Turning houses for profit can be very lucrative if done right. It can also be a huge nightmare if you don’t know what you’re doing. My name is Tyrus Gross, and I have bought and sold real estate for over 25 years.
This article is a step-by-step plan to help you avoid experiencing headaches and drive years off your learning curve. My only purpose in writing this is to make sure you know exactly what to do to succeed in real estate investing. The material I supply here is the brain of over 25 years of experience (both good and bad).
In other words, I want you to avoid the mistakes I make and become as successful as possible; as soon as possible. If you’re going to buy a house (actually own it) and then turn around and sell it, I’ll show you the safest and fastest way to do it. But first, I’ll give you a little background on myself and teach you what not to do.
I started investing in Los Angeles, California in 1989. Like many people, I spent a lot of time and money on real estate. One so-called The guru taught me to get a list of pre-closures and then move door to door. He literally advised me to go knock on the doors of people who were losing their homes.
Surprisingly, a few people let me into their house (as a side note; many people are very emotional when they are losing their house).
I had a friend who was invited to someone’s home, and he found out that the homeowner had loaded a shotgun in the back room, and was very emotional that he had lost his home, which he and his family had lived in for more than 20 years.
I don’t know that I urge you to ever go to the door without knocking uninvited. There is a much better way to buy houses. Never put your life at risk when buying houses. There are plenty of opportunities to buy discounted real estate, and I am going to share with you a large part of what I’ve learned over the years.
The fastest and most streamlined way to buy houses at a discount is to buy them from wholesalers. Before I explain the wholesale buying process, I would like you to imagine what I did before that. Several gurus told me that I had to get a list of REOs (Real Estate Owned: A REO is simply a foreclosure that has returned to the lender), and then buy the house from the bank at a deep discount.
Let me tell you from your experience that it is not an easy process unless you already have an established relationship with the bank’s REO Manager. Even then, the real challenge is getting the bank to come at the price you want to pay. Knocking on the door many times and buying REO from a lender is a complete waste of time.
I spent hours, even months and months, calling and leaving voicemails just to get someone to call me back. I lost the number of voicemail messages I left to REO Managers (I don’t even know if I’m calling the right person), and I called and called back at least 40 different lenders.
We stop to think about it for a moment; weeks or months of time flushed down the drain. I don’t know about you, but I can’t stand wasting time. Even when you get a decision maker on the phone, you still need to negotiate them down at a price that suits you.
Let’s now compare it to buying from a wholesaler, but first I want you to know exactly what a wholesaler is. Wholesale is normally 70% of the ARV (after repair). So if the ARV is $ 100,000, the wholesale is up to $ 70,000, which, after repairs, gives you $ 30,000 in potential capital or profit.
My own philosophy is that if I can’t buy it wholesale, I won’t buy it. The average wholesaler receives five offers per month each month. In addition, the wholesaler will not make money until he turns the property over to an investor like you or me.
In other words, they want to do business with you. When you call them, you are not trying to sell them anything; you call to give them money, and they make a profit. It’s an invitation that house wholesalers really enjoy.
You may be asking yourself how this process works and why the wholesaler is willing to do so. Using the example above, a wholesaler has a property tied up for $ 65,000 and translates it for you for $ 70,000. He earns $ 5,000 from each translated transaction without ever taking property from the property (they just translate / assign the right to buy the property to you).
The wholesaler raises very little money, usually $ 100 to $ 1,000, to tie up the property, and makes a nice portion of the changes in the background. The wholesaler then simply rinses and repeats the same process with other houses. Keep in mind that the wholesaler will do all the preliminary work and other time consuming activities as well as negotiate a lot with you.
I do not know about you, but I’m okay with the house wholesale seller who earns money; as long as their houses are still wholesale to me. I suggest you get access to some local wholesaler email lists to get your first crack at good wholesalers.
I also suggest you do an internet search for house wholesalers. For example, suppose you invest in Phoenix, AZ; then type the words ‘log homes for sale in Phoenix, AZ’ into the search bar of your favorite search engine (or highlight and right-click the words for a quick Google search).
One more thing, always do your own due diligence on all types of real estate companies you plan to do business with. Try to find online or offline comments or reviews about their past and present business reputation, etc.
Tyrus Gross is a veteran real estate investor and has been turning houses for profit for almost 30 years. He managed to find wholesale houses with thorough discounts in seven days or less, and has access to many private lenders that finance these wholesalers quickly. He is the author of the book Get offers now which helps real estate investors quickly find wholesalers. He is available on his website at: www.GetTheDealsNow.com
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