Alternatives to Flipping Real Estate
More and more people are realizing that now might be the perfect time to start getting into the business of flipping real estate - taking older or rundown properties that won't sell and fixing them up so they can be effectively listed and sold. With buyers being even more picky about the properties that they're interested in, sellers that need to sell fast and have a property that needs some work might be more inclined to accept a lower, all cash offer for their property - even if it's less than what they'd like to sell for. This presents a golden opportunity if you're interested in flipping real estate.
Of course getting into flipping real estate means that you'll be taking on some risk too. What if the repair costs are more than you expect? What if it takes longer to repair than you estimated? What if the property and doesn't sell for the price you thought it would? What if it takes too long to sell? Because of these concerns, many potential real estate entrepreneurs consider one of the many alternatives to flipping real estate as a way to get started while minimizing their risk. These can be a great way to simply get their feet wet and try the business out or as alternative strategies for building their real estate business.
Scouting Out Potential Deal as a Real Estate Birddog
One of the best ways to get started as a real estate entrepreneur is by becoming a birddog for other investors. Quite simply, a bird dog is someone that finds potentially good deals for other investors, acting as their eyes and ears in the field.
When they scope out a good property, they let the investor know about it and if it turns out to be a good deal, then the birddog earns a fee. The amount earned depends on the market that you are in, how good a deal the property is, and how much information you're able to provide to the investor. But it's not uncommon to earn fees around $1000 or more for a lead on a good property.
The reason why bird dogging is such an effective strategy for someone starting out is that it requires nearly zero cost other than your time. This is also an especially good option if you're in a job that requires you to be out driving around or walking around neighborhoods as part of your normal duties. But even office workers can vary their route to work, scope out neighborhoods during lunch, or spend a few hours on the weekends looking for potential deals. That makes bird dogging a great, part-time business that anyone can get started with.
Wholesaling
Wholesaling is one step up from being a bird dog but carries with it a bit of additional risk. While bird dogging is simply finding the property and letting another investor know about it, wholesaling is actually going one step further and getting the property under contract. Once the property is under contract, and as long as the contract is properly worded, that contract can be assigned (or sold) to another investor for reasonable fee. Again, the actual amount will vary depending on the property, the overall numbers and what market you're in, but it's quite common in some markets to have wholesale fees of $10,000, $20,000 or more.
Why would another investor pay so much? Leverage! Many investors are simply too busy to find their own deals. It can be a lot of work to find a really good property and many investors rely on wholesalers (and bird dogs) to help bring them deals - and they reward them handsomely for doing so.
The downside to wholesaling is that you actually have a property under contract so you need to know that you have other investors waiting in the wings that are serious buyers with the ability to close. This is why it's crucial as a wholesaler to network with other investors that would be interested in your services so you can get to know them prior to bringing them a property. It's also more important to remain in control of the deal so you can quickly correct course if your investor looks like they might not come through.
These are just two options that are attractive alternatives to actually flipping real estate and are the two best options for new real estate entrepreneurs with a limited budget and that have more time than money.
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