Hi, I have been studying real estate investing for almost 8 months now.
And theres still so much to learn haha. any way I am looking for a niche, I figured wholesaling; then I have heard that wholesaling is for more "experienced" investors. and That Fix and Flips is the best way to enter the market place and start investing.....Now im not really looking for opinions, sorry, im looking for more logical reasons on which way to go... any one else having the same issue? and advice would be greatly appreciated,
Howdy Travis and welcome to the site! It all depends on what your long term goals are as well as your starting capital. Where do you want to be in one year? 5 years? Are you looking to save for retirement or replace a day job? What experience do you currently have? Are you looking for quick cash or passive income? Wholesaling can be lucrative but you need to have the proper systems (read as marketing) in place. Flipping can be great if you understand the market and have the capital to do it safely. Answer some of those questions and I can give you some more targeted advice/recommendations.
Go and find a good deal on a 3/2 in a "Bread and Butter" neighborhood, that you can buy right. Even if it is "Subject to". Positive cash flow. Make sure it is a little deal.
Do the deal yourself. Get dirty hands. Talk to neighbors. Lease it yourself. Make some mistakes. Learn by doing. After you have one under your belt, advertise nationally that you are a GURU and sell your expertise for $33,000. LOL! (I was serious until the last sentence.)
Well you asked a big question!
Biggerpockets is a huge resource for real estate investors. Have you looked at the resources tab?
Let's just brainstorm some possibilities for you.
One, let's say you have some money, and you want to be a passive investor, so you can be a private lender, or a joint venture partner, or find a turnkey privately managed rental (assuming you have a down payment and good credit and a job)
Two, let's say that you have some IRA money, but you can't touch it. Well you can open up a self-directed IRA or a solo 401(k) and start a business. You need to go through a custodian, if it's a self-directed IRA, or if you have a solo 401(k), you can just write checks. This prohibited transactions for these accounts, but these rules can be learned. A good SDIRA or Solo 401(k) contact is
Three, wholesaling, if all you're doing is wholesaling when your marketing to MLS or non-MLS properties, I think you are going to be frustrated. It takes money and time to be a good wholesaler, there are many threads here to talk about the difficulties of wholesaling. Being a one trick pony, wholesaling only investor, there are a lot of investors doing that, stuffing envelopes while watching ESPN, trying to get a motivated seller to sell their house at 65% of ARV less costs. Nothing wrong with theory of that, but the vast majority of houses don't want to sell that cheap.
Four, retailing, which means you buy something, you fix it up, you resell it, you make a profit, you pay the tax, and you do it again. If you do retailing which is rehabbing, buy J Scott's books.
You'll learn practically anything that you ever wonder learn about rehabbing. The problem with rehabbing his if you don't know construction in dealing with contractors and pricing jobs, and dealing with delays, miscalculating repairs, etc., I would be cautious about retailing.
Five, seller financing, which I include the following: subject to, lease options, wraparound mortgages, and installment sales on free and clear houses. Think of seller financing as a way to help the seller sell a house that has difficulty in selling the house. The number one issue is usually very little equity, where the seller bought at the top of the market, has very little equity, and if they sold with an agent the cost to sell might be 10% of value, and they might even have to go into their savings to sell the house, pay to get rid of it.
The opportunity in seller financing is on acquisition,
1. Buy on subject to or wraparound mortgage and lease it out or lease to own the property
2. Offer to lease option the property as a principal and assign the deal for 3% fee
3. Offer to lease option the property with the intent to sublease and sub option, this is called a sandwich lease option.
Note that there are due on sale clause issues with subject to and wraparound mortgages, and with leases and options you want to keep the lease to one year otherwise you'll have a due on sale clause issue.
Another caution is avoiding the Dodd Frank act, which if you do some kind of wraparound mortgage as an exit strategy, or lease to own with rent credits, you should use an RMLO for the owner occupant.
Six, multifamily, to acquire multi unit rentals, or multifamily, it's good to have a firm understanding of this area of real estate investing, look at
he offers a course and multis unit investing which I recommend people take advantage of. See
That once you decide to implement one of these niches, you need a marketing budget, to make the phone ring, and I would talk to one of the great direct marketer folks here. @Jerry Puckett @Dev Horn @Michael Quarles
Negotiating with motivated sellers I think is a skill that you need to make sure that you get a handle on what to say, how to set the appointment, how to present and how to deal with objections.
I know this is a lot in this post but this is real estate investing!
It's a big box, and you need to build team of advisers in legal, tax, small business skills, etc.
And...It's never boring!!!
Gentlemen, thank you for your responses. Ryan your right, I did leave out my situation....but i have a job, full time. I have enough time in the day to do deals no doubt. I have very little in expenses, car payment, phone bill, credit card bills. Nothing overwhelming. and I do have about $8,000 in capital saved up. I am looking at doing at least 1 deal that Mr. Joseph Ball mentioned down below within the next 6 months. and I figured I am looking to establish a good number of deals that cash flow very well over quantity over the next 5 years with rental properties. I dont have a legal entity set up yet, a sole prop to start out, and short term investing. then a LLC for rental properties. And the job I have is good, I work around some investors sometimes, so i figured I can keep my job part time and gain some networking perks with it. If you dont mind me asking how you got started? More specifically, did you get legal advice first and set up your business entity, or did you just charge in with a mentor and capital? or did you use a GURU set of education and use that?
@Travis Avenarius - each path has it's own perils and learning curve. Here's what you should do. Since you've been studying Real Estate for 8 months and still haven't figured out what you want to do one way is to do what Ryan suggests start with the big picture future plan, and work your way back to today.
The second is to take a look at where you are today (take a list of your assets and liabilities) and compare them to what each of the niches that you are looking at beginning in. Map each asset and liability to what you think the requirements for each one is and find the one that maps the best.
Or put each niche on a number on a dart board and throw darts at the board.
Or just pick one randomly and start doing it.
One of the things that I see from the most successful fulltime REI people is that they have worked each niche, it's just another component of what they are doing in REI.
You've gotten some really great advice already. I was in a similiar situation as you are now when I first started. Granted, I'm still a relative newbie, but I have a couple of deals under my belt. If you've spent 8 months researching R.E., especially on BP, you should have all the necessary knowledge to adequately analyze a deal. I think your reserves, at 8k, may be a little low unless you want to do owner-occupied financing or you can get seller financing. If you aren't going to do either of those, I personally would build up enough for a down payment and 6 months reserves before moving forward into a deal. In the meantime, I would learn the ins and outs of your market (ARVs, repair costs, common expense amounts, vacancies, etc.) to be able to spot the diamond in the rough. Once you have that nailed down, you should be able to wholesale fairly easily until you have the capital to do your own deal.
All in all, it comes down to your goals. There are many paths to success in this business. That is way it's so awesome!
Welcome to the world of BP, and I wish you the best of luck! Keep asking those questions!
It depends on your personality and the level of risk you're willing to accept.
If you're the "ready, fire, aim" type then it's good you've exercised caution thus far. If your more analytical then perhaps it's time to pull the trigger.
One investor I knew, a mobile home guru who shall remain nameless, advocated this approach because, while your cash was gone, it gave you flexibility in determining an exit strategy while only risking your own cash - and if you lost it all you at least got an education. Land and mobile homes fit this strategy and can be great proving grounds for trying out various approaches.
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