I’ve heard from many of my investors that one reason they are interested in investing is to wholesale their way to nice chunks of cash. And while we are also in this business to help solve people’s problems – yes, there are also sweet profits that come with these deals.
But, what I don’t hear a lot about, especially from new investors, is talk how to build long-term wealth and stability.
But I get it, I mean, when I first started in real estate, I really did not care about cash flow. Yeap, yours truly, Lorena, was young and uneducated. I only cared about creating a spread between what I could get a property under contract for and what I could quickly flip to another buyer for. I was thinking only about the profit from each wholesale deal- quick payouts and the ability to invest with no money or credit.
So, I thought I had this thing under control and wholesale the first 2 years of my investing career and then took some time-off to live life, you know, kids, home, travel, vacations. After all, I was averaging $30K a month at the time and, of course, if needed extra money, I could simply wholesale another property super fast.
Woops. HUGE mistake.
As you probably remember, the market crashed and I couldn’t do a single deal. I was using all my savings with my current expenses and nothing coming back to replenish the bank account – Have you ever felt like this before? Then it dawned on me – I wasn’t “investing” – I really only had a full-time J.O.B : wholesaling. I was out of job, no money coming in and my savings were now gone.
I freaked out – but then…..it dawn on me!!!!!! I need it Cash flow. Here, repeat after me CASH FLOW.
From there on, I changed my philosophy on investing and began focusing 80% of my time on creating CASH FLOW through long-term buy & holds (rentals) that I could pay cash or I could pay them off in 7 years or less. I just needed five houses in five years so I could live off my rents. My goal was to be financially independent, not to depend on a JOB. I finally understood the term wealth: the numbers of day I could survive without having to go back to work or have a JOB. And that is what “investing” is all about.
What was my plan? Two easy steps: always present 2 offers to motivated sellers – Cash or Terms. And that became my slogan and mission thru my real estate investing CASH or TERMS.
CASH: This is my maximum allowable offer (MAO), which is typically calculated by taking the current market value of the property and subtracting out estimated repairs. Typically, it is 70%. The seller needs to be really motivated to sell and the property need to be in such a condition that I could improve the value and have enough profit.
TERMS: I would negotiate monthly payment at a 0% interest rate, but pay the seller’s asking price (sometimes, even a little above the seller’s asking price). I would have negotiated with the seller to stretch out the length of the agreement to 5 years giving me plenty of time to decide what I wanted to do with the property. Keep in mind this only works if the seller has decent financing in place or if the property is free and clear. I am not assuming the loan, I am simply paying the lender on behalf of the seller.
It is all about the numbers. Cash flow is King
If you did several deals like this, you would create enough cashflow to stop working altogether and live off the passive income the properties produced.
That is how you get RICH by investing in real estate. These strategies create cash flow which produces WEALTH – not just a paycheck.
So, your turn- Go find motivated sellers who have equity and decent financing – and give them 2 choices to buy their property CASH or TERMS.
If you read this article all the way and want to understand more about these strategies, call me for a complementary strategy call and mention this Blog “How do you create cash flow?
For more information about how I can help you as a real estate investor go to: www.TheWomenInvestmentgroup.com
Speaker, Motivator, Real Estate Investor
Empowering Strategic Investment