What Are The Risks Associated With Real Estate Wholesaling?
I love to answer this question when someone new who is contemplating a career as a wholesaler asks me! Here's what tell them: "Real Estate Wholesaling is hand's down the Safest way to get into real estate investing"! There is NO other style, no other method of real estate investing that offers such a LOW LEVEL of RISK!
Let me explain why! First, a risk is a possibility that something may go wrong with what ever it is that you about to undertake, that whatever you are about to undertake may have adverse consequences in this case a real estate deal that may harm you in some way. And when we are talking risks associated with real estate deals, we are usually talking about our MONEY being put at risk!
So lets tear down a typical real estate wholesale deal and examine the components. A wholesale deal is really a middleman transaction between a seller of real estate and a buyer of real estate, whereby the wholesaler make the connection between the two parties (buyers and sellers) and gets paid very well to make that connection.
Since all of the wholesalers interest in a wholesale deal is in just making the connections between these two parties, and NOT ever in ownership of the real estate he's working with, the wholesaler NEVER has any of the risks associated with Real Estate OWNERSHIP! And that's where all of the REAL risks in any real estate deal are concentrated.
Let's talk about the real risks that the wholesaler avoids. These are risks that only the "end user" (the one who ultimately goes home after closing owning the property) has to deal with.
* No Money in the DEAL!
* No Holding Costs (taxes, utility bills, maintenance bills, etc.)
* No rehab or contractor repairs to worry about
* No resell worries
* No tenant hassles
* Your credit rating is never in jeopardy of being tarnished because of a deal gone bad!
The only risk that a wholesaler has to deal with, and this is the only one that exists, is a small earnest money deposit given to the buyer to secure the sales contract that legally binds the seller to the wholesaler, usually ONLY $ 1.00 to $ 100.00! THAT'S IT FOR RISKS!
The Average profit margin on a typical wholesale deal is between $5,000.00 to $ 7,500.00! I know of NO other method of investing, be it real estate, or some other form of investing all together different from real estate that offers NO risk in return for such an awesome profit potential! I mean WHAT A RETURN ON OUR INVESTMENT!
So now you know why real estate wholesaling is the absolute SAFEST WAY for any new or seasoned investor to invest in real estate!
Can the HOA Put a Lien on My House Because of This?
I am furious right now! Last night there was a home owners association meeting and one of the main discussions was about my home. Many of you know that we have been trying to remodel the inside to make it our own. Since Mike's parents left us the house, we've bought a 15 ft long dumpster to clean out the junk (which is completely full of trash) his parents grandparents kept for AGES, the weekend before last we rented a Uhaul to load some of the various boxes of books, linen, and cloth up to Llano, TX.
Right now we are living in the above garage apartment to effectively accomplish this task. So the HOA, while we were loading the Uhaul, apparently got word of the inside condition of the house and wants to put a lien on it! They said that if we don't get it cleaned out soon they're putting a lien on it. I want to scream right now!
I am so frustrated beyond belief. What am I going to do without my home? I mean, that's what that means, right? They are going to kick my family out? If there were any way in hell I could possibly clean it out in "their allotted time frame" don't they think it would have been done by now??!!! Do they think I'm just wasting money on Uhauls, dumpsters and storage buildings because I LIKE spending money? They can clearly see the dumpster sitting in my driveway FULL of garbage. If I could afford to buy another $350 dumpster it would be done, what is wrong with these people? At least I'm trying!
I can't break this headache right now....... How the hell can someone tell me what I can and cannot have in my house to begin with? God knows if it were up to me I'd throw every gosh darn thing in that dreadful house away! Geese, I don't know. God help me.
I'm done venting. Sorry, but I just don't know what to do.
What Happens to a Renter if Their Landlord Defaults on a Mortgage?
I've been reading about the Wall Street bailout for days. I've been trying to understand what caused it. Now I read an article in the Daily News and in Crain's New York that city renters could be next victims of mortgage mess.
The articles goes on to say that "An increasing number of apartment complexes face possible foreclosures and thousands of city renters could be the next victims of the mortgage crisis housing advocates warn. At least 580 buildings containing 40,000 units have one or more factors that could lead to mortgage default, Crain's New York Business reported yesterday on its website.
Private equity firms bought at least 90,000 affordable housing units in the past four years, many at inflated prices in badly leveraged deals, according to the Partnership to Preserve Affordable Housing.
The Riverton apartments in Harlem and Stuyvesant Town on the East Side are both at risk, according to the Crain's website. Riverton's owners indicated last month that they were on the verge of defaulting.
And Savory Park, a seven building complex in Harlem has been placed on a watch list. Appollo Real Estate Advisors and its partners bought the complex in 2006 for 175 million.
Appollo refinanced a year later, increasing the debt to 367.5 million, the credit rating agency Realpoint reported. The agency called the risk of default on the load "moderate to high."
Housing advocates told Crain's that buyers had unrealistic goals about rent increases. The same lenders caught up in the mortgage free-for-all in single family homes lent them money any-way."
If these companies default on the mortgages (loans), what happens to the renters? What can the renters do? Can the renters do anything?
I live in one of the housing developments purchased by Appollo Real Estate. What can the tenants do?
Tips on Setting Up a Self Directed IRA
That free and easy setup self directed IRA might not be a good choice. I looked at the company’s offering that deal. The additional fees that they charge are numerous and the services they offer are limited. Remember to always shop around before you make a final decision.
A self-directed account is a good idea, because, generally speaking, you have more options, but the company’s that are offering free set up are brokerages. Maybe you only want to invest in stocks, bonds and money market funds, but they are charging high fees for each transaction.
A better choice is a company that charges a reasonable set-up fee and an annual fee, but no transaction fees. Of course, you’ll always have to pay a fee for trading stocks or foreign currencies online, but as long as you stick with standard stock market investments, some companies do not charge an extra fee.
Instead of a free and easy setup self directed IRA, you may want to consider a little more diversification. There are a number of allowed investment types that are not related to the stock or money markets.
Some of them can yield very high returns. Others are yield less, but you have to go with the investment types that you understand.
For example, one investor that I know of is a music teacher. His students and others were interested in renting musical instruments. He used funds from his self-directed account to buy a number of instruments and began renting them out.
In less than a year, the rental income paid for the initial investment. So, after two years, he doubled his initial investment and the account will continue to grow in this way for as long as the instruments hold up. With proper maintenance, they could last for a hundred years or more.
With one of the free and easy setup self directed IRA accounts, he could have never made that type of investment, because it’s not allowed by the custodian. Even though, it is allowed under the tax law. But, there is one investment type that anyone can make and the profits can be very high.
Holding real estate in a retirement account is allowed and some advisers encourage it. Real estate is typically not affected by the volatility of the stock market.
You can find an easy setup self directed IRA custodian that allows real estate transactions, but set up is not “free”. It costs about $50. But, custodians that charge for setting up the account may not charge transaction fees or percentages on un-invested cash balances. That’s good, because you need cash balances to invest in real estate.
All of the costs, including the purchase price, must come from the account. All rental income or other profits must be returned to it. There are certain prohibited transactions and rules you need to learn before you get started, but the real estate market can help you secure your future faster than you ever dreamed possible.
Choose the right easy setup self directed IRA and look for some good advisers. Help is available, if you know where to look.
Can the Landlord be Sued Because of This?
I was just wondering, my mother lives in a apartment and can not shovel snow. The landlords have a long drive way that serves three apartment buildings. They also own another building it is is close but does not use the same driveway.
Anyways, the owners plow the snow .... but they do not do anything about the ice. The ice is always there for like weeks until it melts. Its really dangerous and a b*tch to drive out of. If some one had slipped and fell and broke something couldn't they sue the shit out of the landlord for not properly taking care of their property? Cause I was wondering why anyone in their right mind wouldn't want to buy some salt and throw it down.
I don't want to fall. I hate ice because it hurts to fall lol but I rather have them de-ice the driveway before someone does fall... some people are old there. Besides, I have to walk past two buildings on ice just to get to the first building ... that's where the parking lot is.
Upside Down in Condo?
The condo I bought in 06 is worth about $80,000 less than I paid. The developer owner has approx 30 properties unsold and it appears that they did not budget well for reserves and though still on the property are about to pass about $100,000 in debt to the owners in the form of a double condo fee. Many people already have crazy loans from during the bubble, and the community already has owners going into foreclosure. There are lots of management issues and building issues due to the renovations being done by several contractors. The condo management is basically tied to the developer owner as that is who hired the company. What was once affordable is now quickly becoming unaffordable and the situation very scary and uncertain-we although being well over 300 owners have not found a way to come together to be heard by our board to protect our interest. I want to either find a way to modify my loan to try to hang on-or find a way to walk a way that leave me completely out of the property and able to move on. I might be able to rent it out a make my mortgage and condo fee right now but if it goes up again it will be much harder-the next increase will make it triple in less than three years. I would also like advice on help making the developer owner pay for the liabilities that they are leaving for us-they still own about 20 apartment buildings adjacent to the condos.
Is there a law in Washington, DC saying that you can’t have bars on a ground floor apartment windows?
I'm about to move into a ground level apartment (1st floor not in the basement) and come to find out there are no bars on the ground level windows. I live in NE Washington, DC and my neighborhood is not that bad when it comes to crime, but I really don’t feel safe without bars on my windows being that I’m a 20 something single female. I asked the manager and she told me that it's now against the law to puts bars on the ground level windows in DC. However, some of the other buildings in the same complex have bars. I ask her why did some of the other building have them and some did not. She replied that the one’s that have bars had them on there for years and years. I’m not really convinced on this. If the management is not going to provide them I am more than willing to go to home depot and buy some.
Recent Posts
- Top 10 Questions For Self-Directed IRAs
- How to Fund a Self Directed IRA
- Making Self Directed IRA Real Estate Investments
- Self Directed IRA Investments – What You Should Know About IRA Permitted Investments
- Understanding Funding a Self Directed IRA
- How to Find a Self Directed IRA Custodian
- Self Directed IRAs and Passive Income
- Creating Self Directed IRA Passive Income
- Tips on Setting Up a Self Directed IRA
- Where To Invest Self Directed IRA!
Categories
- Commercial Real Estate
- Creative Finance
- Finance
- Foreclosures
- General Real Estate Articles
- Joint Ventures
- Property Buying
- Real Estate Books
- Rehabbing
- Rental Property
- Renting & Real Estate
- Self Directed IRAs
- Wholesaling
Favorite Sites
Twitter: leslie_seo
- Updated my blog with Christmas Gift Ideas - Christmas Gifts to Make http://tinyurl.com/yfo2enk
- Updated my blog with How To Make The Fresh Coffee Possible http://tinyurl.com/yjg66g3
- Updated my blog with Creative Christmas Gift Ideas http://tinyurl.com/yhfwc7f
- Updated my blog with What Real Estate Agents Ought to Know About Home Staging http://tinyurl.com/yzs6y3a
- Just Updated my blog with A Few Suggestions To Make Moving You're your Residence Hall Easier http://tinyurl.com/yhdckjh
- Updated my blog with Home Staging - Expenses Unveiled http://tinyurl.com/ykrzvjf
- Just Updated my blog with My Traffic Business-Affiliate Marketing Fundamental Principle http://tinyurl.com/yffrgvq
