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Brian Lee of http://geniustypes.com/ discusses the symbiotic relationship between wholesalers, rehabbers, and hard money lenders.

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the real estate investing trinity

The Real Estate Investing Trinity

Hard Money, Rehabbers, Wholesalers

By: http://geniustypes.com/

symbiotic trinity
Symbiotic Trinity
  • Hard money lenders, rehabbers, and wholesalers all depend on eachother in the real estate investing world.
  • When investing in real estate you must figure out your “role” and then fill your circle with as many people from the other categories as possible.
three levels
Three Levels
  • These three spheres of the real estate investing world also represent three different levels.
  • As your net worth grows and you gain more experience, the idea is to move up the levels to more and more passive income.
  • If you don’t have a lot of money or credit you start of as a wholesaler, then move on to fliping or renting homes, and then advance to hard money lending.
wholesaling
Wholesaling
  • This is where you start if you want to invest in real estate but don’t have great credit or a lot of money.
  • It takes time and money to make it profitable.
  • Most investors will spend 70% of the houses after repair value to purchase a rehab it.
  • If you can find and buy a house for less than 70% of it’s ARV, you can sell it to a real estate investor and pocket the difference.
wholesaling5
Wholesaling
  • You don’t need great credit, because you’re not actually buying the house.
  • Since you don’t have money to buy the house, you find an investor who does and sell the contract to him.
  • First you need to find a motivated seller. There are many scenarios in which someone is under pressure to close fast- find them!
  • One way to find these people is to put up bandit signs- “We Buy Houses” + Your Phone Number
wholesaling6
Wholesaling
  • You can also find sellers by “farming,” or putting up flyers in neighborhoods letting them know you’re interested.
  • Sending out mailers or placing ads on the internet work too! (Although internet ads are much more expensive)
  • Bandit signs have the lowest cost per buy- meaning relatively they’re the least expensive marketing tool, but also the most time consuming.
  • Go to real estate investing clubs to find investors!
rehabbing
Rehabbing
  • Simply put you buy a house and fix it up to sell or rent.
  • To do this you’ll need to borrow from a hard money lender
  • You’ll need $10-20,000 and a credit score of at least 700
  • Remember that the key to making money in real estate is only buying property at 70% of its after repair value
rehabbing8
Rehabbing
  • Out of the 30% that’s left over, 10% will go to a title company or realtor when you sell, 10% will go for holding costs, and the rest is your profit.
  • When you flip you can realize profits earlier, but when you hold a house you create long term wealth.
  • Keep in mind that there’s a huge tax advantage over flipping when you hold a property for longer than a year
rehabbing9
Rehabbing
  • To avoid having your own tenant horror stories, take management classes- this will greatly reduce your headaches!
  • Whatever the nuisances that come with being a landlord, you get to be your own boss and take your retirement into your own hands.
hard money lending
Hard Money Lending
  • Hard money lenders are special banks that loan to real estate investors
  • They’re familiar of the risks and profit potential of real estate and are much easier to lend from
  • These lenders come in all forms- everything from large companies to individuals.
private lending
Private Lending
  • An individual hard money lender
  • Most passive form of real estate investing
  • Do your due dilligence and make sure the buyer and property are credible- then sit back and collect your interest checks!
  • Remember to never loan more than 70% of the after repair value, get 1st lean on the house, and work with responsible and experienced buyers
helpful links
Helpful Links
  • Visit geniustypes.com for more information on blogging, social networking, passive income, real estate investing, and creative life.