San Antonio would you like to advertise on this site? learn more! Bryan Wittenmyer has been investing in real estate for the past 15 years. He's not the new kid on the block. In the past five years he has written extensively in the real estate field. His articles have appeared in Creative Real Estate Magazine and the Real Estate Entrepreneur. Bryan served on the board of directors of the Real Estate Investment Association of Berk's County for 3 years. • Build a compelling listing. It should, for instance, have a competitive price, a well-written description and professional-quality photos. K.F. (Jack) Griffin says: by Lex Levinrad Beginning real estate investors are often attracted to the quick money that can be made by flipping deals. Flipping deals by assigning contracts is a very lucrative way to make a very nice living ” when the market is going up. In the previous boom there were many “flippers” that made hundreds of thousands of dollars assigning contracts. I even bought some of my houses from people that flip contracts. These people are known in the business as wholesalers.” Please note that flipping contracts is not the same as flipping houses. Flipping contracts is essentially transferring the rights of a purchase contract to another buyer. There are three main advantages to flipping contracts: Requires no cash ” you can put down as little as $10 on a contract No risk ” if you dont flip the deal you dont lose anything Quick cash ” money in your pocket now There is no doubt that these advantages are the reason why so many beginners are attracted to flipping contracts. The majority of the wholesale real estate books and courses that exist are related to flipping or assigning contracts. It is without a doubt the easiest way to start out with no money and no experience. However, there are also some distinct disadvantages to flipping contracts. The main disadvantages to flipping contracts are: You are dependent on your buyers to close. You make no money if you cant flip (assign) the contract. Whatever money you make in assignment fees is taxable so dont spend it all or you wont have enough to pay the IRS when your tax bill comes due. You only make a small portion of the profit. Here is an Flipping vs. Buying & Holding example: Imagine a house that is worth $100,000 that a wholesaler has placed under contract for $60,000. This wholesaler manages to sell the contract to an investor for $65,000 and makes a $5,000 assignment fee. Wholesalers often sell their deals to rehabbers (people that buy and fix up houses). Rehabbers typically look to buy their houses at 65% to 70% of the after repair value (market value when fixed up). So a wholesaler that signs a purchase contract to buy a house for $60,000 should easily be able to assign this contract to a rehabber like myself for a fee of $5,000. This fee of $5,000 is taxable so after taxes of 25% assume that the tax free cash that is left over is $3,750. This is the maximum amount of profit that the wholesaler can get from flipping this contract. Compare this to the investor that buys the contract for $65,000 on a property that is worth $100,000. That investor has just added $35,000 to their net worth. If this property is held long term then the equity should grow over time and as long as the property is not sold there should be no capital gains taxes due. Even if the property is sold, if the investor completes a 1031 exchange they should be able to roll their profits into their next real estate transaction without paying any capital gains taxes. The profit potential is far superior for the buy and hold investor than it is for the flipper. Consider that at an average annual appreciation rate of 5.8% (the historical appreciation rate of real estate in the U.S) what that house could be worth just five years later (answer: $132,564.84). If you owed $65,000 on this house then after five years you would have over $67,000 in equity. And still you would not have paid any capital gains taxes. As long as you do not sell you will never have to pay capital gains taxes. In fact, you would have been able to take advantage of a tax deduction (interest expense), as well as another tax deduction (depreciation expense) which would have lowered your income tax bill. Take a look at the table below to see what a $100,000 house would be worth over 30 years assuming that it appreciated at this average historical rate of 5.8%. Year value 1.00 $105,800.00 2.00 $111,936.40 3.00 $118,428.71 4.00 $125,297.58 5.00 $132,564.84 6.00 $140,253.60 7.00 $148,388.30 8.00 $156,994.83 9.00 $166,100.53 10.00 $175,734.36 11.00 $185,926.95 12.00 $196,710.71 13.00 $208,119.93 14.00 $220,190.89 15.00 $232,961.96 16.00 $246,473.76 17.00 $260,769.23 18.00 $275,893.85 19.00 $291,895.69 20.00 $308,825.64 21.00 $326,737.53 22.00 $345,688.31 23.00 $365,738.23 24.00 $386,951.05 25.00 $409,394.21 26.00 $433,139.07 27.00 $458,261.14 28.00 $484,840.28 29.00 $512,961.02 30.00 $542,712.76 Buying & Holding Real Estate Makes You More Money As you can see from the above table, buying and holding real estate has tremendous long term wealth creation potential. In the previous example of $100,000 house that the wholesaler flipped for $65,000 the maximum profit potential for the wholesaler was $3,750 after taxes. And they did all the work finding the deal (which is the hardest part). Just five years later, according to the above table the house would be worth $132,564.84. The wholesaler has long since spent their $3,750. However as a long term buyer you would own a property with over $67,000 in equity that would be giving you a tax deduction every year. This is the only true way to build fantastic wealth. By year thirty the house would have no mortgage (no payment) and would be worth over $500,000. Lex Levinrad has been a full time distressed real estate investor since 2003. He has been involved in buying, rehabbing, wholesaling, renting, and selling hundreds of houses in South Florida. Lex is the founder and CEO of the Distressed Real Estate Institute, which trains beginning distressed real estate investors about how to find wholesale real estate deals. He specializes in buying foreclosures and bank owned REO homes and offers private mentoring, bus tours, boot camps and home study courses for real estate investors. Lex Levinrad is an accomplished national public speaker and has shared the stage with some of the countries best real estate speakers. Lex Levinrad has authored numerous books about real estate and is also the the founder of the Distressed Real Estate Investors Association (DREIA) and the co-founder of the Port St Lucie Real Estate Investors Association (PSLREIA). This post provided by REIClub.com for creative real estate investors. Copyright 2002-2011 All Rights Reserved. Published with Permission of Author. No part of this publication may be copied or reprinted without the express written permission of the Author and/or REIClub.com. American Apartment Owners Association offers discounts on products and services for all your property management needs. Find out more at www.joinaaoa.org. Thanks again, hungry to learn more! Comments (4) check Hot Deals - Immediate Notificationinfo — Albert Soufi,REALTOR (@asoufi45) July 18, 2017 #751 in Books > Business & Money > Real Estate > Buying & Selling Homes July 10, 2015 at 2:48 AM Figure Cap Rate Assigning Contracts and Wholesaling gets a bad name because it has a low barrier to entry and often gets done by the here today gone tomorrow folks. Chris Denicola says: Assigning contracts, if done in the correct way, i.e. you had the original intent to go through with the purchase, but as you did your due diligence, certain things sprang up that discouraged your interest, and then you had someone who is interested even though you’re not, assigning is a great and legal exit strategy. Hi Tony, thanks for the comment, If you read my blog I have over 400 articles on investing, and being an agent. I link to many of them in this article that explain how vacancies, maintenance, financing all work. I would hope no one invests based on one article they read. How much capital do I need to buy real estate? Personal Assistant for Real Estate, Retail/Wholesale Manager NetWorth Realty (7) 4 Comments 4 Mary | December 23, 2017 at 10:52 am MST The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at fundrise.com/oc. I did read the article titled something about investing with little to no money down but that doesn’t solve the moving every year situation. Any advice? Real Estate Investment Trusts (REIT) are great ways for you to invest in real estate without being actively involved. An REIT is a fund that is setup to invest in mortgage instruments, bonds, and stocks in the real estate niche. Our friend Michelle recently wrote about renting a room to a stranger, which is a great read if you're considering this option. (A) “Real estate broker” includes any person, partnership, association, limited liability company, limited liability partnership, or corporation, foreign or domestic, who for another, whether pursuant to a power of attorney or otherwise, and who for a fee, commission, or other valuable consideration, or with the intention, or in the expectation, or upon the promise of receiving or collecting a fee, commission, or other valuable consideration does any of the following: How do some real estate investors make a lot of money quickly? Awesome article and thank you for taking the time to write and share this valuable information. I was left with one clarifying question: You mentioned knowing the profit your end buyer ideally wants to make. Is it safe to assume as you are finding cash buyers for your list you are simply asking each one what their desired profit is on every deal or minimum expected profit before they would consider it worth their time? In my head I assumed more profit the better so I never thought before reading this article that a number was needed. I hope I’m not complicating a simple thing. If there is a link already established that expounds on veting buyers for your list and questions that should be asked please share. Thanks Brandon and the readers of my post. My Favorite Blogs & Podcasts What happens to us (the wholesaler) when we cannot find a buyer for the property in our contracted time frame??? Your comment will be posted after it is approved. What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition Hey Marcus I was wondering how I go about getting or making a contract Share This the need for 'cultural accountability' which delivers Booties Easily apply Can you really make money flipping houses? The short answer is yes. However, a wrong decision or a bad investment could lead you to make a loss on your project. Making money in real estate flipping houses should involve the investor looking into the system by attending a flipping houses seminar or a training course of some nature. Being an expert in the field will result in better investment choices and force you to be more dynamic when making money flipping houses. Sell Your House Buying short sales is hard work. But you can outsource some of that drudgery by hiring the right real estate brokers who specialize in this field. It’s well worth the effort to find great people for your team before you take the field. Now we need a quick example to tie it all together. Charities Why were the offers declined? Word Wise: Enabled 35.  Become a Home Inspector 2. Hanoi Real Estate Inc. wrote: Love them! But some title companies / closing attorneys won’t do them and if the new Buyer is getting a loan, the lender for the new Buyer won’t allow them. 5 Tricks To Maximize Your Real Estate Wholesaling Business Real Estate Courses Get Started in Real Estate Investing 15.) Notes – Investing in “notes” involves the buying and selling of paper mortgages. While not necessarily a “property type,” notes can be bought, sold, mortgaged, and traded just like the properties they represent.  Often times an owner of a property may choose to offer financing and “carry the mortgage”. In this case, a “note” would be created which spells out the terms of the contract. For example, an apartment owner decides to sell his property for one million dollars. He offers to carry the full note and the new buyer will make payments of 8% per year for thirty years, until the full one-million dollars is paid off. If that owner suddenly needed to get the full balance of the loan, he might choose to sell that mortgage to a “note buyer” for a discount. That note buyer will then begin collecting the monthly payments and decide if they will keep the note or try to sell it for profit. Hi Danny In This Podcast, You’ll Learn: What should a real estate wholesale contract look like? Only 1 left in stock - order soon. Real Estate Exit Strategies Part 1: Choosing Your Path About Contact Privacy Policy Terms of Use They had picked up my article online and asked for permission to reprint it! Even though your buyers are lined up and waiting, and you’ve lined up plenty of capital from private lenders, you still need to find inventory that works. That will typically be some form of distressed property or a property being sold by a motivated seller. Build those lists, master connecting with them and negotiating, and you’ll have a complete, smooth cycle of profit making. Hi Drake – I’ve used them in several, but I can’t speak for all 50. I think you’ll most likely be fine in most places, but you’d have to verify with a local legal pro to be 110% sure (you know, the standard legal disclaimer). 🙂 Oh and my tenants are horses 🙂 Student Success In this post I will cover two important aspects: WHOLESALING BY CONTRACT ASSIGNMENT How To Rent Vacation Properties by Owner Third Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment Complete Series Other states that do not use the “for another” language clearly identify specific exemptions in their licensing statutes. A good example is the South Carolina statute, which reads: DC Fawcett Training – Is It… I would like to thank you for the book and the imparted knowledge. That was an eye opener! I would have been like”What”, if someone had said that to me. I think that is very important to know. I sure hope one day I am able to afford your mentoring because I like your presentations and your candid approach. Thanks again. wholesale real estate market|how to wholesale houses step by step wholesale real estate market|philadelphia wholesale real estate wholesale real estate market|real estate wholesale contract template
Legal | Sitemap