The Strategy

So I mentioned in the last post that our strategy to start investing in real estate is going to be doing wholesale deals and sandwich lease options, but not everyone knows what that means so let me explain.

A wholesale deal is basically one where you find a property and negotiate with the seller to get an agreed upon price far below market value. Then you enter into a Purchase Agreement at that price - which is called putting the property "under contract." Once you have the property under contract, you have the right to sell that contract to someone else. The key point is that you have to make sure that you put "and/or assigns" after your name in the signature line, and make sure there is no part of the Agreement that disallows assignment of the contract in order to do this. So all you have to do is find someone else who wants to buy the property for a little more than you bought it for, and assign the purchase agreement to them for a fee. They will then close on the purchase agreement and pay you a fee of whatever you agreed on.
This obviously doesn't require any credit, and it doesn't require any money either if you can get the property under contract without an earnest deposit. The most it will cost you is the earnest deposit amount, and as long as you write the contract correctly (meaning that you include a clause that provides for a refund of your earnest deposit if the contract is not fulfilled), you'll get it back if you can't find someone to assign the contract to and back out of the agreement. And it's risk free to you as long as you put in a clause that allows you to get out of the agreement if you want to (worded more professionally of course).

So what about a sandwich lease option? Well this is basically a lease option that you enter into with the seller, and then a lease option that you offer to another person on the same property. So there are two lease options on the same property with you in the middle (hence the "sandwich" part). The key is to make sure that you are getting more from the person you offer the lease option to, than you have to pay to the seller who offered you their lease option. The details of this type of deal are extensive, so I'm not going to go over them here. But if you want to learn more about these, check out Wendy Patton's website - she's got some great information, including a free ebook all about them. But the bottom line is that this strategy doesn't require any money or credit either.

Now if you understand what was written above, that's all well and good. But understanding isn't enough, you have to really know how to do these strategies from start to finish. That's where a mentor (someone who's already done it and can help guide you through it), becomes invaluable! So if you want to try it, it would be best if you could find someone who's already done this and ask them for help! You'll hear me talk about getting a mentor often because I really think it's easily the best way to get started in real estate!!!