In recent years, real estate investing has taken on various forms, from flipping houses to renting out apartments. However, one profitable strategy that has garnered attention is wholesaling rundown properties—a method that can yield substantial returns when executed correctly.
On a recent episode of The DealMachine Real Estate Investing Podcast, host and our CEO, David Lecko discussed the nuances of this strategy with Zack Boothe, a seasoned wholesaler who has made over a million dollars a year from this niche market.
What is Wholesaling?
Wholesaling real estate involves identifying properties that are typically below market value, contracting them, and then selling the contract to a potential buyer or investor at a higher price without the need for renovations. The key here is the ability to find and secure deals that others might overlook and to do it quickly.
To learn more about wholesale real estate check out our comprehensive guide.
The "Driving for Dollars" Technique
At the core of Zack's strategy is what's dubbed "driving for dollars." This approach centers around scouting neighborhoods for distressed properties that appear rundown, showing signs of neglect like overgrown lawns or boarded-up windows. Zack's technique is methodical and data-driven. He breaks down target properties into four main categories:
- Clearly Distressed Properties: Often vacant and visibly deteriorated, these properties are synonymous with potential lucrative deals.
- Absentee Owner Properties: The owner's listed address differs from the property's, indicating they may not be keeping a close eye on the property's condition.
- Owner-Occupied Properties: These can be trickier but are sometimes neglected and ripe for a good deal.
- Corporate-Owned Properties: Owned by an entity like an LLC, they usually don’t indicate visible distress but can still be key targets depending on the entity’s investment goals.
His team conducts different types of marketing and outreach tailored to each category for maximum return on investment, ensuring every effort is strategically aligned with the potential of the property class.
The Challenge of Determining Potential
One common challenge that many wholesalers face is determining whether a property is sufficiently distressed to warrant inclusion in their marketing efforts. Zack offers a simple solution: always include, regardless of the degree of distress or the ownership structure. The logic is straightforward—some signs of neglect, no matter how minor, might lead to a profitable deal. So if you are questioning whether or not to add a property, just add it.
Strategic Outreach Tactics
Effective communication with property owners is crucial. For corporate-owned properties, Zack typically uses direct mail, as obtaining accurate contact information can be challenging. If you are a DealMachine user you can tap into the Private Investigator tool to track down the elusive corporate owner. So if you can get the owner contact you might be able to call them.
However, for other categories where he knows he will have the phone number, his approach includes cold calling, text messaging campaigns, and even door-to-door visits to maximize engagement opportunities.
"In real estate wholesaling, especially within the driving for dollars niche, the money is in the follow-up and precision of your outreach," explains Booth. "We use different communication strategies based on the property type, which has consistently shown a much higher ROI compared to a one-size-fits-all approach."
Leveraging Technology
Zack also emphasizes the use of technology, specifically a real estate investing tool called DealMachine. That's us. This application allows his team to streamline the process of identifying and tagging potential deals on the go. DealMachine's functionalities are pivotal in organizing, sourcing, prioritizing, and finding data on leads, which can drastically improve operational efficiency and, ultimately, profitability.
The Power of Systematic Follow-Up
Persistence is key in wholesaling. Booth shares that his team uses detailed tracking methods for every outreach campaign to measure effectiveness and return on investment. This data-driven method helps refine their strategies continually and capitalize on what works best.
Conclusion: Is Wholesaling Rundown Properties for You?
Wholesaling real estate, particularly focusing on rundown properties, can be highly lucrative for those willing to invest the time to understand their market deeply and to develop tailored outreach strategies. As David and Zack discussed on the podcast, success comes from recognizing the potential in properties most would overlook and leveraging targeted, data-informed marketing strategies to engage owners effectively.
For anyone looking to get started or sharpen their skills in real estate wholesaling, following a systematic, disciplined approach similar to Zack's, alongside utilizing robust tools like DealMachine, can significantly increase the chances of achieving financial freedom through real estate. Such strategies not only offer an entrance into real estate investment with relatively low upfront costs but also provide a scalable pathway to grow one's investment portfolio significantly.
