How do millionaires make money in real estate so quickly? Is it luck, their parentsu2024 wealth, or is there some sort of science to it?First, you need to understand that there are dozens of ways to u201cmake money in real estate.u201d Some take a long, long time. Others donu2019t.However, you also need to know that some of the u201cunder 30u201d kids claiming to be millionaires arenu2019t. (Oh, sure, some are. You can be.) There are some people who make money selling coursesu2014expensive coursesu2014and they like to promote themselves with pictures of themselves standing in front of mansions, in front of very expensive cars, on fast boats surrounded by nearly-nude bikini-clad women, and so on. So, donu2019t pay attention to those claims. Thereu2019s usually no way to verify them. However, that really seems to be the way some of those folks have made most of their money. They do a few successful deals. Then they become u201cgurus.u201d They have a $1,995 course. A $2,995 u201cboot camp.u201d A $500-a-month u201cInner Circle.u201dHereu2019s one list of u201cThe Top 100 Ways to Make Money in Real Estate.u201d The list is worthless from a u201chow tou201d perspective (though the site itself is very good, with lots of information), but it demonstrates the range of real estate strategies. Also, keep in mind that many people will start off with one strategy, then use another . . . either when the market changes or when their circumstances change. Itu2019s also important to choose a strategy that youu2019re comfortable with. For example, some investors pursue short sales and pre-foreclosures. Others really donu2019t like doing that.And before we finally get to u201cthe answeru201d (or at least some of them), understand that one way to make a lot of money quickly is to use leverage. And, often, the more leverage involved, the riskier the investment can be, or can get. Still, here are a few techniques that some people have used:WholesalingBecome a real estate wholesaler. Thatu2019s a quick technique to make money, starting with little money. Note: Some real estate investors donu2019t consider this u201cinvesting.u201d And it isnu2019t. Youu2019re not actually purchasing, renting out, or selling real estate. Still, this is a way to make moneyu2014sometimes a lotu2014quickly.A real estate wholesaler puts a property under contractu2014generally at a price substantially below what would be considered market value. The contract is assignable and thatu2019s what you do: You assign the contract to a rehabber or another investor and charge an assignment fee.Example: You find a property that in fixed-up condition (ARV, or after-repair value) would sell for $550,000. It requires about $90,000 worth of work. You can put it under contract for $305,000. You do so, you now have a contract with the owner(s) to buy the property for $305,000. The contract is assignable (most contracts, including real estate contracts, are assignable unless they specifically say that theyu2019re not). You find a rehabber willing to pay a total of $330,000 for the property: $305,000 to the owner and $25,000 to you as your assignment fee: For the rehabberu2019s right to take over your role as purchaser in the contract. You make $25,000. I know people who average $23,000-$26,000 per deal. I know others who average $5,000-$7,000 per deal, but they may do 20u201330 a year.Your investment: Probably $100 or less. Remember: Youu2019re not actually buying the property, so thereu2019s no 20% down or 10% down or whatever. Instead, thereu2019s an earnest money deposit. Many wholesalers use $100. Some use less. But if your assignment contract (the one between you and the rehabber) is written properly, you can even get your $100 back.RehabbingRehab houses. This generally isnu2019t for raw beginners. Learn wholesaling first. Or work with some rehabbers. Also, understand that the reality TV shows that show rehabbers (all the u201cflippingu201d programs on the air) you see are highly fictionalized. Still, thereu2019s good, relatively fast money that can be made. Using the wholesaling example above, suppose youu2019re a rehabber. You pick up the property for $330,000. You put $90,000 into it, and you sell it for $550,000. The rehab process, if done properly, might take 10u201315 weeks. Allow another 60u201390 days to sell it and close. And youu2019re going to have a bunch of expenses. The main ones will be financing from either a hard money lender or a private lender. Youu2019ll also want to maximize the sales price, so youu2019ll use a real estate agent. Still, you might make $75,000, plus or minus, on the rehab. Where I am, rehabbers typically do one at a time. But in other areas, where prices are lower and the profit might be around $25,000, rehabbers might do 2 or 3 at a time.Mobile HomesBuy and sell mobile/manufactured homes. This is like rehabbing, but with a few different profit centers. First, you buy with cash, getting a substantial discount off the asking price. (The secret is that most mobile home buyers want to finance the purchase, but canu2019t. This reduces the number of actual, available purchasers.) Drive through a mobile home park. Youu2019ll see signs in the windows offering to sell for $25,000, $30,000, or whatever. (Can be a bit lower, might be substantially higher. New, really nice manufactured homes sell for $100,000-$125,000.) Do a bit of research on values, though it doesnu2019t take too much. Offer about 35% of the asking price, all cash. Yes, itu2019ll take you maybe $6,000-$10,000. Youu2019ll get people to say u201cyes.u201dHave someone inspect the home. Itu2019s likely to need a few thousand dollars of repairs. Thereu2019s likely to be wood rot around the bathrooms. It might need a new roof. You may need to put in a few working newer (used is fine) appliances. Just make sure thereu2019s nothing major, nothing thatu2019ll take more than a few days to a week to fix.Fix it up and pretty it up. Then put it back on the market at close to u201cretailu201d price. Letu2019s say $20,000. But you put it up for sale with u201cseller financing.u201d Say, u201cOnly $5,000 down and $x per month.u201d (I donu2019t have my calculator with me, but something in the range of $299-$399 a month will work.) So now you get a buyer with $5,000 down. Your total investment in the home is perhaps $8,000. Youu2019ve just received $5,000 from the new buyer. So your net investment really is $3,000. And youu2019re selling it for $20,000. Your return on your $3,000 investment should approach (and often will exceed) 100% per year. Thatu2019s going to give you a nice, solid cash flow. If you want your money even quicker, youu2019ve got the note from the buyer for (in this case) $15,000. The note has a stated return (the amount youu2019re charging the buyer) of perhaps 12%-15%. Wait 6 months for the note to season, then sell the note at a slight discount. There are plenty of people out there whou2019d love to buy a seasoned note yielding 18%-20%.OK. So rehabbing and financing the sale of used mobile homes isnu2019t glamorous. You didnu2019t ask for glamour. You asked for a way to make a lot of money quickly.Other TechniquesI could keep writing all night, but Iu2019ve got other things to do, and so do you. But a few other ways to earn money quickly in real estate without needing a lot of money up front or waiting forever include:Dealing in Notes (performing or non-performing)Options (for houses, apartment buildings, or land)Mobile Home Parks (Buy with seller financing, fix it up, fill the vacancies, then either sell for a profit or collect a lot of cash every month.)Tax LiensJoint Venture (You find and structure the deals. Your partner puts up the money.)
