The budget shouldn’t be your starting point. The quality of your list is the starting point.
The more you sift a list, the more expensive the list becomes. However, the tighter the filters, the higher the quality of responses, and by the same token, the cheaper and more efficient the list turns out to be.
For example, if you’re looking to do lease options, the ideal criteria would be:
Mid-range price points
Little to no equity
Fixed rate loan
3/2/2’s
Houses only
Has a pool
Has a fireplace
Is owned less than four years
Has newer 1st and 2nd mortgage
After that, you’re looking for vacant, rent-ready houses.
You mail as much as you can afford. Once you’ve closed on a deal, you now know what the conversion rate is, and what it costs. Then you scale up accordingly.
Otherwise, your budget depends on the marketing funds you have.
*** Many investors fail to reinvest their profits back into marketing. Or they don’t spend what’s necessary to get a conversion in the first place, and then assume that what they’re doing doesn’t work. The fact is, they failed to invest enough to create a positive result. And the quality of the list can have a big impact on both the cost of marketing, and the response and conversion rate(s).
Meantime, you spend whatever is necessary to get that first conversion, and then act accordingly.
That said, if you spent $5k in marketing and netted $1k on your first deal, then you know that for every $5k you invested in marketing you’re likely to net $1k. So, the next time around, you invest $10k and net $2k. The next time you invest $20k, and you net $4k, and so on.
As long as you net more than you spend, you’re on the right track, and you continue scaling up until you’ve reached your income goal(s).
That’s simplistic of course, but it illustrates a more conservative view of how much money is required to achieve a net profit.
I’ve refined my mailing list criteria to the point where I know what type of homeowner is going to call me; what he owes; the kind of house he owns; and why he’s calling.
Meantime, my marketing costs can run about 10% of my gross profit on average inventory worth about $350k. That is, for every $7k I spend on marketing I can expect to create/capture $70k in gross equity.
**** However, those results came after learning to spend $7k and losing $14k. I got smarter. Just saying.
That’s all I got now.