Making Money With Real Estate
Making Money With Real Estate
Real estate investment continues to be one of the largest wealth creation tools in America. It remains one of the fastest and proven ways to amass a fortune, and more importantly, once you understand the basics, almost anyone can do it.
Not all real estate investment is renting a property out and dealing with tenants. Another popular method is rehabbing or flipping real estate.
The many ways of making money with real estate include not only the various types of property. Of course you can make money with land, apartment buildings, single family homes, commercial buildings and more.
Whatever type of real estate you are investing in there are different ways you you can make your profits. Some of those ways, and how to maximize them are listed below.
1. Pay-down on the loan as fast as you can. Equity builds with every payment you make. If you get the lowest interest rate you can, more of each payment will go towards the principal.
If you have a 30 year mortgage a very easy way to pay it off in 17 years is to make just one extra mortgage payment per year. With that extra payment, all of it gets applied to the principle and yes this will eliminate 13 years of payments.
2. Cash flow. Buy income property the right way, and you not only have your tenants paying all the costs and paying down the mortgage loan, but you also have positive cash flow. As a rule, just don't buy properties without cash flow.
3. Equity appreciation. Sometimes making money with real estate can be as simple as holding on and waiting.
Investments can work especially well if you are buying property to hold and rent out rather than rehabbing for a quick sale. This is a good way to save for your retirement. I always like to hold one property per year until I reach retirement age, and then sell. You'll have a least a $100,000 pay day. Not bad for retirement income.
4. Tax depreciation. After all the tax law changes, you still get to declare a loss for depreciation that doesn't really exist. Saving at tax time, means more after-tax profit. To maximize this, buy property that has its value primarily in the buildings, because you can't depreciate the value of land.
5. Get instant equity by buying low. Buy below market and you get instant equity that will be converted into a profit when you sell. Like any market, the real estate market has great bargains if you are willing to put in the effort to find them. It's just a matter of knowing where to look. Foreclosures can present investors a way to grab a property at ridiculous prices, many times saving as much as 50% off the market value of the property.
If you're dealing directly with the owner, just make a low offer. A seller may have his own reasons to sell it cheap.
6. Sell your properties as fast as possible- If you're rehabbing a property to re-sell your want to turn it over quickly. Here's a method I have used many times.
Work with your Realtor and/or mortgage company to find ways how your can sell your property with no money down, or 3% down FHA. Then, I advertise my property for rent with the option to buy, in the rental section of the news paper. This gets plenty of response, then I show the renter how they can buy with no money down through FHA with their paint of down payment program. This helps both of us, I don't have to paint the property and they get to own it for zero down!
Put a For Sale By Owner or For Rent sign in the front yard immediately to start building a buyers' list.
7. Selling high. If you clean it up nice, make it easy to buy, and find the right buyer, you'll get top dollar. The following four on the list cover ways to create value, so you'll get more when you sell.
8. Finance the sale. You'll often get substantially more for a property if you offer financing. This is especially true if you let someone buy it with little money down. You can also get good interest on the loan.
9. Changing the use. Find a higher use for the property, and you can convert it to make it worth more to the next owner. This could mean making condos into apartments, or apartments into condos. Perhaps converting a home into office space will get the biggest return.
9. Improve and repair. Repairing anything that needs it is obvious, but you need to look creatively and carefully to find improvements to make. Concentrate only on those that will raise the value several times more than what they cost you. One example would be installing a washer & dryer in your units.
10. Sell it in parts. Sometimes in real estate, the parts are worth more than the whole. For example, splitting off an extra lot to sell for $30,000 will rarely decrease the value of a home by that much, so you'll make more money in the end.
Owning multiple properties you can start your own real estate investment empire! Collecting rent money from more than one property can put you on the fast track to wealth. If you've ever wondered why some people are more successful at this than others, every move they make is with the profit motive in mind and this is how they approach their business.
Make a consistent effort to really look for houses that are overgrown, in need of paint, possibly boarded up, etc. These are going to be your best bet for fixing up and making instant equity in your real estate investments.
I've found that HUD repos are an excellent source of homes to flip. And there is new list of properties that comes on the market every week. The prices are low because the mortgage company wants to get the property sold in just a matter of weeks.
Research and planning are essential to finding bargain priced real estate property and a lack of a solid knowledge base will prove to be a costly endeavor. You're in this business to make money!
Look at the sources of profit listed above, and think of how you can use a few of them on your next real estate investment. You can get wonderfully creative making money with real estate.
Wishing you success,
Allen Spencer
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