Replacing broker points with search ads for borrower leads, an eight month case

A short term lender against renovation projects relying on two brokers for deal flow faces a familiar tradeoff: brokers cost a point on origination and, more importantly, control who the lender ever sees. Running paid search directly against hard money and fix and flip financing terms in a couple of metros is one way to build an owned top of funnel instead. A realistic setup: agency management around $2,300 a month, media starting near $2,000 and growing toward $4,600 as it proves out. The landing page should ask for property address, purchase price, rehab budget, and exit plan. Agencies often push back on extra fields because every field costs form fills, and that tradeoff is real. Form fills in a case like this run $95 to $130 with the four fields, and roughly a third of those are fundable shapes. Strip the form down to bare contact info and cost per fill can drop to $54, but the junk rate rises sharply, with first time borrowers who have no down payment mixed in. Over eight months, a plausible tally looks like $31,400 in media, $18,400 in management, 384 form fills, 121 real applications, and 26 funded loans, landing around $1,915 all in per funded loan. Against a broker point on a $180,000 loan, roughly $1,800, that is close to a wash on cost, with the real advantage being ownership of the pipeline. A common disruption worth planning for: cost per fill can double for a week or two when a competitor with a larger budget enters the same metros. Holding steady while a competitor pulls back tends to be the pattern, and budgeting for that swing a couple of times a year is prudent.

chriswalton8 CC1CPRO 17

Answer

wendy_park48 CU1BPRO 17

Two things worth having in writing before calling 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 into your own billing with the agency granted access. Then the landing page and the phone numbers. Are the tracking numbers ported to you or held by them? A friendly separation can turn ugly over a phone number that has sat on a page for two years. On the economics, $1,915 against a $1,800 point is only a wash if the funded loans are the same average size as the brokered ones. If the ad borrowers are smaller deals, the comparison flips.

wendy_park48 CU1BPRO 17

3 replies

omar_haddadPassivePRO

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.

omar_haddadPassivePRO

jordan_ellis2CapitalPRO

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?

jordan_ellis2CapitalPRO

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