All right, things are going great! You're back from that weekend seminar where you handed over some valuable cash to learn how to make money in Real Estate. At this point in time you are highly motivated and ready to go make a fortune. And why shouldn't you be? After all that reputable character you just gave a bunch of money to has made MANY people very wealthy with the same tactics you're about to employ.
There are many different programs out there that range from mostly legit to complete junk. We'll focus more on the latter currently, because frankly that's the one most people wind up attempting. The ones that are complete junk give you a promise that if you go find deals they'll pay you a handsome finders fee. Up to $10,000 in some programs. That sounds awesome! And it makes total sense too, I mean after all these super smart guys can't be in all cities to watch all the great deals, so why not pay you to do some legwork?
Part of what you get for that valuable cash you gave them up front was a stack of completely useless forms. I see one is a contractors agreement. That almost makes this feel like you've accomplished something. OK, so now it's time to contact a Realtor and go find some homes. Maybe you contact me and I weed you out immediately as a rookie who was suckered. So next you contact an agent who's more hungry and less discriminating. All right, you head out to see some houses that are great deals! You ask your agent to send you five recent comps within one mile and you plug everything into your expensive calculator spreadsheet that was also included with the bunch of money you gave these guys.
Awesome! It works! This property fits all the criteria they're looking for. The comp value is high enough, the estimated repair work is good and you send it off to the powers that be in the company you're now an agent of. You get a reply that they're on board. They agree with your assessment that this property is going to work. You and the bank come to terms and now it's time to put down earnest money and head toward closing. OK, that company you're now "working" for asks you to foot the earnest money.
Hmmm... that's odd isn't it? You're supposed to be able to go make untold millions without any of your money at risk? Well maybe you can take a second mortgage (or pull it from your 401k) for the $21,000 in earnest money and hope that if it falls apart that you can get it back. This is where many "purchasing managers" or "contractors" or "buy-side managers" (whatever you're now called is dependent on the program) pack up and go home. They realize they were lied to, and they completely lose faith.
They're the lucky ones. The ones who put the money up most often end up losing part or all of it. While I've only worked with several people who have been through programs like this all have never ended up buying a home. Other Realtors across the country and in this town have similar stories. The margins have to be so high that "real" local investors are snatching those puppies up and moving forward while you're still plugging things into your spreadsheet.
In conclusion dang near any real estate investor who does fix and flip transactions will pay you a finders fee. Typically not as much as you're promised by these guys, but it's certainly possible if the margin is large enough. Find a legit investor in your area or one nearby who's wanting to branch out and go find them deals. They don't charge you anything for your help and will actually pay you in the end. All around, this is the only legit way to go.
Part two will focus on Wholesaling