Usually many people when they start investing in real estate, tend to pick wholesaling as their strategy, but in reality you can find other ways to Start Out Investing in Real Estate.
Wholesaling is finding a property, putting the property under contract, and looking for a cash buyer (investor) that will buy the property for a fee, an amount higher than what you have the property under contract. As an example your contract amount with seller is $50,000, and you assigned the contract for a $5,000 fee to the cash buyer.
This is the prefer entry point to many new people, but the cost of marketing, the stress of finding the deals and buyers may be overwhelming. Also, the time to learn it and be good at it takes time and money.
So here are 3 ways to start out investing in real estate
1. Specialized in finding deals as a Property locator aka Birddogs
Finding properties is the key to success in real estate, but finding great deals is an art.
To me this is the easiest way to start in Real Estate. Your only goal is to find a deal and bring an experience investor to do the work, and when the property closes you get paid for your services.
The fee varies depending on the agreement that you have with the investor, it can be a flat fee of $250 to $1000 or sometimes splitting a percentage of the profit
By doing this, you do not have any risks associated with the transaction, and the best part is that you are learning along the way. This may be the best way to start out investing in real estate.
Just go to a local real estate club, find out who are the real players and offer your services as a bird-dog. I know very successful investors that started this way.
Make sure your agreement with the investor will allow you to go to the appointments so you can start learning how to negotiate with the sellers, and when you are confident, you can go on your own.
2. Live in your First Investment
A single family home is just one house to 4 units (Fourplex). Here you can get a loan ideally FHA and buy your first house. FHA also has a program called 203 (k) and receive money to rehab the single family property.
If you buy a duplex, triplex or fourplex, you can live in one unit and rent the others, The other units will pay for your mortgage, taxes, insurance and possible make some you some extra cash. This will allow you to learn some aspects of the real estate business with minimum risk. At the end investing is cash flow and being a landlord on your first investment property may not be a bad idea
If you don’t like the idea of dealing with tenants, you can buy a house the needs improvements. You can do the repair yourself or hire someone. I am not a handyman, so I would prefer to hire a contractor to do the work.
After two years of living at the property, you can sell it, and don’t pay any taxes on the profit. According the the tax code you can make up to $250,000 as an individual or you can claim $500,000 as a couple TAX-FREE. Now you can use that money to reinvested in other properties and start growing your investment portfolio.
3. Become a Buyer’s Agent
This method will require you to get a real estate license and become a Realtor.
Here the idea is to network with other investors, learn what they are looking for and find it in the MLS. Some investors may teach you how to analyze the properties and estimate repairs. this way when you start out investing in real estate you can learn the in and outs of rehabbing while making money.
Also, what I do with the realtors that bring me deals, I ended up listing the properties with them, so they can make commission on the sale side as well, making them more motivated to bring more deals on a regular basis
One recommendation, do not put the investor in an automated email list. As a buyer agent, you need to find the properties, call the listing agents, find out what the property needs, then call the investor with the opportunity, and you will be a star.
Start Out investing in Real estate with any of these alternatives to learn the basics, before going all out.
Hope this suggestions helped. Good luck and happy investing