On this show, Patti Robertson explains the changes you go through regarding your exit strategies as a real estate investor. Depending on your financial situation and goals, your access to funds are a major factor in deciding what exit strategy is needed.
Mike: Welcome to the “We Buy Ugly Houses Show”, where real investors share real investing stories and lessons from the trenches, where our team buys thousands of investment properties each year. Now, let’s meet today’s host.
Patti: Welcome back to the “We Buy Ugly Houses Show”, this is Patti Robertson, your host for today. I’m a HomeVestors development agent in Hampton Roads. And what we’re going to talk about today is the life cycle of a real estate investor.
When you decide to become a real estate investor, you’ve got to decide on what bucket am I going to invest in? There’s lots of different ways to be a real estate investor. You can be a wholesaler, a rehabber or a landlord. Some people do all three. Typically, the gurus teach folks to start with wholesaling and a lot of people have the conception that you can start and become a wholesaler with no money out of pocket. And technically, you can. My personal opinion is that without the benefit of the HomeVestor’s franchise, wholesaling is by far the hardest of those three buckets, and we’ll go through why as we get through.
Within the HomeVestor’s model, all of the franchisees do different things. Personally, I do all three – wholesale, rehab and rent. And when we started, we started as wholesalers and rehabbers. We were trying to build cash. When I was a new franchisee, my goal was to create annual income and so that’s why we focused on rehabbing and wholesaling primarily.
And as I gained experience as a real estate investor, I started hanging out both at my local market with very experienced wealthy guys and also with HomeVestor franchisees around the country who, at the time, owned, you know, three to four and now people owned five and six hundred houses each. You know, they know quite a bit about real estate investing and I learned that if we wanted passive income, eventually we were going to have to hold property.
So we changed our focus in about 2008, about a year after we started the franchise, and focused on holding properties, and we set a goal for ourselves. We decided where we wanted to be at retirement and we wanted to have 50 houses free and clear. That was our goal. So as we were buying houses, primarily, we were holding them, although we were still wholesaling and flipping some along the way, but we shifted our strategy to hold. And you’ll find that most people do that, they start in one strategy and then as they achieve goals or their cash flow changes, when you’re tight on cash flow, quickly your strategy shifts to wholesaling or flipping to develop some cash.
Once you’ve met your goal, we just in the first quarter of this year, had purchased our 50th house. So they’re not, we haven’t met the free and clear part yet, so that’s what we’re working on next. So our strategy as a real estate investor has shifted back to a wholesale/rehab model so that we can develop cash and work on paying the debt down so that we can work on the second part of our goal, which is to get them all free and clear.
I know that as you have read about real estate investing, one of the biggest benefits that people always talk about are the tax write-offs and those come with rental houses. So you see some investors, some landlords who, you know, they keep buying, they never stop, and one of the reasons for that is that eventually, your depreciation goes away and you start getting socked with a lot of taxes. And so then you may shift again into another mode to save taxes and buying again so that you can build up some of those deductions.
So the most important thing for you as you get started is to figure out what your goals are and then figure out your short term and your long term goals and what strategy is going to help you meet those goals. Be careful that you don’t let other people influence that decision because there’s no right or wrong way to invest in real estate. The most important thing is to just go put a house under contract and then figure out what you’re going to do with that so that it fits with your strategy. Work your plan and adjust as your goals change and as the market shifts.
Thank you for watching the “We Buy Ugly Houses Show”, this is Patti Robertson, and we’ll see you next time.
Mike: Are you looking to get started in real estate investing or take your investing business to the next level? HomeVestors, the We Buy Ugly Houses folks, is the number one home buyer in America, where our franchisees purchase thousands of houses each year, many of which started with little to no experience. If you’d like to chat, please visit uglyopportunities.com/contact. Learn more from the We Buy Ugly Houses Show, an amazing HomeVestors team, by watching more shows at uglyopportunities.com/show or by finding us on iTunes or Stitcher Radio.