“It is much easier to put existing resources to better use than to develop resources where they do not exist.”
Those words from George Soros, one of the world’s most successful investors, were directed at businesses. But they apply to individuals too. Ordinary individuals who work hard for their money.
How can you put your existing resources to work for you? What’s the best way to use money to make money? Is there a way to use other people’s money to make money for yourself?
Are you looking for a great investment opportunity in Australia’s real estate market? Read here to learn all about the benefits of wholesale real estate.
Wholesale real estate is the answer for those who are seasoned investors with an advanced strategy to long term property investing, in fact 42% of established investors use property investment to generate wealth. Twenty-six percent use it for extra income.
Is wholesale real estate the right investment for you?
To help you decide, here’s an overview of how it works and the benefits you can gain.
What Is Wholesale Real Estate?
Wholesale real estate is an investment mechanism. It makes investing in residential property more attainable for more people, although you will require a cash deposit between $150,000 to $250,000 to begin investing in Wholesale Real Estate.
You might also hear it called armchair development, wholesale property, volume discount real estate or bulk property investment. No matter the name, it brings small investors together to help housing developers obtain capital from a bank.
For investors, it’s a lower-risk option for investing in real estate that can be less emotional than buying a house yourself. For developers, it’s a reliable way to secure funds for building.
Why Is It Good for Investors?
Any time you invest your money, you are either making an equity or debt investment. The difference, in basic terms, lies in what you get in exchange for your money.
Debt investment gives you a fixed return.
Equity investment gives you a claim or partial ownership.
When you invest in an armchair development project, you become an equity partner. You get a share of the profit in exchange for your investment.
You and other investors join financial forces to bulk buy premium properties at below-market prices.
Investing in wholesale real estate gives you an opportunity to build capital and equity in a passive way. That is, the developer does all the heavy lifting. Your only involvement is supplying funds for building.
Better still? The bank can cover up to 100% of your investment, which, in essence, takes the form of a mortgage.
How It Works: Before the Build
Real estate wholesalers are the agents that connect developers with qualified investors. Most wholesalers create bulk investor groups of anywhere from 2-6 individuals. At Hyland, we pool the resources of six investors to form a Buyer Group.
The first step toward passive income from wholesale real estate is a registration process. At the end of that process, you sign an expression of interest document. You are then added to our roster of potential investors.
When we find an appropriate development project, we provide you with a feasibility study. You also receive a document validating the research conducted on the project area.
Reports include a variety of data and information such as relevant home sales figures, rental statistics, and capital growth predictions.
The report is critical to your ability to make an informed decision about the investment. It’s within your rights to choose not to proceed with an investment in the project.
If the project meets your investment criteria, you sign an investment contract. These contracts can be in your name or that of a trust or other legal entity for which you have signing authority.
At that point, you sit back in your armchair while the developer builds the project.
How It Works: After the Build
Most projects take 12-18 months to complete. Construction delays are possible, but developers have strong motivation to resolve them quickly.
Upon completion, the property is strata titled into the name designated on the contract. At the same time, the involved bank lends you the cost of the property, which is often 80% of market value. This leaves you with 20% equity in the property. All for the cost of mortgage interest.
That’s the first return on your investment.
Income and Wealth Accumulation
While it’s possible to cash out by selling your interest in the property, most people want greater return on their investment.
They do this by renting out the property. This provides a steady inflow of cash. Retirees as well as people still working enjoy this supplemental income.
Because you gain ownership of the property at a discount, market value rents are commonly higher than any mortgage payments. It’s critical to know the tax implications of renting out the property. Each investor should seek qualified tax consultation information from a Hyland specialist tax agent before deciding to be a landlord.
Another benefit of renting out the property is wealth accumulation. While someone else essentially pays the mortgage, the difference between what you owe and what the property is worth grows. Your equity grows.
If you want greater wealth accumulation? Add more bulk property investments to personal balance sheet.
If you need more reasons to explore investing in wholesale real estate, consider these other benefits.
You don’t need to an experienced investor. To pursue property investment on your own, you need to educate yourself on the risks and legalities. While you still need to know about the risks and legalities of armchair development, the wholesaler is there help and guide you to the right resources.
At Hyland, we work with our clients to give them information and confidence at every step of the process.
Are you ready to improve your financial future with extra income and accumulated wealth? Contact us today to explore how to reach your financial goals with wholesale real estate.