Bought borrower leads with search ads instead of paying broker points, first eight months of numbers

I lend short term against renovation projects, small book, mostly repeat borrowers who came through two brokers. The brokers were costing me a point on origination and, more annoying, they controlled who I saw. I wanted my own top of funnel.

Agency ran Google search against terms in the hard money and fix and flip financing space in two metros. $2,300 a month management, media started at $2,000 and is now $4,600. Landing page asked for the property address, purchase price, rehab budget, and exit plan, which the agency fought me on hard because every extra field costs you form fills. They were right about the volume and I was right about the sorting. Form fills ran about $95 to $130. With the four fields, roughly a third of them were fundable shapes. Without them, in the two weeks we tested the short form, cost per fill dropped to $54 and the junk rate went through the roof, first time borrowers with no down payment and one guy who wanted a mortgage on his primary.

Eight months: $31,400 media, $18,400 management, 384 form fills, 121 real applications, 26 funded loans. About $1,915 all in per funded loan. The point I was paying brokers on a $180,000 loan was $1,800, so it's roughly a wash on cost and I own the pipeline now, which was the actual reason.

What nearly broke it: month three the cost per fill doubled and stayed there for nine days. A competitor with a national budget entered both metros. We held, they pulled back, and I now assume that happens twice a year and budget for it.

Answer

1wendy_park48CapitalPRO7

Two things I'd want in writing before I called this a win worth scaling.

Who owns the ad account and the conversion history. If the agency's MCC holds it, the eight months of learning walks out the door with them, and that history is most of what makes the campaign work at month nine. Get the account in your own billing with them granted access.

Second, the landing page and the phone numbers. Tracking numbers ported to you or theirs? I've seen a friendly separation turn ugly over a phone number that had been on a page for two years.

On the economics, $1,915 against a $1,800 point is only a wash if your funded loans are the same average size as the brokered ones. If the ad borrowers are smaller deals, the comparison flips.

3 replies

1omar_haddadActivePRO11

The rehab budget field is the interesting part. Do you get an honest number in a form field? Every borrower I've ever met puts the number they hope it is, and then I show up and the scope grows 30%. If you're sorting fundable from not fundable on a self reported rehab budget you may be sorting on optimism.

Not saying drop the field. I'd just want to know how your funded 26 compare to what they typed.

1jordan_ellis2ActivePRO6

The nine days at double cost is the detail I'll remember. I'd have panicked and paused everything on day three, which I now realize is how you throw away the campaign's learning to save $400. How did you decide to hold rather than pause?