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

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

3 min read
Marcus Maloney

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. Marcus has been named the “Equity King” for his impressive ability to find real estate opportunities with massive amounts of equity.

Experience
Marcus, a high school dropout, went from G.E.D. to M.B.A. Although his education has a major impact on his investment philosophy, the real impact came from his upbringing.

Marcus thrives on completing successful transactions. As a young kid, his parents and grandparents faced many challenges; as a result, it made him think of ways he could help. His mother and grandmother were avid investors—not in the market but in people. Marcus was a recipient of those investments. And his early years were hard work growing up on a farm.

Marcus was a strategist at an early age. To relieve the burden of his family buying him clothes when it was time to return to school, he decided to make a small investment that paid big dividends. Marcus decided to purchase a small piglet at the beginning of summer, feed it until it became fat, and then sell it to a local farmers’ auction before the school year started. This was one of his first transactions and the beginning of his adventure of finding equity in every opportunity.

Marcus’ hard work continues today: He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who wholesales virtually in multiple states while building his investment portfolio. Although wholesaling provides great money, he saw the opportunity to buy some of the deals he found and convert them into cash flowing rentals.

Marcus currently holds seven rentals, two of which are commercial units. He’s also done the unimaginable and purchased a school, which was converted to a daycare center. Again, he turns what is a marginal profit into a significant equity position. He leverages the equity by using the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy to increase his portfolio without any money out of pocket.

Marcus has been featured on numerous podcasts, such as the Louisville Gal Podcast, the Best Real Estate Investing Advice Ever podcast, FlippingJunkie, and many others. He’s currently a featured blogger for BiggerPockets, the largest community of real estate investors in the world.

Along with completing transactions and working to build his portfolio, he provides mentorship to aspiring investors. This is done through one-on-one interactions and through his successful YouTube channel and blog.

Marcus does utilize his M.B.A. for more than real estate. As a consultant for a successful non-profit institution south of Chicago, he uses his expertise in the development of human capital. His philanthropic efforts help existing stakeholders develop in their capacity to serve those in need of assistance.

Education
Marcus completed his M.B.A. in 2011 from Olivet Nazarene University.

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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.

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.

real-estate-professional-status

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.

proactive-property-manager

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?