Flipping, Renting and Wholesaling
As you know, I feel passionately about teaching professionals from all industries and walks of life the critical skills needed to start investing in real estate. Real estate investing is an ideal vehicle for creating multiple monthly cash streams, and I believe it can be an excellent companion and springboard for your existing professional practice. Whether you are a doctor, lawyer, teacher, first responder or are in the military, investing in real estate is a smart decision that creates freedom for you to pursue your passion.
In this episode of Real Estate Investing for Professional Men and Women, I want to go over the three primary types of real estate investing that you could choose to pursue. These include flipping houses (which you probably know from those countless house-flipping TV shows), buying and renting properties, and wholesaling. In the episode, I explain these three methods of investing, their benefits and drawbacks, and I go over the basics of each.
Please keep in mind that I always advocate for investing your own money, avoiding shady or morally questionable investment practices, and I steer you away from those no-money-down methods you’ve probably heard about. Ethical investing isn’t just the right thing to do, it also helps you avoid risky investment behaviors that can cost you in the long run.
What’s the difference?
The three methods of investing in real estate are each distinct and very different from one another, and each offers pros and cons to consider. Flipping houses is certainly the most flashy, glamorous and fun. You buy a fixer-upper in a great neighborhood for less than what comparable properties in the neighborhood are going for, make cosmetic and functional improvements to the home to increase its appeal and bring it up to the neighborhood standard, and then sell it for more than what you invested in it. That’s great on paper… if you’re looking to make real estate be your primary job. Fixing houses is costly, time-consuming, or both, and flipping is very subject to the market’s whims. Flipping is a risky proposition if the market slows down or worse, if the economy crashes.
Then there’s wholesaling, where you make an offer on a property and get it under contract to sell, then you sell the contract itself for an assignment fee so that the other party can take over your agreement to purchase the property. The good thing is that wholesaling doesn’t require much money to get involved in. However, the downside is that wholesaling is very time-consuming and only results in a one-time profit, since you never actually take ownership of the property. Wholesaling is fine if you don’t have any other options and lack the cash on hand to go with another investment route, but it doesn’t work well for a busy professional whose focus is on their primary business.
And Then There’s Rentals
Rentals are my favorite way to invest. Rentals are hands-down the key to growing your wealth through real estate. Not only are you actually purchasing and taking ownership of a property, giving you the freedom to resell the property later, but you’re actually creating a continual monthly source of income from your tenant. Rentals are always an option and are mostly insulated from the constant real estate market fluctuations. If anything, when the market is down more people end up renting than buying. Residential rentals are the steadiest and least vulnerable sector in real estate.
Of course, even with rentals, there is still an element of risk involved. You’re either going to be responsible for unclogging toilets and fixing air conditioning units or you’re going to have to hire someone to do it for you. And there’s always the risk that a renter will miss their payments. But in the grand scheme of things, the positive aspects of rental properties far outweigh the negatives, and as long as you own a rental property you can keep drawing monthly income from it. What’s not to love about continual, ongoing income?
Want to hear more? Listen to this podcast here.