Are you Wholesaling in the Wrong Market?

Let’s be real: some markets work better than others for real estate wholesaling. 

I recently interviewed Tyson Smith, who shared how he first started wholesaling in Phoenix, Arizona. That’s a really, really competitive market for wholesaling. 

One day he woke up and asked the right question: “What if I wholesaled properties in another market, long-distance?”

His wholesaling business has exploded since that one simple pivot. Here’s how he started wholesaling properties long-distance — and how you can too. 

How to find the right market for wholesaling

Most wholesalers just operate in their local market. But if you start looking at wholesaling from afar, it opens the entire country to your business.

So how do you pick a market, of the thousands of towns and cities across the US?

You want to find “Goldilocks zone” markets with enough population to be worth your while, but not so much that they’re already crowded with competition. Bigger cities aren’t always better for wholesaling — quite the opposite. 

Start by looking up median home prices and average days-on-market on Redfin and Zillow. Fewer days-on-market indicate more demand for housing: a promising sign that you can actually move your contracts fast. 

The higher the median home price, the more profitable each deal will be. Give preference to more expensive housing markets. 

In short, you want smaller and medium-sized secondary markets with relatively high home prices and short listing times sitting on the market. 

How to underwrite deals long-distance

It feels scary to spend marketing dollars and put properties under contract in cities you’ve never visited. 

But Smith urges wholesalers not to overcomplicate their underwriting. It only drags down your deal flow and efficiency. 

Instead, he keeps his underwriting simple, calculating repair costs by square footage. In primary markets like Phoenix, Dallas, and Tampa, he budgets $45 per square foot. In secondary markets like Jackson, Mississippi, he budgets $35. 

Then he budgets 5% of the sales price plus $3,000 for seller closing costs. Boom! It’s that simple. 

The trick is to find such “no-brainer” deals that there’s room for error. Buy the properties at such a discount that you’ll have no trouble unloading them quickly to your buyer’s list. 

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Don’t take our word for it. Try it out for yourself with a 30-day free trial. 

We look forward to hearing your feedback and successes after your first month running with the big dogs. 

New city, new marketing campaigns

You’ll need to start marketing to motivated sellers, to get the deal flow moving. 

We like a three-pronged approach, combining both outbound and inbound marketing. Don’t rely on just one marketing channel if you want to keep your cost-per-acquisition low. 

Direct mail

An oldie-but-goodie, direct mail campaigns still offer among the highest ROI of any marketing channel. 

The trick? To follow up with the same list every six weeks for at least six months. It takes a few mailers before prospects bother to pick up the phone and call you. 

One tactic we’ve found helpful is sending “check-style” offers in our direct mail campaigns. Seeing what looks like a check helps the prospect imagine actually receiving that cash in hand. 

Cold calling campaigns

I get it: no one likes picking up the phone and cold calling prospects. But it works, and much faster than direct mail campaigns. 

You have less competition. Your competitors hate cold calling as much as you do — but they don’t have your determination. 

The good news: you don’t need to do the cold calling yourself. You can hire a VA to cold call prospects for you.

It doesn’t even take much training and skill. Have them ask one simple question: “Are you interested in a cash offer?”

They can then move on quickly from disinterested prospects. 

Inbound marketing

Television and pay-per-click (PPC) advertising can also help drive leads and build your brand recognition. 

The downside is that inbound marketing is expensive. 

So, start with cold calling and direct mail campaigns, and as you can afford it, reinforce that outbound marketing with TV and PPC ads. They’ll help raise your success rates with your outbound marketing, as prospects recognize your name. 

2 secrets to lower cost-per-acquisition

We all want a higher return on investment for our marketing costs. Try these two tactics to boost your marketing ROI and lower your cost-per-acquisition. 

1. Better list targeting

You’ve heard me say it before and you’ll hear it again now: the better you target your prospects, the less you’ll spend for each closed deal. 

Some prospects are more motivated than others. Some can sell at the price you need, and others can’t. 

Waste less money chasing down bad prospects. Target distressed property owners who need to sell ASAP, who have significant equity. 

How do you do that? By stacking your list through a real estate CRM like REsimpli. Pull lists of distressed owners such as those going through foreclosure, tax sale, or divorce. Then stack them with lists of property owners with lots of equity, or those who have lived in the property for at least a few years. 

Also, cut down on wasted mailers. List stacking helps you find duplicates among your prospect lists, and find incomplete addresses before you waste money on mailers. 

2. Relentless follow-up

Most prospects won’t call you the first time they see your mailer or TV ad or PPC ad. 

By the third, fourth, or fifth time? They’re often ready to hear you out. 

Tyson adds that most of his leads don’t come from his first contact with a seller. He considers relentless persistence his superpower. 

That means rotating his direct mailings every six weeks for at least six months. It also means cold calling prospects every month over that period. 

Fortunately, you can automate both the direct mail and the cold call reminders through a CRM like REsimpli. Put these prospects on a drip campaign so you can set it and forget it. 

The 3 ways to scale your profits

Want to earn more money as a real estate wholesaler?

You can scale your business in three different ways. 

1. Increase volume

Imagine you close one deal for every 1,000 touch points like direct mailings and cold calls. If you currently do 5,000 touch points each month, you close five deals a month. 

That makes the calculus pretty simple: to double your monthly deals, double your outbound marketing volume. Not exactly rocket science. 

That said, the quality of your prospects might diminish as you increase your volume in a specific market. If you’ve already gone through your highest-quality prospects, that leaves you with lower odds and higher costs per closed deal as you scale. 

And that, my friend, is where it helps to enter a new market. 

2. Increase your profit per deal

I touched on this earlier: the higher the home value, the higher your profit will be. 

Target higher-end markets and homes to earn more dollars per closed deal. That reduces your labor and marketing costs, while boosting your bottom line. 

3. Improve your disposition process

Wholesaling real estate isn’t just about scoring great deals. It also requires you to find buyers willing to pay a premium for those deals, and fast. 

A wholesaler with an extensive buyers list and a strong reputation can flip contracts within 24 hours. Just as importantly, they can usually move those contracts at the full price they initially ask. 

In contrast, a wholesaler with a weak buyers list will struggle to find buyers. They often need to discount their properties to find a taker. They also risk not finding a buyer at all, and losing the deal. 

Invest time and resources into building your local buyers list. It’s an investment that will come back to you many times over. 

Finally, use a CRM like REsimpli to improve your process. Create a VIP buyers list who you reach out to first. Add SMS messages to alert your buyers of new deals. Automate follow-up to make sure contracts don’t sit too long without a buyer. 

Tying it together

As a sophisticated real estate wholesaler, you can enter markets with weak competition and score outstanding deals. 

You only have to master the skills of marketing, sales, and building a buyers list once. From there, you can simply follow the same formula as you enter new markets. 

REsimpli can help you automate your processes to follow that formula. Use our CRM for list stacking, marketing automation through drip campaigns, and building and contacting your buyers list. 

Don’t take my word for it. Try a 30-day free trial to see for yourself how the country’s best real estate CRM can help you supercharge your wholesaling and flipping business.