Who and What is Your Market?Posted on December 30, 2013 by
In last month’s article we discussed Step #1 of “Determining Your Marketing Plan in 7 Easy Steps” which was to “Determine How Many Leads You Need to Succeed”. This month we’re going to cover Step #2 which is to “Determine Your Market”.
A Market (noun) is defined as “a place or area where products and services are bought and sold”. Your market consists of the area where you do business, the products and services you buy and sell as well as the buyers and sellers of your products and services. To Market (verb) means “to promote products and/or services” to your Market (noun).
So in Step #2, you need to determine the market area where you want to do business, what products and services you will offer, and who the buyers and sellers of your products and services will be.
Like last month’s article, we’re going to use Wholesaling as our chosen real estate investing strategy to illustrate how to determine your market.
Wholesaling is the business of locating houses (usually the house and/or owner is distressed), putting them under contract for a very low price and quickly selling or assigning (quick turning) them to other investors well below retail price. Wholesaling is the art of finding bargain properties and passing them along to bargain hunters at bargain prices.
Wholesaling works in any area, in any condition and in any price range where people want to own properties. Wholesaling tends to work best in lower priced areas since it’s easier for your buyers to pay all cash when they don’t have to bring as much cash to closing as they would when buying houses in higher priced areas. This doesn’t mean that wholesaling won’t work in higher priced areas… it just means that you’ll have fewer buyers who can come up with the large amounts of cash needed to close quickly.
If you can put together good deals, you’ll have no problem finding buyers and making quick profits. Good deals start with good prospects… good house prospects, good seller prospects and good buyer prospects.
A good house prospect in the wholesaling business is usually a property in need of extensive repairs that you can purchase well below its after repair value (ARV). Your ideal property prospect is a vacant, ugly house with no mortgage or a low loan balance. The uglier the houses, the better since you can often purchase them at very deeply discounted prices.
The owners of ugly houses make really good seller prospects since they often tend to be highly motivated sellers. So what exactly is a motivated seller?
A Motivated Seller is “someone who needs to sell and often needs to sell quickly”. These are ordinary people with unwanted houses and unwanted life situations they have to deal with such as:
- Death in the family
- Health issues
- Job relocation, loss or pay cut
- Upsizing or downsizing
- Behind on payments
- Behind on taxes
- Can’t afford repairs & upkeep
- Paying for a vacant house
- Code violations
- Bad tenants or no tenants
- Payments too high
- House is upside down
In addition to people, many banks, lenders and financial institutions may be considered motivated sellers, especially if they have a large inventory of vacant, non-performing assets they need to sell quickly for all cash.
In contrast, an Unmotivated Seller is “someone who wants to sell and is often in no hurry to sell”. These people usually want full price for their homes and are not likely to give you the price or terms you want to create a profitable deal.
Even though you’re in the real estate investing business, it’s also important for you to realize that you’re in the “solutions business”. The services you provide are solutions and the products you sell are homes. You’re looking for motivated home sellers with problems to solve. They have problems and you have solutions.
If There Are No Problems, There Are No Solutions
& Probably No Reason to Get Involved.
After all, motivated sellers with problems to solve will give you better prices and better terms if you can give them better solutions to solve their problems. And getting better prices and better terms should make you a much more motivated buyer.
A Motivated Seller with Problem + A Motivated Buyer with Solution
= Win-Win Transaction
On the other hand, dealing with unmotivated sellers with no problems to solve, who want full price for their homes, should make you a very unmotivated buyer. There’s usually nothing you can do or say to make a seller motivated if they aren’t, so don’t waste your time and energy on un-motivated sellers who don’t want to work with you. Just remember…
Some Will, Some Won’t, So What? Someone’s Waiting…
If you’ll spend your time focusing on finding ugly houses with motivated sellers, then creating offers that will solve their problems, you’ll have many more deals than you can handle. And as I said before, if you get really good at putting together good deals, you’ll have no problem finding buyers quickly and making lots of fast cash.
Our ideal buyers are real estate investors such as rehabbers, landlords, hedge funds and other wholesale buyers who can pay all cash and can close quickly. These investors usually don’t have the time or resources to find these deals themselves (their problem) and are more than willing to buy your bargain homes (your products) and allow you to make a reasonable profit (your goal) if you can leave enough money in the deal for them to make a reasonable profit as well (your solution).
Thoughts to Ponder Regarding Your Market
- What is your preferred real estate investing strategy: Wholesaling, Retailing, Owner Financing, Lease-Options or Options?
- What are the characteristics of your ideal property prospect based on your chosen real estate investment strategy?
- What market areas will you farm to find these properties?
- Who is your ideal seller and buyer for these properties?
- What kind of solutions will you provide your sellers and buyers of these properties?