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Wholesaling to Start Your REI Journey

Welcome to strategy #10 of the Real Estate investing for under $1000 series. Real estate wholesaling is a lucrative and exciting niche within the real estate industry that allows individuals to generate profits without the need for substantial capital or in-depth knowledge of property management. This strategy involves finding great real estate deals and then selling them to investors for a profit. Today  we’ll take a deep dive into the world of real estate wholesaling, explaining what it is, how it works, and giving tips for success in this dynamic field.

What is Real Estate Wholesaling?

Real estate wholesaling, is a method of property acquisition and resale that doesn’t involve buying, renovating, or managing real estate. Instead, wholesalers act as intermediaries, connecting motivated sellers with real estate investors, and earning a fee or commission in the process. It’s essentially finding great deals and passing them on to buyers, which makes it an appealing entry point for those interested in real estate investing.

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Wholesaling to Start Your REI Journey

Real Estate Investing For Women

The Wholesaling Process

 

  • Find Motivated Sellers: The first step in real estate wholesaling is to find properties that can be acquired at a significant discount. Motivated sellers can include people facing foreclosure, divorces, or those with distressed properties. Wholesalers can find these opportunities through various channels, including online listings, direct mail marketing, and networking.

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  • Negotiate Contracts: After identifying a potential deal, wholesalers negotiate a contract with the seller, often using a Purchase and Sale Agreement or Assignment of Contract. It’s crucial to secure properties at a price that leaves room for profit when selling to investors.

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  • Build an Investor Network:

  •  Wholesalers establish relationships with real estate investors, including rehabbers, landlords, and flippers, who are willing to purchase properties quickly. An extensive network can help ensure a fast turnaround on deals.

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  • Market the Deal: Wholesalers then market the property to their network of investors. This typically involves creating a deal package with property details, photos, and the sale price. Email marketing, social media, and local real estate meetings are common ways to reach potential buyers.

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  • Assign the Contract: When an investor expresses interest in the property, the wholesaler assigns the contract to them for a fee. This fee is typically a percentage of the sale price and can vary depending on the deal and market conditions.

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  • Close the Deal: 

  • The investor closes on the property, and the wholesaler collects their fee, often through an escrow service.

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Key Tips for Real Estate Wholesaling Success

  • Build a Strong Network: Your success in real estate wholesaling is heavily dependent on your network. Attend real estate meetings, join online forums, and connect with fellow wholesalers, investors, and professionals in your area.

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  • Focus on Marketing: Effective marketing is critical in finding both motivated sellers and investors. Invest in a professional website, social media presence, and a marketing strategy to attract both sides of the transaction.

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  • Hone Negotiation Skills: Negotiating with sellers and investors is an essential skill for a wholesaler. You must secure properties at favorable prices while maintaining good relationships with all parties.

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  • Understand Your Local Market: Real estate markets can vary significantly from one location to another. Understanding the dynamics of your local market is crucial to identifying opportunities and pricing your deals correctly.

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Compliance and Legalities: Wholesaling can involve complex legal matters, so it’s essential to understand local laws and regulations related to real estate transactions. Consult with legal counsel if needed.

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Conclusion

Real estate wholesaling offers a unique path into the world of real estate investing. By acting as a matchmaker between motivated sellers and investors, you can create a profitable business without the need for large capital investments. However, it’s not without its challenges, and success depends on networking, marketing, negotiation skills, and a thorough understanding of your local real estate market. With dedication and persistence, real estate wholesaling can be a rewarding venture for those willing to put in the effort. And as you can see from the process I just described,  wholesaling is a very active form of investing in real estate.  Unlike the other strategies mentioned in this series,  this is REALLY NOT passive.  So be aware that this strategy requires very little capital to get started,  but it will require your time and a learning curve. 

Ladies,  this is the last strategy in the invest for under $1000 series! I hope you found this series thought-provoking,  inspiring, and  informative.  

Next week I’ll play a replay of a really great episode I recorded on wholesaling.  See you then.

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Fractional Ownership and Rental Income Sharing Investing

Exploring Online Real Estate Marketplaces

Welcome to strategy #6 of the Real Estate investing for under $1000 series. Today we’re going to talk about the rise of online real estate marketplaces that have revolutionized the way we invest in properties, making investing in real estate  accessible to a broader range of investors with varying budget sizes.

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Fractional Ownership and Rental Income Sharing Investing

Real Estate Investing For Women

The Birth of Online Real Estate Marketplaces: A Paradigm Shift

As you know, traditionally, investing in real estate meant purchasing an entire property or committing a substantial sum of money to a real estate project. This approach excluded many individuals who lacked the financial resources to invest in this way. Enter online real estate marketplaces – platforms designed to democratize real estate investing by allowing investors to pool their resources and invest in properties collectively. These platforms offer a range of investment models, including fractional ownership and rental income-sharing arrangements, making it possible to enter the real estate market with a low minimum investment requirement. We’ve already talked about some such platforms in our Crowdfunding and Micro-Investing App episodes, but let’s dive in to see how you can utilize some other resources.

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Fractional Ownership: Sharing the Real Estate Pie

One of the groundbreaking concepts brought to life by online real estate marketplaces is fractional ownership. This model enables investors to own a percentage of a property rather than the entire thing. This way, the cost of purchasing a property is distributed among multiple investors, lowering the entry barrier and enabling a more diverse range of people to become real estate investors. Fractional ownership is particularly appealing for high-value properties that would otherwise be out of reach for individual investors.

A while back I did an episode with Elise Alexander at AceTrader and we talked about investing in Farmland.  This platform and investing style is a perfect example of fractional ownership investing.

Rental Income-Sharing: Profits Without the Landlord Role

Another innovative approach is the rental income-sharing model. In this scenario, investors contribute to the purchase of a property, and as the property generates rental income, the profits are distributed proportionally among the investors. This method not only provides an additional stream of income but also eliminates the responsibilities and headaches associated with being a landlord, such as property management, maintenance, and tenant relations.

Advantages of Online Real Estate Marketplaces

I’ve mentioned this before, but here are the advantages of using online real estate marketplaces:

  • Diversification: With lower investment minimums, investors can diversify their portfolio across multiple properties or projects, spreading risk and potentially increasing returns.
  • Accessibility: Online platforms make real estate investment accessible to a wider audience, including those who lack the substantial capital traditionally required to enter the market.
  • Liquidity: While real estate is often considered illiquid, some online marketplaces offer secondary markets where investors can buy and sell their fractional ownership stakes, providing a degree of liquidity that wasn’t feasible before.
  • Expert Management: Many online platforms have a team of experts who handle property management, ensuring that the properties are well-maintained and generating steady income.
  • Reduced Commitment: I haven’t mentioned this one before. Fractional ownership and rental income-sharing models allow investors to participate without the heavy commitment of managing a property full-time.

Considerations Before Diving In

While the concept of online real estate marketplaces is undoubtedly exciting, potential investors should exercise caution and conduct thorough research before making any financial commitments. Here are a few factors to consider:

  • Platform Reputation: Research the track record and reputation of the online marketplace. Look for user reviews, media coverage, and any information available about the platform’s history and performance.
  • Property Selection: Evaluate the properties available for investment. Consider location, potential for appreciation, rental demand, and the overall strategy of the platform.
  • Fees and Costs: Understand the fees associated with investing through the platform. These could include management fees, transaction fees, and other charges that might impact your returns.
  • Exit Strategy: Before investing, have a clear understanding of how you can exit your investment if you choose to do so. Some platforms offer secondary markets, while others might have limitations on selling your fractional ownership.
  • Market Research: Familiarize yourself with the real estate market in which the properties are located. This topic is worth its own whole series of episodes, but here are a few quick things you can look at to evaluate a market: job growth, economic health, laws and regulations like rent control or tax breaks for real estate owners, and of course demographics. A free tool you can use to get started is NeighborhoodScout.com On one of my shows before, someone also mentioned doing a search for “United van lines movers study” and you’ll get their most recent annual study on where people are moving to and from.
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There are several online real estate marketplaces that offer opportunities for investors to participate in real estate through fractional ownership or other innovative models. Keep in mind that the availability of these platforms can vary by region and over time, so it’s a good idea to do your own research to find the most up-to-date options. Here are a few prominent platforms I found:

  • EquityMultiple: EquityMultiple is a platform that offers both debt and equity investments in commercial real estate properties. While they provide a variety of investment options, some of their offerings may include opportunities for investors to earn a share of rental income.
  • Cadre: Cadre offers a platform for accredited investors to access institutional-grade commercial real estate deals. They provide investment opportunities in a range of property types, including office, multifamily, and more.
  • Patch of Land: Patch of Land provides a platform for investing in real estate-backed loans. They emphasize short-term residential and commercial property loans that are often used by real estate professionals.
  • Groundfloor: Groundfloor is unique in that it focuses on providing real estate loans to house flippers and property developers. Investors can participate in these loans, which are secured by the underlying property.
  • AceTrader: As I mentioned earlier, A while back I did an episode with Elise Alexander at AceTrader and we talked about investing in Farmland. This platform and investing style is a perfect example of fractional ownership investing. Although I haven’t personally invested on this platform yet, since I was personally referred to this platform by a couple people I trust, I feel comfortable recommending you look into it. So, next week I’ll replay the show we did on this so you can get an idea of how this works, and maybe even be inspired to move forward investing with AceTrader, or in this format.

In Conclusion

Online real estate marketplaces have transformed the way people invest in real estate, opening doors for a wider range of investors to participate in this lucrative asset class. Fractional ownership and rental income-sharing models provide flexibility, reduced commitment, and the potential for significant returns. However, as with any investment, due diligence is crucial. Carefully research platforms, properties, and associated costs to ensure you’re making informed decisions that align with your financial goals. With the right approach, online real estate marketplaces can be a powerful tool for diversifying your investment portfolio and tapping into the world of real estate.

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This Series is for Everyone!

Hi there Ladies! Today I’d like to take a quick break from our how to invest in real estate for under $1000 series to share some insights about why I’m doing this series, and how it can help you no matter how much money you have to invest. These strategies are for everyone!

Ladies, you know the main purpose of this show is to help you build wealth to create time and place freedom for yourself and your families.  And I want to help you do this in a way that feels blissful (or at least close to blissful), rather than overwhelming. In order for me to achieve this goal, you ladies need to actually take action and make investments! Nothing happens until you actually take action.  And I feel it is my job to help you move forward to taking educated action.

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This Series is for Everyone!

Real Estate Investing For Women

In this show I’ve shared a lot of investing strategies over the years. But one of the things that I am finding is that many of the strategies I discuss can feel overwhelming, intimidating, or unreachable. Some of this has to do with people thinking they don’t know enough to move forward.

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To that I just want to say, so much of real estate investing is a learn as you go experience.  Of course you need to learn about the strategy you want to pursue. You need to evaluate the market you want to implement your strategy in. You need to have your finances and reserve finances all ready to go.  But the truth is, the biggest chunk of your learning will happen once you actually start investing.  That’s why I recommend having a coach, mentor, or community to connect with whenever you have questions.  Because once you’re in it, it can feel daunting when things don’t go exactly as planned.  So, please please please don’t plan to go it alone.  Please get some support, okay?

The next reason I hear that so many of you haven’t been able to take action is because of time or money. I totally understand, and that is why I am doing this series we’re now in the middle of.  The thing I love about the strategies we are talking about is that they don’t require much of your time or money. But they allow you to start getting involved in the real estate market. They allow you to dip your feet in and start to get comfortable with investing in real estate.

But when we talk about not having enough money, that is subjective. For some of you that means you have only a few hundred dollars.  But for some of you that may mean you have a couple HUNDRED thousand dollars, but you don’t know where to put it or how to invest it, and you’re scared to put it all in one place. Or you’re just too afraid to get started.  That’s all okay.  I know the fear is real.  But that doesn’t mean you can’t get started.

No matter how much money you have, a little or a lot, you can get started in real estate investing using the strategies I am discussing in this series.  You can just put a little in to get your feet wet.  You can put a bit in several strategies to test them, see which ones you like best,  and to diversify your portfolio.

The other thing many of you ask me is that you want to invest in real estate, but you are in the process of saving up for that first investment in a property. So you want to know where to put the money you are saving.  And preferably you’d like to invest in real estate assets because they are safer and more stable than the stock market and mutual funds, and they make much more than just putting the money in a savings or money market account.  Well, in this series I am sharing several places you can put that money to help it grow and also keep it liquid.  Liquidity is important because that way as soon as you have the money saved to buy your first property, you can get immediate access to it.  You don’t need to wait to sell a property or get an equity loan or line.  Instead, you can liquidate your investment and use the money usually within a week.  And in the meantime, you’ve been getting safe returns to help those saved dollars increase in value faster (without a high risk of losing your principle).  It is true that no investment is completely risk free, so you’re not guaranteed to not lose money, but in these strategies, you have a significantly better chance of holding onto your principle, and growing it, than if you put it in more volatile investments like stocks and mutual funds.

And, in other safe investments like savings accounts, money market accounts, and bank CD’s most of the time you will actually lose money. How? Because they don’t keep up with inflation. This means that property values will increase over time at a much faster rate than these investments.  Which could mean you will never have enough money to invest in the kind of property or location you are interested in.

But if you are investing real estate money in real estate assets, your money should grow in line with the increases in real estate appreciation.  Not exactly, but more closely, depending on the strategy you pick.

I don’t want to be doom and gloom here.  There are lots of markets to buy property in, so you can always find a place to invest in properties.  But you know for me I like to keep things blissful, so I like to be able to choose what and where and for whom I buy my properties.  So, having more cash available gives me more options to do that.

Over the last many years, as we’ve been holding or stashing and growing our real estate money to make investments, we have been investing in Ginnie Mae’s directly through our account with Vanguard.  The Ginnie’s track the current mortgage rates.  So when mortgage rates went so low, this investment no longer made any sense. Real estate prices were skyrocketing, but our money was making like 2-3%.  We were definitely losing headway with this strategy.  So I started searching for other options of where to put our money and keep it liquid.  That’s how I started to learn about all the strategies I’m talking about in this series.  And I thought this would be good information to share with all of you too, whether you have a lot of money or not.

I just wanted to give you some perspective on why I’ve been doing this series.  I hope today I’ve given you not only context, but some things to think about.  And more importantly, some inspiration to look at what you can take action on.  Whether it’s one of these strategies, or one of the many others I’ve talked about on this show over the years. Because nothing happens without action.

Okay, that’s it for today. I look forward to seeing you next week and until then remember, goals without action are just dreams. So go out there, take action, and create the life your heart truly desires.

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ETFs vs. Mutual Funds: Understanding the Differences

Last week I introduced you to the concept of real estate ETFs. As you may know there are also ETF’s for securities.  Even though this is a real estate show and we don’t normally talk about stocks, because I brought up the topic of ETFs and because I do believe in diversification, I do want to talk a little bit about securities ETFs.  In this blog  I’d  like to discuss the difference between ETFs and Mutual funds.  When it comes to investing in the financial markets, exchange-traded funds (ETFs) and mutual funds are two popular options. Both offer diversification and professional management, but they differ in structure, trading flexibility, and cost.

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ETFs vs. Mutual Funds: Understanding the Differences

Real Estate Investing For Women

In this blog post, we will explore the differences between ETFs and mutual funds to help you make informed investment decisions.

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1. Structure and Ownership

ETFs: ETFs are investment funds that trade on stock exchanges, similar to individual stocks. They are structured as open-ended investment companies (or unit investment trusts) and issue shares that represent an ownership interest in a portfolio of underlying securities. ETF shares can be bought and sold throughout the trading day at market prices.

Mutual Funds: Mutual funds are investment companies that pool money from multiple investors to invest in a diversified portfolio of securities. They are typically structured as open-ended funds, meaning they issue new shares as investors buy into the fund and redeem shares when investors sell. Mutual fund transactions are typically processed at the end of the trading day at the net asset value (NAV) price.

2. Trading Flexibility

ETFs: ETFs offer intraday trading flexibility, allowing investors to buy or sell shares at any point during market hours. This flexibility enables investors to take advantage of short-term trading strategies, such as day trading or limit orders.

Mutual Funds: Mutual funds are priced once a day after the market closes, and transactions are executed at the NAV price determined at the end of the trading day. Investors can only buy or sell mutual fund shares at the next calculated NAV, limiting intraday trading opportunities.

3. Cost Structure

ETFs: ETFs generally have lower expense ratios compared to mutual funds. Since they are passively managed and designed to track specific indexes, the management fees are typically lower. Additionally, ETFs are structured to minimize capital gains taxes due to the creation and redemption process of shares.

Mutual Funds: Mutual funds can have higher expense ratios due to active management and research costs associated with selecting securities. Additionally, mutual funds may have sales loads, which are fees charged when buying or selling shares, further impacting overall costs.

4. Tax Efficiency

ETFs: ETFs are generally more tax-efficient than mutual funds. Due to their unique structure, ETFs can minimize capital gains tax liabilities. When an investor sells ETF shares, they are selling them to another investor on the secondary market, which typically does not trigger capital gains for the fund itself.

Mutual Funds: Mutual funds can generate capital gains when the fund manager buys or sells securities within the fund, which is passed on to the investors. This can lead to taxable events for investors, even if they haven’t sold their mutual fund shares.

 
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Conclusion

ETFs and mutual funds are both investment vehicles that offer diversification and professional management. However, they differ in terms of structure, trading flexibility, cost, and tax efficiency. ETFs provide intraday trading and lower expense ratios, making them suitable for investors seeking flexibility and cost efficiency. Mutual funds, on the other hand, are traded at the end-of-day NAV price and are often actively managed, making them more suitable for long-term investors.

When choosing between ETFs and mutual funds, it’s essential to consider your investment objectives, trading preferences, and cost sensitivity. Consulting with a financial advisor can provide valuable guidance in selecting the right investment vehicle based on your individual needs.

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Use ETFs to Invest in Real Estate

Welcome to strategy #5 of the Real Estate investing for under $1000 series. And ladies, please understand that just because these strategies are accessible to people with  small amounts to invest, it doesn’t mean that they are not good for people with much more money.  If you have more or much more than $1000 to invest, these strategies are still good for you to consider.  For instance, they are good for diversification and getting the benefits of investing in real estate while still keeping your money liquid.  There are many good reasons for even those with plenty of money to consider the strategies in this series!

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Use ETFs to Invest in Real Estate

Real Estate Investing for Women

As we all know real estate investment has long been recognized as a lucrative avenue for wealth creation and portfolio diversification. However, direct property ownership can be capital-intensive and time-consuming. Enter real estate exchange-traded funds (ETFs), which provide investors with a convenient and cost-effective way to gain exposure to the real estate market. In this show, we will explore the advantages of investing in real estate ETFs, discuss different types of ETFs available, and provide insights into their potential returns and risks.

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Advantages of Investing in Real Estate ETFs

1. Diversification: Real estate ETFs offer investors the opportunity to diversify their portfolios across a broad range of real estate assets. These ETFs typically include a mix of residential, commercial, and industrial properties, as well as real estate-related companies. By investing in a single ETF, investors can gain exposure to various segments of the real estate market, reducing the risk associated with investing in individual properties.

2. Liquidity: Real estate ETFs trade on major stock exchanges, providing investors with liquidity and flexibility. Unlike direct real estate investments, which can be illiquid and require significant time and effort to buy or sell, ETFs can be bought or sold throughout the trading day at market prices.

3. Cost Efficiency: Investing in real estate ETFs can be more cost-effective than purchasing individual properties or actively managed real estate funds. ETFs often have lower expense ratios compared to mutual funds and do not typically involve transaction costs associated with direct property acquisitions.

4. Professional Management: Real estate ETFs are managed by experienced professionals who monitor and adjust the fund’s holdings based on market conditions. This allows investors to benefit from the expertise of real estate investment managers without the need for active involvement in property selection or management.

Types of Real Estate ETFs

1. Equity REIT ETFs: These ETFs invest in shares of real estate investment trusts (REITs), which are companies that own, operate, or finance income-generating real estate. Equity REIT ETFs provide exposure to various property types, including residential, commercial, industrial, and healthcare. They can offer both income and capital appreciation potential.

2. Mortgage REIT ETFs: Mortgage REITs provide financing for real estate by investing in mortgage-backed securities (MBS) and other real estate debt instruments. Mortgage REIT ETFs focus on generating income through the interest earned on these debt investments. However, they may be more sensitive to interest rate fluctuations and carry higher risks.

3. Hybrid REIT ETFs: Hybrid REIT ETFs invest in a combination of equity and mortgage REITs, providing a balanced exposure to both property ownership and debt investments. These ETFs offer diversification across different segments of the real estate market and can provide a blend of income and growth potential.

Potential Returns and Risks

1. Potential Returns: Real estate ETFs can offer attractive returns through a combination of capital appreciation and dividend income. Dividends are typically generated from the rental income or interest payments received by the underlying real estate assets. The potential returns will depend on the performance of the real estate market, interest rates, and the fund’s composition.

2. Market Risks: Like any investment, real estate ETFs are subject to market risks. Factors such as economic conditions, interest rate fluctuations, and supply and demand dynamics in the real estate market can impact the performance of these ETFs. Additionally, changes in government regulations or zoning laws can affect the profitability of real estate investments.

3. Liquidity Risks: While ETFs offer liquidity compared to direct property ownership, there can still be liquidity risks associated with specific ETFs, especially those with lower trading volumes. Investors should be aware of potential trading limitations, bid-ask spreads, and the impact of market volatility on ETF prices.

4. Sector and Regional Risks: Different segments of the real estate market can perform differently based on factors such as location, property type, and economic trends. Investors should consider the concentration of holdings within an ETF and assess the risks associated with specific sectors or regions.

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Conclusion

Real estate ETFs provide investors with an accessible and cost-effective way to diversify their portfolios and gain exposure to the real estate market. They offer advantages such as diversification, liquidity, cost efficiency, and professional management. However, investors should be aware of potential risks associated with market fluctuations, liquidity, and sector-specific factors. By understanding the different types of real estate ETFs available and conducting thorough research, investors can harness the benefits of these investment vehicles and tap into the potential of the real estate market.

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