Ludomir Wanot, who is financially independent thanks to real estate, gave his top 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 20s. He and his brother bought a $138,000 fixer-upper 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 for their first property.
For the next four years, Wanot continued investing in and learning the ins and outs of real estate while working full-time at Amazon. He discovered first-hand just how lucrative real estate wholesaling could be: On his first wholesale deal, he profited $160,000.
“I’d never made that kind of money before,” he told Insider. “I had just earned more than I did at Amazon in the year-and-a-half that I’d worked there on one transaction.”
In August 2020, he co-founded a wholesaling business, Evergreen Housing Network, with his business partner Vernie Gonzalo Dahl. In 2021, Wanot and his partner earned nearly $1 million total in profit, according to documents viewed by Insider.
Even Wanot’s team hasn’t been immune to market conditions, though. They’ve had to shift their strategy as buyer interest has started to decline, he said: “We didn’t get a single wholesale transaction done in the last two months. There’s a lot of fear. Now, more so than ever, we have to focus on being creative.”
Insider spoke to Wanot about what real estate investors should be doing (and not doing) to succeed in a changing market, and the strategies his team is employing in 2023.
1. Stay away from flippingNow is not the time to flip houses, emphasized Wanot, who saw a lot of flips in his market over the past couple of years.
Flipping involves purchasing a distressed home, remodeling it, and then relisting it immediately to make a quick profit.
“These types of investments are extremely risky and volatile,” he said, especially with today’s supply chain issues, rising inflation and cost of goods, and declining home prices. “A lot of flippers that I personally know right now are in a bad place financially.”
That’s partly because, “their lenders are no longer giving them construction payments, which means they can’t finish their projects but they still have to make monthly payments on the money they already borrowed,” he explained. Plus, “their loans are due in 30 days but their homes aren’t selling. Housing supply is up 10%, interest rates have increased from the low 3s to the low 7s, so demand has dropped, and home prices will continue to decrease.”
2. Increase your cash on hand to increase your buying powerAs the housing market continues to shift more in favor of buyers, many investors believe that 2023 could be an excellent time to buy property.
To buy 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 cash by using an FHA loan.” But you do need to have some money saved.
If you’re living paycheck-to-paycheck, start by building an emergency fund, he advised. You need a solid financial foundation before you invest in real estate. Next, start setting aside a couple hundred dollars a month, or whatever you can afford, into an account earmarked 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 under $10,000,” said Wanot.
Understand the resources available to you, he added. You may qualify for a grant or down payment assistance, which could allow you to purchase a property with little to no money out of pocket, as long as you can provide proof of a good credit score.
Regardless of whether or not you’re a rookie investor or a seasoned one, “cash is king,” said Wanot. “Get as much cash on hand as possible 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 pricier than it was the past two years. Average mortgage rates have been hovering around 6%. One way to lock in a lower rate is to do seller financing, said Wanot.
With seller financing, rather than using a traditional mortgage originator such as a bank, credit union, or government agency, the owner of the property acts as the lender and provides a loan with agreed upon terms to the buyer. In other words, the buyer buys directly from the seller in installments as they would with a conventional loan.
Since you, the buyer, get to negotiate the terms for the loan (like the interest rate and down payment) with the seller, “you’re way more likely to receive more favorable and flexible terms than you would from the bank in the current market,” said Wanot.
The process benefits sellers in that these deals provide cash flow, they cut out costly agent commissions, and in the case of default, the seller still owns the property outright. You can read more about how seller financing works and how you can find these types of deals here.
Wanot has already used seller financing in 2022, and saved big on interest payments — and he plans to use more of it in 2023.
4. Mitigate your risk through partnerships This is something that Wanot has done from the start of his career, when he purchased property with his brother, and that his team is still doing today.
“We’re partnering with some really experienced builders, local investors, and finance partners to fund some of our projects,” he explained. “Working alongside other people is way less volatile because you’re splitting the deal with another individual.”
This is especially true for new investors, he emphasized: “People always think they have to do something on their own. You can learn through that process, but what I recommend is working alongside people who have a ton of experience and credibility.”