The Inside Guide to Funding Real Estate Investments

How to Get the Money You Need for the Property You Want

The Inside Guide to Funding Real Estate Investments

Author: Ross Hamilton
Pub Date: November 2017
Print Edition: $19.95
Print ISBN: 9780814438855
Page Count: 240
Format: Paper or Softback
e-Book ISBN: 9780814438862

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Excerpt

For many, the concept of "real estate investor" conjures up images of a skyscraper-owning mega-developer. For others, the image of real estate investor comes from those so-called reality shows about house flipping, where tens of thousands of dollars are made in a few short simple weeks of renovations. Neither of these offer an accurate representation of the real-world investor: The reality is a mash-up of people from all backgrounds, levels of experience, and income.

The Vehicle and Strategy

People get started in real estate investing typically because they have a desire to make money and create a lifestyle-and it can be done with great results. Real estate investors come in all varieties: Yes, there are skyscraper developers and there are house flippers making fortunes, but there are also average landlords cashing rent checks every month. There are mom-and-pop house flippers and there are real estate wholesalers crafting deals to pass along to other investors.The things that distinguish them from each other are the investment vehicle and the exit strategy used to realize profits and create a lifestyle. It's important to know that aspiring investors don't need to have deep pockets or prior experience to invest in real estate. Certainly education and caution are warranted, but the barriers to entry may not be as challenging as many people think.

The investment "vehicle" is the asset class a real estate investor chooses to invest in. Some choose residential properties such as single-family homes, multi-units, or apartment buildings. Others focus on commercial properties such as shopping centers, mini-storage facilities and warehouses, or industrial-use buildings.

The investment "strategy" is the method used to reposition a property for profitability. Strategies are defined mostly by the "exit"--the technique used to realize profits. Our focus is on wholesaling, fixing and flipping, and buy and hold investments.

So, what makes an investor choose one investment vehicle or exit strategy over another? For the most part, it's any of three things: time, money, or skills. These three important factors impact not only the investment vehicle, but also the strategy.

Three Common Real Estate Investment 
Exit Strategies

1. Wholesaling. A wholesaler specializes in finding great deals on properties and passing those deals along to investor buyers for a fee. The buyer of wholesale properties is usually a fix and flip or buy and hold investor. Many people are exposed to wholesalers on a regular basis but don't realize it. When you see a WE BUY HOUSES sign, you are probably seeing the marketing efforts of a local wholesaler. The wholesaler acts as a middleman and earns a fee for finding the seller (i.e., the property), negotiating the deal, and executing the contract. Once wholesalers have a property under contract, they find a capable investor buyer and use an assignment clause to transfer the right to purchase the property to the investor, who then fixes and flips it or keeps it as an income property.

2. Fixing and Flipping. Flippers, as they are often called, bring a distressed property up to market standards and resell it for profit. Fix and flip investors need to find great deals on properties that can be renovated and resold in a relatively short turnaround time. Flippers often rely on local wholesalers to locate properties with good profit potential.

3. Buy and Hold. Probably the most familiar investment strategy is buy and hold--commonly known as "landlording." Landlords purchase property for the express purpose of holding it to generate passive rental income and the potential for long-term gains through market appreciation.

Excerpted from THE INSIDE GUIDE TO FUNDING REAL ESTATE INVESTMENTS: How to Get the Money You Need for the Property You Want by Ross Hamilton. Copyright © 2018 Ross Hamilton. Published by AMACOM Books, a division of American Management Association, New York, NY. Used with permission.

All rights reserved. http://www.amacombooks.org.

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