Earning money in real estate is not difficult, but it’s also not for the faint at heart. The savvy investor can break real estate down to three simple components: Finding the deal, funding the deal, and exiting the deal.
1. Find the deal
There are literally millions of properties on the market. Metro areas like Detroit and Chicago have huge inventories of homes and commercial properties. Add to that the government’s massive inventory and you’ve got hundreds of thousands of properties that are going under-utilized.
Here’s the thing: 99.5% of these properties are not suitable for or desirable to your typical real estate investor. Your job as a real estate entrepreneur – whether novice or seasoned – is to find the needle in the haystack. Well, how do you do that?
Jamming your hand into a haystack in search of a needle will likely result in you pricking your fingers against the hay, and your search may still turn out to be fruitless. If you are lucky, you happen across the needle without drawing blood. But without a strategy, it’s far more likely you will emerge from the search tired, bloodied and unsuccessful.
It’s the same with real estate investment. It’s a waste of your precious time to go in blindly searching for properties with no real strategy for finding the right properties. Lack of strategy is the primary reason over 97% of people who buy investment courses never actually buy a single property.
Over the course of the last 15 years, I created a proprietary system wherein I have been able to identify not only the haystack that contains the needle, but how to find the needle (i.e. the perfect investment property) quickly. I can guide you through the process with my three-month immersion course. You will come out on the other side with real estate expertise and not just knowledge.
2. Finance the deal
Inexperienced investors always assume that in order to earn money in real estate the heavy lifting is finding the money. In reality, finding the deal is the most important step in the three-step process. It is also the hardest part. When you find the right deal, you may have to shop around a bit, but you will always find the right partners to help you acquire, and if need be, rehab the property. Finding the money is always the most important part of earning money in real estate.
Believe it or not, real estate investors have many options when it comes to financing real estate deals. If you choose to pursue traditional bank loans, you can. But a bank loan is not your only option. Let’s just list a few here:
- Partnerships
- Owner financing
- Traditional bank loans
- Private lenders
- Peer-to-peer lending
- Alternative lenders
- Hard money loans
- Government loans
If you are willing to do your homework, you can find the right financing option for your real estate deal. Let’s just look at one viable option – hard money loans.
Before you get antsy and start dreaming up images of Tony Soprano and hoodlums coming to your door at night, let me clarify one thing: hard money loans are regulated. Depending on your stance, hard money lenders may or may not fall into the category of “alternative lenders,” but most alternative lenders have much shorter repayment terms and far higher interest rates than hard money lenders.
Alternative lenders essentially offer short-term loans with usury-level interest rates that can reach as high as 49.99%. These include merchant cash advances, title loans and payday advances. Repaying the loan may require daily, weekly or monthly withdrawals from your bank account over anywhere from 1 month to 3 years.
Hard money loans, on the other hand, typically offer repayment terms of 6 months to 9 years and interest rates hover somewhere between 9% and 16% – a very different animal altogether. But even if you skip over the hard money loan path, you can still pursue a half dozen other ways to finance your real estate investment deal.
3. Exit the deal
If your entry is right, your exit will be fantastic. If you plan to sell, earning money in real estate requires you to buy under market and for a hefty profit. Sometimes you can sell under market and still make a hefty profit… and probably sell the property faster. As a property owner, you may choose a variety of ways to exit a real estate deal.
- You can sell under the market value of the property.
- You can sell at the market value of the property.
- You can provide owner financing.
- You can rent the property out.
- You can flip the property immediately.
- You can flip the contract itself, signing the property over to someone else before you ever make your first payment.
As a final note: Regardless of how you choose to exit a deal, In whatever way you choose to exit the deal, be sure to enter the deal with your end goal in mind. Know what your objective is with every opportunity you pursue. Then apply the three keys and enjoy success in real estate investing.
