What is the best way to start investing in real estate?
Chances are if you have come across this article you may have been poking around on the internet trying to figure out how the hell can I start investing in real estate?
There are so many different strategies to choose … we hear about no money down, buy and hold rentals, short sales, rehabbing, flipping, lease options, subject to’s, commercial, it really can make your head spin.
But deciding the right strategy for you is dependent on your goals and resources you have available…time frame, experience, cash available, if any???
Most people often ask me how do I start investing in real estate? My answer most of the time is wholesaling real estate. My reasoning for this is because contrary to what most people think, wholesaling real estate is a very simple strategy and you can begin the process very quickly with little experience and money to invest.
I do not recommend rehabbing or rentals for most beginners because call me old fashioned but you should have money and appropriate capital reserves. I know there is a lot of people, real estate guru’s, and lame internet marketers that will differ in opinion and probably have strategies that work sometimes. However, wholesaling is the best for most people because you have the greatest chance of achieving some level of success.
This type of real estate investing will put money in your pocket and allow you to build on that momentum and move onto your next real estate transactions.
How do you Wholesale Real estate?
Wholesaling real estate is a process where you act as a middleman, you job is to basically bring together 2 parties and have them complete the transaction. Real estate wholesalers will market to find deals put a property under contract at a discounted market value with a seller and then assign or sell that contract to another investor or buyer for a fee.
Lets do a hypothetical example:
You have been getting your marketing out and your phone is starting to ring. After many conversations with prospects that were not motivated enough to accept less the retail value when you get a call from a brother and sister who live out of state and their parents house needs to be sold.
It needs a lot of work and they need to sell a house fast to pay off debts. After an initial estimate of value you determine the property is worth about $100,000 rehabbed turn key fixed up condition. After a walkthrough of the property you estimate that repairs to be around $15,000. After some negotiations with the seller you agree to put the property under contract for $50,000. Now in order to get paid your job is to market that property to other investors and cash buyers for a fee in excess of $50,000.
Depending on the potential profit spread in the deal this fee can vary. It really depends on the deal. Ethical Wholesalers should not make more on the transaction then a guy who is going to actually rehab the property.
A fair wholesale fee is around 10-15% of the potential profit. For example if the profit from rehabbing the property is projected to be $30,000, a $3000-$4500 wholesale fee would be very fair to pay. Most investors would not balk at that because it still leaves plenty of room left in the deal for the guy who is doing the actual work and taking the risk.
Benefits of Wholesaling:
Quick Cash: Beginners can start to make a couple extra thousand dollars a month just doing 1-2 deals. You are going to be working with sellers who are very motivated and cash buyers who can close deals very quickly, so the process can go very fast. Some sales can go as quickly as 2 – 4 weeks.
No Credit Necessary: As a wholesaler you do not need to use your credit or have a lot of money. Remember you are not actually the one who is purchasing the home. That is not your responsibility and you want to be clear and transparent with the seller. Tell the seller in your initial meeting that your investor, associate, partner etc will be actually closing the deal.
You should have some minimal amount of money for a deposit to make a contract binding but that is negotiable. Deposit money should be typical for your area, for lower priced property a $500 deposit should be sufficient. Your job as a wholesaler is to put properties under contract for your buyers.
No Experience Needed: Yes there is a learning curve but if you are determined you can get started with marketing, looking at deals and making offers very quickly with some foundational knowledge.
It is not easy but anything worth your while takes effort.
You can educate yourself on the subject and do some research online. Check out JoeBarletta.com for great training and resources that can help you get started investing in real estate fast.
You can also learn a tremendous amount from hanging around experienced investors, people who will take the time to be your real estate business mentor.
Prepares you for a career in real estate investing. While you’re wholesaling real estate, you’ll gain experience and learn your local real estate market, make strategic relationships and gain an education how real estate deals work. This can be incredibly valuable to a real estate investing business.
Don’t let fear stop you from learning how to invest in real estate.
Wholesaling can be a quick way to earn great money and you can do it part time while still working at a job. At least do so long enough where you have enough put aside to focus on the real estate business and have your living expenses covered.
Before you actually start investing….you have other options
If you are serious about investing in real estate… GET A MENTOR ASAP.
There is no better way to cut the learning curve, expedite your success and minimize your mistakes and risk then by having someone on your side to walk you through this business step by step.
Having an experienced mentor/friend/coach to call, text, email when it really counts can make you a windfall of cash or save your ass from losing cash :-)
In conclusion, if you want to know the best way to start investing in real estate it depends on you. I believe in having a strong foundational knowledge on the subject as possible, but you must take action at some point. Having a mentor will hold you accountable and keep you focused on the money making activities that get RESULTS.
Learning how to wholesale real estate is a great strategy for investors whether you are a beginner or expert, but in the meantime learn as much as you can and start taking action steps to reach your goals.
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All the Best, JB