Starting with $0.00? No problem.
The old saying “you need to have money to make money” doesn’t always apply in real estate investing. Savvy investors have turned nothing more than grit, determination, and strategy into 100k, and so can you.
Fortunately, the strategy you need to be successful as an investor in real estate can be found in this article. We are going to cover 10 simple steps you need to take to make your first 100k in real estate.
1.Find a House To Flip
Have you ever heard of the BRRRR strategy? This method of real estate investing allows you to build wealth quickly and with little to no cash. Essentially, you use the property as an investment and leverage it to acquire more properties faster. The acronym stands for buy, rehab, rent, refinance, repeat.
Before we dive into the details, you’ll need to know where to find houses to flip, which is the first step. Using Connected Investor’s PiN software, you can locate pre-MLS properties for sale in the location of your choice. The properties listed in PiN are:
- Probate properties
- Vacant properties
- Pre-foreclosures
- Courthouse auction properties
- Bank owned homes
- Zombie properties (in pre-foreclosure and vacant)
- Properties that are for sale by motivated owners
- Shadow inventory (bank-owned property that is not listed)
- Wholesale deals
- Online auction properties
With access to the best deals before they hit the market, you’ll be able to score great investments at a discount. The idea is to find a distressed house that has potential and is situated in a prime neighborhood. After you flip the house by completing the necessary renovations, the value of the home will far exceed both the price you paid for it and the cost of renovations.
2.Run and Review The Numbers
Because not all investment properties are created equal, you’ll want to run some numbers before choosing to purchase and flip the house you’re considering.
Here are a few calculations you should make before you buy and flip the house:
- Capitalization rate
- Cash on cash return
- Cash flow
The capitalization rate, or cap rate, is particularly important, as it will show you the value of the property over time, taking appreciation into account. Cash on cash return is another important figure because you will be able to determine how great a return you will receive on the money you’ve invested.
Because you are planning to flip the house, you’ll want to get estimates on repairs, which might involve getting an inspection done. You should also take a look at some real estate comps to evaluate how much the house will be worth once the repairs are completed.
Ultimately, there should be a sizable profit margin left over, once you’ve subtracted the cost of the house and repairs from the estimated future value of the home.
3.Get Connected With a Private Hard Money Lender
If you were wondering how you were going to fund this investment, no need to sweat it. Before you start doubting your ability to get an investment property loan, remember, hard money lenders, are investors too. They are looking to make a profit off lending you money through charging interest. If you present them with a solid property they know will make a profitable investment, they’ll be more than willing to work with you. Though many hard money lenders prefer that you put some money down, not all will require it.
Through the Connected Investors’ platform, you will have access to hard money lenders competing for your business. We provide fast loan options that don’t require a credit check or SSN.
Click here for access to funding, so you can flip the house and turn a profit.
4.Close on Your Investment Property
Once you’ve found the perfect house to flip and the best lender to secure your investment property loan, closing on your property should be a breeze.
Need a real estate agent? You can connect with one inside our platform.
5.Hire a Construction Crew To Flip The House
Unless you are handy, you’ll probably want to hire a construction crew to flip the house. It could be tempting to work on renovating the house part-time to save some cash but remember this: time is money. The longer it takes to flip the house, the more money you spend by:
- Paying taxes
- Paying utilities
If there aren’t any tenants renting from you, these expenses are coming out of your pocket. Other expenses to consider are:
- Paying interest on the loan for longer than you intended
- Losing out on potential rental income by taking too long to complete renovations
Be honest with yourself. How long will it realistically take you to complete the repairs? How extensive are they? You might find that paying for a construction crew to flip the house can save you money in the long run. If this is the case, use the Connected Investors’ platform to quickly get in touch with construction professionals.
6.Refinance! Don’t Sell
So, once you finish renovating, you sell the house and turn a profit, right?
Not so fast. By hanging on to a property, you can have long term equity from real estate appreciation while reaping the benefits of monthly cash flow from rental income.
But if your goal is to make 100k in real estate within a few years – as opposed to twenty or thirty years – this just won’t do. Between paying off your loan and the property’s monthly expenses, you’d be lucky to profit $15,000 per year.
Instead, consider refinancing the property once the renovations are complete. It will be valued much higher than when you bought it, and you can tap into this equity.
7.Rent The Property
As soon as you can, get your property rented. This will allow your tenants to rebuild your home equity for you. You are getting the best of both here – the cash in hand that typically comes with selling a flip, but also the long term equity and monthly income of owning a rental.
8.Pay Back Your Lender and Reinvest The Profits
With your home equity, pay back your lender to avoid the ongoing costs associated with loans for investment properties. Now you’re off the hook and won’t be racking up interest.
The remaining profit will become the capital you use to secure new investment.
9.Find a New Flip
Return to our PiN software to find another house to flip and another loan for an investment property. This time around, you’ll have an even easier time getting a great investment property loan, as you’ll have a sizable amount of cash from refinancing the last property.
10.Repeat!
Repeat this process by continuing to find houses to flip until you’ve made your first $100,000 in real estate. Eventually, with a vast portfolio of properties, you can push your monthly income over $100,000.
When it comes to real estate investing with this method, not only will you have a steady stream of rental income capable of replacing your day job – you’ll also have tenants building up hundreds of thousands of dollars in equity for you over time.
To get started with this tried and true method of generating wealth through real estate investing, click here to search for the best investment properties before they hit the market.
The post 0-$100K – 10 Steps To Make Your First $100k In REI appeared first on Connected Investors Blog.
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