Stocks and gold as investments have specific documented histories. The companies that publish specific stock and bullion prices are industries unto themselves. Trillions of dollars are invested in stocks and gold. Why would anyone compare wholesaling real estate to investing in stocks or gold?
The main comparisons of these investment vehicles fall into two categories. Let’s start by looking at the results of a long-term investment in each of them.
Cost and Risks of Investing in Each Investment: Gold – As a general rule, 100% of the amount purchased is required to buy gold, unless you use leverage by buying options (risk of loss 100%) or by borrowing money. The risk of investing in gold is that it is a commodity and wild price swings can ensue, causing more than an initial investment if the purchase were to effect the sink. Stocks – Generally 100% of the purchase price is required to buy stocks, unless margin is used, then 50% is required. The risk is practically 100% of the investment because many stocks have literally dissolved in value. In case of margin, the loss could be greater than the initial investment.
- Real Estate Wholesale – If done correctly, the amount of money needed to contract and sell a $100,000 property could be anywhere from $10 to $1,000. The maximum risk is the wholesale down payment amount. How much money can you make in each investment with a very small investment of $1,000 and no credit available?
- Gold – To invest $1,000 in gold, you would probably go to a coin fair or jewelry store and buy less than an ounce of gold coins. If the price of gold doubled, you would have just under $2,000 at the time of the sale due to the spread between the buy price and the sell price. Profit = East. $1,000, but the question is “what to do with the money now?”
- Stocks – It is difficult to invest this small amount of money, but suppose you bought an “odd lot” or less than 100 shares of a specific stock. I won’t discuss penny stocks because of their patchy investment history at best. So if the stock doubled and you made a profit of $1,000; again, you would be faced with the dilemma of which stock to choose next.
- Wholesale real estate – In this case, your $1,000 would be an escrow on one house or up to 10 houses at $100 each. Our historical record in wholesaling properties is a net income of just over $16,000 per property sold.
If they are not sold before the end of our inspection period, we return them to the seller so that there is no risk of losing the $1000 or even the $100. If an investor only closed four deals ($16,000 x 4) per year using a $100 deposit, he would have a return on his investment of ($64,000/$100) x 100 = a return on his 64,000% silver. Again, the maximum risk as a buyer is your escrow or earnest money deposit (EDM).
These wholesale results are not typical and can be extremely low in some parts of the country and high in others. The key to investing is to diversify and limit your risk of loss to well below the total investment amount. Wholesale real estate offers the maximum leverage of any investment while having the lowest risk aversion at the same time. If you’re not already wholesale, consider its possibilities!