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Mill John Stuart, a 19eBritish economist of the last century, shared in his 1848 book “Principles of Political Economy” this general thought: “Proprietors get rich while they sleep”.
He was right. In the nearly 175 years since then, the enormous wealth gained from investing in real estate has been passed down from generation to generation. But you don’t have to be a millionaire to start your own run as an investor.
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A modest purchase can turn into profit – money that you can reinvest in another property. Or keep the property and let the rental income pay your mortgage payment, with money remaining at the end of the month. And sit back and watch your investment grow in value.
GOBankingRates asked investors about some of their favorite investments, and you’d be surprised how little investment some of them made to turn a big profit.
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Ryan David, a real estate investor from Pennsylvania, said he was contacted through his website as soon as it launched about a potential purchase.
“We received a lead for property related to an estate above from a family member who lived in four states,” David said. “We closed for about $15,000, which was the price they asked, and then immediately sold the property to another investor for $55,000. There was no work or rehabilitation, just a quick resale as is. To date, this is the biggest spread I’ve ever made on a single trade.”
Danielle Wolter of San Diego, who runs The Million Dollar Mama blog, said she’s invested in a variety of properties over the years, but the one she liked was a house in Memphis, Tennessee.
“It was a single-family house that needed updating. I bought it for $76,000 and paid a contractor $20,000, in installments, to do the remodeling,” Wolter said. “I had to fire that contractor and hire another one to come and fix the mistakes of the first one for another $20,000.
“I was all in at $116,000. When I went to refinance, the property was valued at $156,000, which gave me instant equity of $40,000. The mortgage (including taxes and interest) was around $600 per month and the rent received is $1,200 per month.
She said she was in the process of selling the Tennessee property, now valued at $210,000.
Entry and Exit in Indianapolis
Alain Perez-Majul is a full-time real estate investor through his company, Virtue Cash Buyers in Indianapolis, and he shared this story of a short-term purchase that turned out to be a winner. It was a “very old” multi-family property and was so worn it had to be demolished, he said.
“The owner lived in Chicago and wanted nothing to do with the property because it was a headache for him, and I was able to help him by getting it off his hands,” he said. “I held the property for a few months and sold it to another investor with a profit of $80,000. Within a month the property had been demolished and to this day – I bought it about four years ago – it is still just an empty lot. I believe the investor is waiting for the zone to turn a bit more before building on it.
A Dirty Delight
Benjamin Dixon, a licensed associate real estate broker with Douglas Elliman’s Mackay Dixon team in New York, was working with a client to find an investment property. He employed this strategy: to seek “the dirtiest possible house in the best location”.
“Many buyers don’t have the imagination to look past dirty windows and walls that need painting or floors that need refinishing,” Dixon said. “I recently found an amazing property in Bridgehampton for a client. We bought the very tired 1970s house for $2.8 million and did a $1 million renovation to freshen up the house. It is now for sale at $6 million and I have a very happy seller.
A handshake agreement
For Tomas Satas, one of his best deals fell in his lap when a cousin called and said his neighbor wanted to sell his property. Satas, the founder and CEO of Windy City HomeBuyer, met the seller, a gentleman who wanted an easy transaction without realtors, buyers and inspectors walking around his longtime home.
“I examined the house and there were major problems. Wouldn’t have passed inspection,” Satas said. “I told him about it and asked him how much he wanted. I almost fell over when he told me. (I) asked how he arrived at that number, and it was double what he wanted. he had paid.
“The man was still operating at 1980s prices. I explained to him that he could make more money if he had it appraised; but, if he wanted to, I would write him a check on the spot. He kept his life simple, took the check, I fixed the foundation and a few other issues, and as a percentage he had the (biggest) margin of any flip I’ve ever done.
“The best property I ever bought was on a handshake deal. I learned he was a carpenter aficionado, so I sent him a very large sum on a home improvement store card to thank him.
For Alyssa Carpenter, it took patience to find a seller willing to accept FHA financing in Austin, Texas, as she searched for her first home: a duplex that doubled as an investment property.
“I was able to secure this property with a 3.5% down payment at a 2.5% interest rate,” said Carpenter, who runs the financial website FI/RE Manual. “After a short renovation, I was able to increase the rent from $700 for a two-bedroom, one-bathroom to $1,400 for the same unit. The tenant has just renewed the lease for a second year. I just moved to the other side (three bedrooms, two bathrooms) and rented it out for $1,900.
She continued: “Being able to buy a duplex as an investment property with so little down payment has had an incredible impact. Gross rents of $700 per month on mortgage. This property also appreciated from the purchase price of $390,000. I received a soft offer from another investor at a purchase price of $515,000. I’m not selling yet, but it’s amazing to see this appreciation in just a few years.
Real estate investors have shared their tips for those looking to invest in residential properties themselves. It starts with networking and marketing yourself as an investor so potential sellers know they can turn to you.
“Let everyone know… that you are a real estate investor looking to buy property,” said Antonio Cousin, the broker/owner of Service 1st Real Estate in Louisiana. “You never know who you might meet who might need to sell and who might be able to help you. It’s also a good idea to join your local property investors association and network within the group. Internal networking might lead on additional opportunities or even on a partnership.
For a seasoned investor, there is no substitute for knocking on doors.
“In the industry, it’s called driving for cash, where you drive through a desired location and knock on doors with an offer,” said Craig Stevens, the founder of Groundbreaking Real Estate in the New York metro area. . “This technique allows an investor to avoid overbidding and can help develop a relationship with an owner since the negotiation takes place face to face. Since the property is not actually on the market, some owners may be surprised at the value of their current property and be seduced by the possibility of selling so quickly.
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