There are a lot of different strategies taught when it comes to real estate investing. Some more popular than others.
Personally, I would only recommend a few of them, and for you to stay away from most of them.
Some Popular Investment Strategies
A lot of real estate books and systems basically talk about four investment strategies:
- Financially distressed real estate
- No money down real estate
- Rentals
- Fixers
Let’s take a look at these strategies.
1 - Financially Distressed Real Estate
This is where they urge you to look for a seller who is "Financially Distressed". Then the only way you are going to buy the property under market value is if the seller is desperate enough to have to sell.
I simply couldn't take advantage of another person this way. Could you?
Next, let’s discuss the no money down strategy.
2 - "The No Money Down" Real Estate
This is where they tell you to buy real estate with the so called "No Money Down" or "Nothing Down" formula. They advise you to go out there and find a seller who is very willing to carry back a lot of paper.
In other words, not only would He have to be willing to act as the bank... lending you His money to buy His house, but He would also have to sell you His property at His loss!
How many people do you think you have to talk to before you would find the right "no money down" deal?
Yeah... you are right if you think it might take you forever!
I would urge you to stay away from the "Distressed" and the "No Money Down" theories.
3 - Rentals
Buying rental property without first checking out the numbers presents another problem in itself. How are you going to handle the negative cash flow? "Negative cash flow" means the amount of money one has to come up with each month in order to pay the mortgage after the rental income has been subtracted.
An example would be: You buy a property for $200,000 with a mortgage payment of $2,000 a month. Let's say you can rent the property for $1,600 a month. In other words, you’re short $400 every month. This is a "negative cash flow" that you somehow have to come up with. And we haven't even talked about the money you also have to come up with to pay the property taxes, insurance and repairs to the property.
Neither have we figured in the "vacancy factor". This is simply the times when your property is not rented for one reason or another. So, when it sits empty you don't get any money coming in!
As you can see, very rarely do you find a property available to the general public so much under market value that, with little or no down payment, the property will pay for itself.
Usually, a large down payment is the only way you can get a property to pay for itself.
4 - Fixers
When it is the property itself that is distressed it is commonly called a "Fixer-Upper", or just a "Fixer".
Many people lack the imagination to see the finished product; therefore, there are fewer buyers for these "Fixers".
Low demand causes low prices. Fixers offer truly great opportunities for profit.
Right now, how likely are you to buy a fixer? If you did, how much under market value would you be paying, 5% or 10% percent?
I hate to tell you this, but you can't make any money buying properties 10% under market value. The only exception would be if you hold on to the property for a very long period of time. When this happens, your property will have increased in value because of inflation, not because you made a terrific buy.
But especially in today’s economy, I would definitely NOT recommend you do that.
Don't misunderstand me, I'm not against fixers. I love them! All the houses I have bought have been fixers to some degree, some worse than others.
Flip Instead of Buying?
For you to get started in real estate with the least money and risk, my recommendation for you is, instead of buying and owning your first few properties, you simply flip them for a profit.
Doing this at the start, will give you the confidence you need to buy and own properties in the future when you have more expertise.
In all my years of profitable real estate investing, I have found that you need to know three things when it comes to real estate. They are…
- Knowing Something Others Don’t
- How to Get to the Property First
- How to Minimize Your Risk
With that said, I would suggest that you get started in real estate the least expensive way and with the least risk. There are basically two ways you can go… flip houses or flip notes.
Which one should you go with? Well, let's discuss some pros and cons with each of them.
Let’s start by discussing flipping houses.
Flipping Houses
By flipping the actual real estate, you don’t need to buy, fix up or sell the property. When you have found a good deal, you simply flip it.
Also, you don’t need to invest any money in these deals. all you have to do is “tie up” the property and assign it to someone else to make your profit.
By the way, flipping houses has nothing to do with…
- Buying properties in foreclosure
- Contacting desperate sellers
- Financial distressed real estate
- Tax sales
- No money down real estate
- Calling people who advertise
- Dealing with Realtors
- Buying properties from the government
- REITs (Real Estate Investment Trusts)
If you are interested in getting started in flipping houses, check out my course "Hidden Real Estate Bargains".
However, if you are not interested in going around and actually looking at real properties, you should consider note flipping.
Flipping Notes
Not too many are aware of this strategy. In fact, you have probably gone past lots of these opportunities in your own neighborhood.
I actually started out by flipping houses, then I went on to actually fix up the properties and re-selling them, and then finally I moved on to what’s called “note flipping”.
I quickly discovered that note flipping is pretty much as risk free as you can get and I believe this to be one of the best opportunities right now!
Here’s How It Works…
As you probably know, since the real estate bust of 2008, it did get a lot harder for buyers to qualify for bank loans. As a result, over the last 10+ years, tens of thousands of people all across the country have been selling their homes without a bank involved. Even now in 2020, about 10% of all real estate is still sold this way.
The seller themselves are acting like the "bank" by lending the money to the buyers. This is called a "private mortgage" or a "seller financed loan". So, the person buying the property will be making monthly mortgage payments directly to the seller, because there is no bank involved.
But most sellers are not too happy, having to collecting monthly payments for years to come. So, you can bet most sellers would rather have the cash NOW and would love to find a buyer for their notes, so they can be cashed out.
Simply being there to solve these peoples' money problems can be very rewarding and satisfying. Plus, you're helping someone to get the cash they really need! This is a real win/win business you'll be proud to be involved in.
By the way, this works with all kinds of payment streams, such as...
- Residential Mortgage Notes
- Commercial Mortgage Notes
- Annuities
- Business Notes
- Lottery Winnings, etc.
That's about it. As you can see note flipping is not too complicated...
If you are interested in note flipping, take a look at my course “How to Flip and Profit in Real Estate Notes”.
Those are my recommendations, regardless if you go it alone, take someone else’s course or get my help.
You Don't Need to Struggle
I have helped a lot of students and I sincerely hope I can help you too become knowledgeable, successful and get amazing results with real estate.
Don’t continue to struggle with typical real estate, or other "shiny objects". It doesn’t need to be that hard. If you don’t take action now..., how will tomorrow be any different from today?