How To Make Real Money

Can you make money by investing in residential real estate? The answer is yes. The real question is, “how much money?” I can't give an exact number here because it all depends on your goals. Flexibility, creativity, and hard work are a few keys to success and there are a variety of different way to make money in the residential sector.It all starts with finding the right deal, and this can be different for each individual investor.

Real Estate is a long-term play and wealth is rarely created overnight, but in order to reach your goals you have to make the first step...find the deal. After you find the property you want to purchase, you usually provide the original money for the purchase. Personally, I typically buy residential properties that are 15-20% below market value. The strategy here is that I can turn around and sell it right away to make money. However, I typically hold onto our properties by renting them out, utilizing quality property management techniques, and planning on appreciation. Appreciation in the Central Texas market has been relatively easy to come by over the last seven years. When you find the right deal (a property below market value) the next step is to determine what type of financing you want to utilize. Common financing options include:

USDA Loan - Zero down, for first-time home-buyers

FHA Loan - 3.5% down payment

Conventional Loan - 20% down payment

Owner Financing - very flexible terms

With Owner Financing you can be somewhat creative. There are fewer regulations and you can usually negotiate the terms with the seller. If you’re pressed for time, you can also utilize a hard money loan. These loans typically have double the interest rate, but you can expect to close in half the time of a typical loan. Hard Money Loans are best to use when buying foreclosures or when time is of the essence. Once you own the property, you can figure out if refinancing is a good option for you. The costs associated with closing twice is something to consider, but if the deal has a large enough margin it can be worth it.

Now, you bought the property...what’s your plan? Do you want to make a quick profit and flip it, or do you want to hold onto this property for consistent cash flow with a check every month?

Let’s dive into some numbers. It is completely possible to purchase 2-4 properties a year if you are motivated. Think “long-term”...you will potentially own 20-40 properties in 10 years. All of which will be bringing in income for you every month. The strategy is very simple but it's not as easy as it sounds.

Gaining this long-term wealth is an everyday decision. When all your friends are going out on the weekend you’ll have to ask yourself if you’d rather spend $100 on a bar tab or use that money for a downpayment on your next investment? I'm not saying either choice is right or wrong. There's nothing wrong with enjoying your life to the fullest today. My mindset, however, is to skip the bar and set myself up to have financial freedom earlier in life. Retiring in 10 years sounds a whole lot better than 40 years.

Opportunities for investing in real estate include:

• Wholesaling - Find a deal and present it to another investor for a quick profit
• Syndication - Organize a group of investors to purchase a larger property, like an apartment complex (common minimum investment is 50K per individual)
• Flipping - Purchase a beat-up property below market value and put money into it to fix it up then sell it for a profit. Factor in costs of higher tax rates! typically 30% on short term capital gains
• Buy & Hold - Save 15-20k, buy a property, and find a renter. Learn how to effectively manage the property or hire someone else to. The rent you are charging will be used toward your mortgage and you will be benefiting from the power of appreciation.

There are so many ways to gain financial freedom in real estate and we are learning more everyday.