The Real Estate Investing Trinity

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Brian Lee of http://geniustypes.com/ describes the symbiotic relationship between hard money lenders, wholesalers, and rehabbers in real estate investing.

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The Real Estate Investing Trinity

  1. 1. The Real Estate Investing Trinity Hard Money, Rehabbers, Wholesalers By: http://geniustypes.com/
  2. 2. Symbiotic Trinity • Hard money lenders, rehabbers, and wholesalers all depend on eachother in the real estate investing world. • When investing in real estate you must figure out your “role” and then fill your circle with as many people from the other categories as possible.
  3. 3. Three Levels • These three spheres of the real estate investing world also represent three different levels. • As your net worth grows and you gain more experience, the idea is to move up the levels to more and more passive income. • If you don’t have a lot of money or credit you start of as a wholesaler, then move on to fliping or renting homes, and then advance to hard money lending.
  4. 4. Wholesaling • This is where you start if you want to invest in real estate but don’t have great credit or a lot of money. • It takes time and money to make it profitable. • Most investors will spend 70% of the houses after repair value to purchase a rehab it. • If you can find and buy a house for less than 70% of it’s ARV, you can sell it to a real estate investor and pocket the difference.
  5. 5. Wholesaling • You don’t need great credit, because you’re not actually buying the house. • Since you don’t have money to buy the house, you find an investor who does and sell the contract to him. • First you need to find a motivated seller. There are many scenarios in which someone is under pressure to close fast- find them! • One way to find these people is to put up bandit signs- “We Buy Houses” + Your Phone Number
  6. 6. Wholesaling • You can also find sellers by “farming,” or putting up flyers in neighborhoods letting them know you’re interested. • Sending out mailers or placing ads on the internet work too! (Although internet ads are much more expensive) • Bandit signs have the lowest cost per buy- meaning relatively they’re the least expensive marketing tool, but also the most time consuming. • Go to real estate investing clubs to find investors!
  7. 7. Rehabbing • Simply put you buy a house and fix it up to sell or rent. • To do this you’ll need to borrow from a hard money lender • You’ll need $10-20,000 and a credit score of at least 700 • Remember that the key to making money in real estate is only buying property at 70% of its after repair value
  8. 8. Rehabbing • Out of the 30% that’s left over, 10% will go to a title company or realtor when you sell, 10% will go for holding costs, and the rest is your profit. • When you flip you can realize profits earlier, but when you hold a house you create long term wealth. • Keep in mind that there’s a huge tax advantage over flipping when you hold a property for longer than a year
  9. 9. Rehabbing • To avoid having your own tenant horror stories, take management classes- this will greatly reduce your headaches! • Whatever the nuisances that come with being a landlord, you get to be your own boss and take your retirement into your own hands.
  10. 10. Hard Money Lending • Hard money lenders are special banks that loan to real estate investors • They’re familiar of the risks and profit potential of real estate and are much easier to lend from • These lenders come in all forms- everything from large companies to individuals.
  11. 11. Private Lending • An individual hard money lender • Most passive form of real estate investing • Do your due dilligence and make sure the buyer and property are credible- then sit back and collect your interest checks! • Remember to never loan more than 70% of the after repair value, get 1st lean on the house, and work with responsible and experienced buyers
  12. 12. Helpful Links • Visit geniustypes.com for more information on blogging, social networking, passive income, real estate investing, and creative life.

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