Last week I wrote about the basics of buy and hold. In response to my post there were some questions from a reader named Ray. Ray wants to get into real estate but he’s stuck on how he will get the money for the down payments and finance each of his deals.
I’m pretty sure most real estate investors have faced this challenge at some point. I know even Donald Trump has faced plenty of challenges when it comes to financing and funding his deals. It’s an obstacle you have to overcome to get deals done!
The good news is that there are plenty of ways to do deals as a real estate investor – even buy and hold deals – that do not require you to invest your own money or qualify for financing. One of the greatest opportunities for this is to find burnt out landlords or real estate investors that just don’t want to deal with the hassles of managing their properties anymore.
One deal we did recently was with a retired couple that wants to spend most of the winter traveling in warmer climates. My husband Dave had met them at a real estate investors club meeting. A few weeks later the fellow contacted Dave and asked to meet. At that meeting he started telling Dave about the properties they owned and about how they had this one that they were trying to sell because they didn’t want to deal with tenants in this property.
Turns out the property was actually so nice that they couldn’t bring themselves to put renters in there for fear the tenants would ruin it. But, the market has slowed this summer, and they weren’t able to sell it without losing money.
As the conversation went on Dave offered a simple solution to their problem. We’d become joint venture partners with them on the property as though we had just purchased the place today (at it’s market value not at the higher price they were trying to sell it for).
Basically with an appraisal and a joint venture agreement we had a deal. They leave their existing financing in place and we become 50%/50% partners on the property going forward.
We put the property into our rent to own program. We spent less than $400 to appraise the property and market it to potential tenant buyers and now we’re now making about $200 per month for us and $200 per month for our partners and we pocketed $3,500 as our half of the deposit fee. Maybe that isn’t big money but when we sell the property at the end of the lease term we’ll make another $10,000 or so from the sale of the property.
In total we should make a little over $15,000 from this deal if it goes as planned and all it cost us was some time and $400.
So to Ray and other new real estate investors thinking that you can’t invest in real estate because you don’t have any money or you aren’t able to qualify for financing I challenge you to start looking for other ways to solve the problems you face. Start attending your local real estate investing club meetings (that’s where we met this particular investor) or calling for rent signs in the area. I can almost guarantee you won’t have to look too hard to find a burnt out landlord or fellow real estate investor that would love to share the burden of their rental property with someone that has some time and energy to tackle the challenge! And if you do – you probably won’t have to worry about financing or funding the deal.