Getting started in the Real Estate business can be a daunting task for those without resources, unless you know the shortcuts I am about to share with you. The basic idea is to use someone else’s money to buy your first property, then use the profits to buy your next property.
So where do you go to get someone else’s money? Even someone that has no money and a terrible credit history has access to thousands of dollars right now, and you don’t have to wait for some loan officer to approve it. This wonderful place is your local newspaper classified section, the Real Estate Investment section.
What I am talking about here is a private loan. There are many investors out there that are willing to give you a loan to buy real estate, but there is a catch. These private lenders have a tendency to charge a much higher interest rate than a regular bank. They will also charge you a large number of points for the loan you get from them. Here is the trick to getting the loan even if you don’t have any money.
Let’s say that you need $35k to purchase a foreclosed property worth $100k. You will also need $5k to cover the repairs to the property before you can resell it. You will probably be be asked for about $3.5k to cover the points on the loan, so here is what you need to do. Set the value for the loan at $44k, but you only take $40.5k, which covers the points, the repairs, and purchase price of the property plus any miscellaneous expenses that you might have.
This strategy works very well, but only if you are able to turn the property around before you have to make a payment on the loan. With the way the real estate market is going these days, you are probably better off keeping any place that you find and renting it out until the market turns around again.
The down side to all of this is that you have to make this purchase on credit. I highly recommend against this as you can get into a lot of trouble if you don’t research your investment property ahead of time. There are too many things that can go wrong with a foreclosed property to take a risk on it in a down market. I would highly recommend looking for other investments that are more likely to have a quicker turn around rake such as stocks or internet marketing systems.