Many real estate investors have come to me with the same concern… they know they need to take their investing to the next level so they can obtain that bigger cash flow they’ve been thinking and dreaming of… but they don’t have a clear plan on just how to do it.If you have you been thinking about taking your investing to the next level, this article is for you.Getting your real estate investing to that next level means venturing into new and possibly unfamiliar territory… But, in order to reap those rewards… it’s got to be done. Many investors stick with the same types of deals they did when they first started investing. There is nothing wrong with that… Unless you are looking for that something bigger.The following is a list of 6 tips to help you take your real estate investing to the next level…Tip #1: Go After Bigger FishThink back to why you first got into real estate investing. I started investing because I wanted to make some serious cash, and I was tired of struggling financially. I started like many investors do-dealing in single-family properties. Then I decided I wanted a better cash flow and I wanted it fast. I went after bigger fish.Commercial property investment deals offer some of the greatest cash flow and returns for your investment dollar. The number of units, and the size of the properties can bring the largest returns for the amount of time and money you invest in any deal.Tip #2: Continually Educate YourselfTo get to the next level in your real estate career, you must continually educate yourself. Education and information enables you to find solutions to any challenges that may come up as you’re doing deals. Education also helps to eliminate unnecessary risk. Unfortunately, many investors believe that their lack of knowledge prevents them from doing the tougher types of deals, like large multi-unit residential or commercial properties. It doesn’t take much to get yourself informed and educated. Read books; attend seminars; talk to experts; and never hesitate to ask questions.Tip #3: Get a MentorA good mentor helps you gain practical experience much quicker and more easily then going it alone. Books and courses are important. But a mentor helps you navigate deals, and overcome any challenges you face along the way. Mentors can serve as your safety net for when you head into that real estate investing territory you are unfamiliar with. If you are serious about taking your real estate investing to the next level, a mentor is necessary. A mentor will get there quicker and with much less risk than going it alone.Tip #4: Utilize a Team of ExpertsThere are many people who shun the idea of new investors taking on the risk of large, complicated projects like large apartment houses or commercial real estate investments. They are right. Very large investments are not for very inexperienced or novice investors. So why not let the experts be your experts. Your team of experts works to eliminate the risk associated with your inexperience and lack of knowledge. You can get to the next level in your real estate investment career when you put together a team of people with the expertise you lack, people who already know how to navigate their way through a big and very profitable deal.Tip #5: Develop Marketing SkillsMarketing is necessary for any business. In fact, businesses lacking a marketing system fail. In order to successfully take your real estate investing business to the next level, you must develop your marketing skills and put them into action. A very good way to start marketing your real estate business is by using direct mail. Then, when you begin to receive responses to your direct mail efforts, get yourself networking at places like local investment clubs as well as with bankers and lenders. This is an easy way to get started-take one marketing strategy, learn and hon it. Then start working other forms of marketing (networking, for example).Your business will get to the next level only when you start learning about and utilizing successful marketing strategies.Tip #6: Have a Can-Do AttitudeAttitude makes all the difference… especially in real estate. A person who thinks s/he can’t do a deal because it’s bigger than he or she is used to, cannot and will not get his or her business to the next level. The wrong attitude can doom you before you even try. Conversely, a person who is hungry enough for success will attain it simply because he or she doesn’t given up.No matter where you are with your investing, these tips can help you take your real estate investing (and cash flow!) the next level. Multi-unit residential and/or commercial real estate can definitely be the right vehicle(s) to provide some of the greatest cash flow in the industry.When you combine education, expert assistance, marketing, and the right attitude, you have the makings for conquering bigger investments successfully, and therefore achieving bigger and better cash flow deals. Your next step is to take action.
One creative way to get started investing in real estate is to use a lease option. The biggest advantage of using lease options to invest in real estate is –control. This method of investing, basically gives the investor the right to possess — be in control of — and profit from a property without owning it.A real estate lease option contract is a combination of two documents.The lease part of the contract is where the owner agrees to let you lease their property, while you pay them rent for a stated period of time. During the lease period, the owner can not raise the rent, rent it to anyone else, or sell the property to anyone else.The option part of the contract represents the right you purchased to buy the property in the future, for a specific price. If you decide to exercise your option to buy, the owner has to sell it to you at the negotiated price. The option part of the contract obligates the seller to sell to you during the option period — but it does not obligate you to buy. You are only obligated to make rental payments as agreed during the lease period.When the lease option contract is written and structured properly, it can provide tremendous benefits and advantages to the investor. If the lease option includes the “right to sub-lease”, the investor can generate a positive cash flow by renting the property to a tenant for the duration of his lease, or lease option the property to a tenant-buyer for positive cash flow and future profits. If the lease option includes a “right of assignment” the investor could assign the contract to another buyer for a quick profit.Lease option real estate investing, is a flexible, low risk, highly leveraged method of investing that can be implemented with little to no money.High LeverageIt is highly leveraged because you are able to gain control of a property and profit from it now–even though you don’t own it yet. The fact that you don’t own it, also limits your personal liability and personal responsibility. Only if you decide to purchase the property by exercising your “option to buy”, would you take title to the property.Little to no moneyThe real estate investor’s cost to implement a lease option contract with the owner requires little to no money out of pocket, because it is entirely negotiable between investor and owner. Also, there are a variety of ways the option fee can be structured. It can be structured on an installment plan, balloon payment or other agreeable arrangement between both parties. The option fee can even be as little as $1.00.In order to secure the property for purchase at a later date, tenant-buyers typically pay a non-refundable option fee of approximately 2%-5% of the negotiated future purchase price to the seller. Depending on how the lease option agreement is written and structured, the investor could possibly use the tenant-buyer’s option fee money to pay any option fee owed to the owner.FlexibleLease option real estate investing is a flexible method of investing because the terms of the agreement, like payment amounts, payment dates, installments, interest rate, interest only payment, balloon payments, purchase price and other terms are all negotiated between seller and buyer. Responsibilities of both parties are also negotiable. For instance, if the investor doesn’t want to act in the capacity of a landlord, he could specify in the lease option agreement that tenant-buyer will be responsible for all minor maintenance and repairs and the original seller will remain responsible for any major repairs.Financially Low RiskIt is low risk financially, because if the property fails to go up enough in value to make a profit, you have the purchased the right to change your mind and let the “option to buy” expire. Even if your tenant-buyer decides not to buy the property, you have profited by a positive monthly cash flow from the tenant-buyer’s rent payments, and upfront non-refundable option fee.Let’s look at an example of a lease with option to buy structured in a way that the investor profits in 3 separate phases of the investment.Profit #1: non-refundable option feeFuture sales price negotiated with the current owner is $125,000 with an option fee of 2% of the sales price. Option Fee you owe the owner is $2,500. The future sales price you set for your tenant-buyer is $155,000 and the option fee is 4% of the sales price. Option fee the tenant-buyer owes you is $6,200. You collect $6,200 from tenant-buyer and pay $2,500 to the owner and your profit = $3,700Profit #2: monthly cash flow from rental paymentsThe Monthly rental payment you negotiated with the owner is $1,000. You set the monthly payment at $1,250 per month for your tenant-buyer. Each month you collect $1,250 from your tenant-buyer and pay the owner $1,000 each month. Your profit is $250 monthly positive cash flow during the lease period.Profit #3: is set up when the lease option contract is initially writtenThe third profit is the difference in the negotiated future purchase price with the owner, and the future purchase price set for your tenant-buyer. Let’s say the property goes up in value to appraise for at least $155,000. Your tenant-buyer decides to exercise their option to buy. You buy the property from the owner at $125,000 and then sell it to your tenant-buyer for $155,000. $155,000 – the $125,000 you pay to the owner = $30,000 profit.Of course the key to making lease option real estate investing work, is finding motivated sellers and buyers. Finding these motivated sellers and buyers shouldn’t be difficult. The continuing down turn in the real estate market, has created a large number of sellers who can’t sell their property and buyers who can’t get financing to buy. The seller could possibly get a fair offer to be paid in the future, by selling their property to a real estate investor on a lease option basis. A potential tenant-buyer could obtain home ownership, without having to qualify through traditional home loan guidelines.One disadvantage of lease option real estate investing, involves the tenant or tenant-buyer possibly defaulting on monthly rental payments. This would make it necessary for the investor to come up with money out of pocket to pay the owner, and possibly have to proceed with eviction process. However, there are certain provisions that can made, and also various “contract clauses”, that can be included in the lease option agreement, to deter buyers from defaulting on payments.If the investor fails to do “due diligence” before entering into a lease option agreement, he could end up with a property that is unmarketable. There could be a number of liens on it, issues involving ownership of the property or it might be in foreclosure. By diligently performing research before entering into a lease option agreement, the investor can avoid these mistakes. A few things the investor could do is– perform background and credit checks on both the seller and buyer, search public records in reference to ownership and property status, or do a title search.Despite the few disadvantages, lease option real estate investing continues to be an excellent way to invest in real estate with little to no money and low financial risks. It also remains to be an excellent way to gain control of a property you don’t own, to generate cash flow now, and possible future profits on flexible terms.Bottom line– you don’t have to miss out on the lucrative profits being made by investors in today’s real estate marketThe more you understand creative real estate investing strategies, and apply them now, the more profits you will make in today’s real estate market. Don’t put off getting the real estate investing education you need — to succeed in today’s real estate market.Learn these things and more:
Creative investing strategies and concepts for Lease option real estate investing, foreclosure investing, and wholesaling and flipping real estate.
How to structure every deal right so you make more on each deal and eliminate your risk.
What needs to be included in your real estate contracts now– to safely avoid issues that could cost you thousands!
The most powerful legal clauses you can use to completely eliminate your risk in all your offers.
The step by step approach to invest in real estate with minimal risk.
How and where to research properties effectively to save hundreds of hours in time.
The best ways to creatively finance your investment properties.
How to know the true market value of properties so you never overpay again.
How to control properties with no money, credit or income verifications so you can make a lot more.