand out. Now one
of the biggest reasons that I was able to get such a good deal on this property is that
we sourced it off market. That's why I'm going to end up getting a 30.85% cash on cash return
year one because there were no commissions, no realtors fees, and the seller was ready
to make a deal. So after negotiating everything with the seller, we put it under contract
and I was able to source a tenant to lease the building before we closed. One of the
other reasons that we were able to absolutely maximize that cash on cash return is that
the property was valued based on the income that the lease would bring and not just a
price per square foot appraisal. That's one of the other beautiful aspects of commercial
real estate instead of the appraiser coming in and looking at nearby comps on a square
foot basis. They were able to put a cap rate on the building and value it at several $100,000
more than what we were paying for it because of that we actually had built in equity into
the property and the bank didn't require us to bring as much money to the table, hence
the great cash on cash return. So for a quick recap on direct mail, pull a list off the
tax records, be sure to scrub it and pull out any of the same owners or mailing addresses
so you don't hit them twice with the same piece of mail, always hand address every single
envelope and commit to sending a certain amount per day. Okay, so now that you've sourced
your property through a direct mail campaign, you've got to do your due diligence. That's
the next step in the process that can ensure whether or not you have a successful investment.
So check out this video here where I walk you step by step through my commercial real
estate due diligence process, and I'll give you a link to download my checklist as well.
Transcribed by https://otter.ai