Proven Ways To Make Money In Real Estate

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There is no industry in the world where more money has been made than in real estate. Yet, many people still worry about getting involved in it, mainly because they feel that they need to have a significant amount of capital. However, that isn’t true. Hard money loans are just one way in which you can enter this market with little to no capital to your name.

Success Stories

There are numerous success stories out there from people who had made it big in real estate with little to no money. For instance, there is Kent Clothier Sr.

Before his career in real estate, Kent started out in the supermarket industry in the Dallas area, managing a billion-dollar supermarket operation by the young age of 32. Kent brought his expertise in the grocery industry with him to Memphis and began American Wholesale Grocers in 1987. By 1995, he built the enterprise into a $50-million venture, which he sold in the late 1990s before pursuing his passion for real estate and establishing Memphis Invest.

Another example is Dean Graziosi, who has a trailer park background and now owns more than 400 properties. There are many others like these two and what brings them together is not that they had, or didn’t have, any money behind them. It is that they had the guts to try things and now have a fantastic amount of money and knowledge.

Real estate is no more or less difficult than making money online. It is simply about knowing what you do and don’t need. One thing you do not need, which may surprise you, is good credit. You also do not need significant capital. Yes, you will have to start with the lower priced properties at first, but this is where you can start to grow. Lastly, when you start, you also do not need to have any major assets to get financing. You simply need to get creative.

How to Make Money in Real Estate

There are two key ways to generate money in real estate. The first one is the passive method, which means you buy property and hold it, by purchasing turnkey properties.

If you leverage turnkey investment properties, then most everything is already done. All you would need to do is purchase the investment property, let the professionals manage it and collect your monthly cash flow checks while your tenants help you build equity.

Your second option is to earn an active income. The most common way to do that is by flipping properties, after you have added value through renovations or development deals. The big thing to learn about, however, is how you can get your foot in the door without having a huge amount of capital. To do that, there are multiple options available to you, including:

  • Lease options for seller financing
  • Trading jewelry, cars, and other fixed assets you have
  • Finding someone in a distressed situation and taking on their payments
  • Finding an investment partner
  • A loan
  • Peer to peer lending
  • Home equity lines of credit
  • Hard money lending

If you are hoping to earn an active income through real estate, which means you will buy and sell properties in a short period of time, then hard money lending is probably the most viable option, and the most preferred one.

Hard money loans, sometimes referred to as bridge loans, are short-term lending instruments that real estate investors can use to finance an investment project. This type of loan is often a tool for house flippers or real estate developers whose goal is to renovate or develop a property, then sell it for a profit. Hard money loans are issued by private lenders rather than mainstream financial institutions such as banks.

The reason why this works is because real estate is based on a simple cash flow principle. This means that, so long as you earn more than you spend, which means you are in positive cash flow, you are doing well. Real estate investments are some of the best investments around to generate continuous positive cash flow, which is why they are so popular, and why so many people have literally made millions of dollars doing so.

8 Key Strategies to Make Money in Real Estate

There are eight key strategies that you could consider if you want to make money in real estate. You could decide to focus on one strategy at a time, or you could combine them in ways that are suitable to you. You are likely to find that, as your incoming cash flow increases and your assets and savings increase, it will become easier to make money in multiple ways, thereby also increasing the speed with which you make more money in real estate. The eight strategies are:

1. Investing in long term residential rentals, which is a passive form of income with a lot of security: people always need somewhere to live.
2. Taking out lease options, which is a perfect starting point in which you lease a property while also having the option to buy. This is a good option if house prices are going up, because you will have set the purchase price before this increase.
3. Home renovation flipping, for which you either need quite a bit of cash behind you, or a good relationship with a hard money lender. In this case, you purchase cheap and distressed properties, fix them up, and sell them for a significant profit.
4. Contract flipping, which means that you find people who are willing to sell at a ridiculously low price, and bring them together with an investor looking to buy. This means that there is less risk for you, because you will never have to close escrow either. However, it is quite tricky to identify these properties.
5. Short sales, which means you find those who are willing to sell their property for far less than it is actually worth, and certainly less than the balance outstanding on their mortgage. This is generally accepted if a quick sale is needed to avoid foreclosure.
6. Purchasing vacation rentals, which is a great way of earning a passive income while at the same time having a piece of property that you can use yourself if you are on vacation. By working with a good property manager, there is not much you need to do to earn your income.
7. Through hard money lending, which you will probably only be able to do once you have been involved in this field for quite some time. When you first start out, you will look for hard money lenders to help you get on the ladder. But as you continue, and if you are successful, you can become a hard money lender yourself. There is a lot of profit to be made in these loans, and the risks are very low.
8. Investing in commercial real estate, which you will probably only be able to do once you are truly established.

Flipping Haunted Homes – The Next Big Money-Maker

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The paranormal, ghost hunting and spiritual activities are very popular and fashionable right now. Yet, in all of this country, there is just one recognized haunted house. It is in Nyack, NY, and is legally recognized as being haunted.

“As a matter of law, the house is haunted.” This sentence in a ruling by the New York Supreme Court in July, 1991 generated international headlines for a real estate dispute surrounding the sale of 1 La Veta Place.

This is of significance because according to law people cannot just describe their house as being haunted when they want to. This, in turn, makes it an important issue for real estate professionals, who must make sure that they represent their properties properly.

Meanwhile, every year, thousands of people travel to Salem, MA, during Halloween in the hopes of being able to witness some spooky goings-on. There is a real appetite for the paranormal, such as for things that make noises in the dark. And that includes haunted properties.

Are Ghosts an Investment Risk – Or the Opposite?

Trulia has completed a piece of research that indicated that a haunting was not good for house prices.

We found that most Americans consider both deaths and hauntings when finding their next home. Millennial men are the exception, with some possibly dying to live in a haunted home, according to Trulia’s September survey, conducted online by Harris Poll among 2,098 U.S. adults ages 18 and older.

What this research showed more than anything, however, is that it presents a very interesting possibility for investors. On average, 43% of us will not buy a haunted property, rising to 50% among those who did not complete high school. What this means, in conjunction with the fact that there are legalities involved with whether or not a house is haunted, is that people have the opportunity to snap up properties at reduced prices because of suspected hauntings.

Fix and Flip – Seance and Flip?

It seems that there is a real market for haunted properties. Indeed, the haunted house in New York was sold and is now worth quite a bit money. Men who are between the ages of 18 and 34, meanwhile, are also a target demographic as they would like to purchase haunted properties. Meanwhile, those with a graduate degree and those over the age of 65 don’t care about ghosts, so they are also a purchase demographic.

But then, there are those properties that you could snap up because of the worry that there are ghosts, and hold a seance or other event to “evict” the ghosts, only to then sell it at a profit. This is perhaps the easiest, as well as quickest and cheapest, way to fix and flip a loan, and you are guaranteed that hard money lenders will be interested in it.

Paranormal Disclosures

Hard money lenders want to see a quick profit. They will happily lend you money to purchase a property if they believe you will be able to sell it within no more than three to five years and at a profit. This is easily achieved with a haunted home. However, you do have to be aware of the paranormal disclosure laws, which lead us back to the property in New York.

Essentially, some states require homeowners to disclose certain events. Those events include hauntings and also recent deaths, or any criminal activity that took place in the home. Hence, you need to make sure that you remain within the law, and that you find out how long after those events you no longer have to disclose them. Buy cheap because of a ghost, sell expensive because it is probably gone. It is the perfect way to flip real estate.

Hard Money Lenders Can Help, But You Do Have To Be Wary

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A lot of people are interested in using hard money lenders if they want to get a quick and easy loan for a property, particularly if it is for an investment. While these types of lenders offer fantastic opportunities, particularly for fix and flip investors, it is also important to be aware of the pros and cons of hard money loans. Unfortunately, there have been situations in which people have lost thousands by turning to these lenders.

Hard Money Loans for Investment Properties Only and Not for Homes

Hard money lenders are only interested in the value of a property, not the individual’s debt to income ratio. It is also for this reason that these loans should not be used for family homes, but only for investment properties. Unfortunately, a lot of families see these loans as a way to get on the housing ladder, in the hopes of then being able to find a better loan by the time they have to pay it off. Because there is no guarantee that this will actually happen, you should never consider a hard money solution as an alternative to a regular mortgage.

Need to Avoid Loan Sharks

In fact, even those who use a hard money lender for an investment property must put measures in place to avoid loan sharks.

Loan sharks make their money by charging very high-interest rates, which are often against usury laws. Loan sharks might use threats of violence to encourage borrowers to repay the debt. All loan sharks are hard money lenders but, fortunately, not all hard money lenders are loan sharks.

Loan sharks are a significant concern for people looking for hard money loans. At the same time, con artists presenting as lenders are a concern as well. These con artists will convince people to pay them for an administrative service, and then don’t come up with any money in return. What these people prey on are people who have fallen on hard times and are desperate for money. This is not necessarily to buy a new property either. It could be, for instance, to renovate, to pay the mortgage, or to pay for any other bill. People who have bad credit often have financial difficulties anyway, which means that they are often in even greater need for some loan to tide them over or to pay for unexpected expenses.

Not all hard money loans are a bad idea, however. In fact, in a sense, a credit card is a hard money loan, and many of us have those. There are many different types of hard money loans out there, and they serve very important purposes. However, as a consumer, you must be responsible and consider what you are borrowing, why, and who from. This is about protecting yourself, something you should do with any kind of financial product. So what are some of the different types of genuine hard money loans that you may want to consider?

1. The Mortgage Refinancing Loan

When you refinance your mortgage, you essentially take out a second loan, which you use to improve the overall value of your property. This means that, for a short period of time, you will have a different loan to value ratio for your property, which is something that many lenders do not recommend. This, in turn, is exactly what people go to hard money lenders, because they use the money for a short period of time to complete the refurbishments of their property, after which they take out a new mortgage. It is important, however, to only do this if it will save money in the long run.

Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan or helps you build equity more quickly. When used carefully, it can also be a valuable tool in getting debt under control. Before you refinance, take a careful look at your financial situation.

2. The Equity Loan

The second type of hard money loan is the equity loan.

A home equity loan – or HEL – is a loan in which a borrower uses the equity of their house as collateral. These loans allow you to borrow a large lump sum amount based on the value of your home, which is determined by an appraiser, and your current equity.

Equity loans, again, are very tricky financial constructions. It also means that you lose out on the equity in your property, at least for a certain period of time. Hence, you need to think about whether or not this really is the best idea. It is tempting to take one out just because it gives you cash in your pocket with which you can do what you want, but there are significant risks associated with it as well.

3. The Bridge Loan

Last but not least, there is the bridge or bridging loan, another complex financial construction.

Bridging loans are short-term finance typically used when there is a gap between the sale and completion dates in a chain. They are also used by people buying at auction, or those who plan to own a home only for a short time – for instance, if they are buying to renovate and then sell on.

These are the most common forms of hard money loans, and perhaps the safest as well. It is with a bridge loan that someone can purchase a property if they have not sold their own yet, for instance. They also are the perfect solution for fixers and flippers. A bridge loan is designed to be only held for a short period of time, which is precisely what hard money loans were intended to do.

We continue to live in difficult financial times, which means people look for various alternatives to find a way to get money together. While hard money loans enable people to do this, they have a specific purpose, which is to help people get money together for real estate. While it may be tempting to use them for other things, you should avoid this for your own protection.