Rental Investment Properties or Wholesaling Single-Family Homes: What’s More Lucrative?

You are ready to increase your income and tired of spinning your wheels in your current industry, so you consider branching out to another seemingly lucrative area right now: real estate.

Not a bad idea.

Research shows that the real estate industry is one of the best places to invest in right now. After all, everyone has to live somewhere, right? In addition, the average annual return for residential real estate investments in late 2018 was 10.6%.

The question, though, is should you focus on rental investment properties or wholesaling single-family homes? Here is a look at which of these aspects of real estate investing is more lucrative.

Rental Properties vs. Wholesaling Homes

Let’s first take a look at the difference between rental investing and wholesaling.

Rental Investment Properties vs. Wholesaling Single-Family Homes

 

Rental Investing

Rental property investing involves purchasing properties and then renting them out for income. Research shows that the average gross rent in the United States in 2017 was $1,082 per month.

Of course, the net amount may end up being a few hundred dollars a month once you factor in property taxes, homeowner’s insurance, and possibly a mortgage. You would need several houses to achieve a modest income as an owner of rental investment properties. For instance, at $500 a month, 10 properties would be necessary for you to attain a salary of $50,000 a year. Of course, investing in apartment communities can yield higher returns as you collect monthly rent payments from tenants in each unit and later sell the property for a profit.

Wholesaling

Wholesaling, on the other hand, involves putting properties under contracts at discounts and assigning these contracts to cash buyers at slightly higher prices but still at discounts. The price difference in each transaction is what the wholesaler gets from the deal. Short-sales and foreclosures are a couple of types of properties that can be found at steep discounts.

With wholesaling, you could easily make a few thousand dollars per deal (specifically, between $5,000 and $10,000). That means, if you complete two deals a month, which is realistic, then you could generate $10,000 per month without the work involved in flipping a house for profit or managing a rental home.

So, is renting or wholesaling more lucrative? The answer is not black and white, as it ultimately depends on how many rental properties you rent out and how many wholesaling deals you can complete in a month’s time. However, both strategies have the potential of generating good returns, and they both have unique advantages.

Let’s take a close look at the various benefits of wholesaling homes versus choosing rental investment properties.

Wholesaling Requires No Money Down

One of the biggest advantages of wholesaling is that you don’t need a lot of money to begin engaging in this type of real estate investing. That’s because you’re not actually buying real estate. Instead, you’re serving as a mediator who can sell real estate to end buyers — specifically, you’re selling contracts to cash buyers. As a result, your only true expenses are marketing your company and your investment property.

On the flip side, rental investment properties do require financing. That means you need to have a down payment ready to secure your mortgage.

Wholesaling Can Generate Money Quickly

Another advantage of wholesaling homes? Wholesaling is short-term investing, so you can generate a profit relatively quickly. On top of this, you can produce a decent amount of money at one time.

Generating cash flow with rental investment properties, however, can be more time consuming, as it is a long-term investment strategy. After all, you may not be able to rent out your properties right away. For this reason, wholesaling is a better option if you’re not the type of investor who is willing to wait for a financial return down the road.

Wholesaling is Low Risk

The great thing about wholesaling a property is that if you don’t seal your deal, you don’t lose much as a result. All you might lose is the small amount of money you put into marketing your deal. That’s because you never truly owned the property. Furthermore, you won’t have to worry about paying property taxes or other expenses.

Rental properties are a higher risk when compared with wholesaling. That’s because, if you don’t manage to rent out your property quickly, your asset becomes a liability instead. You will still have to pay to maintain the property and cover property taxes even if your property is vacant. That’s why it’s best to look for homes or apartment communities that may already have quality tenants in place.

Rental Investment Properties Can Appreciate in Value

You can expect your rental properties to appreciate annually, and this is one of the biggest benefits of having rental properties. In the right markets, your properties could even double in value. There is even more potential for this if you actually work to increase the value of your apartment communities by making various improvements. However, as stated in my Three Immutable Laws of Real Estate Investing, don’t base your decision to buy on appreciation alone. This is not even possible with wholesaling. As a wholesaler, your goal is to quickly assign a property to a buyer. For this reason, wholesaling isn’t suitable for an increase in value long-term.
Rental Properties Provide Steady Income Streams

This is what draws many real estate investors to rental investment properties. As a landlord, you can expect money flowing in your bank account each month as long as your properties are occupied. The drawback of wholesaling is that it doesn’t necessarily provide a steady income stream. For this reason, if having consistent income from month to month is more important to you than acquiring lump sums of money from time to time, then rental property investing is the better way to go.

Rental Properties Can Be an Excellent Passive Income Source

The ideal situation for real estate investors is that they can generate money while they are asleep. Owning rental properties is one of the best ways of achieving this. This is especially true if you place your purchased property into the hands of a property management company. A property manager will handle the tasks of collecting rents and arranging for repairs to be made so that you don’t have to. All you do is review the property manager’s reports and enjoy your steady flow of income.

Start Wholesaling Single-Family Homes or Owning Rental Investment Properties Today!

If you are ready to strengthen your bottom line, you can’t go wrong with either wholesaling or owning rental properties on a part-time or full-time basis. With the right strategies, you can be well on your way to growing your net worth in today’s robust real estate world. Personally, I have the most success by syndicating large apartment communities. To find out how you can get started with apartment syndications, or to passively invest in my deals, get in touch with me, Joe Fairless, today to find out how we can work together.

large two-story investment home

How to Market Your Fix-and-Flip Investment Homes and Score Local Buyers Fast

You found your income property and perhaps even assembled a team of professionals to fix it up. Now, your fix-and-flip property is magazine worthy, and you’re ready to watch the money come rolling in.

 

Of course, you have to sell first.

 

The good news, though, is that research shows investment homes’ gross profit margin is more than $29,000 for successful sellers in the United States, and if the home you’re selling retails at between $100,000 and $200,000, you could easily enjoy a return on your investment of 54%.

 

So, how exactly can you market your fix-and-flip property? Here’s a rundown on how you can score local buyers fast!

Take Professional Pictures as Part of Your Real Estate Investment Marketing Plan

If you can showcase your fix-and-flip home using professional photography, you may be able to sell the home several weeks faster than you would with subpar pictures. That’s because higher-quality images spotlight the special features of investment homes, like granite countertops and crown molding. Professional pictures additionally add valuable depth to those smaller spaces, such as bathrooms and closets.

 

Photography Tips

 

If possible, produce a photo sequence that mimics walking through your house. Also, try to make the rooms look bigger by using a wide-angle lens. You can also use drone photography. Aerial views offer a broad overview of your property, so they can come in handy for drawing attention to a nearby lake or other noteworthy features.

Capitalize on Social Media

Make sure that you utilize social media marketing because most home buyers today search for potential properties online. You could choose to list with a real estate agent, investment company, or just do it yourself!

 

Before hiring an agent or choosing an investment company, take a look at the related website and social media profiles first. The website will show you how professional the individual or company is, and the social media profiles will let you know if the agent or company has the wide following they need to successfully market your property.

 

Tap into the Power of Your Own Social Media Profiles, Too

 

You can also take advantage of your own presence online by showing off your investment homes’ photos on Facebook, Instagram, Twitter, Pinterest, and even Houzz. Instagram and Facebook are especially helpful for spreading information about property listings via your family, friends, and even other investors with whom you are networked. Meanwhile, Pinterest is an excellent place to share images of the property you’re trying to sell.

Put Together Eye-Catching Video Walkthroughs

Years ago, real estate video marketing was like icing on the cake. These days, it’s become a part of the cake. In other words, it’s paramount that you understand video marketing if you want to compete effectively against other home sellers.

 

Video Walkthrough Tips

 

Ideally, the video walkthrough of your property should take three minutes or less, as people tend to have limited attention spans. Also, note that before sunset or after sunrise are two of the best times to shoot your video. This is because the lighting is soft enough to let visitors see outdoors through the windows, in addition to seeing indoors. If you shoot video at any other time, artificial lighting will be necessary to achieve an appropriate level of brightness.

 

The great thing about video walkthroughs for investment homes is that they make personal tours unnecessary in some situations, thus saving you time. They can also reach a relatively wide audience, which includes home buyers who might live in a different town.

Establish a YouTube Following

YouTube is yet another wonderful way to get the word out about your new property listing. You can simply post slideshows or videos of your property.

 

Keep in mind that you’ll draw the most traffic if you frequently add varied and new content to your YouTube channel, as YouTube gives priority to its active posters. Varied content could include a narrated video walkthrough of your property’s neighborhood, as well as a discussion about general topics related to real estate.

 

The more of an expert you appear to be, the more you position yourself as an industry professional. This will make it much easier for potential buyers to locate you online and check out your investment homes for sale.

Include a Property Listing Blog

Finally, try creating a blog for your property listing. A blog offers the benefit of providing more details than you can in the Multiple Listing Service used to market homes. Also, blogs can include links to extra information regarding the home’s neighborhood, as well as pictures and videos.

 

Another major benefit of blogging when you’re trying to sell investment homes is that you can capture buyers’ email addresses by asking visitors to sign up for notifications. With your email list, you’ll have a list of prospects whom you can contact when you have additional properties to sell in the future.

 

If you don’t have a blog, you should create a website for your property listing. The Web page should include a description of the property, its location, and its amenities.

Get on the Path to Successfully Marketing Your Fix-and-Flip Property Today!

If you are ready to sell investment homes, now is as good of a time as ever to start implementing the tips above. The sooner you market your property, the sooner you can start reaping the fruit of your labor and move on to the next property.

 

Get in touch with me today to find out more about what should go into your real estate investment marketing plan!

finding adventure

How to Invest in Real Estate on Vacation with Adventure Flipping

 

If you want to invest in out-of-state real estate, your main options are 1) have a boots-on-the-ground team in the market, 2) buy real estate from a turnkey investment company, or 3) enroll in a credit card that offers great travel rewards because you’ll be traveling to the market a lot.

 

However, Doug Larson, who has been a full-time investor for 11 years buying rentals, fix and flips, land, and lease-options, found a fourth option for investing out-of-state. It’s a strategy he refers to as “adventure flipping.”

 

In our recent conversation, Doug what adventure flipping is and why it’s one of the best real estate strategies for lifestyle investors.

 

What is Adventure Flipping?

 

Adventure flipping is when you perform an out-of-state fix-and-flip by actually moving into the investment property for the duration of the project. For example, Doug currently lives in Utah, but performs two to three “adventure flips” a year in California.

 

Doug said, “I live in Utah, so to do something out of state, you either have to have a lot of boots on the ground and organize things by phone, or you can go down there. This last summer, [my family] went down and picked [a property] up about five miles from the beach in North San Diego County, ocean-side. The whole family came down and we lived in the property… We went to amusement parks and the beach and all that kind of stuff. We lived there for almost three months while I was managing contractors and things. It really was a lot of fun. It was an adventure.”

 

Since you would be living in the property during renovations, you don’t want to take on a project that needs a ton of work. For Doug’s first adventure flip, he said, “[it was] in good condition, just dated. All cosmetics. I think we spent about $45,000 and probably two-thirds of that was labor with subcontractors.”

 

Why Adventure Flipping?

 

Doug said he chose to do the adventure flipping for three main reasons:

 

High knowledge of an out-of-state location

 

“We did three fix and flips in the San Diego area while still technically living in Utah. It’s just the market that I grew up in, I know it, I understand it.” Consider doing an adventure flip if you grew up in an area or lived in an area for an extended period of time, but you no longer live there now.

 

High demand for turnkey properties in the out-of-state location

 

“In some of those nicer areas there’s a little more upside. There are people who really appreciate the turnkey, and maybe living there. The doctors and lawyers … don’t get their hands dirty. They see something turnkey and they’re like, ‘Hey, you know what? I don’t know. It’s $50 -$70k more than this nasty fixer-upper down the street, but I’m willing to pay for that because I just want turnkey. I want to move in and not have to worry about stuff.’ I really appreciate that in those kinds of markets.”

 

Justification to visit an interesting, fun area

 

“I just love it and it was an excuse to go and visit… I did three [adventure flips] in 2010-2011. The last one I sold in 2012, and then we just decided we want to do it again. My wife wants to do it in Florida now. I’m like, ‘Okay, honey. Maybe we will, but maybe not this summer. We’ll see.’”

 

 

Which of the three criteria hold the most weight really depends on your investment philosophy. Doug’s overall real estate philosophy is not about collecting a certain number of doors. It’s about financial independence. In other words, he is a lifestyle investor.

 

Doug said, “If you’ve read The Four-Hour Workweek, or the E-Myth, or books like that … they talk about ‘your business works for you, and not the other way around.’ Make sure that it fits your lifestyle and the things that you really want to do in life, instead of your business owning you.”

 

Doug’s ideal lifestyle involves traveling, so adventure flipping allowed him to work that into his investment strategy. Brilliant!

 

Conclusion

 

Adventure flipping is when you move into an out-of-state investment property while you rehab it and then selling it to a turnkey investor or primary residence buyer.

 

The three main criteria for selecting a location to perform the adventure flip are 1) you know the area well, 2) there is high demand for turnkey properties, and/or 3) you want to have an adventure in that location.

 

While this strategy is obviously not for everyone, for those adventurous or lifestyle investors that love to travel, this is a great creative investment strategy that will fit right into your lifestyle.

 

Did you like this blog post? If so, please feel free to share is using the social media buttons on this page.

 

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That all helps a lot in ranking the show and would be greatly appreciated. And if you have any comments or questions, leave a comment below.

 

 

 

 

computer code

Guide to House Hacking Your First Investment Property

 

Guide to House Hacking Your First Real Estate Investment Property

 

One of my favorite Tony Robbins’ quotes, among many, is “success leaves clues.” This applies to a wide-range of activities, and real estate investing is one of them. If we want to learn how to get started and create real estate investment strategies, we don’t need to reinvent the wheel, because there are “clues” we can leverage to shorten the learning curve.

 

model house with coins and plantsFor those who are on the outside looking in, what you must do is quite simple: find someone who has successfully entered the real estate investment property forest and follow the breadcrumbs they’ve left behind.

 

Sunny Burns, a 26-year old real estate investor, purchased a fourplex for his first deal, and in our recent conversation, he outlined exactly what he did to successfully enter the real estate arena, which a newbie can use as a guide to purchasing their first investment property.

 

The Real Estate Strategy

 

Sunny’s first real estate investment property was a fourplex, which he purchased using the house hacking real estate strategy. House hacking is when an investor purchases a two, three, or four-unit property, lives in one unit, and rents out the others. “I definitely recommend the house hack,” Sunny said. “If you buy a single-family house, depending on how much you make, half your income could be going straight into that house (mortgage, taxes, repair costs).”

 

townhouse rental community“Buy at least a duplex,” Sunny continued. “You don’t want to become a slave to your house. You don’t want half of your paychecks to go there because it’s hard to get out of that and grow from there. But if you can buy something like a duplex, a triplex, or a quad, you can really start to almost live for free.”

 

By following this house hacking strategy for his first investment property, Sunny says, “we actually live for free, and then make a couple hundred dollars after that.” He gets the benefits of both an investment property (cash flow, appreciation, etc.) and essentially a free primary residence.

 

Sunny’s House Hacking Deal

 

Sunny found his real estate investment property on the MLS. “We were just looking at Realtor.com, and I got regular emails from them. One day, I got an email for this 12-bedroom, 4-bath quadplex, and I look at my email and was like ‘wow, this is the property we’ve been looking for.’”

 

When searching for properties, Sunny’s criteria was simple: $1,000 per month in cash flow after moving out of the rental and fully renting it out. It took a while to find the property, but the patience paid off when they found the fourplex.

 

Related: How to Find the BEST Deals with the LEAST Amount of Marketing

 

Most investors who purchase a real estate investment property via house hacking use a FHA loan, which is an owner-occupied loan that requires 3.5% down. However, the drawback of the FHA loan is PMI, which is an additional monthly fee for mortgage insurance. Sunny, understanding that the PMI cost would decrease his monthly cash flow, elected to pursue conventional financing instead. “We actually did conventional financing through a smaller bank,” he explained. “We put 10% down. We went to the smaller bank because they don’t charge you borrower-paid PMI – they take care of the PMI – and we got a great rate at 4%, which I’ve since financed to 3.5%.” The down payment was higher, but since the bank covered the PMI, Sunny was able to save a couple hundred dollars each month. That being said, for your first real estate investment property, make sure you shop around for a loan to ensure you’re getting the best loan that fits your investment strategy.

 

Related: A Millennial’s Guide to Buying Your First Home

 

Sunny purchased the fourplex for $430,000. He put down 10%, which is $43,000, and put in an additional $20,000 in repairs, so $63,000 all-in. Once they completed the renovation, Sunny and his family moved into one unit, rented unit two for $1,000 per month to his in-laws, and rented out the other two units for $1,700 and $1,710. He said, “we can definitely get $1,500 for our unit easy, and then another $500 for my in-laws unit easy once they move out.”

 

house building toolsAs for the renovations, Sunny was able to cut the costs of his real estate investment property by doing them himself. Besides the fact that he and his wife already had some handyman skills (his wife grew up in an old Victorian with her family that constantly required repairs and he had experience working on cars), they learned how to do the majority of the repairs using YouTube. “YouTube really helped a lot in a lot of things,” Sunny explained. “Learning house repair, that was definitely a learning curve, but YouTube, and [my wife] having a lot of knowledge [was key].”

 

10 months after purchasing his very first investment property and after completing all the renovations, Sunny was able to refinance the property and pull out all of the money he put in, both the down payment and the renovation costs. He said, “It worked out great. We purchased it for $430,000, we put that $20,000 into it in repairs, and I think it was under market when we bought it, so it appraised for $550,000, so that was $120,000 over what we purchased it for. We did a cash-out refinance, so we pulled out $67,000, and that was pretty much the $43,000 that we put into it and the $20,000 repair costs, and some closing costs wrapped in.” Not only were they able to pull out all of their initial out-of-pocket costs, which they will use for their next investment, but they also have 20% equity, which is double what they initially put down. That’s a solid way to get into the real estate investment property business!

 

Additional Factor When It Comes to House Hacking

 

Besides the tactics behind house hacking, there is one additional factor in play that applies to those who are looking to get into a real estate investment property via house hacking, but have a family: convincing your significant other! Sunny said he had some issues convincing his wife in the beginning. “She was really hesitant about working with tenants. She was really scared about tenants – they’re going to sue you, they’re going to cause all these headaches.”

 

Rather than go another investment route, Sunny implemented policies and procedures to mitigate the risk of tenant issues. “We did credit score checks on every single tenant. We did background checks on every single tenant. We made sure that they had a least two times the rental income coming in.” As a result, he was able to lower his wife’s fears and now, he says, “she’s a huge fan and tries to tell all our friends to do the same thing.”

 

Conclusion

 

One of the best ways to get your start with a real estate investment property is house hacking – live in one unit and rent out the others.

 

Sunny followed this strategy by finding a property on the MLS that fit his criteria, performing the renovations himself, refinancing and cashing out his initial investment, moving into one of the units and renting out the others, and implementing policies and procedures to mitigate his wife’s fears of owning and living in a rental property.

 

Newer investors can use Sunny’s story (either in its entirety or pick out useful clues) to guide them through their first investment property purchase too! Or, you can contact me to see about creating a strategy that works for you.