1. How do I get started Investing in Properties?

First, you need to determine how much capital (money) that you have to work with. If you have very little capital or none at all—this does not necessarily disqualify you from moving forward. It just requires that you learn to find more creative ways to finance your deals. Where there’s a will, there’s always a way. Most of my clients, including myself, got started with what I call “Sweat Equity”. This is where you put a little hard work, and some sweat, in order to build a stake in your property investment.

Financing is the area that holds a lot of people back from getting started in real estate and I’m here to tell you that there are many financing options available to you, even if your credit is bad. Depending if you’re buying a pre-foreclosure, an auction property or an REO, each one of these has a different potential financing. Don’t let this stop you before you even got started.

2. Can I make more money buying foreclosures?

In the past 12 years I’ve been involved in the purchase and sale of well over 3000 properties in various states and counties. Most of the properties that I purchased were foreclosures. Those that were not foreclosures were in some form or another distressed either physically, financially or both. And yes, I made a lot of money on them.

There are numerous ways to buy foreclosures. The three most popular ways are: pre-foreclosures (sometimes called a short sale), a foreclosure auction (also known as a trustee sale or a sheriff sale), and there’s REO’s (bank owned properties). Each of these methods have their own process and I suggest that you pick one way to learn first and then perfect it prior to moving on to one of the others. The one I learned first can be extremely profitable, but it also has the most challenges if you don’t know that you’re doing, and that is the auction. The auction is by far the best way to find the most property available quickly. It is the closest thing that real estate has to the stock market in terms of liquidity and the fast pace nature of it.

3. Where can I find the deals?

There are actually numerous places that deals can be found, but first you must know what makes a deal. You need to have an understanding of the market and what a particular property in a given neighborhood can sell for when it is fully rehabed. So the old adage, you make your money on the buy, it is so very true. Not over paying for a property is the most effective way to get a good deal. All that being said, the largest number of deals on a daily bases can be found at the trustee sales…auctions.

Another great source is a knowledgeable real estate agent who has experience working with investors. There are many other ways to find deals but finding the deals is not the hardest part. Actually, the hardest part is recognizing if you found the deal or not. Otherwise, you’ll have a hard time separating the good from the bad. This leads to over paying…and that’s called losing money.

4. Should I fix and flip or should I buy and hold?

Personally I believe everyone should buy and hold as much real estate as they can. This is one of the greatest ways to build and preserve wealth over the long term. There are four primary reasons to buy and hold real estate—one of them is amortization and that’s where your tenants are paying down the loan for you. There’s depreciation and that’s essentially a complex text advantage that Uncle Sam gives to you that reduces your taxes. Then there’s appreciation, this is essentially the increase in the value of the property over time. Lastly, there’s cash flow, which goes without saying, its money that you put into your pocket today after paying all of your expenses.

All that being said, I fix and flip and I buy and hold and there are advantages to both. You can turn a quick deal for profit and that money can help you purchase more properties. But, where we are right now in the history of real estate, I would encourage everyone to buy and keep as many properties as rentals as possible. There’s way less risk associated with buying for the long term, and much more potential upside if you’re willing to be patient.

5. What is a hard money loan and when should I use it?

A hard money loan is a loan that is granted solely on the value of the asset not on the strength of the borrower’s credit. Hard money loans are used to make quick acquisitions on properties and for short term bridge loan situations. I have used hard money loans for years on my fix and flip properties. The interest rates are high, but I’m in and out of the properties real quick. Using a hard money loan is generally less than all the fees that are associated with a traditional loan.

A hard money loan should be used mainly on a trustee sale or auction property that you’re planning on fixing and flipping. If, however, you’re buying to hold as a rental, you definitely need to get out of the hard money loan as soon as possible into a more traditional loan with more conforming interest rates.

6. What is wholesaling a property and why should someone do it?

Wholesaling is a great way to create quick cash. Essentially, wholesaling is when you find a deal and rather than close on it you sell it, assign it or double escrow it to another investor for a quick profit. In some cases, you don’t have to put up any of your own money to make money on these deals. Remember, you cannot get greed yon this as you have to still keep enough “meat on the bone” so to speak for the other investor who you end up selling the property to.

I have made a ton of money through the years just acting as a wholesaler. It can literally be a business all by itself. This can also be great way to get started or to supplement what you’re already doing. There are many reasons to wholesale properties. One reason is that you have too many deals going on and making a quick buck can be better than letting it go. Also you may not have all the resources to close on it yourself, but if you wholesale it, you can make some money rather than lose the deal entirely. Some people enjoy wholesaling more that they do any work on their properties.  They like finding the deal and passing it on to another investor for a reasonable fee. Wholesaling puts money in your pocket today, rather than waiting months for a fix and flip, or even years on rental.