So many new real estate investors are asking the same questions:
- What is the best way to achieve success as a real estate investor?
- How can I set up my real estate investing business using as little of my own money as possible?
The Investor's Edge is here to answer those questions, plus much more. Believe it or not, with real estate investments you can have your cake and eat it, too. You just need to learn the best process for generating wealth. But, let’s start at the beginning.
What Is the Best Way to Achieve Success as a Real Estate Investor?
First of all, your approach to real estate investing needs to be as a business, not a get-rich-quick scheme. Many new investors think of fix & flipping as an opportunity to make money fast, and many new investors fail for that reason. They operate by the “bottle rocket” method.
The “Bottle Rocket” Method
First-time fix-and-flippers look at real estate investments as a bottle rocket: you light it up once and watch the explosion. They believe real estate investments to be a “one-and-done” wealth accumulation technique; all you have to do is find, fix and flip one profitable deal. Then, sit back and watch the cash come pouring in. This is NOT the case with fix-and-flips. The more profitable investors understand that successful investments begin with the “diesel engine” method.
The “Diesel Engine” Method
To truly create a successful real estate investment business, you must understand that you’re creating a well-oiled machine designed to eventually run on its own. As with a diesel engine, it can take a while to warm up your REI business. It takes time, money, patience, and a ton of effort. However, once you successfully “warm-up” your investment business, it can run a long, long time. After you successfully sell your first flip (the warm-up), you take a portion of your earnings and use it as a down payment or earnest money for your next deal. Then, you use those proceeds for the next deal, and so on. Before you know it, you’ve got a powerful engine running on perpetual income and generating a bottomless pit of investment returns.
How Do I Begin?
We recommend you start off your successful real estate investment business SMALL. The smaller you start, the less expensive your starter mistakes will be, and the more you’ll learn without damaging your business. The best way to start small in real estate investments is through wholesale deals. I’ll say it again…
The best way to start small in real estate investments is through wholesale deals.
Wholesale deals are far more simple than fix-and-flip deals. Through wholesale deals, you can get your feet wet with investment experience, plus learn all about fixing and flipping from an observer’s standpoint.
How to Wholesale a Deal:
- Find a property and get it under contract – Suppose you find a home going for $50k. You make an offer and get it under contract.
- Sell the property to someone else who will fix and flip it for a profit – You sell it for $60k to a retail fix-and-flipper interested in rehabbing and reselling the property.
- Pocket a modest profit without doing any of the hard work – You just made a profit of $10k without having to rehab a thing!
We highly recommend doing a few wholesale deals before jumping into fix-and-flips. You can earn small profits and in the meantime, learn more about finding, rehabbing, and selling the best deals. You can also use these profits as earnest money or cash-to-close when you’re ready for your first fix-and-flip deal.
A Successful Real Estate Investment Business Uses a Pouring Technique
First, you start off small with a wholesale deal and earn $10k. Second, you pour that $10k into a fix-and-flip deal as earnest money, increasing your overall profit. Then, you sell that flip for a profit of $30k. Next, you pour $20k of that profit into another flip generating $50k. Then, you pour $30k of that profit into another flip generating $90k, and so on. Finally, you can start looking into other forms of real estate investment, such as buy-and-holds. Before you know it, you’ve established a solid profit portfolio, your money is working for you and your real estate investment business is thriving.
How Can I Set up an REI Business Using as Little of My Own Money as Possible?
There are two excellent ways to start your investment business without using much of your own money:
- Wholesaling a deal
- Finding a golden property
Wholesaling a Deal
As we mentioned above, all you have to do is find a valuable property and get it under contract. Then, you sell it to a fix-and-flipper for a profit. You wind up with $10k to use in your next fix-and-flip deal as earnest money or cash-to-close without having to touch a penny of your own savings.
Finding a Golden Property
Another way to start your REI business without using your own money is to find a property so valuable that it qualifies for $0 cash-to-close. Though this is very hard to do, it is possible. Here’s the process in a nutshell:
- Look up the best neighborhoods and find a property selling for a low price.
- Evaluate the property and determine the ARV (after-repair value).
- If the loan costs (purchase price/rehab costs/closing costs/etc.) fall within 70% of the ARV, you qualify for $0 cash-to-close.
- You fix up and resell the property for a profit without having to use your own money!
Here’s a great example: a borrower of ours named James F. found a great property in an ideal Chicago, IL neighborhood. This property was listed at only $25,000, so James brought this deal to The investor's Edge. We determined the ARV to be $133,000. We qualified James for a loan of $95,000, which covered the $25k property purchase price, $42k in rehab costs, and $24k in closing costs. And he still had money left over! He qualified for $0 cash-to-close and earned an overall estimated profit of $28,557.
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