Traditional property investing has its place in the market. Many people bring enough capital into the investing game to get traditional mortgages on rental properties or fixer-uppers. However, that doesn’t mean that traditional strategies are the only way investors find success. In fact, in today’s economy, creative investment property strategies allow more people to become successful real estate investors than ever.
If you’re wondering how to start investing in real estate with no money or no background in investing, exploring non-traditional options can help you get going and build long-term success. This guide to real estate investing will help you get started on your journey to unconventional wealth building.
Traditional Real Estate Investing Can Be Limited
The most common traditional real estate investing strategies are buy-and-hold properties and the fix-and-flip approach. The first is a long-term strategy designed to protect investors from fluctuations in the real estate market. When you buy and hold property, you typically plan to rent it out while watching the market carefully for the best time to sell it. The earnings from a rental property help pay for a mortgage if you need one to purchase the property or provide a consistent income stream.
Fix-and-flip investing is becoming increasingly popular among new real estate investors. Instead of watching housing market trends, these investors watch for properties at significantly discounted prices. However, these properties may require significant repairs before their market-ready for resale. For example, some homes may have structural issues or need extensive remodeling. While purchasing a property in bad condition can carry significant risk, many investors find that the after-repair value of the property is significantly higher than the purchase price and repair costs combined, making this investment strategy an excellent way to generate good returns.
These two investment strategies form the foundation of traditional property investing, but they can be limited if a real estate investor has limited funds to begin with. In both cases, you need to have enough collateral to take out a mortgage on a property. Many fix-and-flip investment properties also necessitate HELOC loans to cover expensive repairs. Additionally, investors take on significant risks when they are either forced to hold onto and manage rental properties for many years or implement costly repairs that eat into their profits. These drawbacks lead many investors to creative real estate investing strategies.
So, What Is Creative Real Estate Investing?
You don’t need to have a lot of resources to begin investing in real estate. You just need a little ingenuity and access to the right tools. One of the best ways to get ahead in real estate is to find the best deals before anyone else knows about them. This typically requires access to insider information from sellers in your area or other real estate professionals.
If you do have connections to motivated sellers, you can effectively create an income stream by marketing for them. Make yourself a real estate agent, and you’ll be investing in more than just the property itself. You’ll gain a reputation and create strong relationships with your community. Then, you can leverage your position to work with sellers directly, avoiding getting real estate agents involved in your real estate purchases.
Selling deals to other investors is a great low-risk way to invest in real estate. Hone your negotiation skills by creating bidding wars between buyers. Sometimes, making multiple offers on the same property can be profitable, too. As you gain experience in the real estate market in your area, you will be able to earn more by acting as a sales broker and negotiator. You’ll learn to negotiate real estate deals based on terms, price, or both.
Consider Owner Financing
If you want to put your entire focus into buying and selling properties directly rather than selling deals to others, you still don’t need to start with a lot of cash on hand. Many new investors have found success by purchasing properties with owner financing. As long as the seller owns the property outright, they can hold the mortgage, allowing you to negotiate your way into buying a property with no down payment. The flexibility of this kind of arrangement is perfect for new and experienced investors building an investment portfolio.
If you do need cash for a down payment, you have options. For example, you can take out a hard money loan as long as the property you’re looking to purchase is a good investment. While this may not work for fix-and-flip investors, it often works for new investors who don’t want to take risks on their first investments. While this is a solid option, if you’re looking for a way to start without taking out a loan from a creditor, you may be able to work within your network to get a private money loan from a friend, colleague, or family member. Don’t be afraid to leverage every resource available to you, especially if you’re confident in the value of a property.
Think Outside the Traditional Bank-Owned Mortgage
One of the best options for creative financing within the real estate industry is the “subject to” mortgage. If holding a mortgage isn’t something you’re interested in doing, you can skip that part of the investment process entirely by keeping the mortgage squarely in the seller’s name. In this case, you take full responsibility for paying the mortgage for the seller, but the seller is still subject to the mortgage obligations. Unlike an assumed mortgage, which places all liability on the buyer, the seller still holds significant liability in a “subject to” mortgage.
“Subject to” mortgages are a great creative real estate investing option for buyers without the means to get mortgages or funds for down payments on their own. If you have the means to make mortgage payments consistently but want to avoid taking out a loan and assuming debt, this strategy might be ideal for you. It has a lower barrier to entry than almost any other investment strategy. Plus, since you take control of the property, you can easily create an income stream by renting it out.
However, “subject to” mortgages do carry some risk. Once you make the deal, your decision is final. Even if the market turns in the seller’s favor, you’re still on the hook for your monthly payments. Additionally, the lender holding the mortgage could decide to call the loan due once they are made aware that the real estate investments have been transferred to you.
Spend Less Time “Finding” Properties and More Time Investing
If you’re ready to start exploring the creative real estate investing possibilities in your area, Privy is here to help. Whether you pursue traditional or non-traditional investing, you need to have as much information about the best markets, properties, and deals for success. Our software helps real estate investors identify the most profitable strategies, markets, and properties so they can spend less time searching for a place to start and more time striking great deals and generating revenue.
You won’t find what Privy offers anywhere else! Our technology gives investors someone more than a real estate investing calculator. With our tools, you’ll be ahead of the curve and on your way to real estate investment success. Reach out to learn more about how the Privy Advantage can help you meet your long-term goals and direct your unconventional investment strategy to success.
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