How Do I Start Investing In Real Estate If I Have Limited Funds To Use
Are there really deals out there that I can make money when I don't have a lot of it?
You bet there is! Wholesaling, taking over properties subject to, and options are great ways for new investors or those with limited funds to break into real estate with little to zero money out of pocket. I just flipped a REO worth $70k that I got under contract for $26K and sold in 2 days to another investor for $35K That's $9K in profit. Wholesaling is about as simple as it gets. All you have to do is find a property that is well below value, get it under contract and assign the contract to another investor who is also going to make money. You might have to come out of pocket earnest money and option money but this can often be limited as well (Usually $500-$1000 for earnest and $100 for option money).
I also just partnered with another investor to take down a property that the home owner's deeded over to us. She provided the 3 months in back payments from her self directed IRA and we are going to rent it, or sell it with owner financing and split the profit 50/50. That should be monthly cash flow of around $200 a month to me and several thousand in cash from a down payment on the wrap! This is usually know as taking a property over "subject to" existing financing staying in place. Basically, I end up owning a property where the mortgage of the previous owner stays in place. I make the monthly payments or I more preferably find a renter or someone to buy the property with owner financing or a lease option tenant where I can get a nice down payment and monthly cashflow. You usually have to come out of pocket to make up back payments, but sometimes in divorce or probate situations, you can often step into a subject to with no money. My buddy, Jason Schubert, just picked up a nice sub to for $2. He could have picked it up for $1, but he didn't have four quarters to pay the divorcing husband and ex wife $50 cents each so he upped his price to a dollar each. What a nice guy! He's picking up the property with $40,000 in equity and he's already flipped it to a end buyer for $18,000 in down payment. That's a pretty good return for $2 bucks!
Options are another way to sell property with little money out of pocket ($100) or non-exclusive options ($10) are another great way to negotiate a price with the seller, and sell the property above what ever your option price is. All an option is that you have a predetermined price for the property and have a speciifc amount of time to perform (could be week, months, or years). This is in effect a contract except the seller has the right often to accept a higher offer on non-exclusive options as you aren't tying the property up exclusively. I once tied up over $6 million dollars in San Diego Beachfront Condos for $10 on a non-exclusive option agreement. That was a fun deal!
As you can see, if you utilize these effective options to start your real estate investment career, you can often compile a nice chunk or pile of cash doing options, sub to's, and wholesale deals that will allow you to make the jump into rehabbing or more monetary intesive investing. What ever you chose to do, go out there and find you some deals! The more you network and talk to other investors, the more deals will wind up in your lap! Happy Investing!
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