Are you one click away from starting your Google AdWords campaign to generate real estate leads?
But you may still be doubting a bit whether or not Google AdWords or Google Ads (as it is called today) works for real estate.
So, does Google AdWords work for real estate?
Google AdWords can work for 10% of real estate marketers with an average cost per sale of $254.20 across different offers and provided their revenue goals are well-aligned with their monthly ads budget.
For the other 90%, it doesn’t work, amongst other things, because of not doing conversion tracking, and thus not having reliable data about conversion rates and where to optimize the campaigns.
You can learn more about how I came to this answer when you read the rest of this article. I provide you with more detailed information about what Google AdWords is, the costs for the real estate industry, and further performance-based marketing data of this ads platform.
What is Google Ads (Formerly Called Google AdWords)?
Let’s say you are a property seller and search on Google for something like “current home values in Kansas City”.
After Google does its thing, you will get to a search results page (the first page) and will find two types of results.
The majority will be so-called organic search results, while the other results will be results that are usually labeled as “Ad”.
These ads generally blend in well in the overall design of the search results page, but on a second look, they are distinguishable from the organic search results.
One of these ads could be yours, and if you appear in the top results for the keyword or key phrase the property seller used, you likely won the bid for this keyword.
Why is winning a bid for a specific keyword or key phrase important?
It enables you to appear in the top results on the first page for this keyword.
When the mentioned property seller clicks on your ad, Google gets money from you. And the earnings for Google will be costs for you, the costs per click (CPC).
As I’ve already lined out in my article “How to Run Google Ads for Real Estate,” you want to start with search ads (there are many more ad types available in Google’s ad platform).
It is for testing reasons, and you will be better able to test a search campaign than others due to better controllable metrics.
Once you have a winning campaign getting you reliable results after several weeks or even months of testing, you can expand or branch out to further ad types.
Further Google Ad types available are display, shopping, video, smart, and discovery.
To summarize, Google Ads is Google’s pay-per-click and pay-per-view ads platform that enables you to place ads on basically the whole internet, such as search results pages, websites, videos, and emails (Gmail).
How Much Do Google Ads Cost for Real Estate?
To answer whether Google AdWords (Google Ads) works for real estate, we first need to look at the costs and some performance-based statistics for this industry. And after that, also at the main reasons, people fail with it.
So, what about the costs of Google Ads for Real Estate?
According to new data from 2021, you will have the following average costs per click for search ads in the real estate industry:
- Apartments and rentals: $1.43
- Homes for sale (agent): $1.39
- Real estate broker: $1.68
- Real estate agent: $1.17
So, the average cost per click is roughly $1.41.
The average monthly ad spend for Google search ads in the real estate industry is also essential to know.
Here comes the short overview:
- Apartments and rentals: $1,500
- Homes for sale (agent): $1,750
- Real estate broker: $1,000
- Real estate agent: $1,212
As the following metric, we should also take a look at the average cost per lead:
- Apartments and rentals: $35.52
- Homes for sale (agent): $96.54
- Real estate broker: $64.07
- Real estate agent: $75.94
Google AdWords Real Estate Conversion Rate, and Other Performance Marketing Data
Based on the data from the prior section, we can crunch some other numbers.
You might wonder now how the different monthly ad spending could generate many leads, and it is a straightforward calculation.
We just divide the average monthly spend by the average costs per lead.
It results in the following number of leads generated:
- Apartments and rentals: 42.2
- Homes for sale (agent): 18.1
- Real estate broker: 15.6
- Real estate agent: 15.9
Advertising apartments and rentals via Google Search ads seems especially interesting when looking at the average costs per lead and how many leads you can get out of that per month.
If we take into consideration the average closing rate of 27%, which I mentioned in this article of mine, we can assume the following number of sales:
Apartments and rentals: 11.3
Homes for sale (agent): 4.8
Real estate broker: 4.2
Real estate agent: 4.3
Of course, if you improve your sales skills, this 27% closing rate number can only go further up, decreasing your costs per sale.
In this context, you may also want to read my article “How Can I Improve My Real Estate Sales Skills“.
Based on the number of sales, we can now calculate the costs per sale you will likely have for Google Search Ads.
We just need to divide the monthly ad spend from above by the number of sales.
So, let’s do it.
Average Costs per Sale:
- Apartments and rentals ($1,500 divided by 11.3): $132.74
- Homes for sale (agent) ($1,750 divided by 4.8): $364.5
- Real estate broker ($1,000 divided by 4.2): $238.09
- Real estate agent ($1,212 divided by 4.3): $281.8
As you can see, just by looking at the costs per sale and then comparing this to what you can earn in commission, the return on ad spend is positive.
To be exact and calculate a concrete number, we need to consider the average home sale price of 2021 in the U.S. It was $408,800 in 2021 (source).
The average real estate commission is 5.49% (source). Applied to the $408,800, this means an average commission amount of $22,443.
For the return on ad spend, this means the following:
- Apartments and rentals ($22,443 divided by $132.74): 16,907%
- Homes for sale (agent) ($22,443 divided by $364.5): 6,157%
- Real estate broker ($22,443 divided by $238.09): 9,426%
- Real estate agent ($22,443 divided by $281.8): 7964%
Of course, the real return on ad spend is probably a bit lower, but still positive since you usually will also have to add further costs that are casually related to your sales (e.g., gas, employees, office rent, etc.) to the cost per sale.
But I think that overall we can agree that the return on ad spend is highly positive.
So, Does Google AdWords Work for Real Estate?
Now, let’s finally answer whether Google AdWords works for real estate. From what I elaborated above, you may already know the answer.
To recap and get you the important data at a glance, I prepared a table overview of the marketing performance data below.
|Average costs per click||Average monthly ad spend||Cost per lead on average||Number of leads that could be generated||Number of sales (assuming a closing rate of 27%)||Average costs per sale|
|Apartments and rentals||$1.43||$1,500||$35.52||42.2||11.3||$132.74|
|Homes for sale||$1.39||$1,750||$96.54||18.1||4.8||$364.50|
|Real estate broker||$1.68||$1,000||$64.07||15.6||4.2||$238.09|
|Real estate agent||$1.17||$1,212||$75.94||15.9||4.3||$281.80|
So, based on the data directly from the industry, we can assume that it does work, provided you know how to make a Google Ads campaign work.
I mention this because some conditions might not get the same average results.
Remember that the above data comes from real estate professionals that managed to get a Google AdWords campaign to work. Many more real estate professionals likely didn’t manage to work (Google survivorship bias).
So, ending this article, I would like to make you aware of the common pitfalls that may lead to your Google Ads campaigns not getting you the same results.
Perry Marshall, who wrote the book “The Ultimate Guide to Google AdWords” (current edition), mentioned that it’s a 90/10 game, meaning that you are part of the 90% that can’t make it work or you are part of the 10% that make it work.
According to the data he presents in his book, 2% of advertisers get 50% of the traffic and based on statistics, and these are some of the common mistakes and pitfalls you want to keep in mind for Google Ads:
- Almost half (42.3%) of Google Ads account managers don’t track conversion and have reliable data about conversion rates.
- Using too few long-tail keywords or not using the right keywords (source)
- Low or bad converting landing pages, or not using one at all
- The lack of a good enough sales funnel (source)
- Not doing ongoing ad optimization and A/B testing
- Skipping retargeting campaigns which reduce your ad spend (source)
Whether or not Google AdWords works for you depends on your individual sales goals and your monthly budget.
If you need to make $45,000 in commission per month, but you only have a budget for Google Ads of $300 as a real estate agent, you won’t get enough leads to close two sales provided you have a 27% average closing rate.
This article has been reviewed by our editorial team. It has been approved for publication in accordance with our editorial policy.