6 Ways to Start investing in real estate – No matter your income
The real estate investing world is vast but profitable.
And there are a number of ways to do it.
And there are a number of personalities that’ll fit into each category of real estate investing.
So in this article, we’ll dive into the top 6 ways to start investing in real estate today no matter what kind of income you have.
Let’s get started…
Real Estate Investing for High-Income Earners – Extreme Passive
For those sitting comfortably on a higher income bracket, the thrill isn’t always in the hustle and grind of real estate, but in the seamless magic of money multiplying with minimal effort. Time may be scarce, but with funds to spare, you have the luxury of choosing the most hands-off investment strategies in the real estate universe. Here’s the lowdown on some extreme passive real estate investment avenues tailored just for you:
1. REITs (Real Estate Investment Trusts)
REITs are a dream come true for those who fancy the idea of earning from real estate without the nitty-gritty of property management. Here’s what you need to know:
– What is a REIT? Think of REITs as mutual funds for real estate. These trusts own or finance income-producing real estate in various sectors, from apartment complexes to hospitals and hotels.
– The Numbers: With REITs, you can typically expect returns in the ballpark of 6-8%, depending on the market and the specific trust.
– The Perks: No landlord duties, diversified exposure to real estate, and the beauty of liquidity – you can sell your shares in a REIT just like you’d sell stocks.
-How to find them: Google Reits. There’s a whole number of them. The one we recommend is Fundrise; Providing a number of strategies.
2. Private Lending for Local Flippers
Have cash and love the idea of earning handsome returns without lifting a finger? Lend it to real estate flippers:
– How it Works: You’re the bank here. You lend money to investors looking to buy and renovate properties. Once they flip (sell) the property, they repay the loan with interest.
– The Numbers: Acting as a private lender can net you an annual interest of around 9-12%. Not too shabby for a purely passive venture.
– The Perks: You don’t have to worry about tenants, toilets, or termites. You just own the paper (the loan), and the interest flows in.
– How to start: Go to local REIA’s and find flippers there. Ask local agents if they work with any flippers.
3. Syndication Deals
Imagine owning a slice of a grand apartment building without having to deal with tenants or maintenance. That’s what syndication offers:
– *How it Works: A group of investors pools their money together to buy a property, typically larger projects like apartment buildings or commercial spaces. A lead investor or syndicator manages the property, while passive investors earn returns.
– The Numbers: These deals typically yield between 6-8%.
– The Perks: You own a share of the property, get a slice of the rental income, and potentially benefit from the appreciation, all without the day-to-day hassles.
– How to start: Go to local REIA’s. Network with other investors.
There you have it, the crème de la crème of passive real estate investment options for high-income earners. Dive into the one that piques your interest, and let your money work its silent magic.
Real Estate Investing for High-Income Earners – Medium Passive
If you’re the kind of investor who enjoys the thrill of a hands-on approach, yet still cherishes a semblance of passivity, then welcome to the medium passive territory of real estate investing. It’s about being in the driver’s seat but without having to build the car from scratch. Let’s delve into some methods that offer control, promise higher ROI, and still offer the leisure of passive income.
1. Buying Rentals from Wholesalers
Wholesalers are like the treasure hunters of the real estate world, and they’ve got the maps to buried treasure – properties below market value.
– How it Works: Wholesalers find underpriced properties and contract them. They then sell these contracts to you for a markup, but you still get the property below its actual market value.
– The Numbers: Securing a property below its market value means instant equity and potentially impressive ROI.
– The Perks: Off-market deals and immediate equity.
How to Get Started:
Network at local real estate investor meetings or associations. Many wholesalers frequent these gatherings. Online platforms like BiggerPockets can also connect you with wholesalers in your target areas.
2. Working with an Agent to Make Offers
Teaming up with a real estate agent is like having a local guide when you’re trekking unknown territories.
– How it Works: Partner with an agent, share your criteria, and let them scout, evaluate, and present potential rental properties. They’ll also aid in the offer and purchase process.
– The Numbers: The ROI can vary, but a skilled agent can lead you to properties with solid return potentials.
– The Perks: You benefit from the agent’s market knowledge, negotiation skills, and network.
How to Get Started:
Seek referrals from friends or colleagues for reputable agents with investment property experience. Alternatively, platforms like Zillow or Realtor.com can help identify agents with high ratings and reviews in your area.
3. Turn-Key Companies: The Ready-to-Roll Rentals
Turn-key real estate is like buying a cake off the shelf rather than baking one. It’s ready, and it’s sweet.
– What is Turn-Key? Companies that provide this service buy properties, refurbish them, place tenants, then sell them to investors as ready rentals.
– The Numbers: You might pay a bit more upfront, but you’re buying a cash-flowing asset from day one.
– The Perks: Sidestepping the challenges of renovation and tenant placement.
How to Get Started:
Local Real Estate Investor Associations (REIAs) often have turn-key providers as members. Attend a few meetings, network, and ask around. Googling “turn-key real estate companies in [your area]” can also yield results. Always do due diligence before finalizing any deal.
Each of these medium passive strategies is like a different flavor of ice cream. Some might prefer the adventurous route of wholesaling, while others might lean towards the tried-and-tested taste of turn-key investments.
Real Estate Investing for High-Income Earners – Active
Okay, adventure seeker, we’re heading into the thick of things now. The realm of active real estate investing is not for the faint of heart, but oh, the rewards it promises! If you’re brimming with entrepreneurial spirit, have a penchant for hands-on work, and aim to reap the highest returns, then buckle up. This part of the journey is exhilarating, challenging, and potentially the most lucrative.
1. Flipping/Rehabbing
Flipping houses isn’t just the stuff of reality TV; it’s a tangible and robust strategy in the real estate world.
– How it Works: Buy a property below its potential market value, renovate, upgrade, and then resell for a profit.
– The Numbers: The margin between your purchase price (plus renovation costs) and the selling price is your profit. Aim for properties where the numbers make sense. Each market is different but if in an average home price area, you’re aiming for $20k net profit an more. OR… aiming for at least 30% annual interest on your money
– The Perks: It’s hands-on, it’s thrilling, and success can mean hefty profits in a relatively short time.
How to Get Started:
Research neighborhoods and market trends. Connect with contractors and real estate agents familiar with renovations. Also, consider starting small with cosmetic flips before diving deep into major rehabs.
2. BRRR
Buy rent refinance repeat.
This is the method that has launched a lot of real estate investors.
If you have cash to buy one property… you have the means to start your real estate investing career.
The key here is “refinance”.
If you can do a “Cash out refinance” you can move that money into the next Brrrr deal with no problem. You just that to ADD VALUE to your deal so that it appraises for much more than you bought it for.
3. Direct to Seller – Finding Off-Market Deals
In a market swamped with investors, standing out by sourcing your own deals can be a game-changer.
– How it Works: Bypass the middlemen. Connect directly with homeowners looking to sell. Negotiate a win-win price.
– The Numbers: Buying off-market often means less competition and potentially better deals.
-The Perks: Direct negotiation, more control, and the potential to unearth hidden gems that others might overlook.
How to Get Started:
Start with driving for dollars – a strategy where you drive neighborhoods looking for distressed properties. Utilize direct mail campaigns targeting absentee owners or those with delinquent property taxes. Also, consider leveraging online platforms like Craigslist or even Facebook Marketplace to scout potential leads.
Active investing is, undoubtedly, the roller coaster of the real estate world. It offers highs (read: high returns) but demands time, energy, and resilience. Yet, for those willing to dive deep, navigate the challenges, and play their cards right, it’s an avenue bursting with potential, both in terms of financial gains and personal growth.
Real Estate Investing for Low-Income Earners – Wholesaling
Picture this: you’re standing at the base of a towering mountain, gazing up at the lofty peaks of real estate investing. From here, it seems like only those with fat wallets can make the climb. But here’s the twist: while they might have the financial gear, you have something equally valuable — time. Yes, time, the great equalizer.
When financial resources are limited, the currency of hard work, dedication, and time can pave your way. In the world of real estate investing, having more hours to dedicate can be a massive advantage, particularly when you venture into wholesaling.
Wholesaling is not for the lazy Sunday afternoon investor. It’s active, dynamic, and at times, feels like a high-paced thriller movie. It’s about connecting dots, sealing deals, and most importantly, leveraging time over money. The best part? The entry barrier, in terms of capital, is relatively low.
How Wholesaling Works
You’re essentially the middle person. Your task? Find undervalued properties, secure them under a contract, and then pass that contract on to another investor. You pocket the difference between the price you negotiated and the price the investor pays. No need to buy the property, renovate it, or even deal with tenants. Sounds simple, but it requires a keen sense for deals and a solid network.
Ways to Start Wholesaling
– Network, Network, Network: This is your bread and butter. Connect with experienced wholesalers, attend local real estate investor meet-ups, and join online forums. Your aim? Grow your cash buyers list and resources. The larger your network, the quicker you can move properties.
– Direct Marketing to Sellers: Consider strategies like ‘driving for dollars’, where you scout neighborhoods for potential distressed properties. Dive into direct mail campaigns, or even leverage digital platforms like Facebook Marketplace and Craigslist.
– Learn the Rehab Basics: No, you’re not renovating, but understanding the rehab process helps you estimate potential repair costs — a critical aspect when negotiating deals.
– Analyzing Deals: This is your compass in the wholesaling jungle. Understand the numbers, know the market, and most importantly, know when to walk away.
– Brush Up on Your Sales Skills: A significant portion of wholesaling revolves around negotiation. Whether you’re dealing with a distressed seller or a potential buyer, your ability to negotiate will dictate your success.
NOTE: There’s also the strategy of “reverse wholesaling” that’ll help you start wholesaling with no experience. It just takes finding the right person to be your buyer.
Wholesaling might seem like a labyrinth at first glance. Yet, with time (remember, your ace card?), persistence, and a sprinkle of hustle, it can be a gateway into the real estate world, even for those on a shoestring budget. Dive in, soak up knowledge, network like there’s no tomorrow, and remember: in the real estate realm, determination often trumps dollars.
Essential Tools for the Modern Wholesaler:
– DealMachine App: Think of it as your GPS to finding potential property deals. While driving around, you can pin distressed or vacant properties, estimate their value, and even send out postcards to owners, all from the app.
– PropStream: A treasure trove for a wholesaler! It lets you pull detailed property data lists. Whether you’re hunting for foreclosures, bank-owned homes, or properties with tax liens, PropStream has got your back.
– BatchLeads: Once you have your list, how do you reach out? Enter BatchLeads, a platform that allows you to initiate cold calls, set up ringless voicemails, or even launch text campaigns.
– SkipForce: Ever got a property lead but struggled to find the owner’s contact? That’s where skip tracing comes into play. SkipForce is your detective tool, helping you locate hard-to-find property owners.
– Investor Fuse: Think of it as your personal assistant. A CRM designed specifically for real estate investors, it streamlines lead management, ensuring you never miss out on a potential deal. Consider our top ten CRM’s here.
– Carrot: You’ll need an awesome-looking website to attract motivated leads. Consider our review of the top website builders here.
– ReiSift: If you’re pulling lists, this is the best tool for not only cleaning but stacking motivation so you get a top-performing list.
Real Estate Investing for Low-Income Earners – Creative Finance
Ah, the magic of creative financing. The canvas where imagination meets real estate, and the palette is teeming with strategies that don’t need deep pockets. Let’s paint the picture.
For a moment, think of real estate not as houses and lands, but as a grand game of chess. Now, in chess, it’s not about the pieces you start with, but how you maneuver them. Similarly, in the realm of creative financing, it’s less about the amount of money you have and more about understanding the plays.
While wholesaling calls for a knack in marketing, negotiation, and quick deal turnarounds, creative financing is a step further. It demands not only the skills of a wholesaler but also a deeper understanding of real estate intricacies.
The Techniques You’d Want in Your Creative Financing Toolkit:
1. Seller Financing: Picture this – the seller acts as the bank. Instead of you getting a loan from a traditional financial institution, the seller agrees to let you pay the property price in installments. It’s a win-win: sellers might get a higher price for their property, while you, the buyer, don’t have to jump through the traditional lending hoops.
2. Lease Options: It’s like dating a property before marrying it. You lease a property with an option to buy it later. This is great if you believe the property’s value will rise, or if you want to experience owning a property before fully committing.
3. Master Leasing: Think of this as being the middleman. You lease a property from an owner and then sub-lease it to someone else, often at a profit. You don’t own the property but control it and benefit from the cash flow.
4. Subject-to Transactions: A little more on the advanced side, this involves buying a property “subject to” the existing mortgage. The loan remains in the seller’s name, but the property’s deed transfers to you. It’s a nifty way to buy without getting a new mortgage.
Real Estate Investing for Low-Income Earners – Hard Money Loans
In the vast universe of real estate, it’s a common misconception that having truckloads of cash is the only way to play the game. But, just like there are multiple ways to climb a mountain, there are diverse paths to property ownership. For those without Everest-sized bank accounts, but armed with grit, ambition, and perhaps a keen eye for spotting potential, enter the world of hard money loans.
You see, it’s kind of like the fairy godmother of the real estate realm. No, there isn’t any magical wand or pumpkins turning into carriages. Instead, hard money lenders can swoop in, evaluate the potential of the deal you’ve got on your hands, and if it sparkles enough, they might just back you up.
Here’s the thing about hard money loans: They focus on the asset. Traditional banks gaze intently at your credit score, employment history, and other personal factors. But hard money lenders? Their eyes are locked onto the value of the property you’re aiming to invest in. They’re mainly interested in the potential return on investment (ROI).
Why might one consider this route?
1. Speed: Hard money loans can be processed faster than traditional loans. In the fast-paced world of real estate flipping, where “you snooze, you lose” can be a literal scenario, this speed can be golden.
2. Flexibility Unlike the rigidity of traditional bank loans, hard money lenders often offer more flexible terms. They can customize the loan terms based on the project, which might be a lifesaver for unique or unconventional deals.
3. Short-Term: These loans are typically for shorter periods, like 12 months. Ideal for those looking to flip properties quickly without getting tangled in long-term financial commitments.
However, before jumping in, it’s essential to note that the interest rates for hard money loans can be higher than conventional bank loans. It’s the price for the speed and flexibility they offer.
So, make sure your deal has enough potential profit to cover the loan and then some.
In Every Income Bracket, There’s a Real Estate Route Just for You
Ah, real estate. It’s not just a playground for the well-heeled, clad in their thousand-dollar shoes. It’s a vast, sprawling territory with opportunities and avenues for everyone, from those counting pennies to those tossing around bundles of banknotes. The beauty of real estate investing is its inclusivity. No matter the size of your wallet or the girth of your bank account, there’s a route, a pathway, a unique journey tailor-made for you.
For the determined dreamer with more ambition than dollars, there’s wholesaling and hard money loans. These paths require a sharp eye for potential and a tenacity to make things work, even when the chips seem down. On the other end, high-income earners have avenues that allow for active involvement and potential maximization of ROI, with strategies like flipping properties or diving deep into off-market deals.
The middle-ground? It’s rich with opportunities, too. From creative financing to leveraging partnerships, it’s all about strategy and making the most of what you’ve got. And then there’s the vast realm in between, where hybrid models of investment allow for varied involvement and risk.
The truth is, real estate isn’t a one-size-fits-all industry. It’s a mosaic, with pieces of all shapes, sizes, and colors coming together to create a stunning picture. Each piece, regardless of its size, adds value to the overall masterpiece.
So, no matter where you stand financially today, remember: in the diverse world of real estate investing, there’s a spot, a niche, a corner just waiting for you. All it requires is the vision to see it, the courage to chase it, and the perseverance to make it your own. Go on, carve out your piece of the real estate pie. It’s waiting, warm and delicious, ready for you to take a bite.