There are so many areas of real-estate to invest. All you have to do is choose one. Most individuals give up on their investor ambitions well before they even get started. Investing in real-estate is not a get rich quick scheme, it is a full time job like any other adventure. Below I will explain different ways to invest and give you a brief description of each.
1. Note buying
2. Tax sales
3. Rental property
Note buying has been around ever since people realized they could create an IOU for property. When you borrow money from the bank to buy a house they make you sign a piece of paper called a promissory note (IOU). This paper says you owe a certain amount of money to the bank, due in a certain period of time. Sometimes the bank decides they do not want to wait thirty years to get their money back (with interest). The bank can then decide to sell that note to someone else.
For example, John borrows money from Wachovia to buy a house for $100,000 at 7% interest for 30 years. John has paid his mortgage faithfully for 5 years and Wachovia decides they do not want to wait 25 more years to get their money back from John. Wachovia then sells the note to SunTrust Bank for $80,000. This means that SunTrust Bank will give Wachovia $80,000 and Wachovia will assign the note over to SunTrust Bank. John now makes payment to SunTrust Bank because they currently own the note.
John still owes whatever is left on that $100,000 loan. SunTrust Bank will now receive payment from John for the next 25 years, or until SunTrust Bank decides to sell the note to another mortgage company. Mortgage companies can sell these notes because the interest that John is paying adds up. Within the first few years John’s interest has paid back the $100,000, and the bank starts to receive nothing but pure profit from that point on. Investors can make money by negotiating the deal between buyers and sellers.
If you know Wachovia will takes $75,000 for a note and SunTrust Bank will pay $85,000 for the same note, then you can structure the deal between the two and keep the difference which would be $10,000
Tax sales is another great way to invest in real-estate. Everyone pays taxes on property they own in the United States. When these taxes are not paid the county in which the property resides will put the property up for public auction, this enables the county to get the back tax owed on the property. Your probably thinking who let’s their property be auctioned off. On some occasions people who die may own property free and clear.
They may also have no heirs to transfer title of the property over. The property may sit for a couple years without anyone paying the taxes on it, then the county decides to auction off the property at some point in time. At auction these properties can sell for less than one hundred dollars up to several thousand. After the property is brought at auction the original owner or heirs of the deceased owner has a small period of time (approximately 1 year) to take possession back. But, not before they give you a percentage of interest.
The owner will have to give you whatever you paid for the property and a percentage as interest (which varies from state to state). If the owner does not pay then the property is yours to keep for whatever price you brought it for at auction. During the redemption period you can rent the property and make money until you can retain full possession legally.
Having rental property is the most common form of investing in real-estate. Be sure you buy low and cash-flow at least $200 a month. Buying rental property at market value is not a smart move. Find distressed property and purchase it well below fair market value. A good deal is property with a lot of equity behind it and good monthly cash flow. If you can’t find motivated sellers yourself consider buying from a wholesaler. They specialize in finding great deals, and normally leave the equity in properties for the landlords they sell to.
As I said above there are many ways to invest , you may even try all three. Get a system going for one before you start on another. Once you get all three systems running like clockwork there are endless opportunities to the amount of money you can make. The key to success is hard work and creativity.