How does the changing market affect wholesalers?

Question

With the real estate market moving towards recovery, in what ways does the wholesaling field change?  I understand there will always be motivated sellers, regardless of the market condition.  I assume that absentee owner lists, inheritance lists, probate lists, etc. can be good lead sources in any market.  However, unemployment continues to decrease, home values continue to increase, and the number of foreclosures continues to drop (on a national level).  I’ve heard some investors comment that it’s time to move from a buy and flip strategy to a buy and hold strategy. I live in the Philadelphia area, and hope to get into wholesaling until I have enough capital to execute buy and hold deals. However, I don’t want to climb onto a “sinking ship” so to speak.  Aside from wholesaling being a difficult field in general, are the current market changes working for or against wholesalers?  How are you adjusting your strategy in response to the market changes?  As someone just getting into the real estate investing game now, I really want to wrap my head around where things are going.  Thanks!

Tim G. · Answer

Yeah it shifts but deals will still be found but it may take more marketing money or different lead sources to secure the deals.

I always smile that when its a bad market the big dogs are out flipping to earn and once its a high market they are out selling courses and mentor programs for the newbies.

Derek Dombeck · Answer

Hi Todd,

Everytime you do a Google search, the top of the page will have paid ads ( by that vendor ) that you can click on.  When you go to that vendors site, they pay Google per click. So you can buy those positions on the search page from Google. The cost per click will depend on the keywords that you are using and how much competition is using the same keywords.

For Example.  Sell Your House Fast  could be your keyword phrase that you want to use. If you wanted a Google Adwords campaign to run world wide, those keywords will cost you a fortune everytime someone clicks on your link if you want to be at the best position of that keyword search. That is why you set up a localized campaign that only targets your city or areas that you want to do business in. Also, when setting up your campaign, you can set daily spending limits. As soon as the limit is reached for that day, your link comes down. It will be back up the next day. Currently, I'm averaging about $2.75 per click. When they click, they are sent to my landing page where they will see a video and have a spot to fill in contact information. Feel free to check it out www.ibuyhousesWI.com

For all the information on setting up, Google..........Google Adwords

Happy Investing

Derek Dombeck

Derek Dombeck · Answer

Hi Michael,

I have been playing this game for about 12 years now. I have been through some changing markets and survived. The short answer is, if you can produce leads and get deals under contract as the retail market gets stronger ( transitions from buyers market to sellers market ) you can sell your wholesale deals faster and for more money. The key is having good motivated leads coming in. To get these leads, you need to dominate your local area with your marketing. This doesn't have to cost a lot of money, but honestly it is proportional to the amount you can spend on marketing. For example, in my area, very few people run a Google Adwords campaign. So I can dominate that marketing for less $ per click. I can set my spending limits and monitor my traffic. If someone else starts competing, I may have to raise what I am willing to pay per click. Same thing with direct mail. I may send out 1000 letters a month now with a 3% response rate. As the market changes, I may have to send out more letters to achieve the same amount of response. Everything in wholesaling is a numbers game. And every different market has different numbers.

Happy InvestingDerek Dombeck

Michael Clark · Answer

Thanks @Matt M.  I will look into that.  I am going into this with an open mind and looking to take the path of most opportunity.

Thanks for the advice @Derek Dombeck  and @MICHAEL YBARRA I attended my first REI club meeting last night and signed up for a full-year membership.

Hi Mary W. !  Thanks for the tip.  Are there any specific videos that you recommend?  I attended the DIG meeting in Horsham, PA last night.  It was awesome!  Check out their website - DigOnline.org It was well attended, very educational, and provided a great opportunity to network and gain insights into local market.  Hope to see you there!

Mary W. · Answer

Yes, I watched Daniel Wiafe's video on listsource and Steph Davis has a video on blockshopper. Someone else suggested DIG to me as well. I will definitely check them out. Thank you!

Mary W. · Answer

Hi Michael!

I'm a newbie in the philly area as well. I have found a few videos on YouTube that outline how to use listsource and blockshopper.com as tools to find which areas cash buyers are buying in. I hope this helps you.

Also just curious which REIA did you attend? There are so many in the philly area.

- Mary

MICHAEL YBARRA · Answer

Derek -Totally agree -  get involved in your local real estate clubs - we formed to probate clubs in Southern Calif. with the use of Meetup - works great!!

key advise i can give - let everybody know in your community - you fix n flip!!

our motto "The more hands we shake - The more money we make!!"

God Bless

Michael Rae

Derek Dombeck · Answer

@Michael Clark

I definitely would utilize your local networks and REIA to find buyers and find out what they are looking for. Target the markets that your buyers want to be in. As far as what list is the best, that varies so much depending on location.

I am in an area without large cities, so it's challenging to maintain a list of active investor buyers because there aren't many.  I started my own REIA and by doing so, I have put myself in the role of the GO TO guy in my area. My only regret is, I should have started it years earlier.  Use those REIAs. They can make your business blow up quickly if you aren't afraid to talk to people.

Good Luck

Derek Dombeck

Matt M. · Answer

Think about getting your RE license. I am transitioning from a fix & flip focus to finding retail buyers, etc. I'll still keep my eye out for deals, but will be focusing on the latter. Just an idea.

Michael Clark · Answer

Thanks @Derek Dombeck !  That makes a lot of sense.  Do you have any advice on how to determining which method of generating leads will be most successful for certain markets?  With online marketing, I know you can Google certain keywords and browse certain websites to see what online strategies, if any, competitors are using.  But when it comes to direct mail, is trial and error the only approach?  I plan to begin my first marketing campaign soon but am trying to figure out how to best spend my money ($500/month budget).  Also, how do you determine which areas to target?  There are several zip codes I have in mind, but I want to determine if it makes sense to target them for wholesaling before I invest in marketing.  I have read several places that it is best to find out if cash buyers are purchasing properties in a given area first and go where the money is.  That makes sense to me.  I am attending my first REIA meeting tonight and hope to begin building a local network.  Have you found this approach to be most effective as well?  Thanks for taking time to share your valuable insights with this newbie!

How does the changing market affect wholesalers?

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