How Much Money Can You Make in Real Estate

Document Sample
How Much Money Can You Make in Real Estate Powered By Docstoc
					My experience with investment real estate has been as a landlord, and as the "bank." I
have to agree with Mark Barnes that being the bank is a much more pleasant way to make
money in real estate. I think you'll enjoy his article, which is this week's lesson:

 Investment Real Estate -- A New Twist: Be the Bank, Not the Landlord, and Get ...
                                 By Mark Barnes

I was a landlord for a decade, and I believe I probably lost a year of life for each year I
tried to maintain 26 properties. I learned the hard way that the most efficient way to make
money in investment real estate is to create a mortgage note and be the bank – not the
landlord.

In other words, you become a private bank, financing the entire sale or part of the sale for
the buyer. When you finance a sale of property, be sure to get a high rate of interest –
generally 9% to...

My experience with investment real estate has been as a landlord, and as the
"bank." I have to agree with Mark Barnes that being the bank is a much more
pleasant way to make money in real estate. I think you'll enjoy his article:

 Investment Real Estate -- A New Twist: Be the
Bank, Not the Landlord, and Get Rich Without the
                     Work!
                                    By Mark Barnes

I was a landlord for a decade, and I believe I probably lost a year of life for each
year I tried to maintain 26 properties. I learned the hard way that the most
efficient way to make money in investment real estate is to create a mortgage
note and be the bank – not the landlord.

In other words, you become a private bank, financing the entire sale or part of the
sale for the buyer. When you finance a sale of property, be sure to get a high rate
of interest – generally 9% to 15%, depending on all of the other terms. For this
article, let’s assume you sell to someone who can’t come up with all of a $20,000
down payment, so you finance $15,000 of the loan. The note should be due in
five to 10 years, meaning the buyer will likely sell or refinance his mortgage
within that period, and you’ll be paid in full.

Here’s how financing a portion of a mortgage can be extremely profitable and far
less work than being a landlord, who is responsible for property maintenance.
Let’s assume you charge 11% on your $15,000 loan, amortized over 30 years
(this makes for an easier payment and a more attractive deal for the buyer, even
though you’re receiving a very high rate of interest on the loan). The payment is
$142.85, which includes principal and interest. Now, you could make it even
more attractive for you by writing the note with monthly payments of interest-only
at 11%.

This saves the buyer even more, as his payment becomes $137.50, but this does
not amortize, or reduce, the $15,000 he owes you. Let’s assume the note is due
in 60 months. You get $8,250 during this five-year period, and in the 61st month,
you get the entire $15,000 that you originally loaned. As you can see, this is a
very powerful investment, as you loaned $15,000 but you received a total of
$23,250.

One final point. Maybe you are three years into receiving your $137.50 (meaning
you’ve collected $4,950 in payments). Now, you decide you need a large sum of
money for something – say, a vacation, home improvement, college tuition, or
some other investment. You are still owed two years worth of payments at
$137.50, or $3,300, and the balloon payment of $15,000. You have several great
options, because you have the power of controlling a lot of money.

You can actually sell your entire note at a discount to a note investor. That’s
right, there are people and companies all over the world that purchase mortgage
notes (the actual payments that are due on a real estate transaction). The note
you have, even though there are only two years left, would be highly attractive to
an investor, because the payments are interest-only and because there is a
$15,000 balloon payment due in 24 months.

Now, remember, note investors are out to make money, so they won’t offer you
full price. They will either buy your remaining payments, probably for a discount
of 10% to 20%, or they might purchase just the balloon payment, at the same
discount, leaving you the remaining payments, or they might buy both the
payments and the balloon.

So, assume you need $11,000. If you could get an investor to purchase your
remaining payments and your $15,000 balloon for $12,500, I would think you’d
be extremely satisfied. Remember, you’ve already made nearly $5,000 on your
loan, so you’d wind up making nearly $17,000, and you don’t have to worry about
collecting the payments any longer. Plus, you will get the “hot” cash that you
require immediately. As you can see, financing part of the sale of a piece of
property is an extremely solid investment.

These examples are just a few of the many ways to own mortgages, not
property, and get rich without the headache of being a landlord. If investing in
real estate notes is something you would like to try, you might want to consider
starting small, like with a mobile home note. These can be very inexpensive to
buy but are extremely profitable.

				
DOCUMENT INFO
Categories:
Stats:
views:268
posted:9/16/2008
language:English
pages:2
Description: This is an example of how much money can you make in real estate. This document is useful for studying how much money can you make in real estate.