The biggest challenge for real estate BWBs (Beginning Wealth Builders) is the down payment needed for their first property. So if a BWB starts with a low-cost property (say $50,000–not $5-million), it's much easier to borrow the down payment.
For instance, if you need 10% down, that's $5,000 for the $50,000 property, but $500,000 for the $5-million property. There are thousands of sources for a $5,000 loan. But there are fewer for the bigger loan!
“Where can I find low-cost properties?” you ask. Here are a number of active sources you can start using today:
- Pre-foreclosures– that is, people who've fallen behind on their mortgage payments and want to sell out before the lender takes the property back.
- Post-auction sales where the lender foreclosed on a property, took it back and failed to sell it at auction. You get 100% financing with these properties.
- Zero-down properties advertised in the real estate classified ads columns of some newspapers around the nation and world. You may not find such an ad the first time you look. But keep looking; you're almost sure to find one.
- Estate sales–where the family of a deceased person “wants out”–that is, they want the money, not the house. So they sell at a “give-away” price!
- Government seized-property sales often offer bargain prices on a simple bidding basis–that is, you are not bidding against others at an auction.
- Damaged property sales in which fire, storm, flood and other damages make the property either a giveaway, or a very low price–sometimes just $1.
- Bankruptcy sales in which the mortgage holder sells the property of a person, or firm, that went bankrupt. Prices of such properties can be low.
- Swapping of one property for another can get you into another property for zero down quickly and easily. Swaps (called a 1031) can be tax-free.
So how can you earn money from low-cost properties? Here are a number of proven and profitable ways:
- Hold the property and rent it to tenants for a monthly income.
- Fix up (rehab) the property and sell (flip) it for a profit.
- Leave the property in the same condition as you bought it and flip it.
- Trade the property for a better one, or a property in a different area.
- Use the property as a starter in a group of buildings you plan to buy.
- Convert the property to one that will bring a larger income.
- Tear down the property and offer the site for sale to developers.
The option you choose is up to yourself. It all comes back to your skills and interests. Remember these facts:
- You MUST enjoy what you're doing. It shows through to your customers.
- You MUST know what you're doing if you plan to rehab or trade properties.
- You MUST have conversion experience if you plan to convert properties.
Yes, low-cost properties can make you rich. You just must be sure you have a plan for what you'll do. Then, get out and do what you plan!
Copyright © 2002 by International Wealth Success, Inc. All rights reserved.
Tyler G. Hicks, the president of International Wealth Success Inc., is the author of many wealth building publications, including the Multi-Family Home and Multi-Unit Real Estate Riches Kit.