Most people have heard of real estate investing in one sense or another, but it is generally a mysterious strategy that they don’t understand or even think it’s something beyond their capability. Contrary to popular belief, real estate investing is something anyone can do if they’re truly interested in learning the ins and outs. With the help of a Houston home buyer company, we’ve brought a summary of the primary real estate investment roles.
The Styles of Investment
There are multiple styles of real estate investment, including wholesaling, flipping, and lending.
Wholesaling is when an investor finds motivated or distressed homeowners that are looking to sell their homes and pairs them up with a buyer that is looking to flip the property. When a wholesaler has a seller, they must lock them in under contract so they can’t go with another wholesaler or be put under a real estate agent. The reasoning behind this is that the wholesaler must be able to have rights to the home if they’re going to bring in an investor, and they must be able to lock in the price. The wholesaler is essentially the middle man between the seller and the buyer, but they do put a contract fee on top of the sales price. It’s important to know what’s a good value for the investor and what is a good price to put on it so that it doesn’t run outside the investors’ range.
The real estate flipper is the most comment investor, the one who purchases a home with the intention of repairing or remodeling it so that they can turn it around and sell it for market price. The flipper may purchase directly from a seller or purchase from wholesaler inventory if the price is right. They must deal with the construction crew that handles the renovations, and they must be able to bring in money from a lender if they don’t have their own budget. This means that they have to know the accounting and finance well so as to bring a good deal to the lender and not put themselves in a hole should things go wrong with the market or remodeling.
The lender is someone who generally was once a flipper but has graduated into simply lending money to other flippers for interest. A lender is generally looking to promote deals based on their preference (a single family home, apartment complexes, RV parks, etc) and if the cost is appropriate based on the after repair value. In most cases, a lender is willing to participate as long as the purchase price is 70% of the market value once the remodeling is complete. This allows for remodeling costs, buffer for issues, and enough profit for both the flipper and the lender himself.
In order to get started with real estate investment, it’s important to attend local real estate events such as REIA groups, private company events like IRA or hard money lender events, or any functions that are related to real estate investment. There are many that happen on a monthly basis in most primary cities. This is where investors go to network, build relationships, learn, and find more deals. Building a network is the absolute most important thing to do when getting into real estate investing. Having a network can not only give you lead flow or buyers/lenders, but it can assist in other ways like JVs, getting new ideas, or even taking part in business that is not related to real estate. Reach out to a “sell my house” company if you’re looking to find some wholesalers that may have inventory for buyers.