When you make $100k per year wholesaling houses you will lose something like 18 to 20% to federal taxes minus expenses and write-offs! Then your adjusted savable income is probable $40k of these funds as you probable need $35k to live on and it will probable cost you $5k in expenses.
But the good news is you should be able to do two or three times this revenue in your first year or so.
I suggest putting your cash in: Your pocket, a wallet, a box, a briefcase, under your pillow, in a safe, in your dog house, or maybe a bank! Oh, you meant after you save enough for a piece of property? Initially I would do the one or two or three single family rentals, then your second year wholesaling when you do $400k or $500k in revenue then maybe look at a small apartment property, mini storage or retail strip center.
Wholesaling is more like flipping’s big brother, you have to have the connection to find a wholesale property in order to fix and flip it! Bad decisions are easy to make, good decisions take time and patience! This person probable did not understand the market their investment was in!
Ok, let’s say that Red Star saves $200k his second year of wholesaling, what happens if you “Blow your Wad” on a $1m dollar building and suddenly discover termite damage or foundation issues or expansive soil or bad roofs or ungrounded electrical? What happens?
You only get 30 year loans on residential property! Hotels, apartments, assisted living facilities, mini storage, office, retail, commercial and industrial are 15, 20 or 30 year terms but will be due as a balloon note in 5, 7 or 10 years. At this time the property will need to be sold or refinanced. It costs points, appraisal fees and closing costs each time a refinance or sale occurs.
Typically commercial property is not 100% financed as the listing and buying real estate agents need to be paid, normally a seller will never pay those costs out of pocket, so even if the seller would sell you his property with nothing down, you’d have to have closing costs and commission money to close.
A typical US home builder will make an average 11 to 14% profit on each home he sells, then of course costs, expenses, write offs and taxes occur, so you don’t really make say 12% cash in your pocket.
Fund your retirement accounts first, then fund your kids college accounts, then make sure you have a 6 to 12 month emergency fund. Then cash can go into a house or two or three the first year as you have the money. In Florida you can probable find cost effective homes or condo / townhouses you can buy for $25k to $40k each, if you pay all cash you set yourself up for a permanent income upfront that you can rely on year after year regardless of the market or economy.