One question I get very frequently is: “Does wholesaling work in my city?” Now, I must admit I am baffled due to the fact that oftentimes these people live in places like LA, Oakland, New Jersey, Denver, or any major city in the US. Chances are if you live in a major city or a high-cost-of-living state, then there’s a high probability that wholesaling works. If you see “I buy houses” signs in your area, that is a good thing; it lets you know that investment activity is going on. Don’t let that scare you, but it does require you picking up an abundance mindset. I think that’s the reason I am able to close deals each and every month.
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How to Research Your Local Market
The first way to research your local wholesaling market is by searching for other members in your area on BiggerPockets. Once you find them, you can read their profiles and see what niche they work in. So for example if you come across five profiles of people in your locale stating they are wholesalers, chances are that wholesaling will work in your area. Being that BiggerPockets is so convenient, I would recommend this be your first resource to research things. And it’s not hard to do. If you are not willing to do that, chances are that you will probably quit in the first 90 days like most aspiring investors do.
The second way is by going to your local real estate club or meetup. Build a relationship with a real estate agent. At that point maybe you can ask the agent to send you a list of cash sales in your area. If it’s lengthy, then I recommend you start marketing immediately because that’s a indication you have some people looking for bargains. Now, if you see two or three cash sales in your city, that’s not a good thing. But I will explain more on that later.
If your city or town has a local real estate club in general, that’s probably a good indication that a lot of investment activity is going on. Be sure to attend these meetings, meet buyers, meet mentors, and learn. They are very beneficial if you leverage them the correct way. Even if you choose not to attend, if you city has a real estate club, that’s a indication it might be a good place to wholesale.
Gauging Your Location’s Economy
Now, I’m located in Charlotte, NC, which is a major city. Our main industry is banking, and Charlotte is the second largest banking hub in the US. The money is literally here in Charlotte, so it is safe to say money is around. And if money is around, there will always be someone looking for a good real estate deal to buy. If you are in a major city or a city with a strong economy, I am willing to bet my last pair of clean underwear that you can wholesale houses there. However, if I were to go two towns over, I could pick up a deal for about $10k and have the hardest time trying to get $12k for it. The reason is that in that city there might be a sluggish economy, no money there, and yes, maybe there are cash sales, but the four or five landlords buy three or four properties per year. If you don’t catch them when they are looking for another, you are stuck with your deal. If you live in a place like this, I would recommend virtual wholesaling.
Now, let’s say you get cash transactions for your city or town, and you see about five transactions for the whole city. Well, I would go so far as to say don’t bother to try to wholesale there. Look into virtual wholesaling. If you live in a small city or town where there’s not a definite indication you can wholesale successfully, you can check cash transactions to give you the truth. Men lie, women lie, but numbers don’t lie.
If you live in a place where there is little to no investment activity, DON’T GIVE UP on real estate investing. Maybe you could pick up a bunch of houses using owner financing with favorable terms. If you should decide to get into fix and flipping, don’t only look into comps, but also look into days on the market. I’ve seen hard money lenders and investors buy in small towns because the deal looked good on paper. Then when it’s too late, they realize the average days on the market is five months. So that’s five months of holding costs to pay, not to mention the three months you took to renovate the property. If the days on market do not bother you, then fix and flip could be a great niche to pursue. If you are still stuck on wholesaling, you could always partner up with a reputable wholesaler on BiggerPockets, where you do the marketing and the local wholesaler finds the buyer.
Wholesalers: How do you gauge your market for interest?
Let me know your best tips in the comments section below!