Why New Investors Should Choose to Wholesale First
If you are just beginning your career in real estate investing, you will need to choose an area of specialization to begin with. You can expand or shift at a later time, but spreading yourself too thin in your early career is a bad move.
Where to start? To learn the ins and outs of sale, resale, financing and turnover and develop a great feel of true worth, start with wholesaling real estate.
Many forms of real estate investing are based on either development or speculation and come with a high risk for properties that may never materialize in a fulfilled form, but wholesaling is based on real estate value: the resale of existing properties.
The wholesaler is looking for a profit based on markup of undervalued purchases, improvements, and services provided by looking for properties to flip either by reserving the property through contractual assignment of marketing rights, or by owning them for a brief time and then reselling them. Wholesaling has very little vaporware. Properties are real; they have real locations and are in the control of the wholesaler.
The initial investment, if any, tends to be smaller, and is much more easily controlled, with more options for handling bad markets and slow moving properties. A wholesaler can turn over a property immediately, bundle a property with other properties and sell to another wholesaler operating at a different level or in a different sector of the business, or a wholesaler can rent in a variety of ways, making sure that his or her initial capital is never tied up for long in any particular property.
The ideal real estate business in a down market is wholesaling real estate. When markets are rising, dreams exist. When markets are falling certainties exist and the wholesaler has certainty. When using speculation as a form of real estate investing, it draws in people who think they are high rollers and with that comes high risks. But these high rollers have high loses when the odds are against them, and now, more than ever, the odds are against them.
A quieter form of real estate investing is wholesaling. Wholesaling real estate allows the agent to learn the trade from the ground up and is based on existing properties, smaller deals and a slowly built collection of properties that allows for smaller but steady returns.
Wholesaling allows a beginner, who is also a businessman, to improve the fiber of his or her own community. By starting real estate investing in an area of familiarity and on a small scale, the wholesaler can develop customer loyalty and regional goodwill the same as the doctor or dentist can and show the members of the community that he or she is adding value to the community, improving relationships and creating worth giving the wholesaler the chance to be a benefactor in the community rather than a stranger coming to the neighborhood leaving it empty of prior value.
Wholesaling real estate is seen as the black-hat bad-guy, but it doesnt have to be. The risks can be controlled, the scale can be controlled, and the methods used managed to tailor things toward the needs of all involved.
A completely safe form of real estate investing does not exist. Risk and daring is part of building investments and capital can be lost. But the approach of wholesale real estate investing can allow a newcomer a chance to learn one option at a time and help manage the risks and reap the benefits.
A true career in real estate investing may start with wholesaling being a hobby, but it can grow into a career over time.
