When it comes to real estate deals, there’s no one-size-fits-all approach. Whether you’re dreaming of transforming a distressed property into a charming Airbnb or prefer the quick turnover of wholesale real estate, the market offers a variety of strategies to suit different investor needs.
Wholesaling is a popular choice for those who want to move quickly from one deal to the next without significant time or financial investment. In this strategy, a wholesaler contracts an off-market property with a seller and then finds a third-party buyer willing to purchase the contract at a higher price. The wholesaler profits from the difference, a process known as an assignment of contract. Typically, wholesalers sell the contract before it closes, allowing them to make a profit without paying for the property out-of-pocket. The main costs involve building a list of leads, often distressed properties, and marketing to those leads.
Wholetailing sits between wholesaling and flipping. Investors purchase a property without an assignment of contract and make minimal renovations before marketing it to a broader pool of buyers. This strategy often yields higher profits than wholesaling because it attracts both investors and regular buyers. Essential upgrades and repairs are made, but the time and money invested are still significantly less than a full flip. This approach is ideal for investors with enough capital to purchase a home and make minor upgrades but who still want to move quickly to their next deal.
Double-closing is another method some wholesalers prefer. In this process, a wholesaler buys a property in their name and sells it within 30 days without making any updates. This allows the wholesaler to keep their profit undisclosed to both the seller and the buyer. Unlike an assignment of contract, double-closing involves two separate transactions with the seller and buyer.
Flipping properties is a well-known strategy, often showcased on TV. Investors buy a property, make necessary repairs and upgrades, and then sell it as quickly as possible to minimize costs like mortgage and utilities. The goal is to renovate and sell the home swiftly to maximize profit. For instance, DealMachine members Krystal and Dedric Polite have a formula for flipping: renovate a home for under $50,000 in 50 days or less.
Long-term rentals offer a different kind of investment opportunity. Building a portfolio of rental properties can provide consistent income without the constant need to find new deals. While managing tenants and property upkeep is required, long-term rentals come with tax benefits and the potential for significant profits over time.
Short-term rentals can be lucrative, especially in popular tourist destinations. Although maintenance and upkeep costs are higher than for long-term rentals, investors can earn up to double the revenue compared to month-to-month leases. Short-term rentals offer flexibility in pricing and availability, allowing owners to adjust rates during peak demand and use the property themselves when needed. However, managing short-term rentals requires more time and effort than long-term rentals.
Creative financing options are available for those who prefer not to go the traditional bank loan route. These options include owner financing, subject-to agreements, self-directed IRAs, private lenders, and crowdfunding. In owner or seller financing, the seller allows the buyer to pay the home price over time without a loan. Subject-to loans involve taking over the payment of an existing loan on the property without paying it off when transferring ownership. Private loans from wealthy individuals work similarly to bank loans and can often be found at local real estate investment meet-ups. Certain IRA accounts allow real estate to be held as a retirement investment, with the IRA owning the property rather than the individual.
Lease options provide another avenue for real estate deals. In this arrangement, a tenant has the option to purchase the property during their lease. Monthly rent usually acts as a credit toward a future purchase, should the tenant decide to buy the property. Rent payments in lease options tend to be higher than the market average since they are credited toward a purchase.
Becoming a licensed real estate agent is another way to profit from real estate deals. Agents take courses and pass a licensing exam to represent buyers and sellers in transactions. This can be a great way to get involved in real estate without directly buying or selling property. Referral agents, who connect clients to licensed real estate agents, can also earn commissions with a smaller time commitment and fewer costs than traditional agents.
Real estate deals offer a range of opportunities for investors, from quick turnovers to long-term income. Whether you’re interested in wholesaling, flipping, rentals, or creative financing, there’s a strategy to suit your needs and goals.
