Investing Strategies

[Jonathan Morris]

After researching endlessly to figure out the best strategy to begin my real estate investing career, I have some thoughts on the types of deals investors will come across. Personally, I want to start out by wholesaling and move into rehabbing while at the same time wholesaling the deals I cannot do myself (b/c of lack of time, finances, etc). Ultimately, I want to build up enough money through wholesaling and rehabbing to purchase buy and hold properties to have cash flow each month to cover my living expenses. This general plan is clearly a long process and not an overnight thing. I think lessons learned wholesaling will help my rehabbing, and lessons learned wholesaling and rehabbing will help my buy and hold investing. Through this whole process, I think there will be three basic scenarios when introduced to a motivated seller: (1) seller is upside down on his loan, (2) the seller has little to no equity, or (3) the seller has a lot of equity. In each of these cases, it seems that there may be ways to profit. If the seller is upside down on the loan, there is the possibility of a short sale. For the seller with little to no equity, there is the possibility of the "lease option" or "subject to" transactions. And for the seller with plenty of equity, a straightforward purchase could be arranged. I am sure other strategies exist. Is my line of thinking correct? ...as long as you have a motivated seller, there is the possibility of profit? One scenario may be more difficult then the next. But if I understand this, then I am not passing up on plenty of deals instead of just looking for the perfect one that fits my criteria. Does any one have any thoughts on these types of scenarios or experiences with them?

[David Weiss]

@Nathan Ewert , every rehabber out there had a first rehab that they were scared of screwing up, because inexperience is intimidating. The thing is, wholesaling doesn't do much to teach you how to rehab....

Underestimating the amount and cost of the rehab is one of the biggest dangers for the newbie. One way to mitigate that is to use an asset-based hard money lender who will inspect the property prior to lending to see if your numbers are accurate. If you don't go down that route, sign the contract contingent upon property inspection and get a good GC to walk the property before your contingency period expires.

Another thing you can do to mitigate risk is to have a good relationship with an experienced local rehabber that you can ask questions and get advice from (or even partner with on your first flip)(or failing that, get advice from experienced rehabbers here on BP!)

Also, if you have a really solid GC in place, one who is experienced and highly regarded by your local rehabbers and who is smart and has built his business around rehabbing flips, that person can tell you what you should be doing with a house, what upgrades are worth the cost and what are not, what's popular with today's buyers and the best way to solve problems that come up. You'll want a GC who other investors say they would trust to manage the rehab without direction if they were out of pocket. There's nothing wrong with letting the guy who has done the renovating on 200 flips tell the investor with 0 flips to his name what should be done during rehab, as long as he's trustworthy enough to not take advantage.

Other rehabbers may have their own $0.02 to chip in....

Good luck!