Becoming an investor today is much easier than it was a few years ago: you don’t have to have a huge accumulated capital to invest, walk around in a suit and follow the numbers on the stock exchange. All true, however, real estate investing requires some serious work on the part of the investor, unless of course, you want to drain all the money on the first 2 transactions. The best part is that today it is possible to engage in real estate investing even without having your funds at all. How? There are 6 working and effective ways.
In remodeling houses and their subsequent sale-flipping, the investor has 3 main items of expenditure:
- The purchase of the property itself;
- Repair and furnishings;
- Maintenance of the house and the cost of selling it.
Typically, banks and lenders can only help with the first item. In addition, if you take out a loan to buy a house and separate funds for maintenance and repairs, you will need to pay quite large sums at the same time. Therefore, it is better to find money from one source.
- Investor partners. This is thought to be the easiest way to find someone who will invest for you. This can be relatives, friends, acquaintances, business partners, as well as other investors or property owners who rent it out. Consider who in your community might be interested in earning extra money and have the means to do so. Sometimes these partners come from very unobvious places – a doctor, a neighbor, or a colleague at work. The ideal scenario for such a deal: partner invests the money, you take care of all the work. Accordingly, the income from the old house is divided in half. However, everything is individual and depends on the particular partner and the offer. For example, someone can share their savings with you in blue world city islamabad. Offer the prospective partner a lucrative percentage to interest them, but don’t forget about your income, even in the worst-case resale scenario. Here, in contrast to credit companies, you can regulate your terms, payments, and interest rates.
If you are just beginning your career in real estate investing, in the initial stages it is better to look for a partner who is already working in this field or, for example, has exchanged a car for real estate, also has good experience, knows why every truck driver needs to keep their check stubs. That is how you can get not only start-up capital, but also learn a lot.
- Special lenders. Companies that are willing to give you the full amount you need. Your income and plans don’t matter to them. They will gladly give you a large loan because they are interested in a high-interest rate and extra points. If your plans are for a quick sale and a short tenure, this is an option worth considering. If you want to do construction for six months or more, it is not the most suitable source of financing, because the average interest rate of such companies is from 14 to 20%. So the less you own the house, the less you pay, respectively, the longer the term of ownership is, the more you pay, and therefore the less your income. For example, if you borrow $100,000 at 16%, and from purchase to sale you need half a year, the interest will be about $8,000. Accordingly, if it takes a year to resell, the interest will already be $16,000. And that’s not counting the extra points that many companies charge for using their services.
- Buying without buying. When you resell a home without actually buying it. You negotiate the terms of purchase and price of the property with the seller, find an investor who buys the house, and does the renovations. You make money on the difference between the value of the property and the price to the end buyer, or you get a fixed rate of 5-10% on the sale of an already renovated house. Thus, you are not invested in the purchase and are not involved in the preparation. Your task is to bring buyers and sellers together, and for that, you take your percentage.
- Crowdfunding. You buy a house with the help of a group of investors. Each of them contributes some part of the necessary amount and receives an additional percentage after the sale. The disadvantage of this source of financing is time. It can take months to raise the necessary funds.
- Seller. The seller of the property can act as an investor. Offer him your services for the “transformation” of his property, as well as a better selling price. Often sellers are more interested in a good deal than selling here and now. Most importantly, don’t forget about your income and calculate a financial plan for each property. There are many advantages to such a scenario: you do not need to look for an investor, the seller is initially interested in selling the property, and you do not have to pay commissions to real estate agents, working directly with the seller.
The real estate market is mobile and active. It is possible to find a potential buyer or tenant for each object, the main thing is to be able to adapt quickly to new conditions and make balanced decisions.