Real Estate Investing Deal Types, Choose Smart!

These are rough transcriptions of one of thelatest htp://www.REI-TV.com episodes. Please go to the links below for loads of of videos about real estate, training, and income opportunities.

Welcome to www.realestateinvestormachine.com , the REI-TV network, and host of www.REI-TV.com , where beginning and experienced investors can find training, networking opportunities, and more info about creative real estate investing.

This is Newbie Tuesday, and we’re talking about various types of deals, real estate investor tips you can use to flip a house, and various strategies. We do all kinds of deals, we do bird dog deals, wholesaling, retail flips, auctions, and I’ve even bought and sold houses on Ebay!

When you first are getting started though, I highly suggest you pick one technique and stick with it. Become a bird dog, become a wholesaler, whatever it might be, and when you are ok at it, you can go to the best thing.

In the past, I’ve repeated many times “I’m just going to wholesale”, or “I’m just going to be an option investor”. It seems right after that, a perfect sub-to or rehab comes across my list, so I tend to do it all… but in many cases, if you’re new, just bird dogging or wholesaling alone may be the best strategy for a new real estate investor starting her career.

Some investors, all they like is bird dogging… or in other words become a “house scout”. Bird dogs find properties for other investors for a fee instead of actually doing the deals themselves. Many have jobs that take them through neighborhoods as they work, (a perfect opportunity to find houses) and they have no intention of going full-time. Perfect jobs for a bird dog include pizza drivers, gas meter readers and mail-men. These are excellent because they are always coming and going.

The best reason to start your real estate investing career as a bird dog is there is zero risk. As a bird dog, all you have to do is find the house, get the sellers telephone number, their address, photos of the house, the seller’s name and selling cost.

That’s why it is called bird dogging… just like when someone is hunting, the dog runs ahead of the hunter (or investor) and flushes out the birds… or houses, in this case!

My first deal was as a bird dog… I made an offer on my own to buy the property… I offered $19,500, and they turned me away. The investor I then gave it to offered $15,000 and they took it! (go figger, eh?!)

In any case, I made a quick $500. It was my 1st deal in the business, and I framed the check, (er, a copy of it, that is!) and hung it on my wall! I’ll never forget that 1st deal… and my 1st payday!

When you want to find an investor to work for as a bird dog, you can just look for “We Buy Houses” signs as you drive, look in newspapers for “We Buy Houses” advertisements, or go to Google and type “sell my house” and you’ll discover lots of pages of investors, many who would love to have you work with him… and if none of that works, contact me with the deal and we’ll see what I can do!

The average bird dog makes between $500 to $1000 per deal, while some investors pay their bird dogs on a “per-lead” basis. This is typically determined by a combination of the closing ratio of leads to closed deals by that particular investor, and the real estate license laws in that state.

The next step for some investors is wholesaling. Many investors stop at this level and make a full-time career out of wholesaling houses… big careers, with seven figure income… yes seven figures, as in “millions” wholesaling. Wholesaling is almost the same as a bird dog, but instead of turning it over to another investor, you agree to buy the house yourself.

When wholesaling houses, just like anything else, you buy something cheap and resell it to someone for more… easy, eh? Wholesalers negotiate the best price he can on a property, then put it under contract to buy.

Once you have a contract to buy, you go to another investor who intends to renovate the property, and you sell, or “assign” your contract to the other investor. Instead of turning it over to some other investor entirely (like a bird dog would) the wholesaler stays with the “deal” until it is closed upon… or when your “buyer” closes and gets the property from your “seller”.

Wholesaling is some of the simplest money I have EVER made in my real estate investing career… and there is little risk when you wholesale, as long as you do it properly. The best part, is a wholesaler simply finds the seller, and the buyer, then walks out of the process… earning his income on the “spread”… and NEVER buys the house!

The “spread”, which is your profit, is the difference between how much your seller gets for the property, and your buyer pays for it.

Another type of deal is what we call a retail flip. Retail flip deals are very similar to wholesale deals, yet a lot of people call it a type of wholesale deal too. We call it retail flip because we deal with “pretty houses” but are selling to the end user… a homeowner who will reside in the property, who’s buying it “retail”,so we call it a retail flip.

In a retail flip deal, an investor gets a “option” to buy the property at a discounted price, or puts the house under contract… not unlike a wholesale deal. He then finds a homeowner to buy the property from him, and again, earns “the spread”. The property is of course, promoted differently, since you’re selling to an end buyer. We market these properties with bandit signs, newspaper advertisements, as well as the MLS, and it’s not unusual to use an auction exit strategy to sell these houses.

There is GREAT profit potential doing this type of a deal, and many deals have been known to be “six-figure deals”, in profit alone. In a retail flip deal, again, there’s little risk except the marketing money to find a house and find the buyer.

A more “risky” type of a project, but one that in these times is very easy to find, as well as easy to sell is a “subject-to” deal. In this type of a project, you buy the property “subject to the sellers mortgage”. In other words, you buy the house, but the seller lets his mortgage REMAIN on the house until you refinance or sell it in the future. This is like “assuming” the mortgage.

The common exit strategy for a sub-to deal, is to find a buyer who needs some time to get their finances or down payment ready, and is willing to give you a deposit, and lease the property until they are approved for a loan. This is more typically known as a “rent to own” property. The buyer rents the property from you, until he can get financing, and “cash us out”.

The good thing about a sub-to deal, is it’s usually “no money down” to the investor. We just buy the property for the amount the seller owes, she signs the property over to us, and we pay the payments until our “rent to own” buyer gets a mortgage.

A subject-to investor gets paid a few ways:

1- He makes some money from the deposit the “rent to own” tenant pays when he moves in. We typically charge $5,000 to $15,000… this is technically an “option fee”. The buyer pays this to us up front, to secure the right to buy the property in the future at a locked-in price.

2- He earns some cash monthly. For instance, if the mortgage payments, with taxes, interest, and insurance total $1,200.00, we would usually charge that buyer $1,400.00-$1,500.00 per month.

3- The “big payday” is when the buyer gets his financing and “closes”, buying the property from the investor. If the investor pays $150.000 for a house, and the buying tenant then pays $185,000 for the house, at the final closing, the investor makes $35,000. (minus the deposit, in #1)

But remember, if the tenant doesn’t make the payments, you will have to make them, as the investor!

Another type of deal, is “buy and hold”. It is what more common investors do… they buy the properties over a long period of time, lease it out, and eventually earn a LOAD of equity, as the renters payoff the investors mortgage over time. Many years from now we sell the house, which could be huge money if you have the ability to work with tenants. This is how traditional real estate investors have traditionally “done the business”, and is one of the absolute best ways to get filthy rich in real estate!

Article Source: http://www.real-estate-article-directory.com

For a more detailed look at these tips and more, please go to www.realestateinvestormachine.com , or www.rei-tv.com , and take advantage the dozens of free real estate coaching and education videos. Nick Cifonie is a real estate investor, trainer, teacher, and coach.

Please Rate this Article

5 out of 54 out of 53 out of 52 out of 51 out of 5 

Not yet Rated