The real estate market is hot these days, with homes getting snapped up in days and bidding wars breaking out left and right. For wholesalers, this is a great time to do deals, as investor interest is high. Of course, some states and cities are better to wholesale real estate in than others. This article is about the best states and cities for real estate wholesaling. Our lists are based on several criteria, which we’ll go through in detail. Read on to find out!
Best Market Conditions for Wholesaling Houses
Market conditions change all the time, but a few important factors determine whether a state is good for wholesaling.
Rising property prices
This is one of the most basic criteria to evaluate. Historical appreciation in property values is a sign that you can make money.
If a state’s population is growing quickly relative to the states around it or the nation in general, this is a sign that people are moving there. An influx of people in a state also means that they’ll be on the hunt for housing.
Is the job market growing or steady in the state? If so, it’s a good one to wholesale real estate since healthy economic activity means more house buyers.
High rental occupancy
If rental occupancy rates are high, this shows that few housing units are vacant. This is a good thing because in areas with high occupancy rates (and, often, high rent), people will be interested in buying homes.
Best States to Wholesale Real Estate
That said, here are the top 5 states for wholesaling, in no particular order:
Texas has a thriving economy, and the Houston, Dallas, and Austin areas show no signs of slowing down in their growth. While ROI on house flips in Texas was only a modest 24%, wholesaling is more about the potential success for real estate investors. House-flipping profits grew 38% and 36% year-on-year in Dallas and San Antonio, respectively, making Texas a real-estate wholesaling friendly state.
Like Texas, Michigan is friendly to real estate wholesaling. It’s also one of the most competitive in the United States, with several regions seeing more than 20% increases in house prices over a single year in 2020.
Florida has always been a dynamic housing market with lots of opportunities. Due to the state’s largely elderly and retiree population, it’s always possible to find interested sellers who have a hard time keeping up with their property and might be interested in selling. The average ROI on a Floridian house flip was 83%, according to CNBC.
Tennessee is another excellent state for wholesaling. Several cities in the state show healthy growth rates in property values, and the state is home to several big companies, including FedEx. While unemployment shot up for a time in 2020, it also dropped quickly. Tennessee is one of the best states for ROI on house flips, with an average profit of $57,000 with a 132% ROI.
The Pennsylvania real estate market is red-hot these days, driven by demand for suburban homes. Listings disappear from the market within ten days, median home sale prices are rising in some areas by $40,000 year-over-year, and the best thing is that there are plenty of great deals to be had in this state that has seen changing fortunes throughout the years.
Best Cities to Wholesale Real Estate
These are 11 of the best cities to do real estate wholesaling deals in. They are listed in no particular order. You’ll notice that many of them are smaller cities – they have a good balance of competition (not too high) and supply and demand dynamics in the market. When considering cities in your area to wholesale in, keep in mind that places with an inventory of many distressed properties aren’t always great. That’s because since there’s a large amount of available distressed property, prices are low, and real estate investors can buy directly from the owner – it’s not worth their time to go through wholesalers.
- Charleston, South Carolina
- Memphis, Tennessee
- Rochester, New York
- Colorado Springs, Colorado
- Tucson, Arizona
- Boise City, Idaho
- Grand Rapids, Michigan
A few larger cities:
- Jacksonville, Florida
- Philadelphia, Pennsylvania
- Houston, Texas
- Spokane, Washington
Real Estate Tip: Wholesale in Your Market First
Before you try to conquer out-of-state markets, start in your local area or nearby. A big part of wholesaling is understanding the market well enough to know where to look for good deals and find them. Sellers may also be more willing to sell to someone from the “neighborhood” than someone from across the country. What’s more, your inexperience with an area’s climate and housing standards may lead to you make some costly mistakes. A distressed property is distressed anywhere in the USA, but going from bone-dry Arizona to buy wholesale property in wet and cold Oregon or hot and humid Florida may lead to nasty surprises if you don’t know what to look for in the property itself. There’s an even greater risk if you buy remotely, with the property unseen except in pictures.
Starting wholesaling in your market is the best way to learn how to assess and acquire properties, build a network of buyers, and develop a marketing and lead-generation system in an area that you’re familiar with. When you live in or near the area you’re wholesaling in, it’s easier for you to find out relevant laws and regulations, but more importantly – unwritten rules and local know-how. Being familiar with the area can mean knowing that an apparently great deal is too good to be true (because, say, the property is on or near an area where hazardous waste had been dumped in the past). As a local real estate wholesaler, you can more easily build and learn from a network of like-minded and experienced real estate investors in your area.
Wherever you choose to wholesale real estate, do plenty of research, run and rerun the comps, and have a good business plan as a foundation. Good luck!