The most common question I get is: “How do I make cash right now in real estate? Oh, and by the way, I have no money to put down and my credit is horrible!”
Okay, not impossible, but it will take hard work, dedication, and learning a few tricks I have up my sleeve.
Here are 7 creative techniques for generating cash quickly without starting from much.
1. The Wholesale Fixer
Find a “fixer” property that needs a lot of work, but is priced accordingly. Get it under contract for 70% of ARV less repairs, then flip it to another investor.
Where to Find: MLS, probates, “free and clear” owners
What to Watch Out For: Banks won’t let you assign their purchase contract.
2. Wholesale Rental
Find a property that would make a good rental, and flip it to a landlord. Usually it’s a “starter” home that’s on the cheaper side and doesn’t need much more than carpet and paint to make it a fine rental property.
Where to Find: MLS, other landlords
What to Watch Out For: Sewer line, roof, or structural problem will push repair costs too high to make it worthwhile for a rental.
3. Sandwich Lease Option
Lease a property from the owner with an option to buy, then sublease to a tenant, giving him an option to buy for a higher price. When tenant is ready to buy from you, exercise your option to buy from the seller, and double-close the deal to the tenant.
Where to Find: Properties for rent, listed as “For sale or rent”
#1 Thing to Watch Out For: Don’t make payments directly to seller and trust him to make it to his bank. Instead use a third-party escrow company to service payments.
4. Subject to, Lease Option
Have a seller who is highly motivated and has little equity deed his property to you, subject to the existing mortgage. Then, lease to a tenant with an option to buy. More favorable than #3 because if you have title to the property for more than 12 months before the tenant buys, the profit is a long-term capital gain, which means a lower tax rate.
Where to Find: Properties in default or in foreclosure (May require you to make up some back payments)
What to Watch Out For: Seller has undisclosed liens on the property. Do a title search before proceeding.
5. Wrap/Rewrap
Buy on a wraparound installment land contract, mirroring the seller’s loan balance and payment terms. Then, resell on a wraparound installment land contract, marking up the price and interest rate.
Where to Find: FSBO seller who has very little equity or advertising “for sale or rent”
What to Watch Out For: Don’t make payments directly to seller and trust him to make it to his bank. Instead use a third-party escrow company to service payments.
6. Flip a Mobile Home
Buy one cheap, fix it up, sell for cash. Works best on older homes that are cheap because few people have the cash to buy a $40,000 mobile and few banks are lending in this arena.
Where to Find: Put fliers out in mobile home parks
#1 Thing to Watch Out For: Your buyer may not qualify for the mobile home park lease!
7. Buy, Wrap, and Sell Note on a Mobile Home
Same as above, except sell on terms at a much higher price and take back a note. Then, sell the note at a discount for cash to another investor.
Where to Find: Put fliers out in mobile home parks
What to Watch Out For: Your buyer may not qualify for the mobile home park lease!
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