Hello - How Do You Pick Your Strategy?

Question

Here goes my first post. ;)

I'm your classic newbie learning the ropes and trying to figure out how to tackle this real estate investing thing. I'm hoping to eventually quit my full-time job and be able to focus on building immediate and long-term cash flow.  There are so many investing strategies I could use: wholesaling, flipping, buy and hold, multi-family, foreclosures, short sales, crash pads, trailer homes, etc., etc.  So how do I pick? I'm wondering if it's best to try a little bit of everything until I figure out what I like or if it's dangerous to have too many strategies. I can anticipate pros and cons to both ways of thinking. Is it dependent on where my market is?  or will each strategy work anywhere? Does anyone have any advice?

Thank you in advance and I'm excited to join such a great network of people!

Mihir Bhimaraju · Answer

@Kristin Szalajko Welcome to the REI world. I've been there and I continue to have the "shiny object syndrome". I hear success stories and it makes me wonder if I need to try that niche. I spent a lot of time researching each niche to the point of blowing up my mind. While it's good to know different niches, I would NOT recommend trying to be an expert at everything.

What helped me immensely is to stop all the deep diving I was doing and to focus on WHY I was doing this and where I wanted my investing career to go in 5 yrs. What I do now is to see if a certain niche will help me get closer to my goal. Also think about how involved you'd like to be- do you want to do flips yourself? acquire a team and have them do the flips while you manage? wholesale till you get a good chunk of cash and invest ? or just keep wholesaling every month and get income that way?  be a landlord and deal with tenants or have a prop. manager and earn passive income?

It's easier to be approved for loans when you're working. So keep your job till you consistently replace your income. That's my 2 cents. :)

Bryan Pham · Answer

Hi @Kristin Szalajko, Welcome to BP! Sounds like you are bitten by the real estate bug. I was also overwhelmed by the choices when I first started but then I realized that everything you listed are just 'tools' in the toolbox. Every situation will call for something new, something creative. Of course, to get started you obviously have to pick one. This depends on your comfort level, where are you in your investing career, what is your why, what are your goals. Its tough to have someone else answer these questions because there's no right or wrong way to investing. First off, you need to do your due diligence, understand your market trends, attending local meet ups and finding a suitable mentor.

Best of luck to you!

Kristin Szalajko · Answer

@Shari Peterson You have great timing.  I just listened to the wholesaling podcast yesterday. I hadn't considered what you shared in deciding what path to use while wholesaling.  I can see where determining what you end profit will be can help determine which to use - double closing v. assigning. The more I learn about wholesaling, the less I think it is fit for my personality.  But...I could be wrong.

Rob Drum · Answer

@Kristin Szalajko There are so many options right?! My advice is to just find something that someone is doing successfully and copy them ;) It's the best way to narrow your focus and find a mentor at the same time.

Omari Bookal · Answer

I was bitten by the REI bug back in November of 2016 when I was 25 an between then and now I managed to purchase my own owner occupied residence (which i also rent out) and quit my full time job to start wholesaling real estate in my local market full time. I realized this tool out of all the ones you mentioned before was that one that fit my particular situation the best. Low barrier to entry (just need to pay for marketing material) and I don't need to purchase any properties in this position. However If I had more money at my disposal I would have done a fix and flip or bought another rental but none of those tools "fit" my situation and this was something I thought I would be the best at. Took me about 7 months to decide that I actually wanted to use this tool, so take your time and choose wisely your tool wisely.

Jody Schnurrenberger · Answer

@Kristin Szalajko, howdy!  I'm also a newbie on here, though I've had properties for several years now.  I agree with the advice above, especially the part about not quitting your job until you are making enough to support yourself and about knowing what you like and don't like, can do and can't do.  For example, I use property managers because I'm terrible at being the bad guy!  I could never evict someone, so that's their job.  ;-)  (Though thankfully, it hasn't happened since I bought in 2001.)

Anyway, good luck with all your choices and welcome to BP!

Shari Peterson · Answer

Thanks @Kristin Szalajko . Yes, it's about thinking about your profit but also about thinking about it from the perspective of that Rehabber who will be your C Buyer. At the end of the day, it has to be a good deal for him or her.

Shari Peterson · Answer

One of the reasons people start out in real estate investing by focusing on wholesaling is because you can do so with very little, if any, money out of pocket. The decision on whether to assign or double close comes down to: "How much will a rehabber pay for this property and still make a decent profit after he puts money in for repairs?"

As a general rule, if a reasonable selling price to a Rehabber is less than 10% over what you paid, then you would want to Assign the contract. For example, you buy it for $100k, Assign it for $10k. The Rehabber is in it for $110k. He'll put $25k in it, for a total investment of $135k, and the ARV is $195k. This is a good sound investment for the Rehabber.

However, let's say you can get this same property for $75k. If the Rehabber gets it for $110k, he's still happy. The numbers are still $110k + $25k rehab, total of $135k, ARV of $195.

But it is highly unlikely he will pay you a $35k Assignment Fee ($110 less $75k). This is the situation where you want to double close using Transactional Funding. Get it under contract with the Seller (A=Seller, B=You) for the A-B Transaction. Then get it under contract to sell to the End Buyer Rehabber (B=You, C=End Buyer) for the B-C Transaction. Arrange for both to close the same day at the same title company. At the A-B Transaction closing, 100% of the funding is provided with Transactional Funding. You pay back the 100% funding plus the fee at the B-C closing. Whatever is left over is your profit.

Bryan Pham · Answer

Best of luck @Kristin Szalajko!! Please keep us posted on your progress.

Hello - How Do You Pick Your Strategy?

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