Follow the money & commercial real estate technology. Where is the money, the profits, in real estate and real estate investing? There are 3 basic categories, flipping, charging fees, and holding for at least a few years. Each has pros and cons, and each “depends” upon what tools, data, and commercial real estate technology you have access too. First let’s look at flipping.
House flipper & real estate investor rely on valuations to access risk
House Flipper Frenzy and how it all started and how the house flipper began. Throughout history, people were involved in bidding wars over homes in hot spots like Boston, Atlanta, New York, Denver, Vegas, Florida, and just about anywhere in California. A new breed of real estate investor known as the house-flipper could purchase a house, invest a few thousand dollars to spruce the place up, then turn around and flip-it before the first payment was due making thousands of dollars of profit from each sale. But what are the hard facts and numbers today?
Things to look at include: Time and cost to find the deal, financing costs, carrying costs, commissions on both sides of the transaction, income taxes, potential loss in value in case the local economic and local leading economic indicators change, and more.
Typically it takes 4-6 months to find a deal, according to Bigger Pockets, so for most investors this is a tough way to go. Even if you could contract a house at 80% of value, buy the time you paid all the other cost in the transaction, mentioned above, there is very little profits. So flipping, is not where the money is in real estate.
- Next, charging fees, and follow the money.
There are multiple ways fees are charged on every real estate traction. Just look at any HUD1, and there are so many additional fees, they are too numerous to count. The big ones are real estate commissions and title fees. So what does the average Realtor make? Is this where the money is? The answer varies, but the average Realtor makes $47,000/year, but the range varies from under $10,000/year to over $1,000,000/year depending upon what niche you are in, and the tools you use. The majority of Realtors are not successful, and only a few get to high incomes. So, the money in not in charging fees.
- Next, real estate investing, and follow the money.
Ass someone who has purchased over 40 properties, flipped, and made commissions, I know that this is where the money is. But let’s look at why, and what tools and commercial real estate technology is needed to assure profits. First lets look at some simple math.
House purchase price of $300,000, total down payment is 5% or $15,000, and to keep it simple we have neutral cash, and do not take the benefits of taxes into account. Let’s assume we are using an accurate real estate forecasts system, such as Growth Maps predictive models, and the forecast change is 10% each year for the next 36 months. What is the true capital gain at the end of 3-years, for the $25,000 invested? Do you know how to calculate this? It has always been surprising to me, that so few real estate professionals know this answer. If you deposited $15,000 in a bank, and 3 years later your account read $99,300, what is the ROI and gain? What if you bought 10 houses?
Follow the money….
- Flipping – sporadic income, hard to find the deals…so only do if you need to get started.
- Charge fees – feast or famine, have to get “lucky” to win, and currently no tools to access current or future risk.
- Holding real estate – the clear winner, and where wealth is created. But you have to get lucky, or have expert tools to win. And this is where Growth Maps matters, with access to future real estate prices and leading economic indicators.
For more information, watch our free demo video on our homepage, and download your FREE eBook titled: “What’s Next for Commercial Real Estate Technology: Leveraging Technology and Local Analytics to Grow Your Commercial Real Estate Business” at https://www.growth-maps.com/free-ebook/
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