The Purpose of Investing in Real Estate Should Be to Create Passive Income

The-Purpose-of-Investing-in-Real-Estate-Should-Be-to-Create-Passive-Income

When investing in real estate there are many different avenues to choose from. When deciding which avenue is best for you, it’s important to consider the difference between passive-income generating avenues and earned or working-income generating avenues. In fact, in my opinion, understanding the difference between passive income and working income is one of the most important things to consider when investing in real estate.

Working Income vrs. Passive Income:

Working Income: Working Income is buying a house, fixing it, and then selling it for a profit. Or building a house then selling it for a profit. Or my favorite is buying a house, holding it (hoping it will appreciate in value, while losing money every month), then selling it.

Passive Income: The best way to understand passive income is to play Robert Kiyosaki’s board game, “Cash Flow 101.” To win (get out of the rat race), you have to get your monthly passive income to exceed your monthly expenses. It’s a real eye-opener. In his game, the quickest way to achieve this is purchasing cash flowing rental properties. Passive income is income that is earned without you doing the work to earn it. Rental income is a great avenue for passive income.

Here are a few reasons why investing in rental properties are an attractive avenue for investing in real estate:

Lower Taxes: Passive income is one of the lowest taxed forms of income, especially rental income. Uncle Sam likes that you’re providing affordable housing and is willing to cut you some slack on the taxes. When you buy, fix, and sell a property, that income is taxed as capital gains and you’re going to pay Uncle Sam 25-40%. Also, owning rental properties is a business, allowing you to write off operating expenses of your business.

Depreciation: This is a benefit often overlooked. Owning rental property provides a non-cash write off over the useful life of the property. Depreciation is defined as the loss in value of the property over time due to wear and tear, physical deterioration and age. Residential income property is depreciated over a 27.5 year period using straight line depreciation (or in other words, depreciated by equal amounts each year over its useful life). While your accountant will do the math, the point is, it’s a non-cash expense lowering you overall tax liability.

Time: Perhaps the best benefit of investing in turn-key rental properties is that it creates time. Remember, passive income creates time, working income takes time. The problem with working income, not only in real estate but in any business, is you have to keep working to make money. The whole reason why any of us get into real estate is for the life-style it can provide. To me, real estate is a means to and end. It doesn’t define who I am. But if done right, it provides time and money to be, do, and have everything I want in life. That’s what this is all about. While a measly $200/mo cash flow on a single family rental property doesn’t sound as sexy as flipping a house and making a quick $15,000, you have to look at the bigger picture.

For example; if you acquire 20 turn-key properties from Equity Services, LLC, each providing $200/mo cash flow, that would be $4,000/mo passive income. That money comes in while you’re eating, sleeping or surfing on the beach (we have a lot of Hawaiian investors)! Now there is some work you’ll have to do, unless you get someone else to do it. Someone has to walk to the mailbox to collect your checks! I get my kids to do it. (There’s more to it than that but you get the point). If 20 properties seems too hard to achieve, remember the old saying; “How do you eat an elephant? One bite at a time!” Well, how do you acquire 20 rental properties? One house at a time! We have one client, Mitch, who is buying his first rental property from Equity Services, LLC. His goal is 500 units in 3 years. Wow! He’s definitely caught the vision of passive income.

Equity Services, LLC = Turn Key

When we’re asked what it is we do, we often state that we sell “turn-key rental properties.” In fact, if you look at our company logo, you’ll see a house with a key. So what does turn-key mean? It means, we have a system in place to handle everything from acquiring the properties, to managing the renovations, to providing the tenants and everything in between. While there are many benefits to using Equity Services, LLC such as our houses are priced right, they have equity, etc., the real value we add is by saving you the time and energy to acquire solid cash-flowing properties. We have a strong relationship with the banks and purchase distressed properties at a discount. We renovate the properties to our high standards (we have rehabbed over 100 properties since 2007). The property manager handles filling the units and managing the tenants. As Timothy Ferriss states in his book, The 4 Hour Workweek, “Our goal isn’t to create a business that is as large as possible but rather a business that bothers us as little as possible.” We have developed a proven system that saves our investors their valuable time. Every now and then we run into the “do-it yourself” investors. We had one investor who gathered information from us, flew down to Michigan, and bought a house. He quickly found out that it wasn’t as easy as he thought, especially long distance. If anything, it helped him appreciate what we do.

Before you run out and quit your “working income” J.O.B., consider this; Keep your job but focus on building your passive-income empire. Use you earned income to invest in more passive income. Then as Robert Kiyosaki teaches in his book Rich Dad Poor Dad, once your passive income surpasses your expenses, you’re financially free. And remember, “profit is only profitable to the extent that you can use it. For that you need time.” (T. Ferriss, The 4 Hour Workweek)


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Property Management and Rental Terms Glossary

Rental-Property-Management

Moderate Housing: This sort of lodging is that of which a government or state office oversees with an end goal to offer help and control the rent to the individuals who meet a specific foreordained criteria.

Luxuries: Intangible and unmistakable elements that are incorporated into or on a property that improve the allure or estimation of the property.

Flat: A multi-family assembling that is intended to house separate people or gatherings of families inside the same building.

Expedite: A land proficient that buys and offers property for others with a specific end goal to get a commission. This expert must be authorized and qualified to rehearse in the state he lives in.

Apartment suite/Condominium: A multi-unit fabricating that takes into consideration singular units to be claimed by its inhabitants. The normal components of this kind of building are possessed by all proprietors inside the townhouse.

Routine Housing: This kind of lodging sticks or complies with the business sector rate, or satisfactory benchmarks, of the territory’s lodging.

Co-Signer: An extra endorser on a lease or home loan that is utilized as a part of request to check the personality of the guideline proprietor or to give a specific level of surety to the moneylender or landowner.

Duplex (House): A house that was intended to house two separate people or families inside the same house. Case in point, a house that has an upstairs for one family and a down the stairs for another family is viewed as a duplex.

Square with Housing Opportunity: The open door for all subjects in America to have the capacity to live in different lodging groups paying little mind to race, sexual orientation, age, nationality, familial status or incapacity.

Morals/Professionalism: An arrangement of standards and good rule that become possibly the most important factor when directing proficient conduct.

Expulsion: A procedure through legitimate means with an end goal to expel a man from their home because of an infringement of the assertion, whether the occupant has not paid rent/contract or on the off chance that they have abused another type of the understanding, for example, commotion unsettling influences.

Reasonable Housing Act: This law is of a government status and was placed in actuality to stop the separation that happens in lodging in view of race, age, shading, handicap, sex, religion, national starting point and familial status.

Lodging Assistance Payments (HAP) Contracts (PDF): The HAP contract is utilized so that those under the voucher project can get area 8.

House: A living arrangement in which individuals live.

Lodging and Urban Development (HUD): The mission of HUD is to build the entrance to lodging that is moderate without separation; bolster the improvement of the group; and expand the homeownership rates.

Pay Levels: These are points of confinement as characterized by the administration that are utilized to set up expense credit limits and different sorts of moderate lodging.

Toxic Paint Disclosure: Requirements that got to be powerful starting 1996 to guarantee that families and people are made mindful of homes that contain toxic paint.

Lease: An oral or composed contract that is created between a landowner and his inhabitant that furnishes the occupant with the privilege of select ownership of the home for a particular measure of time. By and large talking, for leases that are longer than one year, the assertion must be in composing.

Lease Option: An assertion that permits the inhabitant the choice to buy the property they are renting toward the end of the lease term, or some time amid the term of the lease.

Lease Renewal: The restoration of a lease once the term of the lease has terminated.

Lease Term: The measure of time that is settled upon between the landowner and inhabitant in which the occupant will possess the property.

Tenant: The occupant who has concurred for the term of the lease.

Lessor: The proprietor who has concurred for the term of the lease.

Low Income Tax Credit (LITC) Properties (PDF): These sorts of properties give the proprietor a specific measure of expense credits in return for leasing to qualified occupants as assigned by the Justice office, HUD and the IRS.

Support: The upkeep and consideration of a property.

Persons With Disabilities Act: A demonstration that insurances rise to open door for those with inabilities.

Pre-Qualification – This is the main stage in the offering procedure where the most extreme advance sum for the candidate is resolved.

Property: A bit of land and additionally the perpetual apparatuses, for example, structures, that is joined.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Considering Buying Income Property? Have A Revenue Strategy

Considering-Buying-Income-Property

Many savvy investors realize how essential real estate investing might be, as a component of one’s overall strategy, etc! Some get involved as partners or investors in larger projects, where they depend on others to make the right decisions. Others, however, prefer to make their own decisions, and invest in smaller projects, where they become responsible for decisions and strategies. Before getting involved in an Income property, one should carefully consider, which strategy, he will follow, in terms of revenue flow, pricing, etc. Before doing anything, an individual should carefully examine a potential property, in terms of the anticipated return on investment. This means when you look at the price paid, what percentage will you receive, based on the revenue flow, minus the continuing expenses (such as mortgage interest, taxes, utilities, insurance, etc). Different people have different perceptions and ideas, in regard to what that percentage should be, but I believe one should aim for a net 6%, to make the project worthwhile. Let’s evaluate four key components.

1. Know your market: Pricing is not merely picking some number out of a hat, and automatically, receiving that total! Rather, one must evaluate what the competition and marketplace/ conditions, indicate as the realistic range. Consider the ramifications of which segment of the range you opt for! Pricing at the upper end might provide more revenue, but there may be certain risks. Pricing too low, might not generate sufficient revenues. Sometimes, the middle range will make sense, but not always!

2. Option One: Pricing at the upper end of market: Wouldn’t it be great if we could simply charge the highest price, and get the most revenue? However, one must realize it might not get the desired results, or if it does, may take longer to achieve. When that happens, a vacancy might exist, so one should always use a percentage (I recommend 75%) of the total revenues one would receive if fully occupied, in determining if one hits that magic 6% return!

3. Option Two: Pricing at the lower end of market: While providing the best chance to optimize occupancy rates, there is the risk of having lower quality tenants, etc. In addition, doing this, may offer the owner, less flexibility, etc. In rental properties I personally own, I often will price in the lower 50%, if I can attract and keep/ maintain, reliable, quality tenants, by doing so. This is also a gamble, but has worked effectively for me, since I have been able to have a far lower turnover rate, than the rest of the market.

4. Option Three: Pricing in the middle: This may be a wise compromise, if done carefully, and wisely. Always keep a keen eye on the market, your expenses, and carefully screen and qualify potential tenants.

All of these pricing strategies have pros and cons, but what’s most important, is for you to clearly identify, which strategy you will pursue, and maintain the discipline to be consistent! Effectively owning, managing and making money, on rental properties, requires discipline, commitment, and paying keen attention!

Article Source: http://EzineArticles.com/9690771


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

What are the Best Cities for Out-of-State Investors to Buy Rental Properties?

memphis

Many investors cannot buy cash flowing properties where they live locally due to high home values. Many investors also want to diversify their rental property portfolio by investing in out-of-state rental properties. The hard part about investing in long-distance properties is deciding where to buy out-of-state properties. Where are investors buying and where can you get great cash flow?

What cities are turn-key rental property companies investing in?

Turn-key rental property providers buy homes, renovate them and then place a tenant in the home. After the home is rented and managed, they sell the home to investors. There are many trends of where the turn-key investment companies are investing. Below are the most common places where the turn-keys set up shop.

Memphis

Memphis appears to be the number one place for turn-keys with relative low house prices and high rental rates. There are at least five turn-key companies investing in Memphis now. In fact some turn-key companies are moving out of Dallas because there are so many investors there, they are worried about the market.

Indianapolis

Indianapolis is another popular spot for the turn-key providers. There are many turn-key companies investing in Indianapolis, because of low prices compared to high rents.

Dallas/Houston

Texas is a popular spot for the turn-keys as well. Texas has one of the most stable economies in the country and affordable real estate. However, Texas has very high taxes in some locations that makes it hard to cash flow. Texas is also predicted to have one of the strongest economies moving forward.

Florida

The turn-keys are still investing in Florida as well. South Florida like the Miami area has seen huge increases in property values and the focus seems to have shifted to mid Florida for cash flowing rental properties. Florida still has many foreclosures and opportunities to buy below market value.

Kansas City/St Louis

The turn-keys are also focusing on Kansas City and St Louis, although these areas have seen appreciating prices as well.

Ohio

Ohio has many affordable housing markets; some are affordable because the economy is horrible and others are affordable because there is nothing flashy to Ohio. There are couple of turn-key companies that focus in Ohio and have great cash flowing properties.

Milwaukee

Many investors have swarmed to Milwaukee due to its low prices and high rents. There are couple of turn-key companies in Milwaukee and many investors in the area buying with great cash flow.

What cities are the hedge funds buying long-distance properties in?

A few years ago hedge funds like Blackstone and Colony Capital started buying thousands of properties that they turned into rental properties. The most popular locations for the hedge funds were Southern California, Phoenix, Las Vegas, Atlanta, Southern Florida and other large metro areas.

The hedge funds have toned down their investing in these areas greatly because of high appreciation. The rent to value ratios in these areas have decreased and caused hedge funds to look elsewhere. Many hedge funds have ramped down their buying significantly because of the issues involved in renting and managing thousands of rental homes.

An interesting piece of information from the FICON conference was that hedge funds have started looking into buying homes in Europe. The European market is crashing due to the economy and houses can be bought extremely cheap. Some companies are buying homes at 20 cents on the dollar of what they sold for a few years ago and they are making 30 to 40 percent returns on their investment!

What areas of the country have the best economic outlook?

It is not only important to look at cash flow when deciding on an area to invest in, but the local economy of areas as well. There were a lot of economist and data experts at the conference who spoke about economic trends in different locations. The hedge funds and large investors do not randomly pick locations to buy real estate. They use professional firms to accumulate as much information as possible to pick locations. Some of the areas of the country with the best economic growth coincide with where the turn-keys are buying.

Memphis

Predicted to have 33% percent appreciation over the next five years. Memphis has a very stable economy with many large businesses headquartered in the area.  This may be why there are so many turn-key providers in Memphis.

Charlotte

Charlotte is expected to have 25% appreciation and an extremely strong local economy. Many of the economists said Charlotte has incredible growth potential with a new Boeing plant being built and has been off many investors radar up to this point.

Houston/Dallas

Texas has a great economy anchored by the oil and has industry. Exxon is building a 3 billion dollar facility by Houston with 25,000 new jobs expected. Houston and Dallas is another area that keeps getting mentioned as a great opportunity for investors.

What does this data say about where out-of-state investors should be investing?

The tricky part about choosing a location to invest in is nobody knows what will actually happen. Even the smartest economists and investors can’t predict what will happen in specific locations. Having said that, the economists, turn-key companies and hedge funds spend a lot of money researching where to invest and what areas will provide the best returns. It may not be a bad thing to listen to the experts if you are trying to decide on a great place to invest.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Is Out-Of-State Real Estate Investing Right for You?

memphis-buy-and-hold

Have you made up your mind to start investing in real estate, but you’re torn in deciding where to invest?

Are you thinking about making a local investment, but wondering if an out-of-state investment might be better?

This is one of the first of many choices you’ll have to make when you decide to invest in real estate: the simple question of where you should invest your hard-earned dollars. While there are definite benefits to investing in your area, there are also some potentially profit-limiting downsides.

That’s not to say investing in outside areas doesn’t have its own pros and cons. Let’s take a look at both and see why out-of-state real estate investing might be a profitable option you have not yet explored.

Investing Locally

This is the most obvious choice for many real estate investors, but is it really right for you?

If you choose to buy a property local to you, you’ll rest easier about your investment since you know the market. First, you know your competition. You might know the names of professionals you can trust and you’ll have an intimate understanding of what the cost of living is for that area and how to make things more affordable.

Second, if you like to be hands-on, it will be much easier for you since you’re right there. If you want to see the property, it’s just a short drive away. If you want to talk to the property manager face-to-face, you just put it on your calendar for the end of the day.

Drawbacks to Local Investments

On the other hand, investing solely local can narrow your options. Not every market has the inventory of good investment opportunities that you can avail yourself of if you invest out-of-state. The local inventory of available properties may or may not be big enough or well-suited for investment opportunities.

You also run into the problem of whether your local market is the one you want. The recession made a huge impact on housing markets throughout the country and some areas have recovered at different paces than others. You might find yourself out-priced in your current market, but even if you aren’t, you might not be able to see a favorable future where you’re at.

Investing Out-of-State

If you decide to invest out-of-state, you can greatly increase your options. You can literally choose any location, any market and invest in properties there. Whether you want to invest in Florida vacation homes and coastal villas or homes in the suburbs of Detroit, the sky’s the limit. You can make your investment fit your price point and interests.

By investing out-of-state, you can put your money to work in markets with high ROI. You pick and choose which markets you’re interested in, and which ones are rising stars in the real estate investment scene, ignoring your own market’s changes.

Investing out-of-state also allows you to scale based on your needs. For many would-be investors, their local market is priced too extravagantly to make real estate investment prudent. The cost of living in a different state, just a few borders east or west, might be considerably lower. That means you can snatch up excellent properties at a much lower cost than you might in your own market.

Even better, you can snag those investment deals on excellent properties that would go for three to four times as much, if not more, in your own local market. Your purchasing power becomes much stronger in other markets, because everything’s relative.

Challenges of Out-of-State Investments

There are still some challenges to these remote investments. First of all, you have to learn who you can trust and maintain the peace of mind that comes from having easy local access to your investment. You also have to be able to trust that the property you’re investing in is what it’s advertised as.

The property is also more difficult to visit if you like to be hands on. You might have to fly out to visit the property, which some people enjoy but others are seriously bothered by. If you are the type of investor who prefers the more passive turn-key approach, this is an excellent opportunity.

Finally, the market won’t be what you’re used to. Nothing will be quite the same as being there and immersing yourself in the market, but you can learn and study. You just have to rely on someone else to have knowledge of the nuances of the market.

Doing Out-of-State Right

There is a solution to all of the challenges of real estate investing outside your state. When you find a reputable, proven company to handle your turn-key real estate transaction, you have someone you can count on to know the market you’re investing in. Here are the main reasons you should find a partner to work with you on your out-of-state investments.

They can keep a more educated eye on the market, since they know all of the nuances of that area.
They’ll serve as your presence near your investment, keeping everything on track, so you don’t have to make numerous trips to the property.
If the turn-key real estate investment firm is reputable, they want you to succeed. This means they’ll do anything they can to make sure you do succeed.
The question becomes, whom can you trust? You want to make sure you engage in a partnership with a firm who is reputable, knowledgeable and engaged in your market. Referrals from other investors are key, so be on the lookout for like-minded people who have been there and done that.

You should also investigate what the turn-key operation offers you, and what their fee or cut of your profit is. Ideally, you’ll want a partner who can help you throughout your investment life cycle, from acquiring the property to managing it.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Memphis – The Perfect Storm for Cash Flow

Memphis

The city of Memphis is located on the Mississippi River in the southwestern corner of the state of Tennessee.   This city is a regional hub for an area comprising of northwestern Mississippi, southeastern Arkansas, and southwest Tennessee.   Memphis is known as America’s Distribution Center and his home to the busiest air cargo airport in the world.  Its central location and significant transportation infrastructure is one of the reasons that Expansion Management Magazine ranked Memphis the #7 place in America for business expansion in 2005.

The city’ population is 680,000 making Memphis the 17th largest city in the country and the largest city in Tennessee.  The metro area has over 1.2 million residents.  The city is intersected by two major interstates, I-55 and I-40, and will soon be home to the new Canada to Mexico shipping route, I-69.  Additionally more major metro areas can be reached overnight from Memphis than any other city in the central US.   This makes Memphis very attractive to companies looking to expand in the light industrial warehouse sector.

The overall cost of living is 10% below the national average, while the housing market is 15% below the national average.  This coupled with no state income tax makes Memphis a very affordable place to live.  Additionally it is important to point out that an amazing 41% of homes in Memphis are rented.

Memphis boasts a burgeoning business community flanked by Fortune 500 companies; FedEx, AutoZone, and recently relocating to Memphis:  International Paper.   These companies are all headquartered in Memphis.  Also Memphis plays host to a rapidly expanding biotech market.  Memphis recently appeared in the top 10 of  Inc Magazine’s best places for starting a business.

The lifestyle in Memphis is centered around great food, good music, friendly folks, and a cool vibe.  Many of the new creative class generation are relocating to Memphis to enjoy a city that seems to be at the cusp of significant growth.

Investors purchasing property in Memphis are often able to find good value and positive cash flow.  Throughout the real estate boom nationally, Memphis growth has remained around 3-5%.  This has provided investors with great opportunities in many parts of the city.  Most investors in the Memphis area are pursuing a purchase and hold strategy for cash flown, although some parts of Memphis are experiencing significant appreciation; namely Downtown Memphis.  The steady home sales, and good economic outlook leads many to predict future appreciation for the Memphis metro area to pick up steam.

Overall, the low housing costs, high numbers of renters, and positive economic forecast, make Memphis a perfect storm for many investors seeking positive cash flow.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com

Overcome Your Real Estate Investing Fears By Wholesaling

end-of-comfort-zoneHas it always been a dream of yours to be your own boss? Do you want to enter into the real estate investing world, but don’t know where to get started? Is fear standing in the way of you taking the plunge? If you answered yes to any of these questions, now is the time to defeat that little voice in your head saying “you can’t.” Instead, silence the anxiety and make the decision to take action.

Even the most successful real estate professionals will tell you that they were terrified when they started in the business, and that the whole investing industry seemed rather intimidating. However, Sam Zell – the well known real estate mogul – once commented in an interview that, “fear and courage are closely related.” While this sounds counter intuitive at first, Zell explains that fear inspires action, and is actually a call to courage to wake up and get in the game. So if you are simply afraid to launch your real estate business, you already have something in common with a pro.

5 Common Fears That Keep People From Investing

real-estate-investing-fears

According to psychologists and human behavior specialists, there are two opposing forces that account for why people make every decision in their lives: the desire to gain pleasure versus the desire to avoid pain. These forces encourage people to either make some kind of change or do nothing at all; unfortunately, it tends to be the later. The key is to start by making minor changes, which ultimately leads to one big change. That way, when you complete small tasks and experience the feeling of success, you will be motivated to continue. Your desire to gain pleasure will suddenly become more important than your desire to avoid pain.

If you suffer from any of the following fears, you are not alone:

  • “I don’t have enough money to start”
  • “I don’t know where to find deals”
  • “I don’t understand the process”
  • “I don’t think I’m a good salesperson”
  • “I don’t think I have enough time”

Fortunately, with the right education and resources, you will be able to turn most of those “don’ts” into “do’s”.

Why It’s Time To Consider Wholesaling

If insufficient capital is your biggest worry – which for most people it is – wholesaling is the perfect way to get your foot in the real estate investing door; that when opened, leads to a world of endless possibilities.

A wholesale deal can get you a profit much faster than a rehab, buy and hold, or rental property. Keep in mind, however, the profit check you’ll receive after completing your first deal will be far less than a rehab, but multiple wholesales will give you the money you need to start your first house flip – if that is the route you aspire to take.

If “the inability to find deals” is your biggest fear, you just need to understand where to look. The key to profiting on a wholesale deal is to find a motivated seller. Motivated sellers are individuals who need to sell their homes quickly. Perhaps a person’s home is nearing foreclosure. Maybe a parent passed away and entrusted a property to three siblings whom are just looking to get the home off their hands. Another individual may have received a job offer that requires him or her to move across the state in a week, and therefore must find a buyer immediately. Whatever the reason may be, these individuals need to sell their homes quickly and are more likely to sell it for a lower cost – especially if the property is not in the best condition.

The next step in any wholesale deal is the negotiation process. If you are worried because haggling is not in your area of expertise, you just need to be confident in your calculated numbers. Once you’ve found the right property, it is time to begin your initial inspection. Walk through the property, estimate the repairs, and come up with your approximate ARV (after repair value). Typically, it is best to try and offer anywhere between 40 and 60 cents on the dollar of whatever the seller is asking for. If the property is listed for $100,000 and you assume the ARV will be $150,000; start by offering $50,000. As soon as you have your seller under contract, it’s time to find your buyer. If you present an investor or rehabber with a property worth $150,000 after repairs and ask for $60,000, they will likely be interested in the deal.

While you can make a decent profit from a wholesale deal, it won’t be as much as a rehab because you are not actually performing any of the dirty work. It is best to view a wholesaler as a middle man: they are selling the deal (or assigning the contract) to someone else who plans to fix it up.

Entering into the real estate world is scary because it means doing something different. But if you are able to look at those fears from a different point of view, you will be able to confront them. There will always be an excuse for not making a change, usually because it is the easy way out. So if the real estate investing industry as a whole seems threatening, ease yourself in and by trying wholesaling. It won’t be easy at first – and there is also a bit of risk involved – but if you do your due diligence and dare yourself to try something new, you’ll start seeing results that inspire you to keep going.


Memphis Buy And Hold is specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com