[Video Post] 10 ways to make money with real estate.

Stewards Log:11:39:18:06:2010

Top 10 Ways to make $ with Real Estate

Hi There, I am Dave Williams your Business Steward and today I would like to share with you 10 ways to make money with Real Estate.  The purpose of today’s talk is to help you find Idea’s to build your own personal wealth with Real Estate.

In truth there are only 3 key categories that many different techniques fit into:

  1. Buy Personally and live there (Buy and Hold)

1-Pay down your dept faster = A lot more $$$ Later
2-The Smith Manoeuvre House->Stocks->House

3-Self Directed RRSP’s to your own mortgage.

  1. Buy as an Investment:

4- Buy a home or condo and rent it out.

5- Multiple-unit/Multi-family complexes

6-Lease to Own programs

  1. Buy to Sell:

7-Reselling the property

8-Assigning the deal

9- “THE FLIP…” physical improvement

10-“The Flip” intellectual improvement

However each of these categories has multiple methods to make or lose you money.  This is my word of caution, take the time to study the practice of making money in Real Estate or hire a professional advisor.

Houses appreciate at 4% per year when averaged out over the last 20 years.

So, option one is Buy and Hold and live in it.  Historically homes appreciate 4% each year, a better rate of return than bank accounts, Gics, funds…so put your money in your home, that is use your ability to make extra payments each year, select by-weekly payments so you pay it off faster, and consider a variable rate mortgage as they traditionally outperform fixed 5 year rates over the course of a whole mortgage.

Side note – TD Canada Trust gives you the ability to self direct your RRSP’s, so you could be paying a portion your mortgage to yourself.  (Explanation Here)

If you Buy a home or own one…you now have leverage or collateral as the bank calls it.  You can use this leverage to buy other income producing properties, or you could try the “smith manoeuvre”, where you invest in stocks that perform better than the housing market then re-invest it in your home.  This takes a professional investment banker…do your research on them.

If you decide to take that money and Invest in Real Estate you are up to the second stage of wealth building with buildings…yah I know bad pun.

You have some options with Investment real estate, you can buy a single unit (home or condo) or a property that has multiple units and create a cash flow, and yes you get money monthly as well as the property appreciation.

The sixth option to making money I’ve got for you today is Lease/Rent to Own which takes a little bit more explanation.  Due to the relatively low mortgage rates right now, banks are charging a huge premium to get out of mortgages, which is preventing some people who want to move from doing so.  Here is your solution, there are some people out there who simple don’t have the down payment to buy a home, but have great jobs and excellent credit, you find them, they pay you a small fee to buy the rights to buy your home in the future (say when you mortgage naturally comes up for renewal), they pay your rent on a monthly basis (enough to cover your mortgage) plus a little extra, which is really forced savings for the down payment.  At the end of the time period, they buy the home from you, having already given you a down payment, your home is sold, and you have helped them get a home sooner than they could have otherwise.  Good for you, you helped someone and got paid for your troubles.

Finally we can look at Real Estate as Stocks, Buy and Sell, Buy Low and Sell high that is, but sometimes the wait from low to high is so long that people wonder how you can make money this way, well let me give you some IDEA’S!

You got Lucky – Some times, if you are looking at the right time in the right place you can find a property that is undervalue, for any number of reasons and buy it low, turn around and sell it for what it should be worth.  This does require that you are able to tell when they are underpriced, and that you have your nose to the ground for when they do.

Assigning sales is a great way to make money with real estate without putting a lot in.  You make an agreement to buy a home, and then sell the agreement to someone else.  This also requires that you have some knowledge to back up this rash move.  Here is an example, you happen to be sitting in on a public city zoning meeting, they agree to change the zoning for a certain area to allow a developer to build super-condos, you check and there are houses up for sale in the area, you call your real estate agent and make offers on all the homes…I know sounds like a lot of money…but really you are paying the consideration, the “deposit” at offer time, and then contacting the developer to say, hey I’ve got a number of the properties you want, make me an offer.  Voila you assign the sales without closing and get paid for your trouble.

Then we come to “The Flip” dum..dum…duh!  What this is in reality is improving the condition, location, or reality of a property to make it worth more.  You can improve a property physically, such as making an ugly home beautiful again, you can improve the location by doing some landscaping or moving the building and you can improve the “reality” of a property by changing it’s zoning, allowed use, or removing a stigma that was attached to it.

So in a nut shell, those are 10 ways to make money with real estate, can you think of any others???

Here’s hoping I’ve given you something to think about.

Dave Williams


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