If you’re an aspiring real estate investor, you may feel like you lack the capital, connections, and overall “know-how” to get started.
I don’t blame you.
Unless you have piles of cash and tons of free time, buying a bunch of investment properties probably doesn’t seem very practical — or possible, for that matter.
Here’s some good news: You don’t necessarily have to “buy” homes to invest in real estate.
And even better, you don’t need to fork over $20,000 for some scammy class that teaches you the “secrets” of investing.
Everything you need to know about taking your first foray into real estate investing can be found right here in this article.
Yep — you can learn how to make millions as a real estate investor in the time it takes to pop a bag of popcorn (or do both at the same time).
Become a Bird Dog
If you lack investable cash and know next to nothing about the real estate industry, begin your investing journey by bird-dogging.
What the heck does that mean?
Bird dogs are those who provide leads to investors. They pound the pavement in their local communities, searching for distressed or undervalued properties.
They listen to the gossip about who’s moving and who’s facing foreclosure — and they provide this vital intelligence to investors and firms across the country.
Many companies — mine included — happily pay bird dogs thousands of dollars each time an investment opportunity they delivered pans out.
As a bird dog, you’re accomplishing three key tasks:
- You’re making connections in the industry
- You’re learning about all the different ingredients that go into the investing process
- You’re making money you can put toward properties in the future
“Control” Your Destiny (No Money Down)
As I mentioned earlier, “buying” a property is just one way to invest in real estate. That’s the traditional route — one that requires upfront cash you may not have lying around.
Luckily, there’s a creative side to real estate investing that doesn’t have to require loans or down payments. Taking this route, you don’t technically “own” the properties you’re investing in. Rather, you have a “controlling interest” in them.
That’s the path I took as a 20-something with little cash to my name, and it helped me build a $300 million portfolio of more than 2,000 single-family homes. Sure, it’s highly illiquid — but…
- I’m seeing cash flow
- I’m shouldering much less risk, and
- I don’t owe a single penny to the banks
Here are the three creative deals I used most when building my portfolio — they’ll allow any aspiring investor to get started today:
Lease Option to Save a Home From Foreclosure
If a homeowner loses his job, falls behind on his mortgage payments, and faces foreclosure, you can do him a huge favor by working out a lease option.
You agree to temporarily transfer the mortgage to your name, catch it up on its overdue payments, and charge the homeowner rent in the meantime.
Then, once he finds a new job and gets his finances back in order, the “option” part of the deal kicks in: He can “buy” his home back from you at a fair and predetermined mark-up.
Say, for example, a foreclosure-facing homeowner still owes $100,000 on a $200,000 property.
You can take over the mortgage, charge him a rent rate that equals the monthly payment, make the back payments yourself (which, for argument’s sake, we’ll say costs you $3,000), and then a few years later, sell the house back to him for $120,000.
All told, you get to pocket $20,000 on a $3,000 outlay — that’s a 500%+ return on investment, all while buying under market and selling under market and helping someone save the equity a bank would have taken!
Land contracts are a creative way to get seller financing on investment properties — ones you ultimately flip for a profit. In this scenario, you’re dealing with people who own their home outright, but because of age or other circumstances, they can’t maintain it and need to move out.
They’re aiming for a specific price, but the house is currently very undervalued due to its condition. Here’s where you can swoop in and draw up a land contract that grants you control of the property.
You guarantee the owner you’ll sell the home by a certain date for the desired price, and from that day forward, he or she serves as your unofficial lender as you spruce the place up and elevate its price tag.
You agree on a time frame for the project and agree to swap your sweat and tears in work for some of the upside. For example, let’s say you guarantee a homeowner she’ll get $100,000 for her home, but you know it will be worth $150,000 after you install new carpets, bathroom, kitchen, landscape, and repaint all the walls.
Assuming the materials cost you $20,000 (plus some sweat equity, because you’re young and can DIY the labor), you’ll pocket $30,000 once the house sells!
Here’s another great way to bail out homeowners who are on the verge of foreclosure and profit from your generosity. A subject-to deal officially transfers their deed to your name and allows them to walk away unscathed even if they have fallen behind.
You assume responsibility for everything — back payments, monthly payments, taxes, upkeep, and more — and they get to move on with their lives debt-free. Though the homeowners end up seeing no return whatsoever from their properties, often, they’ll happily pounce at an opportunity to avoid catastrophe and save their credit.
Subject-to deals can lead to big-time paydays for investors. When you take over a delinquent mortgage, you’re gaining control of an asset with no money down and no bank loans in your name.
Then, once you catch up on the back payments, you can create a great cash flow opportunity and control the potential upside of the property.
You Don’t Need Money to Make Money
Entering the realm of real estate investing won’t be the easiest thing you ever do, but it’s certainly not the exclusive “need money to make money” world you may have thought it was.
After earning your wings as a bird dog, take a creative path to investing that requires little cash and builds lots of equity.
I’ll see you at the top.
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