Wholesaling Homes Vs Buy and Hold Investing

Super-storm hurricane Sandy has many real estate investors re-evaluating their investment strategies and realizing that they are drastically ill prepared to deal with disasters like this. So what can you do to limit risks and capitalize on opportunities like this?

The Rise and Fall of Buy & Hold Investing

Recent changes in the housing market and economy have made buy and hold real estate investing very popular, but that could be about to take a hit in the wake of hurricane Sandy.

Buy and hold investing and building a portfolio of rental homes certainly has its attraction and advantages. Why not benefit from both regular income and long term wealth building?

It is no doubt, however, that giant private equity firms have been taught a powerful lesson by this recent hurricane. Any amount of time an investment property is held means risk and liability. Imagine having 100 rental homes wiped out by one hurricane!

What would that do to your income and wealth?

Even if properties are only winged and rendered unlivable or leaky or tenants’ finances are hit and can’t pay rent for months, it can quickly become a financial nightmare, if not resulting in bankruptcy.

Wholesaling Benefits Highlighted in the Wake of the Storm

This recent monster storm has definitely highlighted many of the benefits that those focused on wholesaling homes enjoy.

This includes:

• No risk of property damage
• No risk of dead weight properties which can’t be sold
• No negative cash flow
• No loss of ROI
• No hassles of dealing with insurance companies
• No risk of losing your entire net worth overnight
• No lawsuits from tenants
• Not running out of cash for rehabbing

Capitalizing on the ‘Perfect Storm’

Those wholesaling homes are perfectly positioned to cash in on the aftermath of the ‘perfect storm,’ as Sandy was dubbed by the media.

Hundreds of thousands of homes were damaged or destroyed, leaving many looking for new homes, who can be served directly by wholesalers or for which landlords will want more units to offer tenants. Many of these individuals may even be flush with cash soon, providing their insurance companies pay out.

Homeowners will also be far more eager to sell and willing to cut deals. Even if their homes only received minor damage, they may not have the cash to patch them up and stop further damage, especially during the cold wet months ahead. Even those who just had to evacuate and shell out big money to stay somewhere else until power was restored may no longer be able to carry their mortgages and will need to sell.

Then there are buy and hold investors who need new sources of wholesale properties because their wholesalers weren’t prepared for the storm and they need to keep their businesses up and running through the ensuing challenges.

This is a great time for wholesaling homes in the northeast, but investors still need to make sure they are prepared for future storms and other potential disasters too.