Where to begin: Wholesale, Flip, or Renovate to Hold?

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Where to begin: Wholesale, Flip, or Renovate to Hold?

Amiris Brown
Brentwood, MD · Member since 2016 · 115 posts · 12 votes

I’m new to all things Real Estate related, and I need some serious advice!

The following is my question, or dilemma rather, on where to start within the world of Real Estate.

This is my short and long term plans for myself, my boyfriend, and our Real Estate ventures together and/or with additional business partners:

Within a year my boyfriend and I want to be able to buy a single family home of our own (not a dream home, just a basic 3 bedroom 1.5 bath home). It must be a single family home, because my boyfriend has serious major issues with bass-like noises which prevents him from living any place other than in a detached single family house. Anyways, we would like to pay off that home within 3 to 10 years, but given the prices it may take us 8 to 10 years to pay it off based on work income alone. This presents a bit of a snag for us, as we would like to move out-of-State within the next 5 years. At the same time, I would like to get into Real Estate investing, though I'm not sure how this will mesh with our need to buy a detached single family house for ourselves within the next year. Regardless, my ultimate goal is to one day have a buy-and-hold portfolio of rental properties and leased land.

Currently these are my starting options:

  • Option one, my boyfriend is willing to loan me $1,000 with no interest to start in Real Estate.
  • Option two, my boyfriend is willing to partner with me in a $30,000 or less cash investment.
  • Option three, my boyfriend is willing to partner with me using $20,000 of his own money while also obtaining a $400,000 loan amortized over 20 years at a 4% APR (now I have been informed that this loan may only apply to one owner occupied house, and not a loan to buy three houses so I need to talk to the broker and see what our options are if we want to use leverage in obtaining more than one property with a consolidated loan).

My question / dilemma:

Given this frame of reference, should I start out in Real Estate by becoming a Wholesaler? Should I start by doing a flip? Should I start by doing a renovation to buy-and-hold if I get access to a dirt cheap deal (possibly obtaining it while it is either off market through a motived seller or by obtaining it through a government auction)? Should I risk doing an out-of-state flip or buy-and-hold (since the area we live in is overpriced)? Either way, whatever I choose it will be my first deal. Keep in mind, I must not fail at my first deal. Which is why I am seeking a mentorship (even willing to possibly do a partnership) as well, but I need to know exactly where I should start? The reason why I must not fail is, I want to marry my boyfriend so messing up his savings would not be wise for our relationship longevity and stability.

So where should I start on this path given my current limitations? A path that one day I hope will end up leading me to a Real Estate empire larger than Trump’s.


*NOTE: According to three seasoned investors, plus the this BP YouTube $30,000 starting advice, https://youtu.be/F93TODuMBoM, they all suggest to start out with Wholesaling. I’m a bit apprehensive about that, due to the legal and ethical issues I must learn to navigate upon taking up Wholesaling. Thus, I am trying to see if there is any other advice than “become a Wholesaler” type of advice that has already been given to me. Frankly, I think Wholesaling in the State of Maryland is complicated compared to all other residential investment options.

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Rick Wang
Investor · New York, NY · Member since 2016 · 91 posts · 46 votes
10y

I know a little something about overpriced; but overpricing is a relative measure. When the rest of the country took a hit in 2008, NYC did not take much of a beating; now values exceed that of before the bubble. 

Option 1 ($1000) isn't much to begin with.  The more capital you can save, the stronger your dive into this will be.

Option 2 is your bf brings 30k to the table as a partner, but you didn't state what you would bring, whether it is sweat equity, experience, or capital, and also what his responsibilities for what percentage of the venture. Its best to get all this sorted out, as it can tear the relationship apart.

Option 3 is relative, it depends on what you are doing with it, and "how much" for the price of the home your looking for.

Owner occupied units don't make money- though they do build equity.  Only renting and turnover of property (or the ability to borrow against it) make you money.

More knowledge definitely will help. There are career paths that can certainly help; a JD (no need to hire a lawyer for a closing), a home inspector license, realestate license, etc. etc are all helpful.

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  • Elia S.
    Wholesaler/Real Estate Investor/Consultant · indianapolis, IN · Member since 2009 · 265 posts · 51 votes
    10y

    Amiris Hello and Welcome to BP that is good that you an your Spouse are wanting to get into real estate an buy a Home in the Future I would First Recommend learning as much as you can an get with others an see which would be best for you since i cannot answer that Question for you.

    Since I don't know your Weakness or Strengths in Real Estate

    Join your Meetup and Local REIA Club to get Familiar with rehabbing,Wholesaling or Holding a Property also you will need a Team if your Going to buy out of your area Contractor,Property,Mgr,Title Company,Realtor,Wholesaler Etc.

    1Reply
  • Rick Wang
    Investor · New York, NY · Member since 2016 · 91 posts · 46 votes
    10y

    I know a little something about overpriced; but overpricing is a relative measure. When the rest of the country took a hit in 2008, NYC did not take much of a beating; now values exceed that of before the bubble. 

    Option 1 ($1000) isn't much to begin with.  The more capital you can save, the stronger your dive into this will be.

    Option 2 is your bf brings 30k to the table as a partner, but you didn't state what you would bring, whether it is sweat equity, experience, or capital, and also what his responsibilities for what percentage of the venture. Its best to get all this sorted out, as it can tear the relationship apart.

    Option 3 is relative, it depends on what you are doing with it, and "how much" for the price of the home your looking for.

    Owner occupied units don't make money- though they do build equity.  Only renting and turnover of property (or the ability to borrow against it) make you money.

    More knowledge definitely will help. There are career paths that can certainly help; a JD (no need to hire a lawyer for a closing), a home inspector license, realestate license, etc. etc are all helpful.

    2Reply
  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    Thank you @Elia S. for your advice.

    I understand the need for education, which is why after an entire month of soaking up online information (including endlessly watching and listening to BP, J Massey, and more) I want to get hands-on training with a mentor. A month prior to that I spent researching Tax Sales in every county of Maryland and Texas (I have family in Texas I can visit if I need to travel for properties there). I stumbled upon the idea of Tax Sales when dealing with my current slum lord (I'm a tenant right now). I'm not 100% versed in buy-and-hold properties yet, but I have done an unofficial House Hack twice before with roommates years back to cover my living expenses. So I'm pretty confidant I could handle a buy-and-hold, especially pertaining to a single family house.

    I'm supplementing my weaknesses by 1) Seeking mentorship to gain knowledge 2) I joined Bigger Pockets as well as just paid half price for an upcoming 3 day seminar on Real Estate investing through Fortune Builders program so to gain access to crunching numbers as I do not know that info and frankly am horrible at math but my boyfriend is a math wiz so he's going to be my math editor haha 3) I'm asking where to start regarding investment strategy because I don't think I'm aware of all my possible options especially when it comes to financing.

    I'm serious about getting started asap, on this as well as my website and hope to possibly partner with BP in some way (more on that later). I attended the "[90 days to become a landlord]" BP webinar where I got 20% off my Pro membership for a year, and like I said I split the Fortune Builder's 3 day seminar ticket where I paid $99 instead of the full $197 (since they give out two tickets for the $197 price). I have strong networking skills, so during the 2 hour lecture I was able to partner up with a stranger to gain access the seminar for half the price which made it accessible to me considering my limited budget. I plan to network at that event, as well as start attending local REIA meetings. Though, I'm currently still working from home and on an appointment by appointment bases due to ongoing health issues. I don't want to start going to REIA meetings unless I'm able to know I can attend upcoming meetings consecutively over the next 6 to 8 months. Anyways, I started building a team locally here in the DMV (DC/Maryland/VA) area, but may end up having to repeat this foundation setting process out-of-State if I end up going that route.

    Hope that brings a bit more clarity, regarding my weaknesses. I feel I have many more strengths than I do weaknesses, though I acknowledge that my weaknesses are in critically key areas that need adequate addressing which is why I had to spend money to compensate for such weaknesses as it would take years to gain it otherwise for free. As you may notice, I'm trying to make up for lost time here by fast-tracking myself since I'm 34 years old. Had I know there were more than the typical ways to get into Real Estate, I would have started when I was 18 years old and been a billionaire by now.

    0Reply
  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    @Rick Wang Thank you for your advice as well! Very helpful.

    I missed stating a few things that aren't apparent, my apologies.

    I have been told I can start Wholesaling and/or obtain a Tax Lien or Deed for $1,000 or less if I spend time searching.

    Regarding my boyfriend partnering with either $30K or with his credit access of $400K, I will be doing everything. Basically he will be a silent business partner, except for when I need him to proof read anything including the numbers. He is a math and English Lit wiz, while I'm not. So that is the only work he will be doing. I will be providing sweat equity basically, as I have nothing else of my own but my labor until I'm able to make these deals bring a profit to pay him back and leave me with money to re-invest in my Real Estate aspirations.

    While he qualifies for a $400K loan, we are only comfortable with taking out a $300K or less loan. That's assuming we take this route, be it for investing or for buying a home for ourselves.

    0Reply
  • Wendell De Guzman
    Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
    10y

    To help answer your question, here's a question:

    What does SUCCESS look like for you and your boyfriend?

    What will make you say you're successful on your first deal?

    Will it be:

    1. Cash (profit) in your pocket; or

    2. A property in a great area in your boyfriend's name with a HUGE equity, or

    3. A property in a rental area in your boyfriend's name that produces passive income

    Depending on which you choose, that will determine your focus.

    Keep in mind that there are risks in any exit strategy and you have to know what you're doing. Also, exit strategies typically will give you one of the three benefits above but not all three.

    Also, the time it takes to realize your success will be exit-strategy dependent.

    Are you willing to wait...

    1-3 years? Then rent to own or having a rental property are good exit strategies

    6-12 months? Then rehabbing makes sense

    30-60 days? Then you should wholesale

    Makes sense?

    1Reply
  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    @Wendell De Guzman, great advice on direction. Thanks! True, focus is a problem for me, as any of the three options will do for a mid-term length success. Short-term, I just need to start making money towards my Real Estate endeavors. Long term success will be to have an extensive buy-and-hold portfolio.

    I know for sure my boyfriend wants to live in a decent area with a home of our own in the next year, as we just cannot deal with slum lords knowing we could be paying $500 less each month for better quality control in owning our own property in this area.

    Yet, considering I would like to pay for my own medical bills and pay off my student debt which is wrecking my credit right now, I prefer to start making some kind of money asap. Which makes Wholesaling and/or Flipping appealing for me to build up cash now so that when my boyfriend and I get ready to buy in 6 to 12 months from now we'll have more than a $20K to $40K as the downpayment (that is our current range of downpayment btw, between $20K - $40K, but the less the better without needing to resort to having a PRI added on).

    I'm worried that if I choose to do a flip in-State it will then disqualify us for the First Time Home Buyer programs. I really need that as an option for us in Maryland. Which makes me tempted to learn how to do out-of-State investing, so we can still get a house for ourselves here in Maryland. Then again, I could just do Wholesaling for now, and use that knowledge to get a deal on our first home here in Maryland. I'm brand new to Real Estate, and I have only been in the DMV area for 2 years ~ so I am not familiar with the market trends. Depending on what I find out, will lead me to choose to flip or not and wether or not buying a property for ourselves will pay off after 5 years as we do not want to be living here forever as our primary residence. It would be nice if both my boyfriend and I could not have to work in 5 to 8 years due to our Real Estate ventures. As you can tell I'm trying to figure out what is the fastest way to make that happen. We're both pretty cheap, we can live off a little bit but we'd have to move out of the DMV area as everything from houses to food is overpriced here. Like back in NC I could live a carefree life on just $1,200/m, whereas in the DMV area here that can't even pay for a month's rent in a 2 bedroom single family house let alone the monthly grocery bill. So in  5 to 8 years it would be nice to live somewhere else than here, because even though we want to retire early we have no aspirations to waste money on frivolous luxury items other than a vacation or two per year and eating all-organic vegan food and one day returning to college. Thus, even though I plan to become rich eventually in 20 to 30 years we'll just stay living with low to mid-Middle Class accommodations. After all, neither him nor I are materialistic lol! We're just tired of the 9 to 5 as well as tired of the looming threat of unemployment or government disability programs. Plus, we're both interested in helping and giving to communities and causes, which is why I plan to build an empire eventually.

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  • Justin Howe
    Investor · Chandler, AZ · Member since 2014 · 303 posts · 101 votes
    10y

    @Amiris Brown Sounds like you're on a limited budget and want to make cash quickly. Wholesaling might be a great way for you to start. You can make large assignment fees without using any of your own cash or credit. 

    Keep in mind, real estate isn't get rich quick. It takes hard work but if you do it right, you'll build wealth. 

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  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    @Justin Howe, Wholesaling is not a get-rich-quick scheme that's for sure (because it's a job and/or a business). If someone builds-up enough rental properties, especially in the commercial sector, that is a road to riches as well as being just a plain old hands-off investor. Unlike Wholesaling, the other entry points into Real Estate take much more capital.

    I'm not afraid of work, I'm just tired of having to settle for minimum wage even after I've obtained two A.S. degrees and halfway completed a B.F.A. degree.

    To tell you the truth, other than combing over the legalities of the contract, Wholesaling seems to be the simplest and least work effort involved within Real Estate. I only say this because what Wholesaling involves, outside of the contract write-up, does not exactly feel like work to me. Whereas, flipping or rehabbing and/or holding a property as a rental is actual work imho. Ironically enough, I'm interested in buy and hold properties and obtaining land to lease out in the future once I get enough capital and/or credit.

    As for now, you and previous Real Estate professionals seem to be echoing the same thing. I should just start out in Wholesaling. My problem is I hear Maryland is strict when it comes to laws that govern Wholesale deals, and I really need to find a Wholesale mentor to teach me how to avoid breaking any laws and/or ethical codes. Not that I would be oblivious, but having an eye for details in the form of paperwork is not my strong suit (I am well aware of this). This is the only thing keeping me back from starting when it comes to Wholesaling. Whereas, if I had enough capital for a buy and hold I would jump right in (it's in my comfort area after all). I'm already pretty well versed in the legalities and ethical codes of being a landlord. At this point, I wish I could start there but I guess I cannot considering all the advice pouring in that keeps directing me back to starting out Wholesaling.

    Thanks so much for the advice. I guess I'm going to have to step it up in finding a local mentor here in the DMV area that does DC and Maryland Wholesales, so I can learn from them. Certainly, I do not plan on making a career as a Wholesaler though. I want to move on up to investor status after all.

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  • Gary Harris
    Rehabber · Westwood, NJ · Member since 2015 · 388 posts · 136 votes
    10y

    Hello,

    As a Wholesaler and Flipper....it is alot easier said then done!  Based upon what you said....and based upon return I would start to flip locally if the loan comes through.  Since this would be your first flip I would get a mentor in that area to help you source deals, price repairs, analyze markets, etc etc.  Feel free to reach out for advice.

    Gary

    1Reply
  • Rick Wang
    Investor · New York, NY · Member since 2016 · 91 posts · 46 votes
    10y

    nothing in real estate is fast. Everything is harder if you have a weak foundation. First time home buyer credit would work once for each of you. Multi family homes for qualify, but you need to be able to float these properties, sometimes for months while problems are taken care of. 

    If your tired of minimum wage, look at the job postings on these forums; handymen with their own tools and of course practical knowledge to maintain and fix common problems are only being offered an hourly rate slightly better than minimum wage at a fast food joint. 

    You want more, you have to do more. If your weak in math, fix it. If you can't do math in your head, how will you be able to spot good deals? You can't always run back to the bf. 

    Fortunately or not, you have to walk the walk and talk the talk. That's all on you to continue learning. 

    This is not meant to discourage you; it's a reminder that dreams are great, but only if you make it a reality.

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  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    There's a thing called technology and outsourcing, I specialize in both @Rick Wang. Try to lecture me later when I'm no longer in this tight spot, and we'll see who works smarter not harder ;-)

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  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    @Gary Harris, thanks so much. I am contemplating on flipping, or buying a property with our loan and living in it for 2 to 5 years then reselling it. I just visited the BRRRR calc here on BP. Even though my boyfriend qualifies up to a $400,000 loan for a home, if we want to spend the same amount on expenses we do now as renters we will have to buy a home between $270,000 and $350,000. With $350K being our max cut off. I crunched the numbers three times, once myself and twice on the calc to be sure (since I'm bad at math stuff). The problem is, I will have to work hard to find such a deal in this area (not that I'm complaining I like searching for deals haha). My boyfriend does not want to live in a deprived area even if it is not a war zone, as he has issues with noise. It needs to be a quiet area, which those houses usually run $375,000+ right outside of our price range. It's a challenge, but I think I'm up for it.

    I just want to be SURE that we can resell it for a profit in 2 to 8 years (probably 5 years), as we do not want to stay living in the DMV area. We are only here due to his awesomely paying job. As soon as we can peal ourselves away from that, we will be out to a better place. The end goal for him is to save up enough money to immigrate to Canada, it's been his dream for the longest and I want to make that happen for him ~ where he can retire in Canada. Personally, I prefer tropical paradises over the cold though.

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  • Dain Caesar
    Laurel, MD · Member since 2016 · 36 posts · 2 votes
    10y

    Is a loan needed when trying to flip/whole sale a house and if so why?

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  • Rick Wang
    Investor · New York, NY · Member since 2016 · 91 posts · 46 votes
    10y

    its not a lecture, no guts no glory right? What this forum often doesn't tell you is the failure rate. Some are incredibly lucky, but many are lucky to just break even on the first deal. Its a bit like Russian roulette; everyone gets to play at least once! Just about everyone who has made some inroads has a story about someone who bought the rights to a second loan, but not the primary...

    1Reply
  • Rick Wang
    Investor · New York, NY · Member since 2016 · 91 posts · 46 votes
    10y
    Laginally posted by @Dain Caesar:

    Is a loan needed when trying to flip/whole sale a house and if so why?

    That depends on your access to capital. If you have cash on hand, then obviously you don't have to. Some people leverage heavily and will borrow even when there is cash on hand just to be able to do more projects simultaneously.

    You can wholesale without a loan, but you many need at least a loan approval before the seller is willing to go into contract. 

    In general a flip involves a buy/hold or renovation/capital improvement. Unless you go into some sort of partnership with the seller, generally it requires the full sale price to be paid to the seller at the time of closing. I have heard some folks here leverage a credit card. However, I personally do not recommend doing so unless you know all the pitfalls. I do know of a person who was very successful in leveraging over 1 mil on several 0 percent offers by different credit cards. However if you miss the payment window, it's a painful hit; 15-22% for most credit cards.

    0Reply
  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    @Rick Wang, good info. I'm exploring all avenues to obtain my first deal. Though, I am not willing to risk maxing out credit cards when my boyfriend already has access to great interests rates from conventional RE loan options. We were recently quoted 3.47% APR for a 20 year fixed mortgage of $400K, and we can avoid PMI even with just 10% down. That's a nice loan offer from what I understand. I just need to figure out how to get us a home in 12 months but still do a deal as well for myself, it might mean just getting the house and using the equity we build to get another loan ::: sigh ::: I am not sure yet. I'm still in the "get my education" phase of RE lol.

    0Reply
  • Gary Harris
    Rehabber · Westwood, NJ · Member since 2015 · 388 posts · 136 votes
    10y

    Hi @Dain Caesar 

    If you want to flip there are a few ways to do it.  1st Have a bunch of money stashed away and use it to acquire the property and remodel it to sell.  2nd Find someone with a bunch of money that trusts you enough to lend it to you to do the previously mentioned.  3rd Use a hard money loan to pay up to 80% of acquisition and 100% of construction.  If you don't have a lot of money upfront then the 3rd option is very useful.  I personally have used hard money before and it went really smooth using that company.  

    As for Wholesaling...if you have to borrow money to run a direct mail campaign then you shouldn't be doing anything but saving money up.  I know that direct mail isn't the only way to get deals, but based off of my experience it tends to be the most efficient way.

    Feel free to reach out if I can answer more questions for you.

    Gary Harris

    1Reply
  • Gary Harris
    Rehabber · Westwood, NJ · Member since 2015 · 388 posts · 136 votes
    10y

    Hi @Amiris Brown

    I think what will be key for you as you already know is finding the best deal in the best neighborhood. Kinda common sense, but achieving it is never easy. My advice would be to contact active realtors in the area looking for off market deals, Realtors to find deals that need a lot of work, and Wholesalers (find them on here and local REIA meetings). Start reaching out to them to see what's out there on the market and off market arena. Feel free to reach out direct if you think I can assist you any further.

    Gary 

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  • Rick Wang
    Investor · New York, NY · Member since 2016 · 91 posts · 46 votes
    10y

    you can always do the old fashioned way- find a 2 -4 family, and rent out one/ live in one. Still qualify for first time buyer. If your still young (don't know your age) if living at home is a possibility, is worth considering. Quite a few people I know lived in their parents basement even after getting married for 3 years and the capital they saved was enormous. 

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  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    @Rick Wang, those are not options for us in our given/dealt circumstances. I wish they were but we don't have such options. Thanks though.

    0Reply
  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    I'm already on the ball with those steps, @Gary Harris. Except I have yet to go to any meet-ups including the local REIA. It is on my to do list for sure though, after I attend a three day seminar later this month (to learn more especially the lingo/jargon).

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  • Gary Harris
    Rehabber · Westwood, NJ · Member since 2015 · 388 posts · 136 votes
    10y

    @Amiris Brown .... Good, then you are well on your way to finding the right house for you and your boyfriend.  Patience is key with real estate...just keep plugging along and you will find the place that makes sense for you both.

    Gary

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  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    @Gary Harris I just wish I could convince him into getting a duplex or house hacking a single family home, but I already know he will be living in hell if he has to live next door to someone or with someone even if we get the best tenants they'd basically have to be librarians 24/7 for him to be happy about them living there or next door lol. It really looks like we're going to have to go the build a line of equity route, which I'm not too thrilled about in that it will be a slower process ~ but it's better than not doing anything that's for sure.

    0Reply
  • Gary Harris
    Rehabber · Westwood, NJ · Member since 2015 · 388 posts · 136 votes
    10y

    @Amiris Brown  LOL....you're hilarious!  You have to do what's best for the both of you...sometimes as much as it sucks...it takes longer then you want:)

    0Reply
  • Amiris Brown
    OP
    Brentwood, MD · Member since 2016 · 115 posts · 12 votes
    10y

    Indeed, @Gary Harris. :-)

    0Reply
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