Wholesaling - With Nearly No Risk vs. Long Term Real Estate
|Let's start out clarifying a few points about 'short term' investing and 'long term' investing. First, understand that wholesaling and 'flipping' houses are for short term activities. Traditionally, when we think of real estate investing, we envision someone buying a property and holding the property for the long term. |
In this 'traditional' buying situation, the investor would find a good and well maintained property sold through a real estate agent, borrow the money from a bank to fund the purchase and then hold the property for a number of years. The property might have rental income and certainly over time would increase in value. At the end of perhaps 10, 20 or 30 years, the true investor has a property that has appreciated in value and maybe even paid off. This is a long term real estate investor.
To the contrary, what we will be teaching you in this program is quite different. From this point forward we are not going to use the term investor to describe the short term buyer and seller of real estate. We will call the short term buyer and seller a 'real estate entrepreneur'. Thus, one involved in the short term buying and selling of real estate is in essence, building a true business, a business which supplies others in the real estate industry with an inventory of properties. For example, unlike the long term real estate investor:
1) The short term buyer may never obtain a loan on the property
2) The short term buyer may or may not perform repairs on a property
3) The short term buyer's total investment in the property may be only $50 to $100 and their return might be 50 times this amount
4) The short term buyer may hold only a contract to buy the property and may sell or 'assign' this contract to another investor for a profit of $3,000 to $5,000 in 1 week
5) The short term buyer won't always use a real estate agent and in many instances will buy the property from someone who is 'motivated' to sell
6) The short term buyer might buy a property that needs repairs and may spend months coordinating such repairs, and then sell the property
7) The short term buyer might learn about the property from a beginning investor and not a trained real estate agent
8) The short term buyer does not rely on market appreciation. They rely on 'buying correctly' at the right price and under a very specific set of conditions
As you can see, there are some significant differences. The first of which is that the property is generally being sold quickly (i.e., in less than a year in most instances). Also, you might notice that the short term buyer may never obtain a loan in order to purchase the property. The short term buyer may only invest $50 to $100 in the property and then 'assign' or 'sell' their rights to the property for $3,000 to $5,000.
My purpose for introducing these 7 fundamental differences is to change how you think of this process. The short term buying and selling of real estate is without question more aptly a business activity than an investment activity. Take a moment and think about any successful business that you know. As you can imagine, there are numerous parties and players in such a business.
|The author, Darius M. Barazandeh, Esq. is a licensed attorney in the state of Texas. In addition to his legal knowledge he has a Masters Degree (M.B.A.) in Business Finance and brings experience from numerous fields including tax sale investing, real estate construction, corporate finance, and business consulting. Frustrated by the lack of realistic information regarding tax foreclosure sales and other investments, he is "unlocking the secrets" to many of these creative investment methods with his unique 'clear cut' writing style, attention to detail, and legal knowledge. |
Information contained within this article was not intended to be, nor should it be taken by the reader as legal, financial or tax advice. The above article was written for educational purposes only. If the services of a Texas attorney, or real estate mentor or coach are desired, please contact Darius Barazandeh or seek the services of another professional.
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