Yesterday I started out trying to explain how I made my decisions on becoming a wholesaler and to tackle the job of explaining each step in the process. With further reflection I realized I had missed one of the major steps, simply because it was not one I’d considered as the plan was already firmly established in my head. It wasn’t a complete brain freeze, because the first link went back to some of the major avenues but I didn’t process the list any more than that.
What Wholesaling Strategy to Start With?
There are so many avenues to start your wholesaling career with that it can be at times overwhelming, well most of the time overwhelming. What are all the different options and which ones are most effective? The answer of course is, it depends. Helpful, right? Well let’s get a little more detailed on what some of the avenues are.
Bandit signs – The dollar cost and time cost in doing bandit signs is not what I am looking for, and I don’t want to deal with a lot of tire-kickers.
Direct mailings – My main focus. We approved a marketing budget large enough to enable 2000+ mailers a month for the next 6 months. I can also be targeted and remove a lot of the tire-kickers.
Internet Traffic – I believe that I won’t get enough leads to justify this methodology because the budget, and my understanding of working with PPC and SEO is a little lackluster. The budget does include a wholesaling website and goodies. So this will be part of my approach.
Referrals – I network a lot. A lot. I love networking, with other Real Estate Investors. While this is a great low-budget way to get started, I don’t want to shift my networking time from talking strategy to trying to find buyers.
Driving for Dollars – I’ve done this. The time constraints are a limiting factor, and I’ve proven to myself that in the past I have not had the wherewithal to follow through with these leads.
Real Estate Agents – I’m trying to be a wholesaler! I understand the importance of Expired Listings, and Days On Market (DOM) searches, but I know enough Agents that I don’t really want to trouble them for doing this work for me.
Classified Listings – Even though my target area is high-tech, I’m not a big fan of Craigslist, and while it is a low-cost alternative, it’s not enough for me to include in my marketing strategy.
So my main focus is obviously Direct Mailing, with an Internet Traffic kicker. Fortunately for me, I already own Real Estate in a buy and hold portfolio so I have monthly funding coming in to help pay for the program. If I didn’t have the money I’d have to focus more on the lower cost alternatives. Unfortunately, I know that I fail at those. I have multiple posts that are littered with Driving for Dollars results, but I’ve never followed up. Since I am focusing on results this time, I need to stretch my wings and exclude things that I’ve done poorly and work on things that I want to do well with.
What Criteria Should I Use For My List?
From our earlier post about marketing touch points for wholesalers we have this list of types of leads to use for the direct marketing campaign:
Notice of Default
Liens (Tax, Mechanical, Contractor, Bail Bonds)
Specific Equity requirements
New Movers (maybe they haven’t sold their old home yet?)
They each have their ups and downs. Discussion rage across the internet on which list(s) to focus on. One of the arguments that influenced me was that it boils down to this: all the groups come from the same taxonomy. You can specialize in one area and be great at that or you can make a broad sweeping stroke and try to rake them all in. I don’t want to specialize right now, I want broad swath of potential deals. I don’t want complicated messes (Bye – Liens, Notice of Default, and Pre-Foreclosure) and I definitely don’t want to play a long waiting game to close (Bye – Probate and Divorce). I don’t want to have to work with the unfriendly public records county (Bye – Code Violations). I’m not going to spend a fortune on marketing (Bye – Zip-Code Blasts).
Which leaves me with Absentee Owners, Specific Equity Requirements and New Movers. Well, I’m not convinced that New Movers is going to be a big enough stretch so I’ve simplified myself down to Absentee Owners with Specific Equity Requirements. This is a pretty basic strategy, I’ve also thrown in a bedroom range because that’s where the higher prices in my target area are, and are usually easier to sell to rehabbers!
Here is where I get conflicted, If I go with the Absentee owners I’m missing out on what could be a very sweet spot in the area, properties owned for a long time by an older couple with medical or familial reasons to need my help!
What I do know is that with 30% equity on a property I should be able to hit my MAO without having a lot of complications, and anything higher than that indicator is money for the seller. The good news is in a target 30,000-40,000 home list; 14,000 of them have 30%+ equity!
I’m also not sure what to think about the fact that 16% of the homes are Absentee. I’ve posted to BiggerPockets to see if anyone can shed some light on to this ratio.