- Ludomir Wanot, financially independent thanks to real estate, gave his best advice for 2023.
- For starters, avoid flipping properties right now.
- He also recommends having cash on hand and looking into seller financing.
Ludomir Wanot started investing in real estate in his early twenties. He and his brother purchased a $138,000 repairman in the Seattle, Washington area, financed it with an FHA loan, and paid less than $10,000 in upfront costs.
They split the expenses, meaning they each spent less than $5,000 on their first property.
Over the next four years, Wanot continued to invest and learn the ins and outs of real estate while working full time at Amazon. He discovered firsthand just how lucrative wholesale real estate could be: on his first wholesale sale, he made a profit of $160,000.
“I’ve never made this much money before,” he told Insider. “I had just made more than at Amazon in the year and a half I had worked there on a deal.”
In August 2020, he co-founded a wholesale business, Evergreen Housing Network, with his partner Vernie Gonzalo Dahl. In 2021, Wanot and its partner made nearly $1 million in total profit, according to documents seen by Insider.
Even the Wanot team was not immune to market conditions. They had to change strategy as buyer interest started to wane, he said: “We haven’t done a single big deal in the last two months. There’s a lot of fear. Now, more than ever, we need to focus on creativity.”
Insider spoke to Wanot about what real estate investors should do (and not do) to succeed in a changing market, and the strategies his team is employing in 2023.
1. Avoid flipping
Now is not the time to flip houses, pointed out Wanot, which has seen a lot of turnarounds in its market over the past two years.
Flipping involves buying a distressed home, remodeling it, and then immediately putting it back up for sale to make a quick profit.
“These types of investments are extremely risky and volatile,” he said, especially with the current supply chain issues, rising inflation and rising cost of goods, and falling house prices. “A lot of fins that I know personally right now are in bad financial shape.”
That’s partly because “their lenders are no longer making construction payments to them, which means they can’t complete their projects but still have to make monthly payments on the money they already have. borrowed,” he explained. Also, “their loans are due in 30 days, but their homes aren’t selling. Housing supply has gone up 10%, interest rates have gone from 3 to 7, so demand has dropped and house prices will continue to fall.”
2. Increase your cash to increase your purchasing power
As the housing market continues to shift in favor of buyers, many investors think 2023 could be a great time to buy property.
To buy a property, you need cash for a down payment and closing costs.
The first property Wanot invested in: a four-bedroom single-family home.
Courtesy of Ludomir Wanot
You don’t necessarily need tens of thousands of dollars. That’s a misconception, Wanot noted: “You can get your foot in the door without too much upfront money using an FHA loan.” But you need to have money saved up.
If you’re living paycheck to paycheck, start by building up an emergency fund, he advised. You need a solid financial foundation before investing in real estate. Then start setting aside a few hundred dollars a month, or whatever you can afford, in an account reserved for your down payment.
“If people can stop focusing on spending all their money and start focusing on slowly building up their savings, you can buy yourself a house these days for less than $10,000,” Wanot said.
Understand the resources available to you, he added. You can qualify for a grant or down payment assistancewhich could allow you to buy a property with little or no money out of your pocket, provided you can provide proof of a good credit rating.
Whether or not you’re a newbie or a seasoned investor, “cash is king,” Wanot said. “Get as much money as you can to start investing when the market goes down even more.”
3. Use seller financing to get more flexible terms
Financing a home the traditional way – using bank financing – is more expensive than it has been in the past couple of years. Average mortgage rates hover around 6%. One way to lock in a lower rate is to do seller financing, Wanot said.
With seller financing, rather than using a traditional mortgage lender such as a bank, credit union or government agency, the property owner acts as the lender and provides a loan with terms agreed upon at the ‘Buyer. In other words, the buyer buys directly from the seller in installments as he would with a conventional loan.
Since you, the buyer, negotiate loan terms (like interest rate and down payment) with the seller, “you’re much more likely to receive more favorable and flexible terms than you would banking in the mainstream market,” Wanot said.
The process benefits sellers as these agreements provide cash flow, they reduce costly agent commissions, and in the event of default, the seller still owns the property. You can read more about how seller financing works and how you can find these types of offers. here.
Wanot has already used seller financing in 2022 and saved a lot on interest payments – and it plans to use more of it in 2023.
4. Mitigate your risks through partnerships
It’s something Wanot did early in his career, when he bought property with his brother, and his team still does today.
“We partner with really experienced builders, local investors and financial partners to fund some of our projects,” he explained. “Working alongside other people is much less volatile because you’re sharing the deal with another person.”
This is especially true for new investors, he pointed out: “People always think they have to do something on their own. You can learn through this process, but what I recommend is to work alongside people who have a ton of experience and credibility.”