Study, work hard, find a good job, pay your bills, and then maybe you will die without any debt. This was the mindset of the “poor dad” in Robert Kiyosaki’s book “Rich Dad, Poor Dad.”
Sounds like a boring way to live your life. And the worst part: most people do this and still leave bills behind for their loved ones to pay.
Then there was the “rich dad” who said, “you shouldn’t work for money, your money should work for you.”
I’m willing to bet you clicked on this blog, or watched our video, because you want to be more like “rich dad” and find ways to get your money working for you, and you have heard that real estate is a great way to do that.
Am I right?
If I am, then keep reading!
There’s so many ways to invest in real estate. It’s a business of shiny object syndrome. You get excited about one thing, and then you learn another amazing investment strategy and feel like you have to do that too!
Let me give you the best advice I ever received when it came to investing… stay in your lane! In other words, become laser-focused and really stinkin’ good at one or two investment strategies. Don’t worry about what others are doing. They are taking their own path. You have to stick to your guns and become a niche expert.
What do I mean? Simply, if you try to master everything, you will be the master of nothing.
What do I not mean? Don’t put your blinders on. I’m not telling you to pick one strategy and make that your exit for every deal. You have to learn and understand many strategies so you can be diverse in your exits. All I’m saying is don’t try to master all of them. Master one or two.
Okay, now that you understand the mindset, it’s time to teach you the exit strategies.
In our video, we discuss five different exit strategies. I’ll start with those five, but I’ll expand into my top 10 real estate investing strategies.
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1. Fix ‘n’ Flip!
Made popular by HGTV, the fix ‘n’ flip is the sexy way to get involved in real estate investing. Through TV flipping shows, we have been exposed to beautiful before and after photos, large profit potentials, and tons of drama. It looks super risky and appears to have huge rewards, but the truth is if you do the deal the right way, the drama is rare and the rewards can be just as good!
The fix ‘n’ flip is all about your team. If you assemble the right team, finding completing, and selling the deal can be very simple.
Here are some teammates you will need:
- Mentor: No matter which method you use, a mentor is a must in real estate investing. You need a second pair of eyes on your deals, you need someone to help accelerate your learning curve, and you need someone to help walk you through step A to Z.
- Note: Provide value to your mentor too. They are kind enough to help you, be kind enough to repay them. Buy them dinner, offer your own expertise, do a deal with them, etc.
- Private/Hard Money Lender: Sure, you could use your own money to do a deal, but you take on all the risk and you cannot scale (unless you have millions of dollars laying around). Your ability to raise money will determine your opportunity to scale your business. Click here to learn how to raise private money.
- Wholesaler and/or real estate agent: Wholesalers (which you will learn more about as you keep reading) and agent’s number one job is to find deals! The more relationships you build with wholesalers and agents, the more leads you will have coming your way.
- Note: these leads will be less profitable than ones you find on your own because wholesalers and agents take a commission. But, if you don’t develop these relationships, you will always have to find the deal; that costs time and money.
- General Contractor: Arguably your most important team member. They will be the determining factor to getting your place up to standards for market value, and they will determine a majority of your holding time. You want a contractor that comes highly recommended and has experience working with investors.
- Note: You can find sub contractors as well. Sub contractors are a great way to help you reduce your prices, but you also have to manage them. When you build a team of subcontractors, you basically become the general contractor.
- Real Estate Agent: Yes, I know… I already said agent. But I’m saying real estate agent again, because they need to be there for the backend of your deal. When your contractors are done and it’s time to go on the market, a realtor will become your best teammate. Don’t hire your friend who has been an agent for a couple months. Hire a professional who has done this hundreds of times.
2. Wholesaling
Like a fix ‘n’ flip, you will look for below market value homes. Unlike a fix ‘n flip, you do not buy the house — you only put it under contract. Once you have it under contract, you upsell the contract to your list of cash buyers. The difference between your contract price and your sales price is your profit.
Example: You put a house under contract for $75K. During escrow, you sell it to a cash buyer for $100K. You make the difference of $25K. Not too shabby!
The toughest part of being a wholesaler is finding the deal. You have to be a master of marketing, and if you don’t have the money to spend on marketing, you will definitely spend more time looking for the deals.
The best part of wholesaling is that you don’t have to worry about long holding times and costs. Because you never buy the deal (you only own the right to purchase), you do not need to close on the property.
You also don’t need nearly as many teammates as you do for a fix ‘n’ flip. Your only teammates you need are a list of cash buyers.
My friend Matt Garabedian explains and knows wholesaling better than justa about anyone I know. Listen/watch Matt by clicking here.
3. House Hacking
House hacking is a passive income strategy that is done right in the comfort of your own home. Many people do it and don’t even know they are doing it!
House hacking is the act of renting out vacant rooms in your home. This can be done through three common ways:
- Roommates
- Out of town traveling employees
- AirBnB/VRBO
To learn more about house hacking, click here.
4. BRRRR
An acronym cooked up by Brandon Turner of Bigger Pockets which stands for:
Buy
Rehab
Rent
Refinance
Repeat
This is a method that can help you have little to no money invested into a cash-flowing rental property.
My first BRRRR came in the form of a two house on one lot deal. I bought it with the intent of flipping it, but once I was introduced to the BRRRR method, it became a no-brainer.
Here’s the details and the timeline of the deal:
May 15: Got property under contract for $165K
May 20: Received a $50K rehab quote from contractor (All in $215K)
May 31: Close escrow
June 1-July 1: Contractor worked on the large house:
July 3: Tenants moved into the large house
July 2-31: Contractor worked on the small house
Aug. 1: Started the refinancing process
Currently: Expecting to get the full $215K back from the refinance
Future: Own a property with none of my own money. I will AirBnB the small house (ideally cash flow $750+ per month), and I will do this again with more properties.
I bought it, my contractors rehabbed it, I put a tenant in it, I refinanced it, and now I’m going to repeat it! BRRRR… it works!
5. Buy and Hold
This is a simple passive income strategy that most people think of when they hear about real estate investing. It is simply the act of buying a property with the intention of renting it out.
The big mistake most make with buy and hold is the expectation of appreciation. Do not buy a property expecting it to appreciated. Buy a property for cash flow!
What’s the difference? The difference is the expectation.
If you buy a property that is cash-flowing little to no money, and a crash happens, then you are stuck with a headache of owning a property that has gone down in value since you bought it and is making you little to nothing to manage.
But, if you buy a property with $200-$300 cash flow per month, then when the market crashes, you can patiently wait for it to go back up while you collect your passive $200+ per month.
My biggest recommendation is to manage your first few properties on your own so you can learn more about the ins and outs of what it takes to manage a property. After that, you can hire a property manager.
6. Buying and Selling Land
This was a concept that I was unfamiliar with until recently. After learning about it, I was blown away! This strategy is special because it not only is transactional, but can also be residual if done right!
I’ll explain it to you the same way Mark Poldosky (the “Land Geek”) explained it to me.
Mark will buy a piece of land for 25% of it’s market value from a motivated seller –usually someone who has not paid their taxes on this property for months.
He will then sell that property and request a 25% down payment (which earns him his investment back). Mark then loans the remaining 75% (with interest) with a five-year note.
If you understand this, then you understand that Mark has no expenses and is cash-flowing positive income every month for five years! Mark has done over 5,000 deals, and one deal made him over $5 million over five years!
Mark will appear on my show soon, so make sure you are subscribed to our Youtube Channel to be notified: Click here to subscribe.
7. Wholetailing
Wholetailing is a combination of wholesaling and retailing a property. It’s identical to wholesaling in that you get a property at a below market cost and plan on selling it. Unlike wholesaling, you are not marketing it to your list of buyers. You are actually marketing it to all buyers because you are putting it on the MLS.
This means you could get a cash buyer or a retail buyer. And because you have so many buyers, you often make more money because they will start to bid against each other.
The trick with wholetailing is that you have to close on the property in order to put it on the MLS. So you will have to have the means to fund the property.
Shane Swanberg is a master at wholetailing and he will appear on my show soon, so make sure you are subscribed to our Youtube Channel to be notified: Click here to subscribe.
8. Commercial
Multifamily/commercial investing is not much different than single-family buy and holds. The biggest difference is the size of the deal.
The power of multifamily is rent. By increasing the rent, you increase your NOI (net operating income) which therefore increases the value of the property.
Unless you live in a city with rent controls, raising rents is fairly easy. Some landlords like to add value and then raise the rents.
The best way I have seen this accomplished is by Tim Bratz. Tim built a portfolio of $260+ million in under four years without using any of his own money. Take a look at how he did it: Click Here
Or, if you just have a ton of cash laying around, you can be like Grant Cardone and buy them with your own cash 😉
9. Subject to
This can be complicated, so I’m going to sum it up very simply: you own the property, but the former owner owns the mortgage.
Let me dive deeper into this by sharing a story.
Valentin Pits, an investor and good friend of mine, met a seller who was motivated to sell. They could no longer afford their home, and they were stuck with a mortgage that they could no longer afford. They didn’t care about making a profit off the sale, they just cared about getting rid of the monthly payments.
Valentin could have offered to buy their home, but Valentin has found “subject to” to be the best strategy for scaling his rental portfolio.
So, Valentin simply suggested that they transfer the deed into his name, and he would start paying the bank for the mortgage payments. And as a nice gesture, Valentin gave the seller $1,500.
In other words, Valentin bought a rent-ready house for just $1,500!
The mortgage is still in the former owner’s name, but Valentin is making the payments (through the rent that his tenant is paying), and he’s cash-flowing $200+ per month!
Worst case scenario, if Valentin gets struck by lightning and dies, the former owner re-inherits the property, the tenant, and the $200+ cash flow.
Pretty frickin’ sweet!
10. Syndication
There’s two sides to syndication (also known as crowd funding). The syndiactor and the investor(s).
Let’s first talk about the syndicator. This is the person finding the deals and raising the money. Many times, the syndicator is creating a solution for his investors, so he can charge a fee or take more of the profits.
Most often, syndication is a long term investment into rental properties (usually commercial), so the syndicator is raising money from likely more than one person/source.
The investor(s) are usually people who have money lying around and want to invest in real estate but don’t have the knowledge or time. They are willing to invest their money with a trusted professional for a long term, cash-flowing investment – even if it means paying a fee and giving some of their profits to the syndicator.
There are tons of syndications out there. Cardone Capital is a good example. Grant Cardone promotes that he has the knowledge and can find the deals to help his investors triple their money in 5-7 years. He charges a few small fees to get started, and he splits the profits 65/35 upon sale or refinancing of the property.
I myself am invested with Cardone Capital. I invested before I started becoming a real estate investing expert because I wanted to get started without having the headache of finding or managing a deal. Now that I have the knowledge, I do it on my own.
If you don’t have the time or knowledge, this is a great place to start.
Get started! Just do it! Find your one or two strategies, master them, and conquer real estate investing!
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