If you were driving through the storm this morning, you might have heard an interesting story on NPR
. One of the NPR reporters, Uri Berliner, is taking $5,000 and investing it across different types of investments.
When discussing the options available in real estate, one of his options is taking out a “high risk” loan and using it to fix up and flip a house. He decides against it.
Someone should have told him he could use $100 to flip a house like our wholesalers do, and make a nice flip fee – maybe even a few thousand dollars.
Instead Uri chooses to invest in a REIT index fund. For my two cents – he is relying on other professionals, rather than making his own decisions about the value of a property. I see “professionals” making mistakes every day. Mostly because they don’t get out and put their boots on the ground. They want to do everything from the internet. Let me tell you, I never get nervous about the “big boys” coming into our business. I think they are ultimately going to get burnt – bad.
Now, just for fun, I looked up the 5 year return on the Vanguard REIT Index Fund.
The FIVE YEAR RETURN? It’s down 1.44%.
Someone should tell Uri to talk with me – I could show him a dozen ways to make money in real estate without buying a REIT Index Fund.
I believe we are in for a bumpy ride over the next few years. HOWEVER, there is a fortune to be made for those who want to put their heads down and take advantage of the current financing that is available.
I paid over 20k to a wholesaler over the last few weeks. His deals are good. He knows that I close my deals. This wholesaler knows that he gets paid when he works with me. I know for a fact that he gets higher offers – but he works with me – almost exclusively.
Banks are the same way. When you get started, you may not get the best rates possible. But when you get going, and PROVE you know your business, things get a lot easier. They start calling you about increasing your lines of credit – and lowering your rates.
Right now is great time to work with some new lenders. They are anxious to start lending, but they want to work with real estate entrepreneurs again. Of course they want to work with the RIGHT people.
If you have put 10’s or even 100’s of thousands of dollars into a deal, the thing I think you need to be most concerned about is your buyer and their financing.
Next Monday we are going to talk about selling your investment property in 2013 and what you can expect from your retail buyers when they are coming to the deal with traditional bank financing. We are going to be talking about finding money for your deals, and things to keep an eye on with your buyers financing as well.
Too many people make this business too complicated. Find a house that needs some work. Buy the house at the right price. Do the work. Sell the house and make a profit.
It’s a simple plan, and there are plenty of places to make mistakes along the way. But when you buy a house at the right price, you can make a ton of mistakes and still make a profit.
That said, the biggest issues I see facing our business today is financing.