Four Basic Methods Of Making Money in Real Estate

Four Basic Methods Of Making Money in Real Estate

by Andy Ford

Savvy investors can make a profit in almost any market. An investor must know where his profits are coming from before entering a real estate transaction. Knowledge of exit strategies is key to making a profit as an investor. To be knowledgeable in real estate investor transactions, here are some tools an investor needs to flip houses in any market. These are the basics to profiting as an investor.

1) Wholesaling is the process of locating distressed properties and selling to wholesale buyers. Many times the investor has no money in the transaction. Quick profits can be made by assigning properties to wholesale buyers that you already have in place. Experienced wholesalers will already have their buyers' list, which are just a phone call away. The skill needed here is finding houses to put under contract. Placing properties under a purchase and sales agreement is a fairly simple process.

2) Owner financing is purchasing houses from owners that will allow you to take over payments. This is a simple process that allows the investor to think out of the box and place a new buyer who normally cannot get financing or is interested in taking over payments. There are 3 ways to make a profit. First, profits are made in the down payment. The second profit to be made is in the difference between the monthly payment that the investor negotiates between the seller and the final monthly cost to the buyer. And the third way to make a profit is in the final payment when the buyer closes out the sale if he gets financing. This is a good way to have a constant income once you get several in the pipeline. A good attorney or courses can be taken to understand simple contracts to place buyers into an "owner financing agreement." Consult with a local attorney to check for any laws and regulations related to owner financing agreements.

3) Lease option, also known as rent to own, is a method of selling houses that investors use in flat or rising markets to make a profit. Although done a few different ways, investors purchase a home below market by having the seller "owner finance" to the investor. Profits are made by investors basically selling at market value to a buyer "renting to own." Buyers usually will contract with the investor to complete the sale in 1 year to several years. Profits come from the down payment, sometimes in the monthly payments, and the biggest profit is at the end. Many investors do this and feed the pipeline, with the goal of cashing out 1 or more a month as they set up their systems. Profits are very reasonable and the buyer can make $5,000 to $50,000 or more once the buyer decides to take the option to purchase.

4) Retailing is the business of selling houses at market value. It goes hand in hand with purchasing properties at wholesale and rehabbing for resale for profits.

There are more methods for investors but these are the basic principles of buying and selling houses as an investor. Investors develop specialties and focus mainly on one or maybe two different principles. The more knowledgeable an investor becomes, the more successful he can be in different markets. Make sure to abide by rules and regulations of your state.