Real Estate Wholesalers: How To Pick The Right Neighborhood
How do you pick the right neighborhoods to wholesale properties in?
Picking the right market and ‘farm’ area to target deals in is a critical part of success for real estate wholesalers.
There are many niches to investigate as a real estate investor. Each investor may find they have a special knack for different parts of the market. Yet, as a real estate wholesaler, there are certainly some go to segments to rely on for getting started swiftly, and for picking up the pace of deal volume and income when last year’s strategy doesn’t seem to be producing like it used to.
Where’s The Ideal Target Zone For Real Estate Wholesalers?
Start by remembering what wholesaling real estate is all about. Especially compared to other real estate investment strategies.
Yes, it is about buying low, and selling low, in comparison to retail prices. It is also a volume strategy. It generally relies on quickly doing a high number of deals each month and year.
To achieve this, there needs to be sufficient inventory available, as well as demand.
This means you probably can’t stick to the highest luxury price ranges. These pockets may offer huge pay days, but only few of them, and far in between. Unless you have substantial capital reserves, endless patience, and a lot of financial runway, this probably isn;t the niche you are looking for. Consider that Hollywood actors like Tom Selleck are still concerned that they won’t be able to afford their luxury homes if they don’t keep actively working.
We also know that there is limited demand in the cheapest neighborhoods. Most end buyers don't have the stomach for it. The cash requirements for working in these neighborhoods can also be far higher than imagined, due to a lack of financing, and big rehab bills.
Sticking in the middle ground, where there is the largest potential pool of end buyers promises the most volume. Though it can also be the most competitive.
Multiple Exit Strategies
The middle market is also key to maintaining multiple exit strategies. It not only offers the most potential buyers by population, but the widest variety of buyers too.
This can include retailing homes, prehabbing, and wholesaling to both landlords and rehabbers.
Having multiple exit strategies, and leveraging using transaction funding are key for never getting stuck, and losing money in real estate.