Real Estate Virtual Wholesaling: A Modern Way to Expand your Portfolio
Welcome, everybody, this is episode 93, and today, I am speaking with Justin Yurong. He is based in Las Vegas. He flips and sells homes in Fresno. He bought his first rental at 21 years old. Today he is going to share with us his real estate journey.
Who is Justin Yurong, and how did he get into the real estate investment world?
I am 24 years old, and I live in Las Vegas. I got into real estate 3 years ago when I was just 21. I was just learning as much as I could.
It was my senior year in college, and I learned as much as possible. I could podcast every day during classes or work time learning about. I got motivated and believed that all this was doable by seeing others do it.
I was saving alot since I was working on many minimum wages jobs. I saved every penny and got to a point where all my money was in the stock market. And I was like; I think I can buy a house with this. Therefore, that's when I made my first leap.
You can imagine being 20, 21 years old and having your first rental. From the first purchase, I got hooked. I was like, this is a family paying me money to have rentals. It showed me how powerful it was. And that was the start of my journey.
I make alot of content about what I do on social media and youtube.
How to find your first real estate deals
My first deal was through a realtor. I was searching on a website called BiggerPockets. I got connected and started asking questions like I need help buying a home, and I don't know how to do it.
A Fresno realtor reached out to me and asked for a coffee meeting. I then connected with him, looking for deals with him all the time.
There are other techniques that you can also use if you are thinking of making your first real estate deals, and they include:
Online real estate marketplace
There are several online marketplaces like BiggerPockets (the one that I used), LoopNet, CREXi, and niche-specific sites like MobileHomeParkStore.com. Therefore, get out there and do some research. Find some local marketplaces where you may seek bargains.
The dollar drive
Get in your car and drive around looking for empty houses. Make a note of the address when you find something. When you're out driving for a few hours, see if you can compile a list of 10, 20, 30, or 40 homes. Then go home and look up the address to see who owns the property and write a letter to them.
Find deals from MLS
The Multiple Listing Service (MLS) is how all real estate agents record their transactions. Yes, the market is fierce right now, but you may still discover good offers on the MLS with the appropriate setup.
Set up some automatic email notifications with your real estate agent that match your parameters, for example. As a result, you'll be the first to hear about such bargains.
Real estate clubs
Are you aware that every week, people gather in practically every city around the country? Find a real estate club in your neighborhood. The Real Estate Events & Happenings tab on BiggerPockets is a wonderful place to look for these people.
Find a club and start mingling with the members. Make connections, get to know people, and tell them what you're looking for. Real estate clubs can be an excellent source of bargains.
How to fund your first real estate deals
However, getting started in real estate investing does not require a large sum of money. Smart investors frequently purchase properties with no money down and finance the purchase (sometimes more) while still making a fair profit. (In fact, the more you leverage — borrow — the higher your return on equity, trying to make another no plan attractive to wise buyers.)
In fact, with only a few simple spending adjustments, you can construct a million-dollar investment on your own in less than a year, with no cash or credit.
Above are options for financing your first purchase.
Purchase a home with an FHA loan
When considering your first real estate investment, getting a mortgage guaranteed by the Federal Housing Administration is a good idea. With just a 3.5 percent down payment, you may purchase a duplex property, live in one apartment, and rent out the others.
Traditional mortgages take roughly 60 days to close, even with record-low interest rates, which is a good amount of time when you're negotiating a transaction. Despite the relatively higher interest, hard money loans allow you to act promptly if you have a terrific bargain on your hands.
Mortgage Lending by Non-Bank Financial Institutions
With traditional banks struggling to qualify for mortgages, many nonbank lenders steal market share. Their market share might increase by 33% annually to $150 billion by 2025.
Unlike conventional banks, which take a long time to review income, online lenders process applications in as little as 20 minutes. They close the acquisition in two weeks, compared to 45-60 days with banks, and can occasionally fund up to 100% of the purchase price.
The Asset-Based Mortgage: "Buy 2 Rent"
Asset-based mortgages are another option when hard money and nonbank lenders aren't your cups of tea. "Buy 2 Rent," a financing program from Blackstone-owned B2R Finance, focuses primarily on the property's rental income.
"Buy 2 Rent," a financing program from Blackstone-owned B2R Finance, focuses primarily on the property's rental income.
Family and friends funds
Unlike traditional banks, it does not consider personal income. This is a major benefit if you don't have a steady source of income (although a 660 FICO score and other underwriting criteria are required).
What do Warren Buffett and Larry Silverstein, the creator of the World Trade Center, have in common? After using family and friends to fund their initial deals, they became billionaires.
The benefit of this method is that it does not necessitate any initial investment. By taking the FHA approach (Step 1), a group of ten family members can buy a multifamily home for less than $1,000.
Trust deed investing
You're obtaining a mortgage from private lenders who would operate as a bank and handing them a deed of trust as security on the property. This may be a continuation of the friends-and-family strategy.
Trust deed investing worked out for me when I started my real estate journey. I put 15% down, and at that time, because I was in college, I still didn't have a full-time job, so my sister cosigned for me. She didn't put any money, but she put her name. She trusted me enough, and even if I didn't have enough credit, I made my journey by building partnerships with other people who trust you."
Transitioning to flipping and wholesaling
Technology has drastically altered the real estate sector during the last decade. According to the National Association of REALTORS®, 52 percent of house purchasers found their dream home on the internet in 2019. This is exactly where I started as a real estate investor. However, I transitioned to flipping and virtual wholesaling. It's, therefore, no surprise that more people than ever before are working from home.
How about if we told you about a growing group of real estate investors who are making huge sums of money by completing deals remotely all over the country in locations they've never been before, buying homes they've never seen, and making $10,000-$50,0000, and even $200,000 per deal?
Virtual wholesaling is a lucrative real estate investing sector that has recently received much attention. So, if you're hunkering down due to the latest global epidemic or want to collect huge checks from the comfort of your own home, virtual wholesaling could be the perfect business model for you.
My transition to Los Vegas was the genesis of my flipping and virtual wholesaling business. I went on my own to invest in my own business. I learned much by myself, but my breakthrough came when I met this mentor who trusted me and made me who I am today. I learned how to find deals, negotiate, close, and manage escrows through him.
In 6 months, I managed to do 5 deals. This was the biggest learning experience I have ever done in 6 months. After six months of getting the experience, I was confident enough to start working independently. I first tried this in Fresno for about a year before moving to Los Vegas.
I didn't know what I was doing, and I didn't get any deal for a year. Vegas was when my first deal was locked up for a flip, and it was virtual. So I was like, there is another thing, I don't know how to do this virtually. But that was the transition. There was alot of learning on my own, and I didn't really know what to focus on at the beginning until I surrounded myself with other people who knew what they were doing. So I learned the following when it comes to virtual wholesaling:
What is virtual wholesaling?
Virtual wholesaling is the same notion as traditional wholesale in real estate transactions. However, the wholesaler's participation is not based on their actual presence. Digital technology such as the web, email, digital signatures, smartphones, and fax are the tools you need to make it possible.
Due to the obvious location flexibility virtual wholesaling provides, entrepreneurs can operate in multiple markets regardless of their proximity. Basically, I am stating that virtual wholesalers may flip houses in any real estate market. I learned that this is irrespective of your location on the planet, without ever seeing the properties.
To grasp the concept of virtual wholesaling, I had first to grasp the concept of real estate wholesaling.
What is wholesaling real estate?
The term "wholesale fee" refers to a form of the buying process in which the seller sells an equitable stake in a property to another investor for a profit.
A buy and sale agreement between the wholesaler and a motivated seller is frequently used to establish this equitable interest. It's allotted to the eventual buyer before the wholesaler ever buys the property! This is known as wholesaling via contract assignment.
Similarly, the wholesaler could buy the property with short-term operational financing or private funds. They instantly end up selling it to another client for a profit after closure and wholesaling through double closing, often known as simultaneous closing.
At first, I asked myself why I would pay a wholesaler to locate properties for me without making any improvements?
To answer this, I realized that active real estate entrepreneurs are continually on the lookout for prospective fix-and-flips, rental properties, and development prospects. Therefore, real estate wholesalers can provide a plethora of such possibilities.
As the industry's "deal suppliers," wholesalers play a significant role in the real estate investment value chain. Real estate wholesaling pays a fee to the deal finder for connecting a willing and able real estate investor with a lucrative opportunity.
What Is Virtual Wholesaling and How Does It Work?
Virtual wholesaling is quite similar to traditional real estate wholesaling. I deal with some of the most efficient and successful wholesale firms in the country, yet they're almost entirely virtual!
It's not like all real estate wholesalers are set up to work in a virtual environment. The systems, processes, and methods used in one's real estate firm determine how virtual wholesaling operates.
Consider a typical real estate transaction to understand better how virtual wholesaling works. Is any of the parties' actual attendance necessary at any point during the home-buying process? Typically, at the following locations: Real Estate Agents to Meet, Negotiating With Motivated Sellers, Initial Property Inspections, Inspections of the Physical Property, Document Signatures, Repair Cost Estimation, Walkthroughs at the End and Getting Access to the Keys.
Despite popular assumptions, all tasks mentioned above can be done without the buyer's actual presence.
Most traditional buyers and sellers, on the other hand, would not consummate a real estate transaction without first seeing the property. The virtual wholesaling procedure is designated for investors who want to take the emotion out of buying houses, so it's mostly a mindset shift.
The biggest lesson that I learned from my mentor was that it gave me a proof of concept. Because I was able to run both flip and wholesale deals, I like to learn everything from start to finish. I find it, negotiate, manage the escrow and find the end of every deal. The big thing I learned is that it is possible. I realized that you could make real estate a full-time thing if you set your mind to do it.
The Dos and the don'ts of real estate flipping
There isn't a full handbook for house flipping training dos and don'ts, but there are a few excellent behaviors and rules of thumb that you should get used to.
What are the Dos
To be a successful house flipper, you'll need to be able to:
- Concentrate your efforts on the most profitable markets.
- Have a variety of good lead sources.
- Understand housing valuation and put it to good use. When you spot a good deal, act swiftly.
- Calculate your profit margins for each home based on your costs and finance.
- Ensure that your contractors and support employees are well-coordinated.
- Know how to invest in real estate in a variety of ways.
In my opinion, finding leads, understanding valuation, and financial preparation are the three most important aspects of the list above. One of the most effective houses flipping training do's, in my opinion, is to get good at finding leads. You can always invest more into expanding the top of your funnel until you have more high-quality leads than you can properly evaluate and turn into a contract.
What are the Don'ts
A list of do's and don'ts for house flipping training would be incomplete without a list of don'ts.
There are a few habits that, in my opinion, will hurt you when you're flipping houses, including:
- Before moving forward with a deal, not calculating the figures
- Putting all of your (capital) eggs in a single basket (house to renovate and flip)
- Making significant business decisions based purely on your gut instincts or completely disregarding your gut instincts
- Taking too long to act on a once-in-a-lifetime opportunity
- Using external finance that is readily available but has terrible terms
- When your profit margin is lower than planned, you should give up.
From my experience, I learned that while employing others may result in a lower profit margin, it will save you time and money in the long term. You can finish the rehab, put the house on the market, and sell it far faster if you engage entire teams of subcontractors and contractors to work on it. You could wish to hire an interior designer in addition to subcontractors (especially for higher-end properties). Finally, as previously indicated, you'll want to select a reputable real estate agent. The real estate agent may assist you in finding and selling your home and can be a valuable resource throughout the process.
Flipping houses strategies that will help you find your deals
The most cost-effective strategy to sell your real estate investing services is through networking. Attend local networking events such as Chamber of Commerce and Realtor activities to meet people who can provide you with leads on foreclosures, short sales, and other distressed properties. Attend trade exhibitions in adjacent industries to meet mortgage and real estate specialists who can help you close deals faster. Join local real estate investing groups to meet other investors with whom you can perhaps flip property too soon.
Because you're not living in the house you're flipping, determining the ideal location for a property to flip is usually centered on choosing a home in an area where you can make the most money. Finding a neighborhood in a hot market — or soon-to-be hot market — is critical in this regard. To do so, look for neighborhoods with many buyer-friendly characteristics, such as parks, entertainment districts, shopping, and so on. Check out local schools to see how well they do, as high-performing schools can be a selling point for families. Some potential homebuyers are also attracted by public transit and low crime rates.
Working with real estate agents
Some first-time real estate investors want to do everything themselves when flipping houses—using a verified real estate professional who may have access to homes that first-time flippers would not otherwise locate can lead to better deals being identified. Real estate brokers have access to the Multiple Listing Service (MLS) (multiple listing service). Almost every home for sale is listed on the Multiple Listing Service (MLS), and homes sell these days quickly. A reputable real estate agent will keep an eye out for new listings and will typically notify you when one becomes available. The agent is there to assist you, and they may be able to offer advice on how to get a better bargain.