6 Steps to Get Started Investing in Short Term Real EstateGlen Gallucci
August 4, 2008 — 1,530 views
Many beginning investors get stumped when trying to figure out exactly the best way to get started investing in short term real estate. They see people on TV, the internet and direct mail buying and selling houses for profit. I have put together a simple guideline to help these beginners.
My favorite way of telling people how to get started in this business is to wholesale or "flip" their properties for a quick cash payout. This way they can also track the process of making larger profits by watching the more experienced investor.
Remember wholesaling is nothing more than getting a property under contract with the seller of a property and then have another contract with your buyer (another investor) selling it for a higher price than you negotiated. Or as I prefer, just "assign" the contract to your buyer who will close on the property in your place. It's a great tool and an easy process!
There is no risk, you don't need any license and you can do it with little or no money down! I would like to show how easy this process is to complete in 6 SIMPLE STEPS!
1. Find a Property - Find a suitable property that has equity. These type properties are usually found through finding foreclosures. You can subscribe to many services to identify foreclosures which are easily found on the internet. Companies such as American Foreclosures.com, Foreclosure World.com, Foreclosures.com or Realtytrac.com can give you tons of foreclosures in your area. You can also advertise in newspapers that you buy houses, foreclosures, etc. Finding vacant houses with out of state owners is also another great way to pick up bargain properties. Just find the owner and send them a letter that you wish to buy their house. One simple way you can find the owners of the house is by going down to the tax assessor's office in the town the property is located and see who and where the tax bill is being sent. Another way is to tell everyone you know that you buy distressed houses. Many times great deals are found through your own networking circle. And don't worry as you don't have to actually buy the house. Step number 6 will take care of this for you!
2. Make Your Offer to the Seller - Here you will make an offer and have them sign a purchase contract. I suggest you make your offer where there is enough profit for both you and your investor buyer. If not, make a lower offer or find another property. Your contract should always have a contingency clause that will let you cancel the contract. I like the "attorney review" clause which basically says that the contact is subject to your attorney's approval. Or another one is the contract is subject to your sole satisfaction on the home inspection report. This gives you time to find your new investor/buyer and also to check out the house. If your contract does not have this clause (which many already do have it) you can write it in and you and the seller both initial the addition. Also if the contract says you cannot assign the contract, I simply cross it out and replace it with the phrase that this contract IS ASSIGNABLE and both me and the seller initial the change. This is the language that I use. I am not an attorney nor do I give legal advice so you should ask the advice of your professional real estate attorney in your area what verbiage he or she prefers you use.
3. Start Title Work - After signing the contract, contact your settlement attorney or title company to start the title work on the property to insure what the seller has told you concerning any liens on the property or personal judgments is actually true. Only spend these funds if you feel that getting the property at the negotiated price will give you and your investor a good profit. You can also pass this task along to your investor (new buyer) to do if all the other numbers make sense. Another words if the loan amount owed on the house plus any money given to the seller, plus any fix up costs and your fee still leaves a nice profit, you can then sell it to your investor buyer. He or she will investigate any title issues should there be any. If the homeowner tells you they have no judgments, you can tell that to your investor and base you fee on that assumption.
4. Go to your Buyers List - and start lining up potential buyers for your property. If you don't have a buyers list start immediately advertising for buyers. One of the best ways to find buyers is either through your local real estate investors association or place an ad in the newspaper that you have foreclosure properties for sale. You will get a ton of calls!
5. Negotiate Your Deal - Either tell your investor what price you want for flipping this deal to him/her or you can ask what they would pay. Give them all the details to save both of you some time. Remember, it has to be a good deal for both you and the investor. And the investor is taking any and all risks so give them plenty of room to profit. If you find a house that you can buy for $150,000 and needs about $25,000 in repairs and will sell on the market for $250,000, you can certainly ask for a $5,000 or $10,000 assignment fee from your investor. He or she will gladly pay that as they will still make a nice profit for their efforts.
6. Assign Your Contract and Get Ready for Closing - Give your investor an assignment of contract with the amount of money you want for assigning your contract to them. Let's say its $5,000. He/she will give you a $1,000 deposit and the balance when they close the deal. Give your attorney or title company your contract and your assignment of contract and let them do the rest of the work! You are assigning your interest in the property for an assignment fee. You can also do the same thing with an option to purchase contract. You simply sign an option contract, giving you the right but not the obligation to purchase the property at a specific price for a specific time and then sell your option contract to your new buyer/investor for a fee. Here again you are assigning your interest in the property.
It's that simple! This is just one way to make money in short term real estate!
Glen Gallucci, also known as "A Seasoned Investor" actively buys, rehabs and sells residential properties. He has invested, renovated and built numerous residential and commercial projects during his 30-year career. A well diversified businessman; Glen is also engaged in real estate education. From the trenches, and with his down to earth "tell it like it is" teaching style, makes Glen the "real deal" and a sought after speaker around the country as his business experience proves invaluable for the beginner as well as the seasoned investor regarding the successful structure of starting a wholesale or rehabbing business as well as securing private lenders when investing in "quick turn real estate."