Sometimes new real estate investors are afraid of losing money in a deal. Here is a method that has very low risk. I often advise new investors get their toe wet on low risk items before jumping in with both feet.
One of the lowest risk areas that requires virtually zero money and zero credit is finding a wholesale deal. With as little as $100, you can lock in a couple of wholesale deals under contract and then selling them at your local Real Estate Investor Association meeting! I’ve put many properties under contract with only ten dollars, you can too! If it isn’t a killer deal, don’t waste the seller’s time, your own or your buyer’s. You have to get properties under contract with steep discounts in order to sell them quickly. Remember, the more profit you leave for your wholesale buyers, the more they will buy from you. It’s very easy. When you find a great property, you can add in a couple of clauses that:
1) make the agreement assignable (to another investor)
2) purchase is contingent upon satisfactory financing (from another investor)
* leave the parts in parenthesis out of the contract as they are non needed
Finding wholesale deals can be fun and easy too. Let people know that you’re interested in buying ugly houses so you can help clean up neighborhoods and improve property values. You’ll have people calling you to get you to buy their neighbor’s house or the abandoned one next door. You’ll find out of town owners and even people who have inherited property and don’t know the first thing to do with it. The possibilities are endless.
On a wholesale deal, I like to have a maximum agreed upon price that is 65% of ARV (after repaired value) minus expenses. That means if the house would be worth 100k after repairs, you would first want the house priced at 65k (65%) and then subtract the cost of bringing the house up to snuff. So, if you only need a coat of paint on the interior and some minor work on the landscaping, maybe that’s 3k. So, our final price would be 62k.
The reason we need the house to be so low is because not only do we want to make some money on the deal (when we sell the contract), but we also need the deal to be profitable to the wholesale buyer (other investors) for when they sell to a new home owner.
Give it a try. You only have your pride to lose. But remember, first get your buyers list as I mentioned in my previous article, The First Thing Every New Real Estate Investor Should Do. Once you have your buyer’s list, then start looking for some wholesales.