We Can Show You Three Easy Approaches – and None Involve REITs
Investing in real estate the “traditional way” can be difficult and time-consuming. You have to find the properties with real potential, figure out a way to put together the money to finance them, negotiate good purchase prices, keep them well-maintained, find renters and handle the on-going relationships with them. If you are really careful you have the potential to earn a profit. If you are not careful you have the potential to lose money – in some cases a substantial amount.
We’d like to share a little-known fact with you. This fact is so unknown that many of even the most savvy real estate investors have never heard it. Here it is:
You can make great profits in real estate without owning a single property.
Here’s another little fact that’s just as unknown, but nearly as important as the first:
You might even make more money with less risk than if you own property.
Often people are a little skeptical when they first hear these two points, so next we’ll show some actual examples of how they can be true…
Example 1: Making Private Loans
The first example is known as “private lending”, which essentially means private investors making loans with their own funds through specialized real estate brokers who manage the process and paperwork. These loans all have real estate as collateral and can be made for any number of purposes. If a loan recipient ever were to stop making payments on the loan, the private investor can initiate foreclosure proceedings and then either sell the property to get their funds back, or keep the property as a long-term investment. Interest rates for these loans can provide very nice returns to investors, with the added bonus that typically the investors never have to take over ownership of the real estate collateral.
Example 2: Note Buying
A second approach used by savvy real estate investors is to trade (buy and sell) the notes created through activity such as the private lending noted above. In some cases banks or other institutions will sell notes they are holding as well. These are known as “promissory notes” as they represent the borrowers’ promises to pay back the money borrowed. Typically promissory notes have trust deeds (also known as “deeds of trust”) associated with them which reflect the liens used to secure the loans. There are many different ways to make money trading notes. These include buying discounted non-performing notes, turning them into performing notes, and then reselling them at a premium. Alternatively investors can buy those same non-performing notes and foreclose on the properties and then rent or resell the property. Another approach is to buy notes in bulk and resell them individually at a mark-up.
Example 3: Investing in Pooled Funds
Both of the previous approaches do require some time, effort, and expertise. Investors who would prefer to spend their time elsewhere do have a third option which can work well. That option is to invest in a pooled fund with professional managers who already are investing their own time, effort and expertise. The general concept of a pooled fund is that mutual investors contribute their funds to a single pool, which is then invested by the managers into multiple deals. Each fund typically has a different set of criteria for investor accreditation status, minimum investment levels, investment approaches, and risk/return profiles.
If you meet the accreditation requirements and select the right funds, they can be a great way to make a profit from real estate without actually having to “own” anything.