If you checked out this blog last year, you know that I’ve been getting more and more interested in real estate over the years. I was looking back 10+ years ago and laughing about some of my blog posts on kids toys and learning to be a new husband.
Well, 10 years later with three sons and another baby on the way and a man starts to take a good hard look at his assets. In particular, I’ve been looking at real estate an becoming an investor.
House Flipping TV Shows Are Everywhere
When you turn on the TV today, it seems that everyone and their uncle are becoming house flippers. I mean, just look at the number of results on Google for a simple “house flipping tv shows” search.
There are 10+ shows there without even blinking – Flip This House, Flip or Flop, Flipping Vegas, Flipping Out, Property Ladder and the list goes on.
All of these shows promise that making wealth with real estate couldn’t be any easier. And better yet, they wrap up an entire project in a 22 minute show! Crazy. The profits always seem to be a bit higher and the costs a bit lower. I guess small profit margins don’t make for good real estate TV these days.
Anyway, because of all of these shows, you see a lot of people getting into the real estate business. Many people try to flip but soon find out that they may be in over their head. First of all, they need the cash to buy properties. In the real estate investing space, if you don’t have cash to close quickly, you are in a tight spot to try to get any good deal.
Then, once you get the property, you better be sure you know what you are doing in terms of rehabbing. It’s easy to let your rehabbing costs get out of line quickly. Then, instead of making money, you’ve quickly lost your investment. I’m pretty sure that’s not the way it’s supposed to go.
Wholesaling as a Real Estate Alternative to Flipping
If you don’t flip, another way people try to break into the real estate investing space is by wholesaling real estate. What is wholesaling? Basically, it’s the process of acquiring a property from a motivated seller at a discount price and then turning around and selling that property to another buyer, often times another real estate investor.
The advantage of working in this space is that you often times have less risk than a house flipper. Because you are generally holding onto the property for a very short period of time – often times only a few hours – you don’t have all of the construction risks that come with house flipping.
Wholesaling companies are basically in every city in the United States, and you find a TON of information on sites like Bigger Pockets to learn how to get started. Once a wholesaler acquires a property, they often times become the lead source for those who will flip the house. When you have a wholesaler who has integrity, it can be a fantastic relationship and a great way to find deals.
That said, there are a lot of people who wholesale because of the low barrier of entry that you cannot trust. Those people aren’t too hard to spot. When you are around them, you kind of get that “icky” vibe. I’d recommend you find someone who puts their name and face on their website and has some good reviews and testimonials. This site, WeBuyNKYHouses.com is a good example. The owners face is on every page, and you can get a feel for the personality by watching all of the YouTube videos on the site.
As I mentioned, Bigger Pockets is an excellent source for educating yourself on both wholesaling and flipping. And beyond learning, it’s a wonderful place to network with people locally and nationally. They are constantly coming out with excellent content on their blog, their member blogs and with their podcast. It’s all free. So, if you want to learn more, go check them out.
Buy and Hold for the Long Term
While I think flipping and wholesaling are both great for immediate income, my passion in real estate is to buy and hold properties for the long term. This is where the benefits of appreciation and amortization of the loan really start compounding in good ways for you.
The other big benefit of real estate for me personally is that I like being able to see and touch my investment. If I invest in a mutual fund somewhere, who knows what that company is doing to earn a profit. I like being able to know I’m giving someone a good place to work or live.
No matter what area of real estate you are thinking of getting into, there is no question it is a boom. Learn the lessons from 2008 and then go forward and make your wealth in real estate!