The Fastest Way to Retire Investing in Real Estate When Starting with No Money
If you want to have regular income to retire on in the future, follow these real estate investing steps.
First, start wholesaling properties by finding properties for other cash investors and flipping those properties to them for fast cash fees. You can make between $5,000 to $10,000 in fees on each deal completed and build up capital for a down payment on a fix and flip of your own.
Next, find properties where you can use seller financing, by either assuming an existing loan, having the seller carry paper or lining up private money financing where you put 25% down and they finance 75% of the purchase price. Make offers that allow you to make a reasonable profit after paying for private money financing or seller financing. Start buying, fixing and flipping properties to create profits of $20,000 to $30,000 to continue building capital. Do fix and flips every 4 months with the same down payment money and earn an additional $75,000 during the year.
Finally, pool your resources and find rental income properties that you can now purchase for cash so you can negotiate a great deal on it. Find properties from between $50,000 and $100,000 that bring rental income between $750 and $1200 monthly. These properties should have an ARV that is at least 25% higher than your purchase price after rehab. Buy the properties with cash, rehab them, put a renter in the properties and then finance the properties with a new loan from a local credit union for 75% of the appraised value. By buying properties with cash, fixing them and putting them under lease, you can finance them for 75% of the appraised value rather than 75% of the purchase price if you have held them for 3-6 months. By doing this you will be able to finance the properties for nearly the amount you have invested, getting all your capital returned so you can find and purchase another property for cash and do the same process repeatedly.
An example is as follows: A property has an ARV of $125,000 and will rent when fixed up for $1100/month. Using the formula ARV x 75% – rehab = MO you make an offer of $75,000 and negotiate up to your maximum offer of $78,750. ($125K x 75% – $15K rehab = $78,750) If you were to finance the deal up front, the bank would loan you 75% of the purchase price and you would need to put down 25% or $19,687 and pay $15,000 in rehab cost for a total investment of $34,687. If you start with $100,000 in capital you can invest in three properties and then you will be out of money.
If you purchase the property with cash, rehab it, put a renter in and then finance it 3-6 months later, the bank will loan you 75% of the ARV ($125K) which is $93,750. If you paid $78,750 for the property and put $15,000 in rehab, your total investment is $93,750; so, you will get back your entire investment through financing at the later date, making it possible to finding and purchase another similar property every 3-6 months until you have dozens of rental properties using the same $100K of capital. You will receive a positive cash flow of over $3000 annually on each property with no money invested. Once you have enough properties to live comfortably, it is time to retire and let the rent pay off the loans. After a certain amount of years of appreciation, you can refinance again to pull out additional capital for more diversified investments or to just have fun in life.