There is no denying that Pennsylvania has old-world charm. And, I am not only talking about the historic homes in Old Uptown Harrisburg or Elfreth’s Alley in Philadelphia. Even the 50s style suburban homes give the sense of a bygone era. In fact, it’s the grace that these old homes still have that make them perfect as real estate investments.
It’s not a stretch to imagine them rehabbed and move-in ready for the next family. But, you don’t have to do all the work to get it there, either. Getting started by wholesaling houses here in PA can be a solid new career path—especially during these tough economic times. In fact, it’s often the easiest route to a professional real estate investing career. That’s how I built my business over the years, anyway. Let me tell you about what I’ve found to be the best approach.
Why Wholesaling Houses in Pennsylvania Makes Sense Right Now
Houses across the Keystone State have good bones but, with the economy what it is, many are increasingly in disrepair. Over the years, some of our major industries, like coal, have been quietly closing their doors. Of course, oil and gas gave us a temporary boost but even that industry is feeling the pressure recently. Now, with COVID-19, even more residents are unemployed—and potentially facing foreclosure.
More often than not lately, they are also looking for a real estate investor—like you or me—to help them out of an “ugly” situation by buying their house. Even if you are not prepared to undertake a big rehab project, you can still wholesale this real estate in Pennsylvania.
I know, some aspiring real estate investors just starting here in Pennsylvania hem and haw over whether now is the right time. Let me tell you: it is. While small businesses may be closing, supply chains are strapped, and the stock market is bouncing wildly, wholesaling houses is likely one of the more stable career options you can pursue right now.
See, homeowners are feeling the economic strain and they need the relief. You can be the one to provide the financial stimulus to them and set the stage for buoying the economic revival of your community.
Let’s look at some of the market forces at play that are creating the opportunity for you.
➤ Higher Foreclosure Rate
Here in the Keystone State, one in every 9,633 housing units currently faces a foreclosure notice — one of the highest in the U.S. In fact, Philadelphia ranks at the top of metro areas with the highest foreclosure rates. Homeowners who are unable to pay their mortgage are usually looking for a quick way out of a difficult financial situation.
So, there are plenty of opportunities to buy off-market deals inexpensively—before the homeowner gets bogged down in the legal stuff. And, this is where you can help make a difference in your community.
➤ A Seller’s Market
The rates for a 30-years fixed mortgage have slid down from a steep 4.51% in early January 2019 to the current 2.96%. The result is that there are still people out there wanting to buy a home. But, as a new investor, you don’t want to get involved in a complex rehab and all that it entails to make it move-in ready for them. Your best option is wholesaling.
You just need to know how to get started. Fortunately, with the right resources and tools, wholesaling real estate in Pennsylvania can be easier than you think.
Wholesaling Real Estate in Pennsylvania With the Right Resources
If you are just starting your real estate investment career, you may have heard that you should get your hands dirty on a few wholesaling deals first before moving on to fixing and flipping houses. Wholesaling real estate is indeed less intensive than taking on a rehab project before you know what you are doing. You don’t need to know much about finding the right contractor or managing a construction project. But, wholesaling is not necessarily a walk in the park.
Here’s what it takes to do a wholesale deal from the beginning—and the potential pitfalls that rookies often encounter.
Wholesaling is a numbers game because your margins on each deal tend to be less than if you did the full rehab. As a result, you have to build a solid pipeline of wholesale leads. So, you need to stick your nose in a lot of places to find them. Some of the most common ways to do this are:
Real Estate Investment Clubs
Pennsylvania has several real estate investment clubs including Acre of Pittsburgh or Philadelphia REIA where you can connect with potential investor-buyers, local hard money lenders, and others working in the real estate industry. But, what you might find difficult to get are the leads. Blame it on the few scheduled monthly meetings, the low attendance, or just the high competition for deals—your chances at getting new wholesale houses through these investment clubs are pretty slim.
Social Media Groups
To hunt for wholesale real estate deals in Pennsylvania, you can also join groups on social media. Facebook, for instance, has a group called “PA Off Market Real Estate Deals” which seems to have a strong network of investors that post regularly about opportunities. However, just as with the clubs, these leads are not exclusive to you. It is a public group with over 5,000 members so you are not the only wholesaler eyeing those properties.
Driving for Dollars
Driving through the neighborhoods is how most of us started our search for leads. Just cruising through the rural Perry County in Harrisburg, for instance, you’ll see houses that are in a desperate need for repairs and the homeowner might need some relief. But, finding those homeowners is not an easy task.
The bottom line is that none of these lead generation strategies are dependable enough to start wholesaling real estate in Pennsylvania as anything more than a hobby.
Evaluating potential ROI
Not every house is worth your time and effort to wholesale. Doing the proper due diligence and valuation is important to ensure there’s enough upside potential for both you and the investor-buyer you sell it to. For example, the distressed properties to be auctioned through Lehigh County Sheriff’s Sale or Philadelphia Sheriff’s Sale seem cheap enough.
But, the catch is that you can’t inspect these houses before buying. So, who knows what you’d end up with. Even more uncertain is whether you can find an investor-buyer to take it off your hands.
Strong exit strategy
While you may not have not much experience valuating your initial wholesaling deals, it is nonetheless mission-critical to nail. Your negotiations with homeowners and with potential investor-buyers are the two sides of the same coin. Get one wrong and you will squeeze your margins, or worse—you could lose your shirt in the deal.
If you overestimate the after repair value (ARV) of the property, for instance, you won’t find investor-buyers to sell the house to. Knowing the ARV is only part of the equation, though. You also need to be able to convey that value to potential investor-buyers, and that takes marketing finesse. It’s the only way you’ll actually be able to exit the deal.
Many new real estate wholesalers in PA stumble through these potential pitfalls. Some come out ok on the other end, but others don’t. Rookie mistakes can end your real estate investing career even before it begins. But, getting access to the right resources can help you get—and stay—ahead of the game.
The Best Wholesaling Tools and Resources in PA
There are just three basic ingredients to effectively wholesaling: leads, property valuation tools, and strong marketing to buyers. I was fortunate enough to find all three when I became an independently owned and operated HomeVestors® franchisee. Here’s how all that lines up for me:
- Leads. The nationally-known and trusted “We Buy Ugly Houses®” marketing ensures that distressed homeowners call me when they need help. So, I get qualified leads without spending too much time driving around town or attending endless meetings that get me nowhere.
- Property valuation tools. I can evaluate the potential ROI of a property with the proprietary valuation software, ValueChekTM. This helps me get an ARV of the property to negotiate better with investor-buyers and feel confident that the house can actually be sold.
- Wholesale marketing. DealVestors®TM is a user-friendly streamlined online listing portal for selling my wholesale deals. Being connected to other motivated professional real estate investors nationwide gives me a leg up on knowing that my exit strategy will play out as planned.
If you are interested in starting to wholesale real estate in Pennsylvania, you’ll need access to these resources, too. Get in touch with HomeVestors today.
Each franchise office is independently owned and operated.