Join us as Ken takes us through the seven ways to make money in real estate. For more blog posts, click here.
Hey guys, it's Kenneth Yim from Keller Williams Realty here, with another real investing video. This time I want to tell you about seven different ways you can make money in real estate.
All this information comes from Gary Keller's Millionaire Real Estate Investor book. Really really good stuff.
So first things first, it's called "finding and referring". Okay? So that means if you find a property either on or off market, and you introduce it to an investor in to it, often times they'd be willing to pay you a finder's fee. Now, as you can imagine, the fee probably won't be that high, but at least it's a little bit of something and you didn't have to put any cash out. So that's a good way to do it. So always be looking on the market.
Number 2 would be "controlling and assigning". Oops, let me get it in focus there. Controlling and assigning. Now these are a little bit difficult to come across, I mean really you're flipping the paper and not the actual property, andI caution you because for tax purposes you'd be paying business tax, not capital gains tax. Talk to your accountant about that, but you know, it's a great way to make some money with minimal down. So, all you do is put some money down towards securing the property, getting it in to contract, putting maybe a long close, and then finding another buyer that would be willing to pay more than what you paid for it. Not a bad option. I've done that once before and it was pretty awesome... actually a few times. It was awesome.
Another one, "buy and sell". Ok so you buy the property, then right away you close on it and then you can flip it out for a little more money as well too. Now again, it's a little bit difficult to make money on that especially with the all the high closing costs, like land transfer taxes, and selling costs, lawyer fees, and all that. So there would have to be a lot of value in there to make it.
Again, another one to do is "buy, improve, and sell", commonly known as the "fix and flip". I'm doing one of these myself, it's not a bad way to make money. You buy it, close on it, fix it, flip it, and try to profit within 6 months, maybe a year. This is what I would say... these four strategies that we just talked about, "buy, sell, improve", "buy and sell", "control and assign", and also "find and refer" is the best way to get cash quickly. To build your cash.
But the real, real, real way to make money is when you grow your equity. Ok? So here's another option: it's a little bit creative, it's called the "lease option". Alright? So maybe you potentially you have a property that you already have and you've given it to somebody like a tenant and maybe they're trying to fix their credit (so they can't buy yet), you offer them a lease-to-own scenario. Anywhere from 2 to 5 years. So they pay you often sometimes it can be a higher than market rent, so you can get some good cashflow there, you're also building equity because you know you're holding the property obviously, and then you sell it to them at a pre-determined price. Now it could be a win-win, depending on the situation, but it's a good way to make some money. Like yeah... you can get really creative in that. You HAVE to get really creative.
Here's my favourite: "buy and hold". This is what I'm doing with all my pre-construction condos. The reason why I bought a lot of them and I think it makes it easy for the everyday investor, is because you can take that money out of your equity of your home, let's just say, or savings. You have staggered deposits, over a two year period. You'd be paying a certain amount every single payment, maybe $30,000 to $40,000 per payment, until you hit your deposits, your 20% down. Then after that, you can wait for the building to be built, it would be about 4 to 5 years. The market typically WILL rise, and then at that point you get your mortgage, and then you kind of just hold on it right? Put a tenant in there, hold, hold, hold! Don't ever sell. Take a line of credit out if you want to. If you're kind of getting lost, just take a look at my last video on how... I'll point that to you next. Buy and hold I think is my favourite strategy. It just kind of, you know, five years flies by so fast. You don't even notice it.
Also the one to create real value is to "buy, improve, and hold". Right, so same kind of idea. You buy it, put some money in to renovations, and then you can hold on to it, get a tenant in there, and then maybe improve it some more. This also includes buying a piece of property... a piece of land let's say or even a building, and putting more intensification to it, so more density, creating more floors, maybe getting some re-zoning to do that. Something that's one floor now, and then adding two more floors to it, so that's 3 times the amount of space you have. That's also amazing too. So this also can get very creative, and also needs a lot of expertise as well too, but probably is the best way to make money.
So, there you have it, seven ways to make money in real estate. If you want to talk a little bit more, give me a shout!
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