Showing posts with label Real Estate. Show all posts
Showing posts with label Real Estate. Show all posts
Making Money With Real Estate

Making Money With Real Estate

Optioning Hilltops

Making money with real estate isn't unusual, of course, but there are less common ways to do it. There was a man, for example, that went around optioning hilltops. If the owner wanted $30,000 for the land, this investor might offer $300 for an option to buy the property at full price ($30,000) within six months. He didn't have to buy, but the sellers liked the idea of getting full price, or just keeping the $300.

Next, he contacted every radio station, police department, and cell phone company in the area that might need a hill to put a radio tower on. It is common practice to lease the properties on ten-year or longer leases, for tax reasons. Once the investor got a lease signed, it was relatively simple to get a bank to lend the money for the purchase. So he might have payments of $200 per month, and the radio station puts up the tower, and rents the hilltop for $350 per month. Total risk? If he doesn't find an interested party, he walks away, losing the $300 option fee.


Making Money With Fixer-Upper Real Estate

It isn't unusual to buy a house, fix it up and sell it for a profit. It is less common to find these opportunities in the $10,000 price range though. We found that there are towns in this country where you can still buy houses as cheap as $6,000! We bought a house in a beautiful little town in Montana for $17,500, paid a plumber and a friend to fix a couple things ($2,000), and after living in the house for a few months, sold it for $28,000. 

Making Money With Land

Several times I have bought property and then sold it on a "land contract." Also called a "contract for sale," and various other names around the country, this simply means taking payments from a buyer, and delivering the title when the property is paid for in full. This is a great way to make money with real estate if you already have some money to invest.

Here is how my first deal went: 3 acres for sale for $4,100. I offered $3,300 cash, and we agreed to $3,500. This was back when closing costs were lower, so I had maybe $3,660 into it after closing. I spent a few hours raking it, and removing dead branches, etc. Then I put a hand-painted sign on it, offering it for sale for $4750, with only $250 down payment and $100 per month payment, with 11% annual interest.

Within two weeks, I sold it for exactly that price and terms, and closed the deal in a restaurant, with virtually no closing costs. In the end, I sold the land for $1150 more than I paid, but I also collected hundreds per year in interest. The rate of return on a deal like this is somewhere over 20% - certainly better than a bank account, and of course it should be done on a larger scale than this (the next time I did it was on a mobile home on land).

The reason this works is that you are making it convenient for the buyers who don't have the cash to buy the land. At the time, that 3 acres was worth about $4,000, yet the buyer paid 18% more than that for the convenience, and paid 11% interest. With a couple hundred dollars in the bank, his options were limited. I made it possible for him to own that land, and it's worth about $20,000 now.

Other Ways of Making Money With Real Estate

There are many unusual ways that people have used to make money with real estate. I know a guy who made almost as much money letting a construction company carve gravel out of his property as the property cost in the first place. It didn't even reduce the value of the land. A friend of mine bought a small piece of property and let a company cut half the trees out for $4,500. When they were done, you couldn't even tell they had thinned the trees out, and the land had the same value.

I'll add more unusual ways of making money in real estate in the future, so check back.

How to Buy Real Estate That's not for Sale - This page looks at the opportunity in buying before a property is listed for sale.



How to Buy Real Estate That's not for Sale

How to Buy Real Estate That's not for Sale

The point of learning how to buy real estate that's not for sale is to find deals that are not obvious or available to other investors. It is true that you could spend a lot of time and effort without result. On the other hand, the -not-for-sale market doesn't have a lot of competition from other buyers.

Normally you might buy real estate by looking in the newspaper classifieds, visiting a good broker, or a searching listings online. Those are all good ways to start looking your next investment. But when you're looking at the same properties as every other investor, it's not always easy to beat the competition to a great deal.

Another way to find good real estate investments is to look at properties that aren't for sale, and make an offer.

My first home was bought this way. An ad in the paper stating what I was looking for soon brought a call from an old couple who had been thinking about selling. They saved a broker's commission and I bought their place at a good price.

Buying real estate when it isn't for sale starts with a three step search process. Start by deciding what you are looking for - single family rentals, large apartment buildings, commercial properties, or whatever works for you. Then look for properties that fit your criteria, and when you find them, contact the owners.


How to Buy Real Estate from Owners Who Aren't Selling

Don't limit yourself to "fixer-uppers" and other "problem" properties. They may more likely to have owners willing to sell, but many owners of investment real estate have thought of selling. Start with almost any building you like. You can't say beforehand if or why a landlord is ready to call it quits, but you can find out by asking.

Tact is necessary, of course. Give the owner a call, and tell him you're an investor, not a broker. Tell him you like what you see. Let him know you can have an offer ready in a week if he's interested. If he says he's not interested, thank him politely and hang up, but be sure to send him your card or a letter. Many investors have later bought from owners that changed their minds.

If there is some interest, explain that you are an investor, so your offer will have to be based on your return on investment. This means you'll need to see the books. Specifically, you'll need to see the rent roll, listing the units and what they rent for, plus current occupancy, and operating expenses for the last year.

Prepare a confidentiality agreement before you call. Tell the owner you'll sign it and deliver it to him before you see the books. He might not want the tenants to know he's thinking of selling, so inspecting the units may have to wait until you make an offer. Make an acceptable inspection a contingency in the offer.

Why buy real estate investments in this way? Here are two good reasons:

1. No competition

2. No sales commission

Both of these make a better price a strong possibility. Also, instead of waiting for a great property to be listed for sale, you just find it now. Why wait until it's for sale before buying real estate?