My current real estate investing strategy
Here it goes... a little bit of the bean spillage for my non-existent readership. While the interest rate has yet to make any significant moves, the housing industry as a whole is slowing. The bubble may or may not be bursting, but we have reached a plateau, or shift in the real estate cycle. Prices are being reduced, inventory is not moving as quickly, and real estate investing itself has become significantly more trendy creating more competition in the marketplace.
First, I would like to make sure everyone is excited about this! One of my investment partners said he has been waiting for 5 years for the market to make its way back to this point. This is a great time for investors as long as you have a solid investing strategy, and I feel that my current strategy is pretty damn good.
That being said, lets look at the strategy. There are two specific sides to this strategy, one to build capital and the other to build wealth. One fear of mine is to become real estate rich, but cash poor, so we developed a two channel system. Accompanying a buy and hold strategy with a wholesaling strategy has offered us the diversity to overcome this fear. The buy and hold deals will offer us long term (3-5+ years) cash flow and equity while the wholesale deals will offer short term cash gain (2-6 months).
This particular buy and hold strategy focuses on situations where the seller offers us financing and keeps the current mortgage in tact. We, in essence, assume the loan by negotiating a cash out price for the seller, and pay their mortgage through escrow monthly. Our exit strategy is to offer these properties as lease to own opportunities to families who may not have the credit necessary to obtain conventional financing. Being able to avoid the banks due on sale clause allows my company to purchase houses with minimal cash out of pocket and without the use of our own credit, allowing us to repeat the process indefinitely without problems. Our minimum requirements for these types of deals are less than $10,000 out of pocket and a minimum of 100$ cash flow per month. Wash, rinse, repeat.
Simultaneously, with the deals that don't particularly match up with our strategy, we have the option of wholesaling these properties. This essentially means that when I find a fixer-upper, or other distressed property that I am not interested in investing in myself, I am able to take this property under contract and sell or assign that contract to another investor who is interested in the deal. We have also been known to purchase these types of properties outright and reselling them to investors in certain situations. I am not a contractor, don't like to physically work on houses, so I use wholesaling to help other investors who may not like the business side of things.
As this stream of consciousness runs through my fingertips and onto my journal, I cannot help but feel I am being too vague. For this, I would like to apologize and reassure you that I will continue to explain, in greater detail, these systems as I personally work through them. Also, you must realize that investing in real estate is similar to playing a musical instrument. The more chords, riffs, or chops you know, the better a musician you will be, and similarly, the more strategies you know in investing, the more opportunity you have.
First, I would like to make sure everyone is excited about this! One of my investment partners said he has been waiting for 5 years for the market to make its way back to this point. This is a great time for investors as long as you have a solid investing strategy, and I feel that my current strategy is pretty damn good.
That being said, lets look at the strategy. There are two specific sides to this strategy, one to build capital and the other to build wealth. One fear of mine is to become real estate rich, but cash poor, so we developed a two channel system. Accompanying a buy and hold strategy with a wholesaling strategy has offered us the diversity to overcome this fear. The buy and hold deals will offer us long term (3-5+ years) cash flow and equity while the wholesale deals will offer short term cash gain (2-6 months).
This particular buy and hold strategy focuses on situations where the seller offers us financing and keeps the current mortgage in tact. We, in essence, assume the loan by negotiating a cash out price for the seller, and pay their mortgage through escrow monthly. Our exit strategy is to offer these properties as lease to own opportunities to families who may not have the credit necessary to obtain conventional financing. Being able to avoid the banks due on sale clause allows my company to purchase houses with minimal cash out of pocket and without the use of our own credit, allowing us to repeat the process indefinitely without problems. Our minimum requirements for these types of deals are less than $10,000 out of pocket and a minimum of 100$ cash flow per month. Wash, rinse, repeat.
Simultaneously, with the deals that don't particularly match up with our strategy, we have the option of wholesaling these properties. This essentially means that when I find a fixer-upper, or other distressed property that I am not interested in investing in myself, I am able to take this property under contract and sell or assign that contract to another investor who is interested in the deal. We have also been known to purchase these types of properties outright and reselling them to investors in certain situations. I am not a contractor, don't like to physically work on houses, so I use wholesaling to help other investors who may not like the business side of things.
As this stream of consciousness runs through my fingertips and onto my journal, I cannot help but feel I am being too vague. For this, I would like to apologize and reassure you that I will continue to explain, in greater detail, these systems as I personally work through them. Also, you must realize that investing in real estate is similar to playing a musical instrument. The more chords, riffs, or chops you know, the better a musician you will be, and similarly, the more strategies you know in investing, the more opportunity you have.
posted by Miles at 10:36 PM
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