How to select your market
Should you stay local?
If you can, you should always stay in your local market. If you've done deals before and know the neighborhoods that produce results then you'll find it easier to pick the right zip codes for your marketing. Additionally, you'll have the opportunity to meet with buyers and sellers versus having to do everything via phone (or finding someone in the local area to assist you)
When should go virtual?
If your market has a high cost of acquisition then you should consider another market. This is usually the case in highly competitive markets that experiencing an upward trend in pricing. This is also the case in markets where the price point on properties are quite high. An example of this is a lot of the California markets where you can make $25,000 or more on a wholesale deal but it may take upwards of $8,000 or more in marketing costs to find it. So if you don't have the financial ability to sustain this budget then you'll struggle with success. Additionally in these markets it helps if you have multiple strategies outside of wholesaling (such as rehabbing) so that you can extract maximum profit from every deal you find.
Other factors to consider when selecting a market?
Another few other factors to consider are:
- ?Is the market a non disclosure state where you'll have a hard time getting comps on properties (and you'll need
MLS access if you're in one of these markets)
- Do you have resources in that market that you can use to help you? For example, do you know other investors that are buying, agents that can assist you, other business contacts.
- Time zone - If you're in California and are choosing a market on the East coast (or vice versa), be mindful of the time difference since you may need to reach people after working hours
What are the different types of markets?
You have two types of markets, cash flow and fix and flip markets.
A cash flow market is one where the majority of the investor properties are purchased with the intent of holding them for long term appreciation and steady rental income. Most of the properties in these markets are generally lower end (typically sold from $10,000 to $30,000?). You're going to do more volume in these markets but the assignment fees will be smaller.
The second type of market be strictly a fix and flip market, where the majority ?of properties DO NOT cash flow. An example of this would be California markets where most of the price points are very high relative but rents are low. (if someone were to buy the property they would have a hard time achieving positive cash flow on the property after expenses)
Sometimes you have a hybrid market, typically the large metro markets, where you have a mix of higher priced and lower priced deals. Miami and South Florida is an example of this hybrid market.
The TWO things you're doing when you launch your marketing
When you launch any new market you are doing TWO things.
#1 - You are buying data - the objective is to continually tweak your campaigns by pruning under performing zip codes, adding better zips, and eliminating sub optimal property types.
#2? You want to do deals - yes that's always a focus, you want to self liquidate your marketing and create profits so that you can continue to scale and reinvest into your marketing budget. As you do more of #1 the you'll continue to extract more profit from your campaigns