One great way to get started in real estate is to buy properties either with cash or by wholesaling and assign them. The way this works is that an investor – often a bird-dog or a new investor), finds a property and gets it under contract.
Your acquisition strategies could be none, just get it under contract.
Short-Term Financing
Or you could buy the property using short term financing.
You can use cash if you have it, you could credit cards if you have several credit cards with credit on them. You can actually put them together and come up with a certain amount of cash.
You can use hard money. Hard money is basically money that’s provided by hard money lenders that will loan based on the deal, not based on you or your credit.
In other words, if you can get something under contract for 65 or 70 cents on the dollar, they will give you a relatively high interest loan in order to buy that property using hard money.
Or you can use private money. Private money is simply money that comes from a higher net worth individual that’s willing to again loan you money based on the deal.
Exit Strategies
And then after you get the property under contract, your exit strategies could be to just assign the contract to somebody else. Give them the contract, let them put their name on the contract in exchange for a fee, or you can do a simultaneous close.
Simultaneous close hides the underlying terms and transaction. In other words, you could buy the property in the morning for $110,000 and you can sell it in the afternoon for $150,000 and the person you buy it from never knows that you’re going to sell it again or what price you’re going to sell it for and the person that you sell it to, doesn’t know what you actually bought it for.
So, that can be done through a simultaneous close. And then sometimes, you can also flip the property. Flip just means you buy it. You hold it for some period of time and then sell it again.
Sometimes this is needed to season the transaction in the event that the in buyer is getting a loan and they can’t actually get the loan until you’ve owned it for a certain amount of time.
Recommended "Getting Started" Strategy for New Investors
All of these strategies are recommending getting started strategies for new investors.
Typical profits anywhere from $500 to $5,000 per deal or 5% to 10% of the after repaired value minus repairs for average priced deals, and the risk are low.
You can always get out of a contract. Almost all law that talks about who has to execute a buyer versus a seller is weighted in favor of the buyer. In other words, it’s very difficult to force somebody to buy a house that they don’t want but it’s very easy to force somebody to sell a house if they put it under contract.
So many, many variations of how this strategy works. One example I have is I actually had a property a little town called Loga Vista. I got it under contract for $250,000.
After I got it under contract and did my due diligence on the deal, I decided I actually didn’t want the property but instead of doing what a lot of people would do, I just canceled my contract and move on, I actually decided, “Well, let’s see if anybody else wants this property.”
I offered the property to a bunch of other people and somebody else, it turns out, came up behind me and said that they wanted to offer $260,000 for the property.
What did I do? I basically went to them and I said, “Okay. Tell you what, give me $10,000 and I will give you my contract and allow you to buy the property for $250,000.”
I made $10,000 in that example for not canceling a contract.