Investor · Dublin, CA · Member since 2013 · 7 posts · 1 vote
Hi all!
I'm a newbie to real estate investing and needed some advice on investment strategies given a constraint I have. Due to religious reasons I cannot take or pay interest in any form; therefore all real estate investing I do needs to be on an all cash basis. For the past two years, I've been investing with a company that flips properties in the SF area then gives me a return upon sale of the property.
I have a decent savings to work with, however nothing even close to what you need to buy a house in SF. What is the best way to invest in real estate given that I have to do everything on an all cash basis?
Real Estate Investor · Riverside, CA · Member since 2008 · 164 posts · 30 votes
12y
Nadia,
If you buy homes in the lower range of CA prices ($150,000 - 250,000) and you offer your tenants a rent-to-own contract, then you would only be collecting rent which may not conflict with religious rules against interest.
If you offer the prospective tenant an option to buy the house within a fixed time period (usually 2 - 7 years), then the tenant will have more incentive to take good care of the house. In this scenario, the renter pays extra every month that goes towards the purchase price.
You can earn around 13% or more return on investment and also provide a path to home ownership for a deserving family who also does not agree with paying interest.
I hope this information was useful and please let me know if I can assist you further.
Real Estate Investor · Riverside, CA · Member since 2008 · 164 posts · 30 votes
12y
Nadia,
If you buy homes in the lower range of CA prices ($150,000 - 250,000) and you offer your tenants a rent-to-own contract, then you would only be collecting rent which may not conflict with religious rules against interest.
If you offer the prospective tenant an option to buy the house within a fixed time period (usually 2 - 7 years), then the tenant will have more incentive to take good care of the house. In this scenario, the renter pays extra every month that goes towards the purchase price.
You can earn around 13% or more return on investment and also provide a path to home ownership for a deserving family who also does not agree with paying interest.
I hope this information was useful and please let me know if I can assist you further.
Flipper/Rehabber · Charlotte, NC · Member since 2010 · 241 posts · 127 votes
12y
Well you can get owners to owner finance you properties at 0 %. Either a rental or fix & flip. Also you can find your own deals and pool together other folks with money & do Fix & flips projects and split profits on the back end.. I know some Muslims in DC who are doing very well with this Method.
Rental Property Investor · Woodbridge, VA · Member since 2008 · 543 posts · 121 votes
12y
Don't pay interest. Partner with someone to raise the additional cash. The you split the profit based on your individual contribution. Some private lenders will to Joint Ventrues rather than just lend.
Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
12y
Hi Nadia,
Welcome to BP!
I also invest all cash in real estate now, though not because of religious reasons. Fortunately, I am in an area where I can do a lot more with my cash.
The company you are working with in SF, can you continue working with them to accumulate more to do your own flips? Are you only looking to do flips or rentals also?
It sounds like you have been doing well with your investments so far.
Your investment objectives have a lot t do with your options as well as your ability to manage properties and your price point. I own properties free and clear and have an objective of current income. You could invest in rental property and achieve anywhere from 8 to 20% annual Return on your cash investment in rental income without using leverage. The increase in ROI comes with increased need for management and expenses and less potential long term profit on future sale. The price point of your investment will most likely determine the market you need to invest in given your objectives.
Investor · Dublin, CA · Member since 2013 · 7 posts · 1 vote
12y
Thank you everyone for your advice! I'm a newbie here so feel free to simplify down your responses.
@Ted Schmidt - Great idea on the rent to own scheme. Unfortunately rent to own also doesn't work within my religious beliefs (it includes two transactions, namely sale and rental, concerning one item at the same time and that isn't allowed either).
@Nasar Elarabi @Dawn Anastasi - I'm not too sure I understand how owner financing truly would work. Why would an owner would want to finance at 0% and is this common? Fix and flip projects are essentially where I'm investing right now, so definitely a suitable option for me.
@Justin Pierce - Great advice... this is exactly along the lines of what I'm thinking given the steep home prices in the area.
@Sharad M. - I can definitely continue investing with this company to build up more capital. I'd love to have rental properties that just generate me a stable passive income, but I just don't see the ROI if I don't leverage. How have you made all cash investing work for you?
@Michael Lauther - I am definitely fortunate that my investing has been going well :) Great point that price point and my objectives will govern my investing. How do I get to the point where I can generate greater than 10% of annual return from a rental assuming I buy all cash? You've got me intrigued!
The ROI is lower with all cash purchases, but my peace of mind is much higher with free and clear rental properties. My wife and I live on the lower of the two incomes and save the higher one, so fortunately, we keep reinvesting the savings from the higher income back into buying more properties and it has been working well for us.