OK, I now have a generalized plan:
- Continue learning on this forum, courses, and by visiting FSBOs & open houses
- When the time is right, buy a SFH that needs a lot of work at a good price to rent to tenants.
- Use a general contractor for the rehab, keep notes on cost of all materials, prices , time taken to complete, and any unforeseen problems, etc… . Then rent to tenants.
- Use the knowledge that I gain that I learn from observing the rehab process as a way to quickly estimate repair costs and go into wholesaling in the future when the market begins to normalize.
That’s not a bad plan, my only question is why wait to do wholesaling.
The main benefit of wholesaling is that there is little to no risk. With wholesaling you get the house under contract, put up a small earnest money ($10 or $20) and then you sell/assign that contract to another investor. If you can’t find anyone to sell/assign the contract to you walk away from the deal and you only lose your earnest money.
You don’t need to do any repairs, you don’t need to get a loan, and you don’t have to wait for an end buyer to come and buy the home which could take months in this economy.
With your plan, you are taking all the risk by doing the repairs, hiring the contractor, renting it out.
It sounded like you wanted to learn about rehabbing. You can do that wholesaling too. If you wanted you could give the investor you are selling to a better deal if he/she will let you tag along on the rehab.
Like I said, your plan will work just fine. Hope that helps.
Thanks for your response James. I thought it was too risky to do wholesaling right now with home prices continually dropping (I live in one of the hardest hit areas of the country) and to try to determine what your rehabber’s holding time & ARV, etc is right now. I thought that if I could take the time to just research and buy one rental house and commit to holding it long term or at least until the market stabilizes that might be safer.
Wholesaling is still alive and well (even in crappy markets), and there is little risk involved.
Find out what the investors and landlords in your area are looking for, and then bring them deals that fit their criteria. You’re in and out in a short period of time, and can make a nice chunk of change on each deal.
Good luck,
Steph :cool
Its a plan HoldandBuy but I didn’t see where the money part comes into play. How were you going to finance the purchases, have the funds for the rehab, etc?
How about thinking about doing it my favorite way. Find a fixer and a lease option tenant/buyer that can do repairs in lieu of the option fee (its easier if you find the T/B first). Tie up the property with a option (using the repairs as your fee also). You don’t want a real fixer but more of a cosmetic one (paint, carpet, appliances, landscaping etc.)
Make sure you have a T/B that can do what he says, keep an eye on the project. For more info on something like this go to my blog and see the Lease Option Pages. The link is below in the sig.
Let me know if you have questions.
Good luck.
donrock
Thanks donrock–the financing part could be a problem. I’ll check that link that you mentioned.
When you wholesale houses, you shouldn’t have any risk
involved, unless you are wholesaling bank owned properties; you risk
your earnest money.
If you’re working directly with sellers, you shouldn’t have any risk at all,
not even your EMD.
Where the risk is right now, at least if you don’t have the capital/cash,
is holding onto properties. You need to account for vacancies, maintenances,
repairs, etc.
The buy and holders who are getting really wealthy in this market are the
ones who have the financial backing.
If you don’t have the financial backing to support unforeseen costs, I would
start out wholesaling, lease/option flips, and owner finance flips.
HTH