Real-estate investment strategies
 Investment Strategy #1: WholesalesOne of the true "no money down" deals in real estate, wholesaling is where many people get started. When you wholesale a house, it means you find a property that you can buy for less than it's worth and then sell that property to another investor. If you find a $100K house that you can buy for $80K (usually due to death, disability, divorce, layoffs, or they've moved out of state suddenly to a new home because of a job transfer), you can sell that house to another investor for $85K and make a quick $5,000. Houses are not hard to sell if they're worth $100K and you sell it for $85K. If the house is ugly you can sell it to a rehabber. If it's in good shape you can sell it to someone who wants to keep it and rent it out. As long as you can find another investor who would like to buy that house, you don't have to fix it up or find tenants or find money to buy the house yourself. You simply offer to buy the house from the owner, write up a contract that allows you to pass the house along to someone else, and sell that contract to another investor. Since it's not too complicated, many of our wholesalers can do several deals a month and make $5K~$20K per deal. Strategy #1.5: Bird-Dogging Another thing that can be mentioned here is being a "bird dog", someone who finds houses for investors. Even less complicated than wholesaling, bird dogs don't put a property under contract but just give investors leads to possible deals. Postal workers, handymen, and other people that spend time around residential properties can take note of houses that are vacant or for sale and alert investors for a finders fee.  Investment Strategy #2: Fix and FlipsMaybe you've watched the shows on TV about flipping properties or seen ads that say "We buy ugly houses". These investors will buy a house that most regular home buyers won't touch because the house has taken some abuse. Investors will then fix it up and sell it quickly for a profit. One of our investors met a man who had an odd hobby: this man enjoyed buying large kitchen knives and throwing them across his living room into the opposite wall. Having knives embedded in the living room wall was only one of many minor problems with the house, so when this man came to a point where he had to sell his house or go bankrupt he found that normal home buyers were not very interested. The property was lacking a certain "visual appeal", and since he didn't have the money to fix it up his only option was to sell it to an investor who would. Things like fixing holes in drywall, replacing carpet, and applying a fresh coat of paint to a house will cost a few hundred dollars but will increase the value of a home by several thousand. Investors who fix and flip houses will find a $100K house with problems, buy it for $80K, put $10K in to fix it up, and sell it for $110K, pocketing a good $20,000. Return to Investment Strategies List  ;Investment Strategy #3: RehabsRight now, at this very moment, someone somewhere in America is trashing their house. Why are they trashing their own house? Who knows...when life gets difficult some people's first instinct is to beat on their apartment with a blunt object. More often it's years of small repairs left undone that turn into very large repairs. The fact that someone is destroying their own house or letting it go to shambles usually indicates deeper problems, and these people generally aren't in a position to pay the mortgage on their demolished home for very long. When a house needs to be rehabbed, as opposed to fixed and flipped, it usually means that there is damage done to the house beyond simple cosmetic fixes. Often it means you need to repair roofs, reinforce the structure, or go into the walls and fix major electrical or plumbing problems. However, as with most things in life, the more problems a house has the greater the opportunity for profit. If you can bring a very troubled house back from the brink you can make some very good money. Return to Investment Strategies List  Investment Strategy #4: Short SalesEvery now and then there is someone who finds a way to owe more on their house than the house is worth. They accomplish this through a combination of home equity loans, second mortgages, interest-only mortgages, and other liens against their house. If you owe $215K on a $200K house, nobody's going to pay you $215K for it and no real estate agent will sell it because they can't get their commission from the gain on the sale. Your options are foreclosure and a short sale investor. In a situation like this, the only person who wants this house less than you is your banker. A bank loses tons of lending power when it has to take a foreclosed house. What about the home equity loan, the second mortgage, and the contractor who has a lien on the house because he put a swimming pool in the backyard and never got paid for it? If a house goes to foreclosure, all of these people basically get nothing. A short sale investor knows how to talk to banks, lenders, and anyone who wants money from the owner of the house. Short sale investors can explain to all of them that the house is going to foreclosure soon and, if they want any money at all, they'll have to settle for less than the full amount they're owed. A short sale investor can talk a home equity lender into accepting $4,000 for their $20,000 loan, the second mortgage lender $5,000 for their $40,000 loan, or a contractor $500 for their $10,000 outstanding bill. That's better for these people than letting the house go to foreclosure and getting nothing, and suddenly this $200K house that was $15,000 in the negative can now be bought by the investor for $170K and won't get foreclosed on. Return to Investment Strategies List  Investment Strategy #5: Subject To/Lease OptionsHere's one of the more creative deals you can put together. Lets say somebody is having a hard time selling their home. It's been on the market for several months and they need to get rid of it. What if you came along and offered not to buy the house immediately, but to buy it some time in the next couple years. Along with that, you offer to pay all their mortgage payments for them until you did buy the house. Not only that, but you'd give them a couple thousand dollars as well. Would that sound good to the home owner? Usually that sounds fine to them, but how does the investor make money on this? To make this work, the investor has the owner move out (they often have already) and finds someone else to move in. The someone who moves in is not a renter, but someone who is looking to buy the house. This is called a lease option buyer--instead of buying the house right away, the buyer gets to live in the house for a year and then decide to buy or not. This is great for buyers who would like to own a house but want to try out the house or the neighborhood first, or they need some time to improve their credit, or any number of reasons they can't or don't want to buy right off. The nice part is that anyone who is thinking about buying the house they're living in will generally take much better care of a house than a regular renter. Here's where the money is made: when someone moves into a house with an option to buy that house, as opposed to laying out money to buy the house immediately, that option costs money. Usually several thousand. The investor can give part of the option money to the current home owner (the one who owns the home but has moved out) and keep the rest. Lease option buyers usually pay a bit more per month than regular renters do, so if a lease option buyer pays $1,200 per month and the mortgage is only $1,000 per month, the investor can make mortgage payments and still pocket $200 a month. Lastly, when the investor offers to buy the house within a couple years, they set the price at the current market value (meaning if the owner is asking $200K, the investor will buy the house for $200K but not for a year or more). When the lease option buyer decides to buy a year or two later, the house will have appreciated $10K~$50K or more. If the lease option buyer wants to buy the house for $230K, the investor will first buy the house from the owner for $200K and then sell it to the lease option buyer for $230K, making $30,000 on the deal. If the lease option buyer decides not to buy, the investor just finds another potential buyer, collects another lease option fee, makes money each month on anything over the mortgage payment, and gets two years worth of house appreciation instead of one when it sells. Return to Investment Strategies List  Investment Strategy #6: Commercial PropertyDid you know McDonalds isn't in the hamburger business? Most people see McDonalds as place to get fast food and break teenagers into the world of minimum wage burger flipping. That's not the case. McDonalds is in the real estate business. McDonalds may make some money on happy meals, but the company itself makes most of it's money buying land and leasing it out to their franchisees. Any group of multiple housing units or business buildings is considered commercial property, such as apartment complexes, malls, and business centers. This is often what experienced and wealthy investors will get into after they've tried their hand at residential real estate and are tired of getting calls at midnight when a toilet is clogged. Return to Investment Strategies List  Investment Strategy #7: Land Development/ConstructionWe're making more babies, but we're not making more land for them to live on. Thus the worth of land keeps going up. So how do you make money with land? You can wait for the value of the land to go up by itself, or you can make improvements to the land. If you buy a tract of land and then have it subdivided into lots for houses or commercial buildings, the worth of the land goes up. If you work with the city to get roads and electricity and plumbing delivered to a piece of land, the worth of that land goes up. If you put a building on that land, the worth of the land goes up. If you buy a piece of land, subdivide it, sell some of the lots to get money to build on the other lots, build on the other lots and sell some of those to pay for the rest of the buildings you've built, you can find yourself with ownership of a very nice piece of property in a well developed area. Not too bad from starting out with a piece of bare land. Land development can take years to complete, but when it's done the investors usually walk away with millions. Return to Investment Strategies Lis  Investment Strategy #8: Buy and HoldThe whole point of getting into real estate is to arrive at a place where you can get out of real estate (or get out of working period). Buying and selling properties for large chunks of cash is great, but you don't want to have to do that for the rest of your life. There will come a time where you'd rather take a couple months off for vacation or just retire altogether. This is made possible by holding on to properties. If you bought 20 properties 20 years ago, you'd likely be making $10K~$15K a month in rent. This is passive income. This is income that arrives in your mailbox whether you work or not. If you pick up 10 or 15 properties over the next 5 years, or maybe some larger commercial property, is $5K~$10K a month enough to cover your bills? If your bills are $4,000 a month, and you've got $5,000 coming in the mail each month, guess what that means? You can sit around and watch TV for the rest of your life if you wanted to. If your bills are $4,000 a month and you've got $15,000 coming in the mail each month, then you've done something that most people don't know is even possible--you're free to do what you want for the rest of your life. We live in a world where most people work for 40 years, save (or try to save) all their spare change in a retirement account, and hope they'll have enough to live on when they retire. What happens if they didn't save enough? What happens if they've got 20 years of retirement money but they live another 25 years? Do they go back to work at age 80? Do they become a burden to their children? The beauty of owning rental property is that the checks keep coming in the mail for as long as you own the property. Those checks will get bigger because rent goes up with inflation. When you do die, those checks go to your family members. It's a beautiful thing, and if you've got good passive income it doesn't matter if you're 65 or 35, you can retire and you've got income for life that won't run out. Return to Investment Strategies List  Investment Strategy #9: Creative Real Estate DealsAs if the strategies mentioned aren't creative enough, one thing you should realize (especially when just starting out) is that there is a world of real estate possibilities that you can participate in right now. It doesn't matter if you're short on money, don't have much time, have bad credit, or little knowledge. You just need to take a look at what you do have and find other people to contribute what you lack. This is called leverage. Leverage means you use other people's time, money, knowledge, or skills to help you (and them) make money. One investor, a month into working with us, thought he didn't have anything to contribute till he found out his location was something he had to offer. He was living in Utah and met a California investor in our community. California home prices were too high to profitably buy and rent out, but Utah was just starting to see tremendous appreciation. The California investor bought a duplex in Utah using their money and credit, and the Utah investor, who lived only a few blocks from the rental property, landlorded. They both made money that neither of them would have otherwise, and the new investor got first-hand landlording experience. Another investor found out an $800K apartment complex could be bought for $600K. He received $50K from passing that information on to a more seasoned investor. You don't have to be an expert at every strategy when you have a network of investors to pass deals on to. If you live in a house for two years you don't have to pay capital gains tax when you sell it. Some investors have gotten very good at buying run-down homes in areas that are about to experience significant appreciation. They buy the home, spend two years fixing it up, and when they sell it they make $100K+ with all the appreciation and improvements they put in. They then move into another house to fix up and let appreciate while living on the money they made on their previous sale. One new investor knew that his family had a piece of land that had appreciated greatly, but his family had no plans to do anything with it. With some newly acquired knowledge they refinanced the land and the investor got $60,000 to put towards new real estate deals. Many new investors don't know they can use 401K's and IRA's to invest in real estate. There's a lot of money sitting in under-performing mutual funds right now, and if you can promise a better return than the stock market you can combine many people's accounts to fund your real estate deals. As you learn how real estate works and spend time around other investors, you'll find many ways to work with other people's resources to make you and them wealthy. Return to Investment Strategies List  Investment Strategy #10: The Last StrategyThe last strategy is something that many of the people in our group use to make $10,000 a month. It's the most simple of all the strategies that we teach and, for that reason, it's where most of our new people get started. We teach this strategy at our intro meetings, which everyone is welcome to attend. Return to Investment Strategies List |
