How to Know You’re Driving for Deals in All the Right Places

One of the best things about wholesaling is that you can do it anywhere. It’s like the pawn shopping of real estate — you provide homeowners speed and convenience, and they provide you with properties at low prices. Of course, you also need to have buyers lined up to purchase those discounted properties to ensure the other half of your business model works.

In real estate, that means knowing where your buyers want to buy, which most likely will differ from traditional locations. You can get a glimpse of where that is by visiting websites like listsource.com, which let you filter options by recent cash sales. The ZIP codes with the most cash transactions are the most active for investors (who usually buy in cash).

You can also visit real estate investment clubs and ask around. These are local groups of real estate professionals and investors who meet regularly to network and learn from each other. Some groups, though, are aimed at selling to the audience and making a very decent profit.

With plenty of online and in-person research, you can direct your wholesaling efforts where they’ll be most appreciated and drive for deals that are upward bound. Even if you have the money to gamble on guesswork, there’s no reason to do so when you have all the tools you need to find the hottest locations.

Prep Work Is Always Worth It

Location is one of the biggest value drivers in the industry, but it can also create issues. I once bought a house for $4,872 and then spent another $70,000 renovating it. It rents for $2,000 a month on Airbnb, which gives me about a 33% cash-on-cash return. It’s great, but it's also the only $70,000 home in the area.

When I wanted to refinance the home, the bank couldn’t justify the loan. It was classic “nicest house on the block” syndrome, where there’s little room for forced appreciation through improvements. In another area, I bought a $44,000 home and put $65,000 into it; then it appraised at $160,000. The area’s still growing, so refinancing it was no problem.

I didn’t realize it at first, but I quickly learned that finding the best location isn’t only about finding the nicest location. Understanding as much as possible about any given landscape is just as important. Those early experiences taught me to analyze landscape properly before making any investments. I’ve since developed several methods for landscape analysis, but these are my top five:

1. Join local REIAs.

Real estate investment associations (REIAs) are in every major city and provide invaluable opportunities to network with the most well-informed investors and professionals in the area. Joining an association was one of the first things I did after entering real estate, and my membership is still an important part of my success. Enter your city and the phrase “real estate association” into Google, and you’ll find upcoming meetings to attend and groups to join.

2. Use the ZIP code method.

The ZIP code method means using sites such as listsource.com to find the most cash-heavy ZIP codes in your area. You can enter the county and filter the data by property type, most recent sale date, and more. You can also get details on the number of transactions in each area that involved cash, which tend to have more active investors. It all revolves around data — learn to filter and prioritize market data by ZIP code, and you’ll be able to move through the most lucrative areas faster than ever.

3. Use ComeHome to measure the odds.

Even with a lot of preparation, neighborhood and market conditions change over time. Trying to predict what might be more or less appreciable in the future is like gambling, but you can even the odds somewhat with an app like ComeHome, which pairs your data with a heat map of one-year forecasts. After you’ve worked through the top five most-cash-active ZIP codes on your list, use a forecasting app to see what other areas are expected to appreciate.

4. Ask Google where opportunity lies.

Run a quick Google search of your city for opportunity and promise zones. Opportunity zones are low-income areas that offer certain tax advantages to investors who help revitalize them. Promise zones are high-poverty communities where investors can partner with government agencies to bolster economic activity and education throughout the community. Both zones offer immense value, so select the one that best suits your goals.

5. Find houses the old-fashioned way.

With all the modern tools and methods for finding real estate opportunities, don't forget the old-fashioned methods. There’s nothing like physically driving around and spotting opportunities in real time. That ability is essential as a real estate wholesaler. Look for homes that are vacant or obviously distressed, and watch for signs of owners who cannot afford to maintain their houses or who might be having trouble selling them.

Once you know where to find the highest potential for value, you can start making moves to maximize that value. Be careful to avoid the "nicest house on the block" syndrome and you won't have to learn things the hard way (like I did). Instead, work to learn as much as you can about whatever area interests you. By making the most of these tools and others like them, you're certain to get the most out of your investments.