Hot spot areas are areas where seasoned investors love to buy. Typically, these are areas which have a resale house (used houses, not new houses) selling, once it has been rehabbed for about 25% less than your average multiple listing sales price in your area.

Let me say that again. Once these houses you birddog or wholesale have been renovated, their after market value (ARV) sales price will be about 20-25% less than what the sales in your city combined then averaged out sell for.

An example would be you take all the sales prices in your city from the $5000 ugly house to the 3 million dollar luxury house, put them in a pot then take the average of all of these combined.  That is your average sales price for resales.

These houses will be owned by folks whose income is about 30% less than the middle class of your area. Getting the picture now?

These are the houses you want to find. You might have to get out of your comfort zone if you live in middle or upper class neighborhoods. But get out, drive these areas, and get to know what houses seasoned investors are looking for.

These are definitely not subsidized or even ghetto areas I am speaking of, those are not good areas to bird dog in. The area you want is between ghetto/war zones and average middle class neighborhoods.

These are the areas investors love to buy in. These less expensive houses sell quickly, as there are much more lower socio-economic class families to sell to versus a slightly more rare middle class family to sell to or who buy houses.

Okay one more analogy to help paint a picture in your mind. How many folks buy at Wal-Mart versus buying from Nordstroms or Neiman Marcus?

When I was a new investor I only wanted to look at pretty houses in pretty areas, and all i did was look too! Finally when I started looking in the areas i just mentioned I began to do 3-4 wholesale deals a month.

They are cheaper to buy and sell quicker, makes sense to me.

Yes, occasionally you will find a middle class house abandon and in need of repair especially in light of the current economy. Unfortunately they have no equity/money in them. But they will be rare and you will burn a lot more gas and time and may never find a super deal.

Go where the odds are greater for your success, that little lesson took this investor a long time to learn.

Hope this helps you get to where you’re going.
Happy Trails,
Bill Guerra

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