Real estate is cheap! It’s time to buy! Oh wait… the economy’s a disaster, and you don’t have any extra money for a glass of wine with dinner, much less buying a rental property as an investment.
So what’s the answer? Why, buying without a lot of money, of course. Here are three methods that might help you become a real estate investor, taking advantage of the monumental drop in prices.
Idea 1: Cash Out Equity from Your Residence to Reinvest
This option is clearly not available to everyone, as some people may not own their residence, or may not have any equity left in it. But before we go any further, let’s define equity, for those new to the idea of real estate investing: equity refers to the difference between how much a house is worth and how much is owed against it. For example, if your property is worth $100,000, and you owe $65,000, your equity is $35,000.
This equity can be converted into cash by taking out a second mortgage or a home equity line of credit (HELOC), and used to buy an investment property. HELOCs are generally a better option, as they’re more flexible and often don’t require the borrower to pay closing costs (they are effectively a revolving line of credit, like a credit card, that’s secured against your house).
Look into cashing out some equity, if possible, to start building your real estate empire, and if it’s not possible…
Idea 2: Negotiate for a Seller-Held Second Mortgage
In case word hasn’t reached you, there are thousands of desperate sellers in this country, who will go to great lengths to sell their homes. This puts you in an excellent negotiating position, allowing you to demand them to hold a note for your down payment (in effect leaving you with 100% financing, and only responsible for closing costs).
Alternatively, you can ask for a seller concession, which is a fancy term for cash back in the real estate world. Be patient, and push hard on these two points, because sooner or later you’ll find a seller who, in their desperation, will agree to one or both in order to sell their house.
Idea 3: Find a Grant
You’d be amazed at the enormous number of grants out there to help people buy real estate, whether for a primary residence or an investment property. That said, no one’s advertising free money on the radio, so you have to dig a little bit to find these grants. A good place to start looking is with your local municipal government; ask about grants to improve impoverished neighborhoods, or grants for minority- or women-owned businesses. Also check online, as there are thousands of grants hidden in the bowels of the world wide web, available to those with the patience and skill to find them. Non-profits, federal or state government initiatives, community outreach; they’re out there, so dig deep, and prosper.
It is a sad misconception that only the rich own rental properties. Anyone can become a real estate investor and build an empire of rental units, using the equity from the last project to finance the next. We live in a buyer’s world, for the moment, so stop swimming upstream by trying to sell, and start buying!
Read more articles from the author, Kevin Kiene, at his on-line resource for Landlords, www.ezLandlordForms.
There is an online database of real estate investing articles, along with many free real estate forms.
[tags]real estate, investing, investment, lease, rental, landlord, investor, forms[/tags]
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