Hey, Mike Wolf here, coming to you from Phoenix, Arizona. Today, I happen to be at a friend’s house where I have access to all kinds of fancy high tech equipment at my beck and call, and it’s not often that I get these luxuries while I’m on the roads. I’m very excited to answer somebody’s question that came in this morning.
I’m going to read it here because it’s quite a detailed question, “I was wondering if I could ask you a question about something that seems like it would make a lot of money but I just started school to get my realtors license and really don’t know anything about real estate.”
I’m just going to stop right there and say; first of all, getting your realtor license is not a preparation for being a real estate investor. They’re two unrelated fields, and I’m speaking from experience because I used to be a realtor way back in a previous life. I can tell you that when you go to real estate training to be a realtor, they’re basically teaching you what’s important to protect the public. They’re going to teach you how to do the contracts properly, the legalities and other stuff like that. They don’t teach you anything that has to do with real estate investing.
Getting your real estate license is not going to help you with this but I’m happy to help you with this. “I want to invest but struggle with starting off.” That’s very common. “I saw your videos on tax liens but I can’t do that without money upfront. This property that I found is about 2,000 square feet on an 8,000 square foot lot; hopefully this can make me that money.” Well, I’m wondering, once again, if you can’t do tax liens or deeds, they require probably the least amount of money of any strategy that I’m aware of, I don’t think you can do this 2,000 square foot house on an 8,000 square foot lot which requires a lot of money.
Anyway, talks about how the owner’s paying it off. That’s not really relevant, but the idea is just to tear down the ageing three bedrooms, two studio homes and build a modern four unit quadplex. And talks about tripling the return and what things should I know, Mike? There are a whole lot of things that you need to know. Number one is we talk about tripling your money. Well, if you don’t know much about real estate and you probably don’t know the values of this property, you probably don’t know what the value would be of that fourplex that you’re going to build.
There are lots of things you need to know. Firstly, what is it going to cost to get this property? Number two, if you got this property, where are you going to get a lot of moving parts to this — you’ve got to build teams, you’re going to have to raise some money, maybe you can get the owner to carry for you, that’s called a VTB, Vendor Take Back, you might be able to get the owner. If you don’t have a team, if you don’t have the experience, if you don’t have the money, you don’t have a lot of resources that you’re bringing to the table.
What you have is maybe a deal. We don’t even know that. First thing you’re going to do is figure out what would it cost to buy this property, then you are going to have to get some contractors in there to figure out what is going to cost to tear this thing down, build that fourplex that you’re talking about, then figure out what’s the market for that and also make sure that the zoning is okay. You can’t just go rip down a single family home, put up a multifamily property unless you have the proper zoning. You need to check if that’s even a possibility in that area. There are so many moving parts to this thing that if you screw up one of them, you’re toast.
I would start with a much more straightforward deal, maybe rehabbing a single family home and doing that from start to finish and then work your way up to something more complicated. And while you do that, you’re going to start building the resources. Finding somebody who can do a renovation for you on a single family home is a lot different than having somebody do a teardown and developing a large multifamily property.
Having said that, if this is genuinely a good deal, then I would do the due diligence on it then maybe what you want to do is wholesale it. Let somebody else do the deal. What that means is you’re going to sell the deal to somebody else. You’re going to put it under contract, find somebody else who’s got the know-how, experience etcetera and then make a profit by selling them the deal or you can get somebody to do a joint venture with you, say, “Hey, I’ve got the deal, if you’re willing to do the work, I’ll help do some of the work. Let me know what I need to do, I really want to learn,” and maybe let your partner make most of the money on it in exchange for getting an education.
That would make a lot of sense. I mentioned my tax deeds course which I do in Houston, where I’m going to teach you how to buy properties. One of my clients just picked up a property not long ago for a single family home for $7,200. It’s much easier to raise $7,200 than it is to get this probably 2,000 square foot house. I don’t know what market you’re in and it definitely is a lot cheaper than what you’re going to have to spend to build this property.
I hope that helps to answer your question, I wish you luck and anybody who has a question for me; feel free to email me at firstname.lastname@example.org. If you found this helpful, please subscribe to my YouTube channel, share this with anybody that you think might benefit from it, and I look forward to helping you in the future. Thanks a lot, I’m Mike Wolf.
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