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

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.

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.

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?

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.