Perhaps the most common phrase bandied about a Real Estate Investment Club is “There’s more than one way to skin a cat!” In fact, savvy real estate investors know you can invest for dazzling profits in real estate without ever having bought a property. Here are nine of the top ways:
1) Bird Dog – A lot of investors get their start this way. A bird dog starts by getting to know real estate buyers – foreclosure investors, rehabbers, landlords – and finds out what kind of properties they like to buy. Then the bird dog searches for deals that the buyer will be interested in. If the bird dog refers a seller to the investor and a purchase is made, the bird dog gets a “finders fee”, normally $500-$2000.
2) Wholesaler – A step above the bird dog, the wholesaler finds a great deal and ties the property up with a contract. Then they contact investor for the property. The investor buys out the wholesaler’s rights to the transaction – normally paying the wholesaler anywhere from $2000-$50,000 for selling out their deal.
3) Option – Similar to what a wholesaler does, someone investing in options will pay a property owner a fee to get an exclusive right to buy. As time goes buy the option investor finds a buyer who wants to purchase the property. Ihe option-holder sells out to the buyer, normally at a nice profit.
4) Lease to Own – You can gain control of a property and not own it, by signing it to a long term lease. While many people are used to 12-month leases, some investors will go for leases of 3-5 years or more. Then they’ll sublet the property – often on an arrangement known as a “sandwich lease” where the tenant pays more than what the investor pays the property owner. The investor profits from the difference.
5) Master Lease – A powerful investment technique with apartment or commercial buildings, the investor signs a lease making them responsible for the operation of the entire property, with set payments. The investor then works to raise rents, and pockets the profits.
6) Tax Liens – In most areas you pay off the unpaid taxes of a property. You receive a lien and get excellent interest paid to you once the tax lien is paid off. If it is not paid off (normally in 3-years) you can foreclose on the property, theoretically gaining ownership on a property for pennies on the dollar.
7) Hard Money Lender – Some of the smartest people loan money to real estate investors, rehabbers and construction companies with “Hard Money Loans.” These loans are made against a damaged house to allow repairs to be made, and are often at high interest rates, typically 12%-20% or more.
8) Discount Note Investor – Many owners take mortgages for part of the sales price of their property. But in a year, when they need cash, they have to sell their $10,000 loan at a discount. A savvy investor cashes the mortgage holder out, and often ends up earning a high interest rate.
9) REITS – For the least adventurous – Real Estate Investment Trusts are essential mutual funds that invest in real property like apartment complexes, shopping malls, office buildings and mobile home parks. they trade very much like stock.
So you don’t have to even own property to invest in real estate. In fact, thousands of investors make fortunes never taking a real estate property into their name. As they say, “There’s more than one way to skin a cat!” and there is more than one way to invest in real estate without owning property.