There are more ways to make money in real estate than you may think. My friends at Bigger Pockets, one of my favorite real estate investment blogs, came up with this list. I have added my own notes and thoughts.
If you are interested in investment opportunities, residential, commercial, or business ? give?us a call.?We?re here to help! The Hagley Group can help set you up with the right investment partners to help you meet your investment goals.
Making Money On Major Types of Properties
There are many different property types that you can use to make money in real estate with. The secret is finding one that you love and can throw your heart and soul into.
1.) Raw Land ?? Purchasing land usually does not produce cashflow, but can be improved to add value. Land can also be subdivided and sold as well for profit.
2.) Farm Investing ? In addition to the land itself, the products that are made on the land can be used to make a profit.
3.) Water/Mineral/Oil/Gas Rights ? The cousin of investing in raw land, this is the process of buying and selling a person?s (or company?s) right to use the minerals (or water, oil, gas, etc) on a property.
4.) Single-Family Homes ? This is the most common investment for most first time investors. Single-family homes are easy to rent, easy to sell, and easy to finance. There are great deals to be had in San Leandro, San Lorenzo, and Hayward.
5.) Duplex/Triplex/Quads ? Small multifamily properties (2-4 units) such as these are one of my favorite investment routes. These property types combine the financing and easy purchasing benefits of a single-family home with the cashflow benefits and less competition found in larger investments. Best of all, these properties can serve as both a solid investment as well as a personal residence for the smart investor. Oakland has a lot of these properties at the moment.
6.) Small Apartments - These properties can be more difficult to finance, because they rely on commercial lending standards instead of residential lending standards. However, these properties are excellent in terms of cashflow. They are too small for large, professional REIT?s to invest in (see below) but too large for most novice real estate investors. Additionally, the value of these properties are based on the income they bring in. This creates a huge opportunity for adding value by increasing rent, decreasing expenses, and managing effectively. These properties are a great place to utilize on-sight managers who manage and perform maintenance in exchange for free or decreased rent. At this level, real estate can truly become 90% passive.
?7.) Large Apartments - These buildings are the larger, nicer complexes you see all around the country, often times in upper-middle class neighborhoods in the suburbs. They often include pools, work-out rooms, full time staff, and high advertising budgets. These properties cost tens of millions of dollars to buy but can produce solid returns with minimal hassle.
8.) Large Commercial Office Space - Buying large commercial buildings and renting out office space to business professionals. Usually professionally managed by large property managers.
9.) Small Commercial Office Space ? Buying small commercial buildings and renting out office space to business professionals. Often much more hands on.
10.) Industrial Properties- Manufacturing, warehouses, distribution centers, etc.
11.) Mobile Homes ? Generally found in parks but also on private land, mobile homes are found all over the country and can be an inexpensive way to enter the world of real estate investing and can also experience significant cashflow.
12.) Mobile Home Parks ? The entire park in which mobile homes are situated on can also be bought and sold. Often times the individual lots are rented out to mobile home owners, and other times the homes themselves are corporately owned and leased to individuals.
13.) R.V. Parks - An RV park owner simply rents the space temporarily to individuals with motor homes or campers.
14.) Motels/Hotels ? Especially profitable in tourist friendly areas, renting out rooms in a motel or hotel can provide significant income.
15.) Notes - Investing in ?notes? involves the buying and selling of paper mortgages. While not necessarily a ?property type,? notes can be bought, sold, mortgaged, and traded just like the properties they represent.? Often times an owner of a property may choose to offer financing and ?carry the mortgage?. In this case, a ?note? would be created which spells out the terms of the contract. For example, an apartment owner decides to sell his property for one million dollars. He offers to carry the full note and the new buyer will make payments of 8% per year for thirty years, until the full one-million dollars is paid off. If that owner suddenly needed to get the full balance of the loan, he might choose to sell that mortgage to a ?note buyer? for a discount. That note buyer will then begin collecting the monthly payments and decide if they will keep the note or try to sell it for profit.
Making Money Using These Popular Investing Methods
Just as there are many property types, there are also many ways you can make money with those properties. Every deal is different and may require a different strategy, so it is best to get acquainted with as many of these methods as possible.?
16.) Fix and Flip Single Family Homes- We?ll start with the obvious and most popular one. Buy a cheap home, fix it up, re-sell it.
17.) Buy-N-Hold Single Family Homes ? Another favorite. Buy a home, hold it for a significant length of time (20+ years), pay the mortgage down, and live off the cashflow in retirement.
18.) Wholesale Single Family Homes- A popular choice for beginners, wholesaling involves scouting your local area, finding great deals, putting those deals under contract to buy, and then ?assigning?(selling) those deals to an investor for a fee.
19.) Hybrid Fix-N-Hold for Single Family Homes ? Simply, a single family home is purchased for a low price during a low market, remodeled to force appreciation, and held until the market improves and sold. This method seeks to maximize the ROI while limiting the risk.
20.) Wholesaling Apartment Buildings ? Some investors make their entire living off wholesaling just one or two large apartment buildings per year. With the larger price comes less deals but much higher finder?s fees.
21.) Fix-and-Flip Large Apartment Buildings - From duplexes all the way to large complexes, there are many apartment buildings in need of a complete overhaul. The benefit of flipping apartments over single family homes is the ability to collect rent while the property is being marketed for resale.
22.) Buy-N-Hold Large Apartments ? Similar to the long term approach to single family homes, but on a much larger scale.
23.) Hybrid Fix-and-Hold for Apartments- Find a low-cost apartment building needing help, fix it, then rent it until it is most advantageous to sell.
24.) Turn-Key-Investing ? This type of investor is similar to a fix-and-flipper, but seeks primarily to sell the remodeled properties to out-of-town individuals seeking a good place to keep their money moving. Often times Turn-Key companies also can handle the management and all other issues, making the investment truly passive for the purchasing investor.
25.) NNN Lease - Often times big businesses do not want to own the building they use (for tax purposes), but instead rent the building and pay all costs associated with the building such as maintenance, taxes, insurance, and more. You, as an investor, can own these buildings for highly-passive income.
26.) Vacation Rentals ? Buying a property in a vacation area and renting it out when you are not staying there is not only a great way to pay for your vacation home but also build equity in a location where prices go up (and down) with more extreme force.
27.) New Construction, Residential ? Just like it sounds. The process of building a home with the intent of reselling it.
28.) New Construction, Commercial ? Like residential, but involving commercial places.
29.) ?New Every Two? Primary Residence Flip - Many investors simply invest only in their own home, adding value and reselling every two years. The reason behind this is that in the US, the IRS allows a tax-free sale of a primary residence every two years. If you don?t mind moving often, this might be a great option for you.
30.) Cash Purchase, Sell on Contract ? If you have the cash, you can buy properties and then immediately re-sell them to buyers who may not be able to conventionally qualify for a mortgage. You can carry the mortgage for as long as you?d like, or sell the note for cash in the future.? Make sure to collect a large down payment when using this method.
31.) International Real Estate Investing - You don?t need to live where you invest (but it often does help a lot). Many investors choose to live wherever they like but invest where it makes the most sense ? often overseas. While there are many challenges to this type of investing, there are also huge rewards? to those who can effectively navigate the international waters.
32.) Lease-Option Sandwich ? Without actually owning the property, lease-options allow a person to gain control of a property by leasing it with a legal ?option? to purchase the property at a specified price within a specified time period. Often times these properties can be re-?sold? using another lease option and the investor simply makes money being the ?middle man.?
Make Money When Buying Investments
It?s often said ?You make your money when you buy.? There are many different strategies you can use to ensure profitability when you buy, starting with finding the best deals. The following is a list of many of the top places to find good deals and make money when you buy.
33.) Subject-To - Purchasing a home with the existing financing in place. This method, while not illegal, can trigger the ?due on sale? clause and cause the bank to start foreclosure on the property. Use with care.
34.) Lease Option - As mentioned earlier, a lease-option (lease purchase) is a method used to control real estate without taking title. It is simply ?renting? the property with the legal right to buy it later. This can be a good way to buy a property if your intent is to quickly sell it again later.
35.) For Sale By Owners (FSBO) - Often times, sellers will decide to save the costs of hiring a real estate agent to sell their home and sell it themselves with a sign or newspaper advertisement. These sellers can often times be excellent sources of finding good deals or seller-financed deals.
36.) Buying REO?s - REO?s are bank-owned properties that were taken back in foreclosure. Often times these properties can be picked up for significant discount, as a bank is often very willing to get the loan off their books. Additionally, there is no emotional attachment on the part of the bank.
37.) Auction at the Courthouse Steps ? During the process of foreclosure, a home is generally brought to the courthouse steps to be sold to the highest bidder. If no one bids, the home goes back to the bank. Often times, homes can be purchased for steep discounts using this method.
38.) Buying in Pre-foreclosure - Sellers on the brink of losing their home can be very motivated to sell their home and save their credit. Many times, more is owed on the house than the house is worth. However, sometimes great deals can be found by weeding out a lot of bad deals.
39.) Short Sales - A bank will often take less than the loan amount on a property to save the hassle and costs of foreclosing. This means you can often get a great deal if you can wade through the red tape and long wait-times that short sales involve.
40.) Tax Liens - When homeowner?s refuse to pay their taxes, the government can foreclose and resell the property. You?ve probably seen the ?Pennies on the dollar? infomercials on late night television, but this method can be trickier than the gurus portray on TV.
41.) HUD Foreclosures - When a US government ensured loan is foreclosed on, it often becomes the property of the department of Housing and Urban Development. It is their job to sell the home and often will offer steep discounts in order to move the product.
42.) VA Foreclosures ? Similar to the HUD foreclosures, the US Department of Veteran?s Affairs sells their homes as well after foreclosing on one of their insured properties ? and no, you don?t need to be a veteran to buy one.
43.) USDA Rural Development Loans - If you live in a rural area, the US Department of Agriculture actually offers a loan program for primary residence homes that require as little as 0% down.
44.) VA Loans ? If you are a veteran of the United States, the government offers 0% down loans on primary residences.
45.) Bulk REO?s ? Often times, banks will group together large packages of REOs and sell them in a package to large investment firms or wealthy investors.
Make Money Using These Marketing Techniques
Without proper marketing, you?ll never make any money in real estate. Whether renting, selling, buying, or any other activity, these techniques will help you find the solutions to the issues you face.
46.) Bandit Signs - You?ve seen them before ? those rectangular, often hand-written signs, that advertise ?we buy houses? or a variety of other sales information. While tacky and well used, this method is still one of the best ways to market your business. (?Be aware that they are also illegal in many, if not most areas)
47.) Direct Mail - This old school method of finding leads still works today. Sending out a massive amount of letter, especially to your defined target market, is a great way to get calls and weed through deals.
48.) Craigslist Ads - Craigslist is free, easy to use, and taking over the marketing from newspapers across the country. If you don?t use Craigslist yet, do so.
49.) PPC Marketing - PPC (short for Pay Per Click) marketing is the process of soliciting business online through companies like Google, Facebook, Bing, and Others. The beauty of PPC marketing is that you only pay when an ad is clicked on ? thus you only pay when an ad works.
50.) Newspapers - The classic way of advertising still is one of the best, if you can afford it.
51.) Business Cards - If you don?t have business cards, you are leaving a lot of money on the table. Hand out business cards to every person you meet and you?ll be surprised at how quick your business grows.
52.) Websites ? Websites today are very inexpensive and easy to create. You have no excuse to at least have a Facebook page, LinkedIn, or Google+ page.
53.) Word of Mouth - Despite all the technology we have today, nothing will ever come close to the effectiveness of word-of-mouth advertising.
Make Money In These Real Estate Related Careers
You don?t need to invest in real estate to begin making money from it. There are many paths that will help you earn income while you learn and grow, in preparation for when you are prepared to jump in and begin investing.
54.) Real Estate Agent, Residential- Many people often overlook this option, as it technically isn?t an ?investment,? but becoming a real estate agent may help you earn income each month while giving you the tools to supercharge your investing side-career.
55.) Real Estate Agent, Commercial - Primarily assists buyers in purchasing businesses, buildings, and other commercial ventures.
56.) Mortgage Lender, Residential - Working on the loan side will give you huge insight into the math that makes investing work ? as well as significant contacts to the big players in your area. Usually lenders work for one institution, such as Wells Fargo, Bank of America, or others.
57.) Mortgage Lender, Commercial ? Same as above, but on the commercial side.
58.) Appraiser ? An appraiser works with lenders to determine the value of a piece of property. Working as an appraiser will give you in-depth experience in determining how much a property is worth.
59.) Title/Escrow Agent ? The Title and/or Escrow agent makes sure all the parts fit together to make a sale happen. By working in this field, you can get an inside look at what happens in the background during every real estate transaction.
60.) Real Estate Attorney - A lawyer who helps the investor stay protected and within the confines of the law.
61.) Real Estate Accountant - An accountant is able to see first hand the math behind a real estate investment.
62.) Contracting ? Nothing will give you a better idea of what it takes to remodel a home than actually being the person remodeling it.
63.) Flip Project Manager ? By working side-by-side with a house flipper as the project manager, you can be involved in every aspect of the deal, learn the business from the inside, and make valuable relationships without investing any of your own money.
64.) Real Estate Marketer - A real estate marketer works with investors to find leads. From online PPC marketing to bandit signs and more, a marketer can be a valuable part of an investment team.
65.) Property Manager, Residential ? Many investors don?t want to manage their property so they turn to property managers to look after their property.
66.) Property Manager, Commercial - Most commercial owners don?t manage their own properties but rely on commercial managers to take care of their investment.
67.) Resident Manager - Often times apartment owners and property managers will trade free-rent in exchange for a tenant to look after the place, collect rent, do maintenance repairs, and essentially ?manage? from within the complex. This can be an excellent way for a young person to learn the investing game without losing any money (and actually making some).
Make Money By Lending Money
Lending money is one of the oldest, and most profitable, businesses on the face of the earth. As a good friend of mine once said, ?You aren?t making money until your money is making money.?
68.) Hard Money Lender - A hard money lender is a person who lends money for the acquisition and/or improvements to an investment property ? based almost entirely off how good the deal is.? If you are looking for a way to earn significant returns on your money without needing to actually own the property, consider becoming a hard money lender.
Make Money When You Pay For Real Estate Investments
Real estate investing requires money, but doesn?t specify who?s money.? There are many ways to pay for investments and the list is only limited by your imagination and creativity.
69.) All Cash - If you have the cash, buying property with no mortgage attached can be a very stable and safe return on your money. While the returns may not be as great as when using leverage (like a mortgage), the security is often worth it for many investors.? Owning a property mortgage-free also enables you to sell on contract whenever you?d like.
70.) Seller Financing - If a seller owns a property free-and-clear (no mortgage), they often times will be willing to finance the sale themselves. This enables you to buy a property without the hassle and costs of going through a bank or other lending institution.? This is often an excellent way to acquire larger apartment complexes or commercial buildings, as the owners may want to continue receiving an income but not want the hassle of dealing with tenants.
71.) 20%-25% Down Conventional Investment Mortgage - This is the classic method for buying a real estate investment through a bank. Come up with 20-25% down payment and the bank will finance the rest.
72.) 20%-25% Down Conventional Personal Mortgage - This is similar to the above method, but you can often get a better interest rate if the property is your primary residence. This works best for duplexes, triplexes, and four-plexes.
73.) 3.5% Down FHA Mortgage- If the home is your primary residence, you can often use an FHA government insured loan that requires (currently) just 3.5% down payment. Again, this is only on your primary residence. This is applicable for single family homes up to four-units.
74.) 3.5% Down 203K FHA Remodel loan - The FHA also has a loan program for buyers who want to buy a property that needs work to fix it up. The minimum down payment is (currently) just 3.5% of the total loan amount, and you are allowed to borrow the costs associated with remodeling the home ? both labor and material. This can be an excellent way to build substantial equity in a primary residence without needing to have a lot of money upfront.
75.) 10% HomePath Investment Mortgage- These loan types are only available on Fannie-Mae backed bank REOs, but can allow an investor to purchase the home for just 10% down payment with other benefits.
76.) Small Partnerships - Partnerships are an excellent way to invest in real estate, where two parties (or more) join forces and bring their talents, resources, and experience to the table to make a profitable investment. Perhaps you don?t have the cash to buy an investment but have the time and your friend has the cash but no time ? you can join forces and help strengthen the deal and make good money.
77.) Real Estate Syndication - When multiple parties join forces to buy a property it is known as a real estate syndication. This is an excellent opportunity to purchase large properties such as apartment complexes, shopping malls, or warehouses. There are stricter laws governing syndication, so be sure to consult with a real estate attorney.
78.) Use a Home Equity Line of Credit (HELOC) - If you have significant equity in your own home, you can often get a line of credit based on that equity. That money can then be used to finance almost any purchase, including residential property. This is a great way to finance fix-and-flips or to get the money needed for a down payment on a larger purchase. A HELOC is generally very low interest, but variable.
79.) Use a Home Equity Loan - Similar to the HELOC, the home equity loan is (usually) a fixed-rate second mortgage on your primary residence that you can use to purchase anything you?d like ? including real estate.
80.) Small Business Loans - Banks often will finance a line of credit or loan for small businesses- and this can include a real estate investment company.? Many banks (especially small, local banks) will even tailor a loan program just for you that help you finance properties.
81.) Self-Directed IRA Investing - Many people have IRA?s, but few know that you can actually use your IRA to invest in real estate.
82.) Whole Life Insurance - This little-known strategy can actually have a significant impact on your investing career. If you have a whole life insurance policy, talk to your insurance agent about how you can borrow money against it to invest in real estate.
83.) Using Hard Money - Hard Money Lenders loan money based primarily on the Loan-To-Value of a property. While the points and fees can seem high, they are often the best method to quickly finance a property. Be sure to always have an exit strategy, as hard money loans are typically good for less than two years.
84.) Using Private Money - If you have friends, relatives, neighbors, or others who are looking for a better interest rate than the 1% or so they get from a bank CD or saving?s account, they may be interested in lending that money to you to finance your acquisition.? Generally, private money is based off the relationship more than anything, but still secured by the loan-to-value of the deal. This is one of the best ways to finance real estate, but use caution when there are personal relationships involved.
Make Money When Selling Investment Properties
Selling properties can net you a lot of cash ? but can also cost a lot in fees, commissions, and taxes. The following is a list of ways you can make money when you sell.
85.) 1031 Exchanges - In the US, when it comes time to sell, you can often avoid paying taxes on your profit by reinvesting that profit into another similar investment. This is known as a 1031-exchange.? There are strict rules that govern this transaction, so be sure to seek professional advice before embarking on this journey.
86.) For-Sale-By-Owner Selling - In today?s world of advanced technology, it is possible to sell a home without using a real estate agent. While I generally do not advocate this route, many investors have found success and significant cost savings by selling the home themselves.
87.) Flat Fee Selling Agents - There are many companies out there that will list your property for a set fee (from $99 ? $1000) plus the buyer?s agent commission (3-3.5%) rather than the typical 6-7% due on normal transactions. The effectiveness of this strategy largely depends on your market.
88.) Become the Seller Agent - Getting your real estate license does not require that you become a real estate agent. Often times you can save thousands of dollars by listing the property yourself.
89.) Carry A Contract- When you sell, you can often defer all the taxes due plus receive a monthly income by selling on contract to a worthy buyer. This can also enable you to get a premium price for the property. Be sure to collect a sizable upfront down-payment and screen your buyers very carefully.
90.) Carry a Second - While more popular in the past, this method is still a viable option to help close a deal. You can sell a property but be willing to carry a ?second mortgage? at a higher interest rate. For example, the buyer puts 20% down, the bank funds 70%, and you fund the remaining 10% with a second mortgage on the property.
Make Money By Teaching/Sharing Information
Finally, if you have experience in real estate investing you can make additional income by sharing the knowledge you have.??
91.) Consulting ? If you are experienced in real estate investing, perhaps you can share your information, help others, and make a decent side income while doing it.
92.) Blogging ? Creating a blog and discussing your real estate adventures can be a good way to organize your thoughts, build relationships with other investors, share your knowledge, and even build your list of lenders or buyers.
93.) Retirement Specialists -A retirement specialist is similar to a consultant,? but focuses primarily on helping individuals invest in real estate to achieve their retirement goals.
94.) Author ? Many investors choose to share their knowledge through writing and publishing a book. With the emergence of Amazon and other e-book providers, this is becoming significantly easier to do for anyone with a computer and a love of writing.
95.) Infomercials ? If you really want to explode your investing reach, you can rent space on a television network to gain followers or sell a informational product. Cheesiness optional.
96.) Public Speaking - Teaching others through speeches can be a great way to build your investment business and share what you know, while establishing yourself as an expert in the field.
97.) Podcasting ? A relatively new medium, Podcasting brings the ability to create a radio show down to a level where anyone with a computer and microphone can experience.
98.) Talking TV Head ? If you?re especially experienced and love being in front of a camera, television networks like CNN, Fox, or MSNBC may be interested in knowing your perspective on trends in real estate.
99.) Full-scale Guru ? Please? just don?t.
And Finally, Number 100?
100.) Get Involved In the Community! ?Talk to other investors. Subscribe to investor newsletters and blogs ? like Bigger Pockets. Call or Email us for more information.
Source: http://thehagleygroup.com/the-hagley-report/100-ways-to-make-money-in-real-estate/
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