“How should I start investing in real estate?” The question varies slightly, but the core of it is always the same. And, for a new real estate investor, I think that’s an important question to ask.

Years ago, when I first started speaking at our local real estate group, I used to sit down with each person, usually over lunch, and try to determine their level of knowledge of the real estate markets, financing techniques, sales skills, and other critical areas. of knowledge before recommending how they should start investing in real estate.

After doing a dozen of these meetings, it occurred to me that the answer I gave was the same regardless of your experiences, skills, and knowledge.

Without fail, I encouraged them to start selling wholesale.

What is wholesale?

Wholesale is finding great real estate deals. Then, put the house under contract and find another investor or retail buyer to buy the contract to buy the house from you for a profit above what you agreed to pay the seller.

For example, you get a big discount and sell that discount to someone else for a fee.

Why wholesale?

I recommend wholesale to beginning real estate investors for a number of reasons.

First of all, it is a very low risk way to get involved in real estate investing. When you put a house under contract, you’re putting down as little as $10 and ideally no more than $100. Beyond your time and some marketing expenses, that’s all you should have invested in your business when you started.

Second, it’s an exceptionally great way to learn about your market. As a new investor, you might think that $10,000 below refinance appraised value is a good deal on a home. Your market is likely to teach you otherwise and you better learn that lesson by trying to get this type of deal approved with only $10 invested in a binding deposit instead of trying to sell this house while making mortgage, utility, taxes and insurance on a house you actually bought.

Third, you will meet other investors and be able to learn from them. As a wholesaler, you need to find out what other investors want and are looking for in the deals. Some will be helpful and will want to share information and time with you. Many will not; Don’t take it personally. There are good and bad people in this industry just like there are good and bad lawyers, doctors, and accountants.

Fourth, you can generate fast cash. A common challenge with many real estate investors is cash flow. Learning to sell wholesale is learning to make money fast. Master the ability to generate quick cash and you will have solved many problems.

And finally, you can find great buy and hold deals for your portfolio. Inevitably, as you search for wholesale deals, you’ll find exceptionally good properties to buy, rent and long-term hold for your own portfolio. I strongly suggest you do half a dozen or more wholesale deals before considering buying a long term rental. By then, you should have a much better idea of ​​what a really good deal is than you did on your first day as a real estate investor.