There is a very familiar quote: “If you’re not with me, then you’re against me.” In the world of real estate investing, this couldn’t be further from the truth. Competition is often viewed as threatening and a challenge for business, but this point of view is only true if you have the wrong perspective.
Normally a business owner hates to have competition in the general vicinity of their service area; however, have you ever wondered why you see fast food establishments or gas stations a few doors from each other? Often if there is a gas station on one corner, there’s another on the adjacent corner. This is an example of cluster marketing. These industries use the philosophy that the companies are stronger together rather than standing alone.
Cluster marketing is basically leveraging your competitors’ traction to help build your brand. It’s imperative as an investor you utilize your relationships to help build your business and help your competitors along the way. In what way, you may ask?
5 Reasons Your Competitor is Your Ally
Strong relationships will produce more resources.
This strategy is to have someone else be an extension of you and vice versa. Although you may work independently, it’s good to lend an olive branch to someone else. This can happen in the world of wholesaling. For example, you can let a wholesaler know if you have deals you are having difficulty moving.
Their buyers list may be more extensive than yours, and it’s an opportunity for you both to share on the wholesale fee. This can also work the other way around by bringing a buyer to the table for someone else’s deal. Half of something is always better than all of nothing. By building quality relationships, you are informing the industry that you are here and willing to work with a group mentality to stay.
Competitors help you keep an eye on the market.
By having a keen eye on your market, you will be able to see exactly what type of deals are moving faster than others and what areas are extremely hot. Your competitors can be a barometer of how certain areas and deals are being sold. This is great for identifying what areas to market to and concentrate your resources on. This is one of the basic steps in “wholesaling 101,” but many times we tend to become disengaged with a certain area.
For example, in Phoenix the city is separated between the East and the West Valley, and many investors focus on Central Phoenix, the East Valley and Northern Phoenix, but they overlook what is occurring in the West Valley. Sometimes you can be extremely focused in one area and miss the opportunities in another. Although being focused in a certain niche and area is extremely important, you have to make sure you do not have tunnel vision.
Relationships help expand your buyers list.
Expanding your buyers list happens in conjunction with strong relationships. You can expand your buyers list by offering everyone that you meet at a property your selling skills or exchanging information. No buyer will decline giving you their information because you will be another resource for them to find deals. By no means am I saying be shrewd or not tactful, but you’re in the industry to provide a service, and you will only be able to provide the service by expanding your network.
You’ll get recommendations for good contractors.
If you have spent any time in this industry, you will understand the difficulties that arise when trying to find quality, punctual, and efficient contractors. Along with building your buyers list, many of the people that are coming with the buyers are normally contractors. Make sure you get their card as well. Finding a good contractor is a goldmine, and if you are able to refer the contractor some work (after you have seen his/her quality of work, of course), you are providing scenarios where you are building your credibility, and you are building your bank account of favors.
Becoming allies helps open up joint venture opportunities.
As you can tell by now, becoming allies with your competitor is important, as this can lead to joint venture opportunities where you can do more deals and make more money off of each deal. Most wholesalers, especially when starting out, are fearful of doing their first flip, and normally it takes someone who is willing to push them to the next level. This happens by joint venturing on projects. I normally tell everyone each deal is a joint venture because it is impossible to do everything on your own and become successful.
Related: 4 Actions All Wholesalers Should Take to Land Deals Without Traditional Marketing
The power of two is stronger than anything you can do independently. Yes, there is more logistical work involved, but once the process is formalized, then you can do more with less by utilizing the power of two. You may be great at finding deals and negotiating, and someone else may be great at coordinating and working with contractors.
Learn to leverage and be leveraged by your competitors. There is always a give and take, and you have to remember that. People mistake negotiating as keeping focused on their interest alone, but great negotiators understand that it takes two in order for the best case scenario to be accomplished.
Have you encountered a time where you had to utilize your competition’s knowledge or resources to meet an expected end?
If so, please share!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.