Lesson 4: Choosing your wholesale Real Estate Market
How Far is the Commute?
When deciding where your target market will be, there are some things to take into consideration the first and foremost should probably be how far it is geographically from your house?
When you need to look at a property, go driving for dollars, meet a contractor, or any other wholesaling activity, you don't want to drive an hour or more to get there. So if at all possible, start wholesaling in an area that is close in proximity to your home.
Are you like me and notice inevitably when you're trying to work something always comes up? Your kid's school calls and needs you to come to pick them up, your best friend needs a ride to the airport or your spouse calls and requires you home right this minute!
If you've picked an area to work in that's close to your home, it's easier to get back in the game after you've taken care of the personal issues.
When you need to look at a property, go driving for dollars, meet a contractor, or any other wholesaling activity, you don't want to drive an hour or more to get there. So if at all possible, start wholesaling in an area that is close in proximity to your home.
Are you like me and notice inevitably when you're trying to work something always comes up? Your kid's school calls and needs you to come to pick them up, your best friend needs a ride to the airport or your spouse calls and requires you home right this minute!
If you've picked an area to work in that's close to your home, it's easier to get back in the game after you've taken care of the personal issues.
Think about Marketing (effectively)
|
Another thing to think about when picking your area is your marketing budget and effectiveness.
Chances are you don't have thousands of dollars to spend every month on marketing. So if you plan on buying bandit signs, sending out mail, or any other marketing tactic (we'll cover marketing in the next section), it will have much more effect if you do more in a smaller geographical area. Take mailing for example, If I were to send mail to all the vacant homes in the entire Tampa Bay area (in the picture above), it would cost a small fortune, and most people can't afford that. |
|
But if I just targeted the city of Bradenton, it would be much more affordable, and I could send it to the same list several times.
(It's a proven fact that marketing to a smaller group of prospects multiple times has a much higher response rate than marketing to a larger group just once)
So pick a smaller market and Own It! Know every investor buying in that area, and let the competition know they'd be wasting their time marketing there because you get every deal. And make sure everyone with a vacant or distressed property knows that you're the go-to person if they need to sell a house quickly!
(It's a proven fact that marketing to a smaller group of prospects multiple times has a much higher response rate than marketing to a larger group just once)
So pick a smaller market and Own It! Know every investor buying in that area, and let the competition know they'd be wasting their time marketing there because you get every deal. And make sure everyone with a vacant or distressed property knows that you're the go-to person if they need to sell a house quickly!
What's your comfort level?
Personally, my market has always been houses in lower to middle-class neighborhoods because that's what my investors buy, and frankly, now I'm comfortable with that, so I stick with it.
This makes it very easy for me to walk through a house and estimate rehab costs. I know what they're worth, I know what my investors will pay, and it all goes pretty smooth.
Now, if tomorrow I decided to change my market and only go after upper-end homes over one million dollars, it wouldn't be comfortable for me. It would be a ton of work to estimate renovations, I would have to build a different buyers list, I probably wouldn't relate to the sellers well, and that would affect rapport... The bottom line is it would make it much more difficult for me.
My point is to pick a niche you're comfortable doing. If you have lived all your life in a neighborhood with $50,000 - $75,000 houses and never stepped foot inside a mansion, my suggestion would be wholesale some $50,000 - $75,000 homes. After you get some deals under your belt, you can up your game if you like, but learn the business first (just my suggestion)
On the flip side, if you grew up in a wealthy neighborhood, you might not want to start in a low-income area. Now I hope nobody takes offense to this because it's just me talking from personal experience (I grew up in the Detroit area), But when a rich guy rolls up to look at a house in a lower income area driving his brand new range rover, the seller might be polite, but they could be (and probably are) thinking something else entirely.
Just give some thought to what you're comfortable with, and I'll leave it at that...
This makes it very easy for me to walk through a house and estimate rehab costs. I know what they're worth, I know what my investors will pay, and it all goes pretty smooth.
Now, if tomorrow I decided to change my market and only go after upper-end homes over one million dollars, it wouldn't be comfortable for me. It would be a ton of work to estimate renovations, I would have to build a different buyers list, I probably wouldn't relate to the sellers well, and that would affect rapport... The bottom line is it would make it much more difficult for me.
My point is to pick a niche you're comfortable doing. If you have lived all your life in a neighborhood with $50,000 - $75,000 houses and never stepped foot inside a mansion, my suggestion would be wholesale some $50,000 - $75,000 homes. After you get some deals under your belt, you can up your game if you like, but learn the business first (just my suggestion)
On the flip side, if you grew up in a wealthy neighborhood, you might not want to start in a low-income area. Now I hope nobody takes offense to this because it's just me talking from personal experience (I grew up in the Detroit area), But when a rich guy rolls up to look at a house in a lower income area driving his brand new range rover, the seller might be polite, but they could be (and probably are) thinking something else entirely.
Just give some thought to what you're comfortable with, and I'll leave it at that...
Where are the fish biting?
|
I advocate the reverse wholesaling method, which means finding your cash buyers first and then going out and marketing for houses you know they'll buy.
In any major or midsize city in the country, there are real estate investors buying homes to fix and flip or to turn into rental properties. When choosing your market, it's important to know where these investors are buying, so you know where to focus your marketing efforts. If almost all the investors are buying in the areas south of town, why would you spend money marketing anywhere else? Do some research and find out where the fish are biting before you start putting out bandit signs, sending mail, calling, or driving for dollars, it will be worth the time. |
|
Wholesaling in the middle of nowhere...
What if you want to wholesale real estate, but there is one tiny little problem... You live in the middle of nowhere.
This can certainly be an issue if there is little to no investors buying houses in your area, so you have two options:
#1 Move to the city (okay, this might be out of the question)
#2 Look into Virtual Wholesaling
Virtual wholesaling is perfect if you want to get into this business but live somewhere that's just not the best area for real estate wholesaling. It's also something to look at if you're in a situation where you have to work from home because you have small children, you're taking care of a parent, or you're not physically able to get out and look at properties.
If you would like to know more, you can read about virtual wholesaling here.
This can certainly be an issue if there is little to no investors buying houses in your area, so you have two options:
#1 Move to the city (okay, this might be out of the question)
#2 Look into Virtual Wholesaling
Virtual wholesaling is perfect if you want to get into this business but live somewhere that's just not the best area for real estate wholesaling. It's also something to look at if you're in a situation where you have to work from home because you have small children, you're taking care of a parent, or you're not physically able to get out and look at properties.
If you would like to know more, you can read about virtual wholesaling here.
Choosing your Market Recap
- How Far Is The Commute, does it make sense?
- Marketing Effectively, it's easier in a smaller area.
- Comfort Level, pick something you know, and go from there.
- Where are the Investors buying?
- Wholesaling In The Middle of Nowhere, Is virtual wholesaling an option?
What do you think?
Did this help? can you think of anything you'd add? please let me know.
|
|
|