Some Ways to Make Money With Real Estate
By Steve Gillman - 2004
Optioning Hilltops
Making money with real estate isn't unusual, of course, but
there are less common ways to do so. Those are the ways we'll
cover on this website. There was a man, for example, that went
around optioning hilltops. If the owner wanted $30,000 for the
land, this investor might offer $300 for an option to buy the
property at full price ($30,000) within six months. He didn't
have to buy, but the sellers liked the idea of getting full price,
or just keeping the $300.
Next, he contacted every radio station, police department,
and cell phone company in the area that might need a hill to
put a radio tower on. It is common practice to lease the properties
on ten-year or longer leases, for tax reasons. Once the investor
got a lease signed, it was relatively simple to get a bank to
lend the money for the purchase. So he might have payments of
$200 per month, and the radio station puts up the tower, and
rents the hilltop for $350 per month. Total risk? If he doesn't
find an interested party, he walks away, losing the $300 option
fee.
Fixer-Upper Real Estate
It isn't unusual to buy a house, fix it up and sell it for
a profit. It is less common to find these opportunities in the
$10,000 price range though. We found that there are towns in
this country where you can still buy houses as cheap as $6,000!
We bought a house in a beautiful little town in Montana for $17,500,
paid a plumber and a friend to fix a couple things ($2,000),
and after living in the house for a few months, sold it for $28,000.
For more of the story you can visit our website on Cheap
Homes .
Land
Several times I have bought property and then sold it on a
"land contract." Also called a "contract for sale,"
and various other names around the country, this simply means
taking payments from a buyer, and delivering the title when the
property is paid for in full. It is basic seller financing, and
it's a great way to make money with real estate if you already
have some money to invest.
Here is how my first deal went many years ago: There was a
small piece of land of about 3 acres for sale for $4,100. I offered
$3,300 cash, and we eventually agreed to $3,500. This was back
when closing costs were lower, so I had maybe $3,660 into it
after closing. I spent a few hours raking the leaves and removing
dead branches. I outlined a possible driveway using a shovel
and a few logs to line the sides. That took another hour. Then
I put a hand-painted sign on the property, offering it for sale
for $4750, specifying that it could be bought for a $250 down
payment and $100 per month payment, with 11% annual interest.
Within two weeks, I sold it for exactly that price and terms,
and I closed the deal in a restaurant, with virtually no closing
costs. In the end, I had sold the land for $1,150 more than I
paid or about $1,000 more than I had into it after costs. Now,
that's not a large profit, but keep in mind that this was many
years back and the selling price was around 30% more than I had
paid just weeks earlier.
I also collected hundreds of dollars per year in interest.
The total rate of return on a deal like this is somewhere over
20% annually when accounting for the interest and the capital
gain, which is certainly better than a bank account. Of course
this can be done on a larger scale than this. The next time I
did it was on a mobile home on land, which I owned as a rental
for a short while before selling it for 16% more than I had paid..
The reason this works is that you are making it convenient
for the buyers who don't have the cash to buy the land. At the
time, that 3 acres was worth perhaps $4,000, yet the buyer paid
more than that for the convenience of the seller financing, and
paid 11% interest for the same reason (although rates were higher
generally then). With perhaps only a few hundred dollars in the
bank, his options were limited. I made it possible for him to
own that land.
I made a decent return, and relatively quickly. Within a few
years after paying off the balance the land was worth at least
$15,000, so the buyer did well too.
Other Ways
There are many unusual ways people have made money with real
estate. I know a guy who made almost as much money letting a
construction company carve gravel out of his property as the
property cost in the first place. It didn't even reduce the value
of the land. A friend of mine bought a small piece of property
and let a company cut half the trees out for $4,500. When they
were done, you couldn't even tell they had thinned the trees
out, and the land had the same value.
I'll add more unusual ways of making money in real estate
in the future, so check back.
How to Buy Real Estate That's
Not for Sale - This page looks at the opportunity in buying
before a property is listed for sale.
Free Fixer
Upper Real Estate Course! Get your free Fix and Flip Course
at www.TipsForFlippingAHouse.com.
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