Real Estate Investing…and Risk

1. Real Estate Investing…and Risk
This topic has been one of heated debate for quite some time now. You have the "Die Hard"
Wholesalers, your Rehabbers, and Landlords that all feel that their strategy is the best.
Probably the best way to describe where everything fits in, it's best to think of a triangle. If you look at
Real Estate like a triangle you'll see that on one side we have Rehabs, on another side we have Rental
Property and on the last side of the triangle we have wholesaling.
I consider wholesaling to be the bottom side of the triangle, the foundation. Wholesaling is the
foundation that quickly injects large chunks of capital into your home buying business. This is the capital
that you'll be using to grow your business and purchase long term wealth vehicles like Rental Properties.
I personally wouldn't recommend trying to do any of the other real estate investing strategies until
you've had a few wholesale deals under your belt.
Wholesaling, or "Flipping" properties is by far the easiest way for a new real estate investor to go from
zero to $20,000 in 30 - 45 days. It won't take you long to get to the point where you're making $10,000
to $20,000 checks each and every month only working a few hours a week. That's probably one of the
greatest benefits that you'll find when wholesaling Real Estate.
Who wants to worry about fixing junk properties? Or unclogging toilets? This is a strategy that you can
put on auto pilot if you put the appropriate systems in place. If done properly, you should only need to
show up to Close the Deal & then to pick up your check at the title company. Remember that time is
your most valuable asset!
Once you’ve created your investor list (which we will discuss) it won’t be hard for you to move these
deals in a short amount of time, normally within 10 to 15 days. Your buyers will be paying with All Cash
and financing is not an issue.
This is much easier than selling to an "End Buyer". In a slower Real Estate Market, it may literally take
two to three months for you to find a qualified buyer who wants to buy the property. Remember that
the keyword here is "QUALIFIED BUYER". When you're dealing with other investors you know that they
either have cash or hard money, and financing isn't a big issue. When you're dealing with "Joe Q. Public"
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2. you're going to get interested buyers with various financing issues and you're the one
that has to worry about getting the deal closed. Once you find a buyer, you’ve got to
get their loan approved, then you’ve got to get the loan taken care of, get the appraisal
and all the other things that come with a regular retail buyer, and so it may take anywhere between
three months to eight months to close a deal on a rehab, going from purchase - rehab - resale.
That brings me to another reason why I prefer wholesaling real estate over rehabbing. When you buy,
fix and resell real estate, you're committed to the property. Once you close on that baby it's yours...The
Good and the Bad! If some unforeseen problem arises (It always does), you're going to be the one that
carries the expense. If you're rehabbing a property, you've got to start by hiring a contractor or
handyman. You’ve got to get him to do all the repairs to the property, market the property, go through
the process with the end buyer. All of this may take a long time, and you are the one carrying the costs.
Every day that this property remains in your possession, money is pouring out of your wallet.
In a wholesale deal, all that you are really doing is getting control of the property. You would simply take
the same property that you would normally buy and rehab, and get it under contract. Then, you're
taking that contract, marketing it and selling it to other investors that want to take on the project. There
are investors out there that prefer doing rehabs. These are investors who have the cash to pay and who
don’t mind waiting six months to do a rehab. There are also investors that want to do a deal, but are
horrible at talking to sellers and would not be able to secure the pricing that you can. These Rehabbers
have no problem paying you an "assignment fee" (the amount that you pocket when you sell your
contract) because they understand that it is a cost of doing business for them.
The Rehabber will generally net more than a wholesaler, but look back at all of the risk and time
associated with doing a rehab. The average, depending upon your location is between $25,000 $40,000, and at times even more. But most wholesale deals are going to net you anywhere between
$10,000 and $20,000. Usually about half of what the average Rehabber makes per deal. However, unlike
the rehabber, as a wholesaler, you have more control of the amount of money you earn. The best part
of wholesaling is that your pay is directly proportionate to your ability to put deals together and not how
much time or physical labor you have in a deal. As you get better at negotiating, you'll be getting
properties under contract for less and less, allowing you to sell the contract for more and more.
I would personally rather do four wholesales and spend less time than to wait six to eight months for a
single rehab to cash out. Even if you're in a position to wait that long, is it really worth the risk? That's
the question that you need to ask yourself when deciding which real estate investment strategy you
want to take on. Exactly how much risk are you willing to accept?
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http://www.closingcow.com
Call Us or Text Us 323-230-3502 Watch Our Video on YouTube click here
Our YouTube Channel www.youtube.com/watch?v=KVoSsqk_Pr0