There are many ways to invest in real estate, at landlord by design we get a lot of questions about real estate investing. I wanted to list out 20 ways to make money investing in real estate, many do not require any of your own cash.
People often over complicate the idea of real estate investing. They read about some of the iconic real estate investors like Donald Trump. This often leads to disappointment. When I meet with people who want to invest in real estate the first question is why? I then ask if they want to be active or passive? The third question is about what skills and experience, then of course what does the end goal or exit strategy look like. Once we answer the initial questions, we can devise a plan.
Their are some really simple ways to invest in real estate, and of course some really complicated ways as well, for the purpose of this series on real estate investing we will be looking at the common investment strategies for small to mid size landlords. In today’s post I will list them out, then one by one I will write a more detailed article on each method. If you see a method that is not listed, but would like to know about, make sure to comment and I will be sure to add it to the list.
Now, let’s show you how you can make money starting today.
20 Ways to Make Money Investing in Real Estate
- Boarders – Rent a room in your house, condo or apartment. Rent storage space in your basement, attic or an unused room, rent an unused garage, rent a parking space in your driveway, supply meals or do laundry for boarders for an additional fee. (please note you will need to check with your landlord, local by-laws, and insurance company before you get started).
- Rent all or part of your current home on a site like Air B&B. The Air B & B concept has really exploded in the past few years. You can also turn your house into a full B & B. Furnished accommodations are in high demand in many areas. These methods are of course subject to regulation and insurance requirements.
- Student housing – If you buy a house near a post secondary learning institution, you will find demand for housing students. This can include taking in exchange students in your home to live with your family, or renting a room, section of a house or a whole house to students. You can generally get more revenue by renting by the furnished room, rather than renting a whole apartment or house. The exchange student revenue model depends on the organization. The amount of students you can have in one house will usually be regulated locally.
- Elderly boarders – with the aging baby boomer population in many parts of the world, as well as a shortage of quality affordable nursing homes, provides a huge opportunity. This is especially great if you have nursing or other healthcare training. The opportunities in this area include not only full time care, but also evening and weekend care to give a family a break. Many people are now looking after elderly parents and sometimes need a break. This method can be as simple as designating one room in your home, to building or re purposing a home into a small nursing home with full time staff. The revenue model for the elderly can be quite strong. A small operator can offer great service for a lot less than a full scale nursing home. This is definitely a regulated area, so make sure to do your research on requirements, and insurance. This may include modifications to your home for bathroom grab rails, and wheel chair accessibility etc.
- Secondary suite / apartment in your home – This in my opinion is a must have in all homes (you will need to check zoning and regulations in your area). Adding an income producing suite will not only increase the value of your home, but it is an easy way to off set your mortgage cost. It can be as simple as a bachelor, up to a two bedroom basement apartment.
- Taking in boarders with mental or physical challenges – There are programs available in many areas to take in boarders who might have physical or mental challenges. The amount will depend on what is required of you. This can work out as a win win for you and your family. If you already work in health care, this can be a great way to help someone and collect rental revenue.
- Save up a down payment – This is a common way for people to purchase a rental property. The amount down will depend on local mortgage rules, the buyers credit rating, and the type and size of the property. In some cases the down payment amount can be lower as a percentage, if the property is 6 units or larger, or has a commercial component. I will say that if you want to get into real estate investing in a low risk way, then save up 20% down, buy a 2 – 4 unit property, in good condition in a desirable area, hire a good property manager and presto gain wealth in real estate. Then save and repeat. It may take you longer, but if you plan on working your regular job until retirement age, why complicate the process. This simple method is often referred to as buy and hold investing.
- Joint Venture deals – A joint venture can be formed in a simple way, many people who have money for down payments do not want the haste of finding deals, setting up management and dealing with tenants, maintenance, accounting and all the day to day challenges involved in owning real estate. These deals can be a real win win if you lack money, but either have connections to buy good cash flowing properties, or skills such as property management or construction. A common deal would involve 50/50 ownership with one partner being money and silent, and the other being the work horse.
- Condominiums – Condo purchasing used to be way better in the past, however, it can still make sense today. The great part is that since you are only responsible for the inside of the unit, it can be cheaper for insurance, maintenance and management.
- $0 down investing – This is possible in many areas. Tough or rural areas are best to find worn out landlords that may have trouble selling, so they are willing to help finance your down payment with a second mortgage, or even the whole property. You can also seek hard money or higher risk money lenders. If there is enough equity, they will often help you buy the property, pay for the renovations. Then you can get the property appraised and get financing from a larger bank. You can often get additional cash in these deals which can be used for future property purchases. You can also use this method with cash from Lines of credit, credit cards, friends, family etc.
- Fix, refinance and repeat with diamonds in the rough – You can find properties that can be purchased below market value in pretty much any market. You can usually make money if you area able to reduce construction costs. I have a friend that specializes in structural problems, so for him if a house is listed with structural problems, while most people are walking away, he is walking in. I often see could deals on properties that just need a face lift. You can do minimal work to a property that will change the vale, appearance and rental revenue at a relatively low cost. Properties often do not sell because people looking at them do not have the vision to see what it could look like with a bit of elbow grease. You can buy and hold these type of properties or refinance pull out some cash and sell.
- Private sale purchase – We have found some great deals buy buying properties private sale. This has worked both by placing ads looking to buy houses with a quick close, and by reaching out to private sale sellers. Often times the seller may want to save on real estate commissions, or in the case of them reaching out to us, they usually have some other problems financially and if you can come up with a solution, you can often get a great deal. I have a friend who purchased a house from a couple going through a divorce, he was able to buy the house below market value, pay off the couples debts, and rent it back to the newly single X-wife who had no desire to move. A real win win.
- House flipping for profit – This has definitely been glamorized over the past number of years, however, it is a great opportunity if done right. One easy way is to buy a fixer upper and fix it up while you live in it. When the renovation is complete, sell it, and move to a new opportunity. The key to finding a good flip is patience. You need to remember just because you have the cash lined up, does not mean it is the right time.
- Tax sales purchases – This can be a great place to get a property below market value. There are several challenges with this method of investing, however, pretty much every area that collects property tax will end up selling some properties for the amount of tax owing. Make sure to read My First Tax Sale
- Foreclosure purchases – This is what I get asked about a lot. It is easier than you might think to find the listings. It could be as easy as going to your local court house. You may also contact the owners before they reach the foreclosure auction and work out a deal. Make sure to read Foreclosure Hunting, and How to find Foreclosure listings
- Online auctions – We are now in the age of the internet. The great thing is many lending institutions, especially private lenders and independent banks often find themselves with properties they have foreclosed on and need to unload in a quick low hassle way. Click here to read an article about auction experiences from a biggerpockets.com Investor Colin Murphy from Tampa Florida
- Raw Land – Land can make a great real estate investment. As the saying goes, they are not making anymore. Ocean front and lake front can often be the most desirable. A great way to build equity is to buy land that you can change the zoning and resell. This can often take time, money and lots of hassle, which is why it can result in a big pay day. An example would be if you were able to buy farm land just outside a big city, then have it re-zoned as residential. After you have it rezoned you could sell it to a developer or make a deal with a developer and divide it into individual lots. Another example could be you buy an old run down house in an area that has built up with lots of multi-family units. You can buy the old house tear it down and have the land re-zoned to accommodate a multifamily property. You could even go as far as drawing up some building plans and sell it as a package to a builder. Permits and zoning are two areas that provide barriers to developers and builders. If you do the leg work it can result in some big pay days.
- Syndication – This is where you can pool your money with other investors (usually that you do not know) and buy a property or several properties. In the past several years the government has cracked down on organizations that run illegal or fraudulent syndication, but it is still not without risk. If you are putting money into a syndication make sure that it is a properly set up and regulated one. If they do not provide a prospectus then it is likely not set up properly. Here is an article from the Ontario Canada government about what to watch for when getting involved in a syndication.
- Become a lender – If you have cash these days, we all know it is a challenge to get a steady return. I will say most banks do a great job advertising their mortgage products, so if you want to lend money in the form of a mortgage, you will likely have to look at riskier clients. That being said, if you partner with a home flipper or a refinance investor, you maybe able to get a great rate of return and only have to lend the money out in short periods of time. For example if you lend money to a house flipper who buys a property, fixes it up in 90 days, and it sells with in the next 90 days, you can get a great rate of return in a short period of time.
- Passive investments – These can include REITS ( real estate investment trusts), other real estate firms that are traded on the stock market. Check out the top 5 for 2018 from Investopedia.
I hope this list gives you some ideas on how you can invest in real estate. In the coming weeks I will elaborate and provide more detail on each of the twenty methods above. If I have missed any, that you would like me to write about, please comment in this post.
All real estate investing involves risk of not just losing money, but also your health and well being. Before you do any real estate investing make sure to do your own research. Landlord by Design does not condone any form of real estate investing.
I do not want to end this post without giving you the opportunity to purchase our book all about property management. CLICK HERE NOW.
Until next time,
Design Your Landlord Experience,
Michael P Currie
Photo Credit Goes To http://energepic.com
Awesome content and guide that everyone can follow through in investing in real estate.