Real Estate Wholesaling

How to Minimize the Wholesaling Competition in a Hot Market by Using Leverage

Expertise: Personal Development, Real Estate Wholesaling, Real Estate Investing Basics
96 Articles Written

I am starting to see a lot of forum posts discussing the competitive marketplace and what tools and ideas wholesalers should use to keep deal flow steady — and more importantly, increasing.

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I am in one of the hottest markets, Phoenix, and I am seeing the difference between doing deals a year ago compared to today. Especially in my market, there is some steep competition, like Sean Terry, Justin Colby, Doug Hopkins, and Cody Sperber, to name a few. Just like me, these guys know it’s a highly competitive market, so there are things we all have to do keep our bottom line steadily increasing.

We know that leads are the life-blood of our businesses, and without leads, our businesses would suffer tremendously. Now, it’s not just about the lead but how to cultivate, massage, and finally close the lead.

Landing the Deal When Competing With Other Investors

I received a call from a seller recently, and he told me that he received numerous letters and post cards and had a few visits from investors. This is not unusual; however, some newbie investors would immediately assume this to be an uphill battle because of the competition. There is one thing I like to remind myself of, and that’s to run my own race and enjoy my journey. Yes, I stay informed of what the competition is doing, but I have to stay focused on the goals that I set out to accomplish for the year. Back to the story — I went on the appointment, and true enough, there was a small stack of letters and post cards on the kitchen table. I previewed the house, built up the rapport I had started over the phone, told him thank you, and left.


Related: BP Member Interview: How to Profit in a Hot Market With Retirement Communities [Video, Pics & Numbers!]

I know this is fairly different than what most of the gurus tell you, who teach that you need to make your pitch at the house, then get the seller to sign and commit immediately. Yes, that approach works with some sellers, but this appointment was not a “hard sell” appointment. I listened to the seller, and he informed me that he was upset with the last few characters who visited the house and stated they were too pushy. I understood his personality type and knew this was a big decision for him and that he would make the decision on his terms and his terms only.

At the end of the day, I did get the contract and made $11,500 on this fixer-upper — no, it’s not a $30k home run, but in a competitive market, every dollar that helps your bottom line is a substantial.

It is common practice to use multiple marketing strategies, such as bandit signs, direct mail, skip tracing, cold calling, and SEO, but these techniques are being used by the majority of the competition. Leverage is an awesome tool when used most effectively.

Using Leverage in a Hot Market

In these competitive markets, leverage has to be used. I’ll use my market as an example again. Being here in Phoenix, we are so close to California, Las Vegas, and Texas that the guru train route is directly through the middle of my city. The reason I state this is because the guru gets a chance to come through town for 2-3 days, and the career seminar investors get excited and begin to market to home buyers. This affects the local reach of our market dollars because the market becomes inundated with so-called investors who are looking to get rich quick.


Related: “Dear Seller” Letters: The Tool You Need to Win Deals in a Hot Market

How do we minimize our competition? We use leverage!

Due to the market being saturated, we find techniques to limit our competition. We use the leverage of the contract to make our offers more appealing to the seller. Some investors believe the trick is to always offer more money than the next guy. This is not always the case, like in the deal discussed above. We leverage the contract by having our earnest money go hard immediately. This means there is no inspection period, and we may put a larger earnest money deposit to show the seller we are serious and are ready to pull the trigger NOW. I've seen contracts written with $50K hard earnest money deposits. I am not saying I've done $50k hard, but with these competitive times, creativity really does come into play.

It is important to leverage urgency when someone knows you are ready to play ball. This technique is important to let them know either they will get the money or the next guy will get the money. Either way, a house is being purchased. Normally, this will give the seller a chance to think and consider your offer before allowing you to walk away.

What leverage do you use when a market is on fire?

Let’s hear it. How do you stay relevant in a competitive market?

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who ...
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    Robert L. from Ventura, California
    Replied over 4 years ago
    Hi Marcus, Thank you for your post. When I first got interested with REI 13 years ago, it was about buy and hold for Cashflow. Now, there are so many different strategies and niches that have become popular. And it is interesting that wholesaling is what the gurus choose to pitch. If someone wants to get rich quick, isn’t that what casinos are for? Oh, wait, that doesn’t always work out either. lol
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied over 4 years ago
    Robert, The ultimate goal is still passive income atleast for me it is, but wholesaling is a great means to an end. I use the cash from wholesaling to invest in rentals. I am eventually going start investing in multifamily units but until then SFRs and wholesaling is my strategy. Gurus use wholesaling as a quick cash problem solver but we know it is not as easy as it is portrayed to be. The reality is once Newbies see how difficult it is they are not willing to push through adversity. Thanks for your imput Robert. “Enjoying the Journey”
    Lucy Balyan Investor from San Ramon, California
    Replied over 4 years ago
    Gurus also use the new wholesalers to find the deals for them knowing it’s difficult to get a seller to agree to sign contract for 40 to 50% below market specially if the EM has to come from the wholesaler not the coach like Sean, Cody, or Preston. Some of these programs offer no EM or only $100 EM. This doesn’t work in a competitive market. A good EM & Assignment with 15 days for buyer to do due diligence (appraise, inspect, get a rehab quote). Or buy & say within 10 days, inspect & get a contractor quote. If doesn’t appraise, or rehab too high or problem found, walk away.
    Michael Duemmel Investor from Rochester, New York
    Replied over 4 years ago
    Hi Marcus. I liked reading your post. We are from Rochester NY. We are also finding there are so many different strategies out there. I have also learned some are absolutely better than others, but we are staying focused
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied over 4 years ago
    Michael, Thank you for reading, it is difficult sometime to pull away from your daily schedule to write an article but I know reading these articles help me a lot as well. Its part of the cycle of paying it forward. Yes stay focused it is so easy to get distracted. I suggest doing a vision board with your goals to help you stay on track. Keep blazing trails and happy investing. “Enjoying the Journey”
    Mike Dmuchoski Flipper/Rehabber from Mesa, AZ
    Replied over 4 years ago
    Great post, Marcus. Indeed it is very competitive out here and your simple tips are things people should be doing already but most surprisingly aren’t!
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied over 4 years ago
    Mike, You’re right this is some things wholesalers should be doing but they are not. They are used to the low hanging fruit and when that fruit is not there THEN they start to remember some of these strategies are brought back to rememberence. Thanks for your imput “Enjoying the Journey”
    Michael Sadler from Edmonton, AB
    Replied over 4 years ago
    That’s smart; using $50k earnest money to sweeten the offer. I see many investor buyers not willing to put earnest money deposits on the table with their offer. If you can raise or got that kind of cash it’s great – a real advantage! A downfall is that you could lose the cash – couldn’t you? – if the deal falls through on your side. I don’t do anything to leverage the deal – I just bring the buyers and sellers together electronically.
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied over 4 years ago
    Michael, That is the risk however if you know your buyers really good you can get them under contract and close the deal while your still within your inspection period. This limits the risk of loosing your EM. There have been numerous deals I’ve done where we closed and was still in the IP. Great response Michael I’m sure others were thinking the same thing. Thanks again “Enjoying the Journey”
    Lisa Bryant from Washington, District of Columbia
    Replied over 4 years ago
    Hi, Marcus- Your end results with such a competitive deal worked out really well. Building relationships in the business can go a long way. Keep sharing. Great advice! Learn, Apply, Produce!
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied over 4 years ago
    Lisa, We had to go through a lot to bring this deal to the finish line, actually this same deal has inspired another blog article about working through obsticles that may present itself after you have the signed contract. This one really was tricky but yes the end result was well worth the struggle. Thanks for reading. “Enjoying the Journey”
    Gregory Beaty from Phoenix, Arizona
    Replied over 4 years ago
    Great article Marcus! I’m just getting started and also in Phoenix. To be honest, I’m looking elsewhere to start. I was born and raised in central Indiana and as most know, Indianapolis and the surrounding areas are hot hot hot at the moment. I’m thinking I may hit the virtual wholesaling up hard for a while. Then, when I’ve maybe figured some things out, start trying to play in this beautiful (but full) sandbox we call “the Valley.” I wish you luck brother. Maybe I’ll catch you at the AZREIA or could take you for lunch sometime. Be Well! GB
    Replied over 4 years ago
    Hi, It’s really a nice and great informative post. Thanks for sharing it here.
    David Coleman from Houston, TX
    Replied over 4 years ago
    Thanks Marcus for information this help me get a better understanding on wholesaling i will use it.Thanks David Coleman
    Taylor Campbell from Tempe, Arizona
    Replied almost 4 years ago
    Great post Marcus, some great points you bring up here. The market here in Phoenix is most definitely saturated with the “get rich quick” type. We should connect sometime!
    Marcus Maloney Wholesaler from Queen Creek, AZ
    Replied almost 4 years ago
    Taylor, Thanks man I appreciate you reading the post. Well you definitely know how to find me lets get together leverage right