Three Ways To Get Started In Real Estate

It’s not uncommon for people interested in real estate investing to get anxious and question their abilities. 

Where do I start?

When should I start?

How much money do I need?

Do these questions sound familiar? Many novice real estate investors think they must have massive amounts of money to start this business.  

The answer to these questions is quite simple. Glenn Schworm reveals how investors start their new careers in real estate without any out-of-pocket expenses. 

Glenn Schworm, the founder of Home Flipping Network, suggests novice real estate investors begin in three ways.

1. Assigning Contracts
2. Wholesaling
2. Short-term Rentals

Let’s explore each of these strategies, and you can determine where, when, and how you’ll start your career in real estate investing.

Assigning Contracts

Assigning contracts is simple but not without nuance. For a real estate investor to assign a house, we must:

1. Find an off-market house. No one knows about the opportunity with this house.
2. Homeowners are typically in a bind and need to move quickly.
a. Could be behind on mortgage payments.
b. Demand Letter from a mortgage company.
c. Loss Mitigation may not have been approved for various reasons.
d. Foreclosure proceedings may have begun.
3. Determine the home’s value after repair value using the Home Flipping Workshop Evaluator.
4. Contract the home below market value.
5. Then, take the contract and assign it to another investor, but increase the price so that you make money.

Example #1: The Dewberry House

John went door-knocking after running a marketing program and found a homeowner living at 1515 Dewberry Lane.  

The house is rather unkempt but otherwise in good condition. John knocked on the door and sat down to speak with the Homeowner, Mrs. Knockberry.  

She informs John that she must move to Georgia to care for an ailing mother and does not have the time to deal with a realtor.  

She has been behind on the mortgage for two months, wants to get to Georgia quickly, and needs $5k.  

John runs the numbers on the home, and the evaluator states the home is worth $120k after $15k in repairs.  

She has a mortgage of $40k on the house. Since the home is not in foreclosure, you contract the home for $60k.  

Afterward, John attends his local real estate investor networking event and makes it known he has a contract for $75k with an after-repair-value (ARV) of $120k.  

Lorenzo and his wife Rebecca jump on the deal. John assigns the agreement and, at closing, collects $10, Mrs. Knockberry collects her $5k, and Lorenzo and Rebecca are off to the races.

Do you get it? 

You arrange the deal but put no money down. 

Assigning a contract means you do the sales work, which is no easy task, and reap the benefits of your labor in the markup.  

For the assignment to work well, you want to get the house at a reduced amount, and the property must have great potential.  

How Does Wholesaling Work?

Many investors use wholesaling and assigning interchangeably, but there is a difference.  

When you assign a contract, you do not use any of your own money; however, when you wholesale a property, you assume the title.  

Here is the difference between the two:

Assignable Contract: An assignable contract is a provision allowing the holder of a contract to transfer or give away the obligations and rights of the contract to another party or person before the contract’s expiration date. The assignee would be entitled to take delivery of the underlying asset and receive all of the benefits of that contract before its expiry. However, the assignee must also fulfill any obligations or requirements of the contract.

Wholesaling: In real estate wholesaling, a wholesaler creates a contract with the seller for the exclusive right to buy their property for a set amount.  Then the wholesaler attempts to reassign the contract to another potential buyer for a higher price.  The difference between the two prices is the wholesaler’s profit. 

Let’s examine it. Wholesaling a home means you have done the following:

1. Found an off-market house.
2. Contracted the house at a deep discount.
a. The homeowner is typically desperate and does not have time to deal with a realtor.
b. Could be behind on a mortgage.
c. Could be in the throes of divorce.
d. May have a personal reason for quick relocation.
3. This Homeowner does not want you to assign their contract. They want you to close the deal. They do not trust the assigning process and only want to deal with you.
a. Yikes! What if you don’t have the money?
b. No problem, get transactional funding to close the deal.
4. Once you close, you sell the home at a profit that leaves plenty of room for the flipper to repair the house and make a handsome profit.

Example #2: Rockford Lane

Allison and her sister Tangy are new real estate investors. They ran a marketing program and found three houses in disrepair, and one is behind on taxes.  

The sisters go to 2121 Rockford Lane and meet a middle-aged woman named Angie, who looks overwhelmed.  

The sisters explained why they had come and asked if she had received their letter.  

Angie replies that she has received their letter and will call. The home is her childhood home, and both parents have passed away.  

Angie is overwhelmed with grief because her mother had dementia and had not paid the taxes.  

She is so worried she will lose the house. Allison and Tangy asked if Angie wanted to do with the home. She says she lives in Alabama and wants to unload this house as quickly as possible.  

The sisters run a comprehensive estimate on the home using the Home Flipping Network Evaluator and discover the house has an after-repair value of $225k.  

There is no mortgage on the house.  

The sisters tell Angie they can contract the home for $100k and no more. It needs about $50k in repairs, which could increase once the work begins.  

Angie says she liked to make about $115k on the property. The sisters tell her they could help her conduct an estate sale to help get close to the $15k she wants.  

Angie agrees but does not want the house assigned to any other investor.  

She only wants to work with Allison and Tangy.  

So, the sisters contract the home and get transactional funding from another cash-heavy investor who wants only $3k back on his principal loan.  

Then, the sister finds a flipper who can take on the project in a month. Therefore, the sister closes on the house using transactional funding of $100k and wholesale to a flipper 30 days later for $113k.  

The sisters make $10k, pay the $103k back to the investor, and move on to the next deal.

Again, the difference between assigning and wholesaling is who assumes the title.  

In wholesaling, you take possession of the title and sell the property to another investor.

The Benefits of Short-Term Rentals

The world of travel and leisure has changed drastically. Airbnb, VRBO, and other companies have made travel accommodations family-friendly.

Instead of cramming into a hotel for a week with three kids for an unpleasant vacation, short-term home rentals have become a viable option.

How do you capitalize on this as a novice investor? 

With the proper training, this step is simple.

You can lease a home in a desirable location in your city, town, or elsewhere. Afterward, place the house on the Airbnb or VRBO network.  

Once they approve your home, they will place it on their network, and travelers will begin booking the house.  

You must ensure it is clean and all amenities are precise. Remember, these are vacationers. They want it to be excellent, even picturesque.

After you’ve prepared the home, then what? Collect the rental income.  

Investors earn upwards of $30k monthly on these homes, especially when they do it correctly from the beginning.  

There is some work involved, but nothing out of the ordinary. A good cleaning company, a handyman, and decent furniture are all needed.  

If you can buy the home, do it. Pay the mortgage off quickly and enjoy the continual income.

Short-term rentals are significant retirement investments.

What’s Next?

You may be a novice, but you can do good business, create wealth for your family, and establish a legacy.    

First, if you expect to establish long-term success in this industry, you will need training.    

You will also need mentoring from an experienced professional.    

Get the proper real estate investing training and learn every step from A-Z at the Home Flipping Network. Get connected to the right resources and people who will be able to support you during difficulties.   

Get connected today and begin your real estate investing journey with an innovative and profitable perspective.