In the past decade, technology has completely transformed the real estate industry. Generating leads and making them into top-notch deals has become more flexible for wholesalers than ever. But great deals also come with significant challenges; it is still inevitable that most traditional buyers and sellers would not be willing to compete without seeing the property in real-time, making it strenuous for virtual wholesalers to step up their online market.
Listen to Lauren Hardy unveil starters’ common mistakes when transitioning to working on their screens. Moreover, Lauren also breaks down the four fundamental essentials that you need so you can bring your virtual markets to the next level!
The Top 4 Things to Look for When Choosing a Virtual Wholesaling Market
In this episode, I am going to share with you the top four things I look at when I pick a virtual market when I’m virtual wholesaling. This comes from years of experience, some failed markets, successful markets, and over 350 students seeing the markets that they pick. I have got some solid advice in this episode. You need to read to it to the end. I share the common mistakes that I see people make when going virtual and picking their territory. I share with you what you need to look for. I have four items that are non-negotiable for me, so make sure you keep reading.
I’m going to first share with you a couple of mistakes that I have seen over and over again. I thought it was important to start this episode with the two key mistakes I see people make the most. Mistake number one is you trade one problem in for another problem. Typically, this is the person who decides to go virtual because they have a problem in their current market and looking to fix this problem. That problem could be that the market is too competitive, high priced, and saturated with buyers. An example of that type of market would be Orange County, California, New Jersey, New York or Seattle, those high-priced and saturated competitive markets.
You have a problem. Another example could be maybe your market is a little bit too small and you have capped it out because it’s a smaller market. Maybe the population is 150,000 in the whole county and you have capped out your marketing list. You do not have any more people to market to, so you want to go to a bigger market. It starts with the problem. You are looking to fix that problem by going virtual. The problem then you find is you traded it in for another problem because the next market you picked has another problem. I call it trading in one problem for another. Let me give you an example.
Don’t trade one problem in for another issue.
I will use a student that I have. I love this guy. I’m not picking on him at all. It was exciting because it gave me a moment to give him some direction. He originally was in a market that was a suburb outside of Chicago. It was a smaller market. He was doing very well. He was wholesaling houses pretty regularly but he was running out of people to market to because the area was small. He wanted to grow. He wanted to do more volume. He decided to go virtual.
He got into my coaching program. At first, he had in mind these markets that he has seen on the news that are doing very well. They happen to be in Florida. Florida is super hot. He picked some very highly saturated and hot markets in Florida thinking that are so different from the market that he is in. There are going to be more people and a bigger population base.
He is solving his problem but what he does not realize, and this is where the experience comes in that I brought in is that he is trading one problem in for another. In his market, it’s not that saturated with competition because it’s a less known market. It’s so less known that I can’t even remember the name of it. It’s not highly competitive. He is not used to competition and talking to a seller and having six other wholesalers he has to bid against.
He is used to running out of sellers to market to. He is used to maybe having a harder time finding end buyers but he is not used to acquisition or lead generation type issues. What I told him is, “You are going to go to Florida, Tampa or whatever the market was. You are going to run into acquisition issues that you are not used to experiencing and not going to like it.” Acquisition issues are the worst. I would say of all the issues that are a problem that if you are not used to dealing with it, you are not used to a lot of competition.
It’s pretty hard to get used to it. I said, “You are trading in one problem for another.” My advice to him was, “Why do not you find another market right next to another smaller suburb that you know that is closer to you. You are still virtual. It’s probably a couple of hours away but it’s not all the way in Florida and not this highly saturated market, so you are not trading in that one problem for another.” That is the first mistake. I see this a lot.
Mistake number two is finding the exact same problem in your virtual market. You are literally, thinking the grass is going to be greener on the other side to find the same grass. You are leaving one market to go virtual, and then you are encountering the same problem. It’s four hours away from your house. You have to get on a plane to go there.
Let me give you an example of what I mean by that. I had a friend who gave me a call. He is in Atlanta and he goes, “Atlanta is so saturated. Every deal, I’ve got five wholesalers calling the same seller that I’m talking to. My deal flow is less. It’s getting harder to close deals. I’m having to market to more sellers to get that one lead or close that deal. I need to go to another market.”
He picks Oklahoma City. He goes, “I heard you are in Oklahoma City. I’m thinking of going there. I’m thinking it might be better there.” I laugh. I go, “I’m having the same problem in Oklahoma City. You are now going to have to work harder to do the same deal volume that you are used to in Atlanta. I guarantee there is probably not much different from Atlanta to Oklahoma City or at least maybe the outskirts of Atlanta to Oklahoma City.” In that situation I said, “Why do not you get outside of Atlanta and go to the suburbs of Atlanta, around Atlanta, areas that are a little less known, a little less on the map than Atlanta.”
That second mistake is you are not solving your problem at all. You are finding the same problem. You are going to be very frustrated because you put a lot of work and effort into going to that market. It’s a lot of effort to go virtual. What do you look for when you are going virtual? Let’s get into the four things that I like to make sure my market has.
First: Proof Of Concept
The first thing that I like to look for is proof of concept. What is the proof of concept? You want to see other people wholesaling houses at the volume that you want to do. They proved that concept for you in that territory. If you go to that territory and you are looking on Facebook at their local Facebook Real Estate Investment Association, and you see a bunch of active wholesalers. That is a good sign. That is the proof of concept.
If you go and you can’t find any wholesalers, you might even go as far as posting on a few different sites, local Facebook Real Estate Investment Associations or even the national Facebook groups like at the Wholesaling Inc Facebook group, for example. If you can’t find anybody who is actively wholesaling at the volume you want to do, that might be a problem. You might not have the proof of concept. An example in my career was Tulsa, Oklahoma.
Several years ago I went to Oklahoma City as one of my markets. We were doing very well. Tulsa happened to be next door. It was only about an hour and a half drive. It was very similar to Oklahoma City in numbers, population, and average house price. I thought, “No brainer. This would be so easy.” I could not find active wholesalers there.
The only thing I heard from others say, flippers, landlords, buyers is they would say, “A wholesaler may come around but they do not last long here and I’m not sure why. The wholesalers do not hang out in Tulsa for some reason.” Tulsa at that time was very behind the curve as far as wholesaling goes. They were a little prehistoric. Times have changed.
We stuck it out and we stayed in Tulsa but it was very difficult because I did not have the wholesalers to collaborate and joint venture with. You need some wholesale activity. A little bit of competition is good, especially when you collaborate. I did not have that. We were stubborn and we stuck it through but I will say that I have been in four different markets since then and that was one of the hardest markets we have ever broken into because we did not have the proof of concept.
I recommend finding the proof of concept because you need to find that joint venture partner to first work with, which is one of my number one rules. When you go virtual, you need to start working with a joint venture partner. If you do not do this step, it is going to be a very long learning curve for you. Please read that advice. Find the proof of concept so you can find that joint venture partner that you can work with.
Second: Average House Price
The next thing I look for is the average house price within the county of your virtual territory of interest. There are two ways to go about your wholesaling business. I call it squirrel hunting and elephant hunting. Squirrel hunting is where you are going to have smaller deals but more volume. Elephant hunting is less volume, bigger deals. In my opinion, you usually end up making about the same amount of money.
I’m a squirrel hunter. I like lots of little checks, seeing a pipeline, knowing that I’m getting a check every week or a couple of checks every week. That personally, works for me in my psychology because I have bills to pay. I have two kids and responsibilities. Psychologically, I like seeing that I’m getting paid more frequently. I do not like going three months to wait for that $70,000 check because for three months, I’m going to think, “What if this deal does not go through?”
A little bit of competition is good, especially when you collaborate.
If you are squirrel hunting and you have got that same mentality I do, then I like to stay within the average house price range of $130,000 to $200,000. Markets and things change. If you are a little bit above or below that is okay but I’m giving you some guard rails. How do you find that? The way that you can find that is, you can go on Google and search the average house price of, insert the county of interest. “Average house price Philadelphia, average house price Columbus, Ohio.”
I like to reference the Zillow market research page, whatever it is. You will see it. Go ahead and google it. It’s a pretty thorough page. It talks about the average house price and some statistics within that market. That is my favorite place to look for the average house price. If you are an elephant hunter, good for you. You are a little bit more flexible. You can go above $200,000. I see most elephant hunters stay out of anything above $500,000.
Anything above $500,000 starts getting hyper-saturated. You are talking about the high price markets, Seattle, New Jersey or Rhode Island. It gets harder to play in that pond. If that is something you want to do, more power to you. I know a lot of house flippers or value-add-type developers, they do very well in markets like that. For the sake of this, we are talking about wholesaling, so let’s stick with that.
Third: Find Your Market Population Size
That takes me to my third piece of advice when finding your spiritual market. Population size within the County or Metro. I don’t want to go anywhere that is too rural. I want to see that there are at least 150,000 within the county. A hundred and fifty thousand will not get you that far. That is still pretty small. I also like to make sure that there are some neighboring counties that I can work with when I exhaust my subject county, which will happen inevitably, as you start closing more deals and gaining more momentum, you are going to want to expand.
Fourth: Follow The Buyer trends In Your Market
The fourth piece of advice in finding a virtual market is to follow the buyer trends in your market. As real estate markets heat up, as you go through the market cycle and you are close to the top of the market, the major metros become very saturated. Buyers will start looking outside of the metro because they are having an inventory problem.
They are having a hard time finding deals that make sense and cashflow. This is the same with buyers that are buying for their personal residence, as well as institutional buyers, hedge funds, and landlords. They want to find more deals and the major Metros become more difficult because the demand is high, which drives the price up and there is less supply.
They have to look at areas that they maybe didn’t consider before the market started heating up. I had seen this personally in my wholesale business. We had buyers that wouldn’t look at properties outside of Oklahoma City proper. They are so much more open-minded because they can’t make sense of the deals that are coming out of that territory.
Buyer trends are going outside of the major Metros. They are going to the suburbs outside. Especially with the COVID pandemic, more people are moving outside the Metros to get more space at a better price. Follow the buyer trends. Pull within PropStream. Pull a list of buying activity, the absentee owner activity and see how many absentee owners are purchasing outside of the Metros and find those ZIP codes where you are seeing that there are maybe more than twenty purchases by absentee owners.
That is going to tell you that this isn’t the territory. This is the ZIP code that buyers or investors are going and market to those areas rather than the hottest point of the Metro. That concludes the four things I look for when choosing a virtual market. I hope you liked it. Hopefully, you’ve got a lot of practical information out of this. It’s my goal to always give you practical information that you can take and use in your business with every piece that I do.
If you are looking to go virtual, I want to help you. Go ahead and check out, www.VirtualInvestingMastery.com, where I have an amazing group of people and students. I have helped a lot of people take their business from their backyard to their virtual territory and I want to help you. Make sure you check that website out. Thank you so much. I will see you next time.
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About Lauren Hardy
Lauren Hardy is a Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.
Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.