EVERYONE WANTS TO INVEST IN REAL ESTATE, BUT NOBODY KNOWS HOW!
Real estate is known as the king of investments for two facts:
- The richest by far invest in real estate, which has given them impressive leverage to keep making more money.
- It is one of the safest investments that exists; Because the money you invest in real estate is backed by land, by a construction made of blocks, concrete, copper wiring, construction materials, among other things; and not just because of a contract or paper, such as the stock certificates of a company, in which you do not physically own anything of the company.
In short, real estate is an instrument to create a fortune or wealth safely and, depending on the investment strategy, in a relatively short, medium or long term.
If you are still not convinced of this, here is a list of celebrities get from Realestate Property News, that you surely know, who have extensive investments in real estate:
- Leonardo DiCaprio: investments in ultra-luxury properties with a value of + $ 20 million in Malibu, Los Angeles and Manhattan. A 0.54-hectare Palm Springs property offering short term rentals at an average of $ 3,700 per night.
- Kylie Jenner: 4 houses in Los Angeles with an average value of $ 5 million each, a mansion and other properties in the area.
- Johnny Depp: 5 penthouses in Los Angeles with an average value of $ 3.5 million each.
Of course, if you are reading this article, it is very likely that you do not have the financial resources that Leonardo DiCaprio, Kylie Jenner or Johnny Depp have; But there are other interesting options for people, like you and me, that can help us enjoy the benefits of this wonderful industry. You can also get ideas about the best hard money lender.
Therefore, without further ado, I share with you the 5 options to make money in real estate with little capital.
Image for post
- Buy pre-sale properties.
This is what most do when they want to invest in real estate; And the reason is because it is very easy and you do not need a lot of technical knowledge about the industry, but good advice and take good care of the times in which the operations are carried out.
When you buy a pre-sale property, what you are really doing is financing the construction company so they can finish the building / subdivision / complex. Developers, in order not to borrow so much money, or pay expensive interest to banks or investors, prefer to pre-sell the properties and that gives them enough cash flow to be able to pay the construction costs (and advance some of their profits). You can do this investment in trustworthy names like The Property Buying Company.
You can see the boom of pre-sale and pre-construction properties in major locations in the world, like the Greater Toronto Area. Developers have been building condos in Mississauga, townhomes in Richmond Hill, and residential properties in other neighbourhoods because it’s such a highly desirable location where real estate will continue to rise in value.
Normally they ask you for a minimum of 10 to 20% down payment, and the rest is financed by your mortgage loan once the construction company has completed most of the construction.
You can buy very cheap and with relatively little capital (up to $ 600,000.00 MXN for a 3MDP department).
You don’t need to be a real estate or finance guru. It is enough to advise you very well with a real estate professional you trust.
They are new and attractive apartments that can be resold relatively easily.
You depend on having an excellent credit history to obtain a mortgage loan at a good rate (usually a score of +750).
You will not see the return on your investment until you resell the apartment.
If it takes time to sell, consider that you will be paying your mortgage credit that, during the first 10 years, the payments are pure interest.
2. Buy mortgage auctions.
Before we get into this topic, I ask you to be very careful with these because there are many scammers out there who scam people with non-existent auctions.
Buying auctions is also a very easy and inexpensive way to make money from real estate; However, it is not recommended to do it as a first investment, since your knowledge and proximity to the real estate industry must be enough to avoid fraud and that you lose all your money in the first attempt. They are safe investments as long as you are well advised, have an excellent lawyer with extensive experience on the subject and have a very broad notion of the movements of the real estate market in the areas where you plan to invest.
Basically, your lawyer will give you a list of auction lawsuits and you will be responsible for making a decision to purchase rights, based on your market and financial analysis and your investment objectives. NOTE: property is not bought here … what you acquire is a transfer of litigious rights, which gives you the privilege of “fighting” the property by legal means in a court, but it does not make you the legal representative of the property.
Despite all this, you can buy assignments of disputed rights at 50% of the value of a property (or less), plus your attorney’s fees; And 2 things can happen: that you carry out the entire trial process until you adjudicate the property and can sell it to someone else through a mortgage loan, or that you resell the assignment of rights to another investor, at a higher price, obviously.
You can get properties for quite low prices, compared to the market.
If you are well advised, and you have the best lawyer with enough experience, they are very safe investments.
Not having the proper knowledge, and not being well advised, can lead you to lose your money.
There are many fraudsters posing as specialized law firms who ask for advance payments for fees or “sections” and then disappear with your money.
3. Sublet properties.
This is a gem of real estate, because with good time, money and collection management, it can be very profitable and leave you money month after month.
Subletting is, broadly speaking, that you rent your property from the owner and, in turn, you sublet it to someone else at a higher value than they charge you for rent. Therefore, the difference between income is your profit and it is money that month by month you will have in your bank account.
- It is relatively easy to carry out.
- You can start this business with zero pesos.
- There are markets such as industrial and commercial that allow you good profit margins.
- The money falls month after month to your bank account.
- You need impeccable time, money, collection and tax management.
- Not many owners are willing to work under the sublease scheme.
- You become the one responsible for delivering bills to the property owner.
- You must become a specialist in managing rental contracts so that the business can proliferate or have an expert lawyer on the subject who will advise you very well to protect you against any situation or demand.
4. Invest in funds or repair projects in Real Estate.
Personally, the best option because it does not imply hard work, nor that you specialize in some sub-world of the industry, or that you have to be dealing with renters, courts, etc; However, money continues to generate more and more every day, thanks to the interest that they pay you for participating with your money in these projects.
These projects can be as simple as buying-repairing-selling houses or as complex as building a mini city in the middle of the desert (Las Vegas?).
In this type of investment there are two aspects: those that ask you to borrow your money in exchange for a return and those that make you a partner in the project in exchange for a profit. In practice they are the same, you receive financial compensation at the end of a term; the difference lies in who you are to the owner of the project.
When it comes to money for a return, it is very similar to investing in a bank. Your money can be used at the discretion of the owner of the fund or project for what he thinks is right, without having to tell you what it is being spent on. In most of these cases, like the bank, they offer you the instrument that is available or what they offer, period. There is no space to negotiate terms, conditions and, of course, the returns they offer you cannot be negotiated (which many times are not guaranteed).
When it comes to becoming a partner in the project in exchange for a profit, you have a little more freedom to negotiate, often based on the amount of money you put into the project … as in everything, more money, more power. In this type of scheme, in general, the owner of the project guarantees a certain profitability for the investor partners or “coadjuvants”; which is normally more attractive than that of banks. Here you do have a little more access to information about the financial analysis of the project, the projection, estimated times and other useful information to be able to make the right decisions with your money.
Both options are good, just different and right for each investor profile. There will be those who prefer a simple “take my money and give me a return” treatment and there will be others who want to know a little more in depth about the project, its development, its planning and its financial analysis, etc., to make a more informed decision.
- You don’t need to be an expert in the real estate industry to make this type of investment.
- You don’t need to invest that much time.
- There are very accessible investment options. In most cases you can invest from $ 100,000.00 MXN.
- You can find both home remodeling projects, which are relatively quick (1 year, year and a half), as well as mega developments or trusts that are longer term (3 to 5 years, or more).
- Normally the yields or profits are much better than what banks or passive investment funds offer (government debt, CETES, surety bonds, etc).
There are companies that don’t even charge money management fees.
If you are interested in learning about real estate, you may have only a small notion of what it is, however you will not specialize in any subject of this magnificent industry.
Not all funds or project owners guarantee you a percentage of return by contract, which is why they offer you “reference” percentages, but when you sign your investment contract you find clauses that do not guarantee what was promised.
These schemes are not widely promoted as investment instruments (is it because they do not charge management fees?) So, despite being an excellent tool to boost your money, the novice investor deposits their money in other instruments that have lower benefits and often they just have good marketing.
So how do I start making money in real estate?
If you got this far, I suppose it is because you are quite interested in the topic of investing in real estate (and who is not?). So, the following steps that you could carry out can be:
Decide how you would like to earn more money, if with your effort, work and study; or leaving it in the hands of experts so that they can take care of it and you can dedicate yourself to doing your thing.
Find out more about the option that most catches your attention to put your savings to work in real estate.
If you have an acquaintance or trusted person who is already dedicated to this, then ask them! Take advantage of his experience and trajectory doing this business so that he can guide you in the best way mine is owner of park view city Commercial plots.
“80% of the world’s money is in real estate.”
So invest in it.