There are many ways to strike it rich in real estate but fixing and flipping remains one of the best. If you can combine this with seller financing, you'll be the hottest real estate investor in your region of the country. The even better news is that you don't have to have a pot full of money to do both. There are plenty of private investors out there that will fund your deals.
What will help you out putting these deals together is having a bit of a track record fixing and flipping houses. Naturally, investors are going to be leery about handing over hundreds of thousands of dollars to a new fix and flip investor. However, if you have a track record of fixing and flipping houses in the past, now is a great time to change your business model to fix and seller finance houses to create multiple long term passive income streams.
With private investors steadily moving into the real estate market, you can use other people's money to create steady passive income streams by creating seller-financing deals that produce an income for years to come. This is as simple as finding a fixer for maybe $85,000 that needs $15,000 in repairs. Then you partner with an investor that puts up all or most of the $100,000 to bring the property up to market standards.
A good house is easy to sell on today's market when you offer seller financing. Of course, you collect an above prime interest rate with seller financing. That's the appeal to private investors. With conventional mortgages rates hovering around 4.4% and savings accounts or certificates of deposit offering no more than 1.5%, investors will come out of the woodwork when you can offer them a return of 7%.
You collect two profits on the deal. First, because you are offering seller financing, you can sell at a premium to buyers that can't qualify for a traditional mortgage. Let's say the market value of the house is $100,000 after repairs but you're able to sell for $110,000. You require a $10,000 down payment and use the private investors $100,000 to finance the house. You pocket the $10,000 down payment.
Next, you pay the investor 7% but charge the seller 9%. Your passive income comes from the 2% difference in the interest rate. It's not huge but you have a steady interest income. The 9% monthly interest on the mortgage starts at $750 but you are only paying the investor 7%, which comes to $583.33. Your monthly passive income is $166.67. Not a lot but that's after you collect the $10,000 down payment. Put a few of these deals in place and you'll have money in the bank as well as money coming in every month for years to come.
Investors are everywhere. The most common ones are individuals with a high net worth. There are more of them out there than you might think. They don't always have direct control of their money. Many of them have their money trapped in retirement accounts. The secret is being able to show them how to move their retirement funds out of the highly risky stock market and into a secured mortgage producing a high interest rate. This only means introducing them to the little known self-directed IRA.
Self-directed IRAs allow retirement accounts to be invested in almost anything. These can be very appealing to people that are fed up with the volatility of stocks and bonds. Still, these people don't want to put their money into an inflation-killing savings account. A high interest mortgage becomes a great option for them. As a real estate investor, all you need to do is research self-directed IRAs, put a presentation together to educate private investors and write a good elevator speech. An elevator speech is a short introduction that you use to explain private investing with self-directed IRAs in a minute or less. You use this as a hook to get an appointment to show the in-depth presentation. In a short period of time, you'll have several private investors financing your fix and finance deals to create multiple passive income streams for you.
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Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.