When you’re a new real estate investor, there’s an overwhelming amount of information out there about how to get started, and which kinds of investments to make. I know firsthand how intense it can be at the beginning, and if this is you, definitely keep in mind that everyone has to start somewhere.
No one was born an expert in anything. And the good news is, there are plenty of resources out there, to help you make informed and educated decisions about what kind of investments you should make. If you’re looking to get your start, you’re probably considering either fix-and-flips, or wholesaling. Here are five things new real estate investors should know about both of these options.
- The fix and flip basics
To start off, you should understand the basics of this kind of real estate investment. This process involves buying houses which need some work. Sometimes, it can be a lot of work, and other times, it may be just smaller cosmetic jobs.
When you’re looking for these properties, you can find some amazing deals. But you need to be cautious that you don’t pick a property which will end up being a money pit. Sometimes, when you peel away the outer layers, some of these properties need some seriously expensive work done. But at the end of the day, these projects can be fun, creative, and a great way to make some nice returns.
2. The wholesaling basics
On the other hand, wholesaling is a kind of real estate investment that involves very little cash on hand. You simply act as the middleman for properties already on the market, and sell them for a markup from the asking price. That markup is your profit.
Now, wholesaling can be a great option for people who aren’t looking to repair properties, and also for investors who don’t want to actually risk a lot of their money. But these kinds of investments involve a lot of networking, research, and marketing tactics, to be successful.
3. To help you decide, look at your finances
If you don’t have any money to spare on a project, wholesaling may be the better option for you. While fix and flips can be tempting, and can net you a high return, they can also take a lot of time and money to get them done. Wholesaling is a great choice for investors who are tight on cash.
4. Wholesaling is also a great place to learn the ropes
As a new investor, you have a lot of learning to do. You shouldn’t let that stop you from making an effort, but it’s something you need to acknowledge. In order to learn the ropes, you need to get in the game.
While you will learn on the job by both wholesaling and fix and flips, wholesaling may be a great place to start! It allows you to learn without stressing about your finances, or worrying about repairs that need to be made.
5. Both have their pros and cons
Both of these types of real estate investing have different pros and cons. Wholesaling may be a better place to start on paper, but it requires some serious legwork and networking, and there’s no guarantee that you’ll make money, because you have to successfully close deals. With fix and flip, you’ll eventually unload the property at some point, but it can be a big undertaking to repair a property.
If you’re starting a real estate business, you know it’s important that your new business makes money. The question is, what are the most effective real estate investing strategies to go about making that money? Make sure you have a good understanding of what kind of work the property needs, before you get started.