In this interview Sharon Vornholt, a Louisville, KY real estate investor and expert, shares with Mashvisor what it takes to succeed with real estate investing in general and wholesaling in specific.
Sharon, you have been a real estate investor for about two decades. What made you choose this career over other real estate professions?
I owned and operated a home inspection company for 17 years, so I was already in a real estate related field. About 7 years into my first business, a Realtor friend took me to our local REIA meeting and I was hooked. I knew this was what I was meant to do. Being a real estate agent never appealed to me. Real estate investing was a very different business model, and I have always loved it.
What are the benefits of real estate investing which other types of investments don’t offer?
Most other investment strategies are market driven. The stock market is a perfect example. As an investor, you have no control over what the stock market does or the money you make.
Real estate is a solid investment so long as you follow these two principles: 1) Don’t overpay for the property when you buy it and 2) Don’t buy property in a depreciating area. If you are a buy and hold landlord, you can build solid, predictable streams of passive income.
What are the three most important characteristics you need in order to succeed as a real estate investor?
1. You need to get really good at marketing and branding. Marking is how you get leads and branding is why they choose YOU. One of the most important aspects of your branding is your website. It’s critical that you have good website.
2. Investors think they are in the “house business”. In reality, we are in the problem-solving business. If you are able to solve people’s problems, you will do very well in this business.
3. Real estate is always changing. To succeed, you need to be a lifelong learner. One of the biggest changes I have seen in recent years is in the use of technology. It’s essential that you keep up, or you will get left behind. Also, you must be able to quickly adapt to the inevitable changes in the real estate market.
You started as a part-time investor. How did you know you were ready to make the jump and become a full-time real estate investor?
It took me about 10 years of investing part time to take the plunge and invest full time. I instinctively knew when it was the right time. It was when I felt like I had enough experience, enough knowledge, and I had developed the relationships I would need going forward.
The market was also a determining factor. When I went full time in 2008, it was both the best of times and the worst of times where real estate was concerned. Everything was on sale; houses were cheap, but buyers couldn’t get a loan. It was my relationships with other real estate investors that allowed my wholesaling business to flourish.
What do you wish someone told you when you started your career in real estate investing and which took time to figure out on your own?
I think the biggest mistake I made is the same one that new investors are still making today, and that has to do with branding. You should start building your brand right from the beginning, and I didn’t do that. I felt like I didn’t need to worry about building a brand while I was learning and getting experience, but I was wrong. Here’s why you need to focus on your brand.
If you think about this business for a minute, investors are all pretty much the same. We all buy houses. The one chance you have to differentiate yourself is through branding. My advice is to start building your brand from day one.
You live in Louisville, KY. Is that where your real estate investments are?
Yes. I am a big believer in investing in your own backyard, especially when you are starting out. You know the different areas in your city, and you’re familiar with neighborhoods and the property values. It’s just so much easier. However, there are areas around the country where the property is just too expensive for that to make sense. Those investors generally invest in other states.
How did the Louisville real estate market perform in 2018? What are your expectations for 2019?
Our market is pretty stable. Like most areas, we had low inventory this past year. However, housing prices remained stable, and our rate of growth is sustainable. We don’t have those huge upswings in prices, but we don’t have huge downturns here either. I expect 2019 will be very similar.
What’s the current state of the Louisville housing market? What makes Louisville a good place for investing in real estate?
Like most other areas, the Louisville real estate market is definitely a seller’s market. The things that make Louisville a great place to invest are our stable market and our affordable home prices. In December of 2018 the median house price in Louisville was $178,000, and the average home price was just under $223,000. As you can see, home prices are very affordable here compared to many areas, so it’s a great place to buy rental property.
What’s the most traded property type in Louisville?
Single family homes are probably the most sought-after properties, but there is a strong market for multi-family properties as well as commercial properties.
What’s the most profitable investment strategy in Louisville? Are rental properties performing well? What’s the average return on investment?
That depends on who you ask. If you ask a rehabber, they are likely going to tell you rehabbing is the most profitable strategy. The same is true for a buy and hold investor. My opinion is that you really can’t go wrong with real estate if you buy smart.
Rental properties provide both passive income and long-term wealth. If you buy good properties in appreciating areas, you can definitely do better over time than with most other types of investments. According to Freedom Property Group, the largest source of turn key rental properties here in Louisville, you can expect a ROI of 10-15% if you invest passively. It can be higher for folks managing their own properties.
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You specialize in wholesaling real estate. How did you choose this investment strategy over others?
I am a rehabber at heart. I love taking a distressed property and turning it into a beautiful home for someone. The first 10 years in this business I was a rehabber and a buy and hold landlord. When the market crashed in 2008, everything was on sale, but retail buyers couldn’t get a loan. That’s when I began wholesaling.
It was relatively easy for me to make that transition to wholesaling because I had a decade to build relationships with other investors. I had a handful of solid cash buyers which was all I have ever needed. I was also really good at marketing, so it was a perfect fit.
Would you recommend wholesaling to beginner real estate investors?
I think wholesaling can be hard for a new investor for 3 main reasons:
1. You have to find properties to wholesale to your investor buyer, so you need to do a lot of marketing. If you don’t have a strong marketing background, this usually stops people in their tracks. You need about 3-5 lead channels or ways to get deals.
2. As a general rule, new investors also need some time and practice to get good at negotiating with sellers. Even if they are able to generate leads with marketing, they may not be able to put a deal together until they have some experience with negotiation. Personally, I don’t think this comes easy to most people.
3. The other piece of the wholesaling puzzle is that you need a buyer’s list. You need someone to sell those properties to once you get them under contract, and they need to be cash buyers.
The quickest way to build a rock-solid cash buyer’s list is at your local REIA. Find out which investors are rehabbing a lot of houses, and who is actively adding rentals to their portfolios. Those are your cash buyers. You only need a handful of cash buyers on your list if you use these guidelines.
Final thoughts on real estate investments
Real estate investing is the perfect vehicle for building a successful business. You can come from any background, you can have any level of education, and neither your age nor your gender has anything to do with your ability to be successful. It is indeed the perfect business.
Sharon Vornholt has been investing in real estate in Louisville, KY since 1998. Sharon not only is passionate about real estate investing but also loves teaching others how to succeed in this business. In addition to being a full-time investor, she is a blogger, a coach, and a host of the “Let’s Talk Real Estate Investing” podcast.
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