Using Wholesaling & Other Strategties in Real Estate Investing

[Dustin Cavalier]

Hi everyone! I hear posting on Biggerpockets is a great way to get some very insightful thoughts on the real estate world. I hope you prove those folks right! So, in a nut-shell, I am very interested in using wholesaling to enter the real estate investing market, eventually tapering off into rental properties for the passive income, and I would love your input on this!

Allow me to lay the economic landscape of my area. I currently reside in the 77379 Spring/Houston Texas area where the market is cooling off as a whole due to the downturn in the oil and gas market. Houses are continuing to rise in value, and inventory levels are starting to rise. New leases on rental homes are starting to rise rapidly, and unemployment is starting to rise as well (up 4.8 to 5.7% Sept year over year). This leads me to believe that, coupled with having one of the fastest growing housing markets in the country over the past few years, we are on the cusp of an economic/real estate slowdown (and a potential downturn). The signs are appearing to become more and more obvious as each month's economic/real estate reports are being published, but it is not clear if we will see just a slowdown or a downturn. At this point, it is safe to say there will definitely be some incremental downside risk in this market. This will more than likely present unique opportunities, but I do not yet have the real estate experience to confidently navigate and capitalize on such a situation (I have a few ideas though).

With that being said, I've been researching the incredible world of real estate investing, and I am ready to take that first step, developing a strategy to enter the market. I've crunched the numbers, analyzed many different strategies, and I've decided on a few of the 1000's of approaches, yet I am still trapped in the "beginner's fog' and conflicted between a couple strategies. 

After listening to a ton of Brandon Turner and Joshua Dorkin's Podcasts, here are a couple strategies I have come up with so far:

1. Start with only a few thousand dollars, and use wholesaling to develop a deep discount business model to build cash and locate the best properties to flip or become rentals at the best possible price,

2. Network with a good wholesaler, and use a bit more money to begin purchasing homes to either flip or turn into rentals, or

3. Forgo the wholesaling aspect of the business, use even more money, and buy properties ready to rent from a flipper.

Now, in order to avoid as much of the "it depends" responses as possible, allow me to explain a bit more about myself. I am an incredibly driven individual, who has a great career already in place. I do work slightly more hours than your average Joe (50-65/week), so time is not a huge luxury, but I definitely have spare time. I will not be giving up my career for real estate until I have far outpaced my current career growth. I have a love/hate relationship with risk. Basically, I hate risk, but I also don't mind living a little on the edge if my business sense/instincts feel right. My background is finance and accounting coupled with business strategy. Hope's this helps!

Alright, I've ranted for a while and probably typed way too much, but if you have read through all of this, and are not bored to death with my rhetoric, I would love to hear everyone's opinions and thoughts on this given the economic status of this area. I am very open to strategies other than what I have mentioned thus far too, so feel free to tweak or introduce new ideas to what I have come up with.

Thank you bigger pockets community.

[Tim Shin]

Hi Dustin, I invest in zip codes nearby but live inside 610 loop and work 50-60 hrs/wk like you. Based on my last 2 years doing wholesale to build cash to buy rentals it is not my preferred method and I don't recommend it if you don't need it to build cash in Houston without putting in tons of work and hours. That being said, cash buyers are currently buying 90% of ARV - repairs in many cases and sellers have been seeing pretty high prices in the last year so it's hard to get a good deal on both wholesale and wholesale buyer if you're trying to use no money down BRRRR. I'd recommend talking to Donny Gothard at Security National Mortgage for their temp to perm financing program. We used them on our rental purchase and the rates and costs are pretty good. Ultimately the easiest route is to buy cash or 20% rent ready on MLS, not necessarily from a flipper because as you said inventory is high in your zip. fewer headaches and easy to get.

I will be out of pocket for a while now besides any forum stuff because of a family emergency - I'm sitting here in an ICU with nothing to do - but otherwise I'd be happy to help. Good luck.