Wholesaling Houses - Choosing an Area to Invest In

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1) Common Misconceptions About Wholesaling Houses

As with any investment method, there are lots of myths and misconceptions about wholesaling houses. In this video, we set the record straight, and more likely than not, you will walk away more convinced than ever that wholesaling houses is a legitimate and profitable way to invest in real estate.

All right, hello, my name is Jack Bosch, and today we’re going to talk about flipping houses without using any of your money. And the first module is about choosing an area to invest in.


My name is Jack Bosch. I am the CEO and also obviously a co-founder and contributor to myOpenPath. My claim to fame is I have flipped over 3,800 pieces of real estate since the year 2002, and I am going to walk you over the next few modules through the process of how to flip houses and wholesale houses without using any of your own money. Let me clarify that, or classify that. If you have to sometimes use $100, that still qualifies as no money compared to the purchase price of the property which might be $100,000, or $500,000, or something like that, and the most you will ever need to get the deal done might be something like $100.


All right, so what you will learn today: in today’s session, you will learn, first of all, common misconceptions about real estate, about wholesaling, about how to do these deals, and also about which area you can choose. Number two: we’re gonna talk about understanding your end buyer. Number three: we’re gonna talk about that you shouldn’t be a pioneer in your industry, and instead, you should be looking for movements, basically where there is other people, too.


Number four: we’re going to talk about different markets, which kind of market you should be going for when wholesaling houses. And number five: we’re obviously diving into what is the best market, what is the ideal market. And number six: we are going to look at some test market strategies on a very high level, but since this is the introductory module for the entire wholesaling mastery course.


All right, so module number one: common misconceptions. Well, a common misconception in real estate is that values go up and down proportionately in all markets in the United States, and that is obviously not true. Real estate is extremely local. Even if we go look back into the years of 2008, 2009, and 2010, when the real estate market crashed almost all over, the common perception was that the real estate market was in the gutters all over the United States, and that was absolutely not true.


So it’s absolutely not true that the markets all over the United States go up and down at the same time. You might have little market bubbles that pop up in one market and then come down. You might have areas like California and Arizona went through the roof, and Florida and Nevada, too, in the 2006, 2007 run-up to that, and then absolutely got destroyed afterwards, where at the same time, markets like [inaudible 00:03:26] were completely stable and did not move more than 5% in that entire time period. That actually has an effect on what you should invest on in a market that you want a wholesale in, right? These are things you want to take into consideration.


Also, on top of it, not only across the United States, within one bigger market, there is pockets that go up and down all the time. Like, I live in Phoenix, Arizona, and there is a central corridor just north of Downtown that is completely going nutty right now, with everything being bought up. It’s like all 1950s build kind of stuff, and these houses are not very big; their apartment complex are kind of outdated. Everything is being bought up. Everything is being remodeled. Everything is being put into good shape again. The funky Mono restaurants are moving in. So in this market, prices are going through the roof.


Yet, in other parts of the market, prices are stable or perhaps even slightly declining. In other segments of the market, the market is a little slower and so on and so forth. So it’s all very, very, very local, even within one market. So you gotta keep that in mind.


Number two: if an area is going up in value, then it must be a great area to invest in. Well, generally speaking that is true, because when an area goes up in value, then it’s always a good thing, but it all depends on your strategy. So, for example, if you are…and right now, in this program, we’re talking about wholesaling, but let’s expand for a second our horizon. If you wanna be a cash flow investor, then a market, once it hits a certain price level, is no longer a good market for you to invest for cash flow, like, for example, the San Francisco Bay Area.


I mean, you might get $3000, $4000, $5000 in rent on a condo in Downtown San Francisco, but that condo costs a million and a half. So your mortgage on that condo is probably much higher than the rent you receive, but the market is going up. So that, to me, is not investing, that, to me, is speculating.


We’re gonna have a course probably in myOpenPath some time down the road where we talk about speculation versus investing, but at this point right now, I just wanna point out that that is an investment strategy, but that investment strategy requires deep pockets, because every single month you’re losing money, and you are hoping for the appreciation to be more than making up the loss in cash that you have every month. And certainly that works, but it only works until it doesn’t any more.


So, therefore, I am staying away from these kind of techniques, and instead, I am wanting to make sure that I am making money right now. And the way to make money right now is that you buy and sell very, very quickly, ideally without even using any of your money, and ideally even on top of it in a way that you still leave money in for the next guy, so that the sale happens literally the moment, the day you have the property and the contract, you also get to sell that property. So literally, it’s a very, very quick transaction that might be as quickly done as 7 to 10 days. You both bought and sold the property without using any of your money.


So number three also is if an area is going down or has a stagnating value, then it must be a bad area to invest in. That’s not necessarily true at all either, because, again, it depends on the strategy. When the market was declining steeply in 2008, in 2009, there were still great deals to be had in those markets, just the strategy you actually execute is different. We’re gonna talk about that in just one second.


And particularly in a stagnating market, it’s a great market to invest. And also, a market that has already steeply declined is an amazing market to invest, because now all of a sudden cash flow works as well as usually it’s a distressed market in that case, and in a distressed market is some of the best deals that can be found in such a market. So, again, these are misconceptions that exist about real estate.


And number four, the misconception there is that you should only invest in your hometown market. That is not true either. Now, obviously, it, again, depends on your strategy. Now, being in your hometown market has some advantages, and if you live in a big market where there is plenty of houses to go around, then there is no reason for you to move into a different market initially, because you’ve got everything you need right in your backyard, and you perhaps already have some of the relationships in place, or you can build them easily, and you can if necessary jump into a car, drive down to the property, and go look at it, but that doesn’t mean that you have to be in that market.


What it also doesn’t mean is that you are doomed in the real estate space if you live in a little itty-bitty town of 250 people an hour away from the next bigger city. You are not, because, as I will show you through this program, we are going to talk partly about virtual wholesaling, where you can basically flip deals all over the country without actually having ever seen the house, without ever having to meet the seller 101, I mean, you meet them over the phone, but not in person, and without ever literally setting foot into that state. So we are going to talk about that, too.


And number five: competition. That competition and other investors in your market is a bad thing for business. That’s a misconception. That’s not necessarily true. As a matter of fact, some competition is actually good, and usually, if there’s absolutely no competition in your market, that’s actually a very, very big alarm signal and a very, very big alarm flag that you want to look at.


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