What can every real estate wholesaler learn from billionaire investor Sam Zell?
Sam Zell is head of America’s largest apartment REIT, and worth around $5B. He’s been throw multiple real estate cycles, and is famous for compiling a $3B portfolio of distressed property from banks, with a down payment of just $1 on some of them. He’s also known for flipping a whole portfolio to Blackstone for $39B just before the biggest dip in the last down turn. Needless to say; he knows a thing or two about flipping properties, and winning no matter what is happening out there. So what can he teach us about wholesaling today?
1. It’s All About Supply and Demand
Winning in business, and especially the real estate business is all about supply and demand. There is still significant supply of distressed properties to be tapped out there. Without wholesalers other investors and retail buyers don’t have the supply they need.
2. Look for Markets with Pent-Up Demand
If you aren’t getting the traction you need on the flip side look for markets where there is already great demand for wholesale properties. Where are investors searching, but are coming up short on inventory? Zell has found this in a variety of places, and even has one office which is open 24 hours a day, 7 days a week, which he says is full of buyers around the clock.
3. Serve Others by Taking Bad Assets off their Hands
Some aspiring wholesalers are conflicted by the prospect of picking up homes on the cheap from desperate sellers. If you are transparent, and are making fair offers given the dynamics of the situation you are providing a valuable and desperately needed service. Don’t underestimate your value and the importance of what you do. Do good business, and operate from a position of confidence.
4. Understand the Downside
Sam Zell says that what continues to cause investors to fail and get crushed is that they never see the downside coming. They always become over confident and optimistic about the market and begin to believe “it’s different this time.” Zell has been through enough rotations (profitably) to tell you that it isn’t different. Trying to stop the turning of economic cycles is almost as challenging as stopping the earth from rotating. The good news is that wholesalers can profit during all cycles – if they buy right. That is providing they bid on properties well and build in enough profit to cover the unexpected.
5. Leverage is Great
Zell and his companies juggle billions of dollars in financing. For Zell it is all about getting the right mental perspective on this. He says he sleeps well owing billions of dollars. That works when you have structured deals well and are confident in your position and success.
6. Liquidity is King
Leverage is so powerful in part because it enables investors to stay liquid. By using transactional funding real estate wholesalers can finance 100% of their deals, while keeping their cash on hand to stay flexible and agile.
7. Influence Your Own Destiny
Like Warren Buffett, Sam Zell also takes big positions in the investments he tackles. Whether it is a controlling interest in a business or partnership, having a sizable audience that will be your recommendations without thinking twice, or controlling enough local real estate that you can control the values – there are numerous ways to influence your own destiny. Ask how you can more strategically make acquisitions, and build a following, so that you can control the market and your own outcomes?
Authored by Best Transaction Funding BestTransactionFunding.com is the leading source of transactional funding and hard money loans for real estate wholesalers in the US, where 100% financing, and saying “Yes” is what we love doing all day long.
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