How to Invest in Real Estate

Turn on the television at 4 am any night and you’ll be in the middle of a ‘real estate investment’ infomercial. They promise that you can buy a house with no money down. You can easily make millions of dollars buying real estate. You can get rich. All you need to do is give them $5000.

This is sad. The information is not worth thousands of dollars. You can learn everything you need from a reputable web site for less than $500.

The real question is, ‘are these all lies?’ The answer is ‘yes’ and ‘no.’ Yes, you can make money investing in real estate, especially in today’s volatile market, if you have the discipline to follow a good program. However, the answer is no, if you are one of the people who think that you can invent your own program.

You also need to be determined enough to continue fighting, even if you hear the word ‘no’ a hundred times. Remember, if it was easy, everyone would be doing it.

Here are a few elements of a good program. The first step is to become familiar with the many zero down programs that have popped up to help buoy the market in the face of the current difficulties faced in the sub-prime market.

The FHA and VA have loans that are very close to zero down. Many people get started by borrowing money for the down payment. Clever people borrow from all sorts of venues, from family and business partners, to life insurance policies and drawing equity from current properties.

Another way to get zero down is to offer the seller more than they are asking, if they accept the down payment in the form of a note. The promise of an extra $5 000 on top of the asking price will make many sellers wait a few days or weeks for the down payment.

Many new investors do not understand what ‘no down payment actually means.’ The real estate industry has many terms that are not self-explanatory. This is why many confused, and often Do-It-Yourself investors call real estate investing a scam. Just because you do not understand how something works, doesn’t make it a scam.

One method of investing with zero down is to use another property as collateral. You can often use current rental income in the income calculations for a loan. One trick is to borrow what you can, but use it on more than one property.

Most people borrow $20 000 and use it to buy one property. With a little education, and some education into how the real estate industry works, you can turn a $20 000 loan into the down payment for 3, even 4 properties.

Another way to work around the rules is called ‘seller refinance.’ The seller may refinance the property, receiving the cash they need from the proceeds of a new loan. The buyer gives the seller a note for the balance of the seller’s equity. This will work, especially if the seller can expect a much larger profit than if they received the price of the house.

Leasing with the option to purchase is fast becoming a hot way to swap properties, especially if you use rental payments to pay the lease.

One way to make these work is to offer the seller something they need. Sometimes you can trade up on properties if you own one in the area where the seller is moving. Sometimes, you can even offer assets like a boat, or vacation property, as a down payment.

This is just a glimpse into the methods of investing in real estate that is used by today’s investors. All it takes is a little knowledge, and a solid understanding of how to invest without loosing your shirt.






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