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Investment Real Estate -- A New Twist: Be the Bank, Not the Landlord, and Get Rich Without the Work!
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. Mark Barnes is the author of the new novel, The League, the first work of fiction, based on fantasy football. He is also an investment real estate and home loan finance expert. Learn more about his suspense thriller at http://www.sportsnovels.com Get his free mortgage finance course at http://www.winningthemortgagegame.com
MORE RESOURCES: Landmark Settlement Breaks Up the Real Estate Cartel The American Prospect Top real-estate CEO sees decades of housing pain ahead: 'What the Fed did will have a 30-year tail on it' Yahoo Finance Commercial Real Estate's Systemic Threat: Separating Fact From Fiction Commercial Observer Rules that helped set real estate agent commissions are changing. Here's what you need to know The Associated Press Brockton-area real estate sales for Dec. 26 to Dec. 29, 2023. Enterprise News Refined Real Estate: Historic Queen Anne Polson House lists for $6,950,000 seattlerefined.com Luxury’s Latest Battleground: Real Estate The Business of Fashion The Realtors’ Big Defeat The New York Times Local real estate agents face uncertain future with new negotiation rules WJHL-TV News Channel 11 Investigation underway after 44-year-old real estate investor seen on video firing shots off boat docked at Lakeview ... WSVN 7News | Miami News, Weather, Sports | Fort Lauderdale Will March bring more madness to Craven County's real estate market? New Bern Sun Journal Rules that helped set real estate agent commissions are changing. Here's what you need to know Lufkin Daily News A luxury agent on how the NAR settlement will change his business The Washington Post What National Association of Realtors agreement means for Texas real estate KAMR - MyHighPlains.com Rules that helped set real estate agent commissions are changing. Here's what you need to know KXLY Spokane Cities Face Cutbacks as Commercial Real Estate Prices Tumble The New York Times Realtor group will pay $418M to settle commission lawsuits The Associated Press National lawsuit could shakeup housing market, cut into real estate agent commission 11Alive.com WXIA Swimmo Invest Opens up a New Chapter in the Real Estate Industry Markets Insider Realtors’ settlement could dramatically change cost of housing sales The Washington Post What Seattle-area homebuyers should expect after national settlement The Seattle Times CrewBaltimore’s mission to accelerate women’s success in real estate Afro American Newspaper Legal complaints escalate over Israeli real estate events NorthJersey.com Realtors Reckon With a Seismic Shift to How They Get Paid The Wall Street Journal What the death of the 6% real estate commission means in D-FW The Dallas Morning News China’s Real-Estate Market Just Set a Record—but Not a Good One The Wall Street Journal Real estate commissions, unassailable for decades, could crumble after landmark settlement The Denver Post Making Sense of New York’s Confusing Luxury Home Market The Wall Street Journal Is the Era of the Celebrity Real Estate Agent Over? Industry Reacts to Settlement That Could Slash Commissions Hollywood Reporter Pension funds snap up real estate at steep discounts Financial Times National Association of Realtors Agrees to Slash Commissions to Settle Lawsuits - The New York Times Rules that helped set real estate agent commissions are changing. Here's what you need to know Northeast Mississippi Daily Journal Bay Area Real Estate Executive Charged with Wire Fraud, Identity Theft in Investment Scam - Hoodline Foreclosures Are Rising—Especially in This One State—but Not for the Reason You Might Think - SFGATE Real estate sales in Peoria, Tazewell and Woodford counties for March 17, 2024 - Peoria Journal Star Real estate sales in Peoria, Tazewell and Woodford counties for March 17, 2024 Peoria Journal Star Realtors Reach Settlement That Will Change How Americans Buy and Sell Homes The Wall Street Journal Rules that helped set real estate agent commissions are changing. Here's what you need to know News10NBC Once America’s Hottest Housing Market, Austin Is Running in Reverse - WSJ The Wall Street Journal Real estate lawsuit settlement upends decades-long policies that helped set agent commissions WQAD Moline End of 6% real estate commissions could mean lower home prices The Atlanta Journal Constitution Real Estate Credit Investments (LON:RECI) Shares Pass Below 200 Day Moving Average of $126.75 Defense World A Look Into the Future of Home Buyers’ Agent Commissions The Wall Street Journal Manhattan Real Estate Update westsiderag.com Granite Real Estate Investment Trust (TSE:GRT.UN) Given Consensus Recommendation of “Buy” by Brokerages Defense World National Association of Realtors to cut commissions to settle lawsuits. Here's the financial impact. CBS News Bridgemarq Real Estate Services (TSE:BRE) Share Price Passes Above Two Hundred Day Moving Average of $12.93 Defense World Blackstone, World's Top Alternative Asset Manager, Eyes Record Highs Amid Real Estate Bottom Investor's Business Daily Chicago Voters Face Choice on Tax to Fund Homeless Programs The New York Times 4 Ways a Settlement Could Change the Housing Industry The New York Times Texas sues Colony Ridge development for fraudulent real estate practices The Texas Tribune Real Estate Stocks Drop As NAR Agrees to $418 Million Settlement Markets Insider Antitrust ruling rocks real estate: Buyers brace for shift in commission structures Straight Arrow News |
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