Can I Wholesale in a Small Town?

Can I Wholesale in a Small Town?

Can I Wholesale in a Small Town?

Q: I live in a small city (population 100,000ish) and a number of agents I’ve talked to say that wholesaling won’t work here. Specifically, they tell me that the market is so strong that properties just don’t sell for pennies on the dollar, and that there are just a few investors in town who snatch up all the really good deals. Advice? - DJ, Beaumont, Tx.

A: Yes. Stop listening to real estate agents. You are taking to heart the word of professionals who...

1) don’t understand what you’re trying to do,

2) have a vested interest in convincing you to offer as much as possible, and

3) don’t “get” real estate investors at all.

It may be true that the market in your area is strong: it has been in most of the country for several years now. But the thing driving that strong market is first time and move-up home buyers, and those home buyers are not in the market for the kind of ugly, smelly houses you’re looking for. Sellers who own these junker properties and can’t afford to fix them are, for the most part, left out of the buying frenzy. And believe me, there are plenty of sellers like this in a city of 100,000.

Your first step is to find an agent who is willing to show you the cheapest, ugliest houses in the MLS on a regular basis. But your second step is to implement some ways to find properties that aren't listed. Calling or writing to preforeclosures, estates, owners of vacant properties, and so on are all ways to generate leads that these agents don’t even know about. There are many examples of letters and postcards to use in your wholesaling manual, or just make up your own with the message that you can pay cash, close quickly, and don’t care about the condition.

As for the contention that there are “just a few investors in town”, I’d like to place a wager on that. I once read a statistic that said that about 3.5% of the population owns at least one rental property. So in Beaumont, there should be about 3,000 potential buyers for your good deals. And if there are only 10, who cares? If you have good deals, all of them will be happy to pay you take them off your hands. If you have a local investment association, now would be a good time to attend a meeting and talk to some potential buyers. If not, try getting the names of some of these investors and taking them to lunch. I think you’ll find them very receptive to the idea of you finding great deals for them.

Incidentally, I believe that the day of the uncooperative agent is about to come to an end. Housing sales are down about 3% this month, and higher interest rates plus increase unemployment are pointing toward a recession. This is actually good news for real estate investors, because a lack of homeowners in the market equals more deals for us. And when agents are no longer able to make the “easy” sales to qualified homeowners, they’ll either get educated about how to deal with investors or they’ll get out of the business.

by Vena Jones-Cox