Wholesaling, Flipping, Buy and Hold? Which is best to start with?

Question

I am fifteen years old, and I was first introduced to real estate investing a year ago. I read a free Amazon ebook about wholesaling. This book was written by a "guru" and was essentially a big advertisement, however, I did learn a few things about real estate. This past year I have been reading books on real estate and business, and I just recently began listening to the Bigger Pockets podcast. I have come to the conclusion that Buy & Hold is by far the best option (long term) for real estate investing. However, it is more difficult to start out with, and is almost impossible (if not impossible?) to do as a full time job. Wholesaling, if I could make it work, would be a good way for me to learn the market, learn the trade, and make a bit of cash to later invest in a down payment.

I have a few options once I turn 18:

-Find a mentor and go into wholesaling full time, after a few years of saving money, I will be able to buy my first rental property

-Find a partner (an experienced investor) and do a flip, and like before, buy my first rental after a few years of saving

-Find a job either related or unrelated to real estate, and after saving a few thousand dollars, buy a rental property

The first two options would be most beneficial, as I would be learning the real estate market while making money, however, I don't know how soon I would be able to make profits with wholesaling/flipping and I will need some source of income to pay for my education/living expenses.

Matthew Porcaro · Answer

Buy and hold!

Flipping and wholesaling is not the same as investing. It is a service, a job.

That isn't to say that you shouldn't be utilizing these strategies to build cash reserves, but once you have the cash your goal should be putting that cash in cash flowing rental properties!

Matthew Porcaro · Answer

I would do exactly what I did!

Buy a foreclosed small multifamily with a 203k FHA loan. Only put 3.5% down, and use the 203k to wrap the rehab costs into the mortgage.

After rehabbing the foreclosure, you will build equity into the property. You will also now have a property that you can live in one of the 2 to 4 other units (small multifamily) and rent out the rest of the units. Those tenants will be covering your mortgage payment every month, and then some!

In my case, I bought a foreclosed duplex, rehabbed it, and rented out one until until I was able to refinance out of the 203k FHA loan. Now I rent out both units, which gives me $2000/mo cash flow + I built $130,000 of total equity into the property after a $90,000 rehab that was built into the mortgage.

My mortgage on the property is for $350,000, but it appraised for $480,000, so I have $130,000 of equity I can do whatever I want with.

Willie Kate · Answer

@Noah Norton Just to add a broader perspective, wholesaling/rehabbing is a way to create revenue (cash) is a relatively short period of time.  Buy and hold is the long term play.  Either way, you're creating your own business (the key is remembering that you are building a business). There are a lot of good resources here on BIgger Pockets and few other reputable resources as well that go in depth in all these areas.

As you pursue the path of a real estate investor, ask yourself questions like do you want to be an active investor or passive investor?  Or do both?  What is your ultimate goal? How do you plan to finance your properties and/or transactions?  How much time do you have to invest in your business?  Picking the path and getting started is probably the biggest challenge but, as they say, "your mileage may vary".  It is possible to be a real estate investor part-time even while attending college (don't miss out on that experience).

As I saw posted previously, attend your local real estate investor meetings.  It's a great place to network, develop relationships and find mentors.  You can ask questions there and be with like minded individuals who can share their experiences and provide invaluable insight into real estate investing.

Good Luck and happy hunting!

John Fortes · Answer

I'm more excited that you are 15 and looking into this right now. Being part of the site and already being active. Young man, you are going to do just fine in this world! Keep learning and growing.

Here is a rule of thumb... Do what makes sense.

• If you have a deal that you are wholesaling and it makes sense for you to flip, then flip.
• If you have a flip that makes sense to keep and rent, keep and rent.
• If you have a buy and hold that makes sense to sell (someone willing to pay X amount), then sell!

What ever you do just make sure it makes sense. Every opportunity, is just that, an opportunity within itself. Deal by deal look at what makes sense. Looking forward to seeing your growth and God bless!

Noah Norton · Answer

Thank you! The way I see it, I need $10k-20k to begin with Buy & Hold, and that will only get me a cash flow of $200 per month (with the right property)

I've also seen lots of advice saying that beginning with wholesaling is extremely difficult and beginning with flipping is even more difficult. Both take a lot of experience to do well in.

I'm having trouble seeing what the right move is. I have the next three years to study all aspects of real estate, but once I turn 18, what is my best move?

What would you have done personally if you had started at 18?

Noah Norton · Answer

Thanks, this is exactly what I was looking for.

Oleg Shalumov · Answer

@Noah Norton not often one would see a person thinking ahead at the age of fifteen. i am applauding to you!

I would recommend you focus on Buy&Hold as that is the best way to invest for long term. But I seen a lot of people doing flips to pay off the rental properties faster.

That probably sounds very exiting for you, but you should be spending a lot hours educating yourself before you take any steps.

Good luck to you!

Matthew Porcaro · Answer

I'm going to be blunt. I personally thing wholesaling is a waste of time.

For the amount of time and money you spend finding deals, you can put that effort into saving a down payment for a distressed property that you can rehab, and turn into a cash flowing rental property.

Go to your local real estate investing association meetings, and look for any full-time investors that would be looking for an intern. Just help them out in exchange for their knowledge about finding good deals and building equity and cash flow.

Also, you don't need as much for a down payment as you think. FHA loans only require 3.5% down, which is small enough money for someone at any income level to afford. You can buy a distressed property, rehab it, and rent it out, giving you a huge jumpstart in your real estate investing career.

Noah Norton · Answer

Thanks! That's what I had figured, buy and hold is the way to get to "financial freedom."

One more question though, do you suggest finding a mentor and beginning to wholesale straight out of college? Or should I find a more "predictable" job while I learn about wholesaling. (By learn about wholesaling, I mean on the field experience, not the kind of learning one would get from a book)

Wholesaling, Flipping, Buy and Hold? Which is best to start with?

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