The Pros & Cons Of Wholesaling Houses In Small Cities Vs. Big Ones
What are the advantages and disadvantages of wholesaling houses in smaller cities versus larger cities?
Larger cities can definitely offer more action, prestige, and options. Financing is typically easier as lenders prefer markets they know. Yet, more and more real estate experts are heralding the benefits of investing in the suburbs and small towns. So, how do they really stack up?
The Pros of Wholesaling in Smaller Cities
1. Less Competition
Fewer investors operate in smaller locations, meaning there may be less price pressure and may be more value for wholesalers and house flippers. You can potentially also do more deals with fewer conversations thanks to not being out bid all the time.
2. Lower Prices
The suburbs and small towns typically come with much cheaper property prices. That can be attractive for new investors trying to get in, as well as when buyers and renters are fleeing unaffordable cities and downtowns.
3. Easy to Dominate
One billboard, one magazine and newspaper ad, a couple of signs and a couple hundred dollars a month on Google Ads might make you the most visible and dominate brand in a small market very quickly.
4. Great Growth Opportunities
Lower prices and rents now, mean more room for growth. There will be more room to grow in the number of properties too.
The Cons of Wholesaling in Smaller Cities
1. Less Demand
A smaller market also means less demand from a smaller pool of prospects.
2. Lower Dollar Amounts
Cheaper homes and lower entry prices may sound good. They can make it easy to mark up properties 50% or 100%. Yet, the dollar amounts are small. You can by for $50,000 and sell for $100,000, but still only make $50k. In a big luxury market a modest 10% profit margin may at least give you double or 4x that.
3. Returns on Marketing
Smaller markets mean fewer eyes on your marketing. You may only have a couple hundred online searches for your product a month. A few thousand vehicles go past your signs, and a few hundred blog readers. In bigger markets you might get a million views for the same outlay.
4. Little Economic Strength
The one thing that has kept most investors out of small towns, besides the lending issue has been the economic fundamentals. They have little diversification. Normally only one or two major employers. Perhaps all focused on farming and agriculture. It doesn’t take much to crush those towns and leave them with high unemployment. However, this is changing, provided there is good internet, there are millions of high paying remote jobs available that can pay a lot more than local ones.
Where will you invest?
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