I LOVE THE LAND BUSINESS!
It’s provided a life of unparalleled freedom for Ligia and me. And in today’s rapidly changing real estate landscape, land flipping can be a powerful investment strategy to propel you to freedom as well. But the first challenge land flippers face is: finding viable leads.
Recently, I explored an AI-driven lead generation service specifically for land flippers. It’s a service that utilizes SMS texting-based AI agents to reach vacant landowners and gauge interest. I tested it on a sample of nearly 5,000 owners at a cost of $50 per lead, and my findings offer insight that may impact not only my land-flipping business, but also will decide whether it merits a recommendation to my Flipping Dirt coaching students.
Below, I’ll walk through the results, key learnings, and whether this AI-led approach shows promise for my land-flipping business.
How the Lead Generation Program Worked
The AI platform promised to simplify seller outreach by contacting landowners and identifying those interested in selling. The program took a list of pre-supplied owner names and applied skip-tracing to ensure accuracy and acquire necessary contact information. Skip-tracing, in this context, involves using various data sources to verify owner details and find reliable contact methods. A perfect job for a pre-programmed AI Agent. However, the fallout from this process was fairly large and I had to provide over 8,000 records to net the requested 5,000 owners to contact. Any owner responding positively was defined as a “lead” by the platform.
Results: Breaking Down the Numbers
After the outreach campaign, I ended up with 90 total “qualified leads” (QL), meaning 90 owners responded with some degree of interest in selling. However, as I reviewed these leads, it became clear that not all met my personal ideal buying criteria or what I would classify as a QL.
Here’s how the numbers stacked up:
- 49 leads were disqualified due to various factors, such as exaggerated pricing (e.g., asking $850,000 for a $20,000 property) or already having the property listed with a realtor. Among these were 16 other non-qualified leads where owners requested full market value or the properties did not pass our initial due diligence check.
- 38 leads were not reachable or had incomplete contact information, making it difficult to pursue further. Still working on these ‘ghost leads’!
- 2 leads are pending purchase (awaiting final negotiations and closing).
- 1 lead converted to a purchase, with significant profit potential! (more on that below)
In the end, only a small portion of these leads proved actionable. This limited conversion rate highlights one of the challenges of using AI for real estate acquisition: while the platform can identify interested parties, assessing quality is still essential.
Qualifying Leads: The ROI Picture
Out of the qualified leads, the properties that either closed or are pending include:
- 1 purchase for $10,000: valued at approximately $62,000, showcasing the potential for an incredible ROI. This will more than make up for the service investment…but is it an outlier?
- A pending property at $2,000, with an estimated resale value of $22,000.
- Another pending property at $14,000, with resale potential of around $25,000.
Looking only at the 1 completed purchase to-date, we’re all-in at $14,500 (service + purchase) and stand to profit over $45k! This is why I absolutely love Flipping Dirt!!
If the other transactions go through and we look at all three properties, the average acquisition cost would round out to approximately $1,500 per property. We’d be all-in at $30,500 (service + properties) and look to net over $75,000 in profit on these 3 deals.
All. Day. Long! Thank you very much.
So, even the potential ROI from the secured property alone indicates a lucrative return on this service, making the initial investment in our AI Agent friend totally justifiable.
However, given the high rate of non-qualified leads, embedded with tight Operations in my DNA and curious what else is out there, I’m holding off before expanding with this service until I compare a couple of other acquisition options.
Lessons Learned: Intensive Negotiation and Follow-Up Efforts
Using this AI-driven service was valuable for discovering seller interest, but several challenges surfaced during the qualification process:
- No Price Anchor: Many sellers approached through the AI agent lacked a clear sense of what our offer might be, relative to the actual or their perceived market value. This led to negotiations that required more time and tact, as owners often made inflated counter-offers. Our typical model is to make offers to potential sellers, which bypasses the need for time-consuming negotiations.
- Labor-Intensive Follow-Up: Although the AI facilitated initial contact, securing a deal still required significant follow-up on my end. Connecting with each lead often took multiple calls, texts, and voicemails before I could engage in meaningful conversation.
- Cost vs. Quality of Leads: With a total spend of around $4,500 for 90 leads, the cost-per-lead was on par with expectations. However, factoring in the high percentage of unqualified leads (about 20% ‘wasted’ expense), the effective cost per viable lead was higher than anticipated. I do think these criteria could pretty easily be trained into the AI Agent.
The Bottom Line: Is AI Lead Gen Worth It for Land Flipping?
Based on my initial experiment, the potential ROI from a few key properties can make the cost-per-lead a worthwhile investment, but this method is not without its drawbacks. The high rate of non-qualified leads and intensive follow-up required has me still pondering this channel’s role in my strategy. As such, I’ve paused further campaigns with this platform while I explore other approaches, including direct calling platforms and additional acquisition methods.
For land flippers considering an AI-driven acquisition service, I recommend testing on a smaller scale to gauge lead quality and follow-up workload before committing. In the end, while AI agents provide valuable initial connections, human negotiation and qualification still play a crucial role in securing profitable deals.
But these services will exponentially accelerate and improve. My friend who has developed this particular service actually uses the AI Agents to do all the work through negotiations, contracts and submission to Title for the final transaction. This is because he’s able to fully define his business logic and boundaries, which becomes more difficult once applied to other clients. But it won’t be long.
I’ll reserve my final opinion until I have a couple of additional data points. Stay tuned for those follow-ups and the final evaluation…