February 10, 2012

6 Ways To Invest In Real Estate

There are many ways you can invest you money into real estate. The first question I must ask you is "What type of investing you would like to do?"

When I ask that question most people respond in a similar manner "I just want to make some money!" So I have highlighted the top 6 ways you can earn income in "Real Estate."

1. Make Money Monthly (Positive Cash Flow)

You can buy a property and become a landlord. This doesn't necessarily mean you deal with tenants. There are plenty of management companies that will do that for you at a nominal rate and/or fee. Majority of the time the rate and/or fee is a percentage of the rent that is collected on your behave.

You must buy a property and structure the deal so that the mortgage payment, plus your total property expenses are less than the amount of income (rent) you are receiving. Hence the term "Positive Cash Flow"

When calculating positive cash flow, DO NOT forget there are annual tax benefits to owning real estate.

2. Flipping (Buying and Selling)

The idea here is simple: buy a property for less than it is worth and re-sell it for the appraised value. You can buy a distressed property that is in need of improvements or from a distress property owner who needs and/or wants to from owning the property.

When you buy a property that is in need of improvements, to make the most money you will want to update the property but do not go overboard. Regardless if you do the work, or hire someone you will need to calculate your cost to improve the property and holding cost. Holding cost are the expenses of owning the property during the time of repairing the property until the property is sold. These cost include property taxes, any mortgage payments made, utilities and normal maintenance such as yard care and home owner association dues (HOA).

When you buy property from a distressed owner, often the property is fine but the owner has either fallen behind in mortgage payments and/or taxes, or does not want the property for other reasons such as relocation, divorce, probate, etc. In this situation, you payoff the owners debt, take over the property and sell for a profit. Obviously the debt needs to be lower than the market value for you to profit.

3. Lease Option

This less common method involves controlling the property without taking title. You lease the property and either sell the property or lease to another tenant until the property sells. This one is a bit more complicated and has some drawbacks, such as the inability to depreciate your lease, but you can reap big profits.

4. Buying Tax Liens

Property in default for back taxes can be purchased from the government. You simply place a deposit as designated by the government and sit out the waiting period. If the taxes are not paid, you get the property. Oh, in the meantime your money earns interest and you are guaranteed by the government not to lose a dime! Check with your local city and/or state for the amount of time you must wait before you can actually take possession of the property.

5. Private Lending

Individuals are allowed to finance so many properties per year without the regulations of becoming a mortgage company. This is a great way to invest passively in the real estate market. By holding a first deed of trust, your money is secured by the property, and you can charge more interest than you would otherwise earn with a typical safe passive investment such as CDs.

6. Pre-Construction:

Buy property direct from builders before they are built. You lock in a wholesale price and market the property upon completion. This is a good opportunity in many areas. You have no tenants to worry about and no mortgage payments during the construction.

So there are six choices for you to start making money in real estate! Hope this was helpful to you. Now go out and purchase any and everything you can.


If you have any questions, please call me
9am - 7pm, 7 days
Dante Walker - Posh Realty
(951) 234-7674 or (323) 642-7674. I'm here to help you!

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