When a typical investor who is not related to the real estate industry is considering investing in real estate, they usually have few defined sets of techniques that are considered an investment. This usually involves first researching the property and then working to secure financing from lenders.
In order to obtain this financing, the investor generally has to invest some of his own money to make the down payment. It was a more traditional way of making investments. There are few slightly different techniques that go slightly outside of these limits to reap huge profits or allow investors to get ahead without using their own money.
A real estate investing technique that some investors typically start with is called bird dogging. In fact, it is not about investing, because the investor here does not invest his time or money in the transaction. Here, the bird dog will get its usual share by referring offers to other interested investors. The bird dog here will have his share once the deal is done.
In another type of technique, seller financing is used for the home purchase. Here, the seller becomes the lender for this transaction. As the deal is finalized, the seller typically lends the equity in the property to the buyer, and then the two sit down together to finalize payment details. Payment terms can usually be principal only, interest only, or any combination of the two.
Yet another technique that takes full advantage of seller financing is where it allows the buyer to take responsibility for the seller’s loan that is currently in place. It can be done in two ways: on the one hand the lender will allow the purchaser to simply take over the loan from the seller (also called assumption). The buyer’s credits must be approved before the bank will transfer the loan to him.
In the second method, the purchaser takes charge of the seller’s loan, known as ‘subject to conditions’. Here, the buyer simply repurchases the property without establishing contact with the lender. This can sometimes be risky as some banks also include an acceleration clause in the contract which allows them to demand full repayment of the entire loan they have given upon transfer of ownership.
Flipping is another popular real estate investing technique that involves buying a property that is undervalued. After purchase, the property is quickly sold again at market value, sometimes after repairs or renovations are needed to add value.
While a number of people may opt for traditional real estate investment financing, for a smart investor, researching newer and more profitable techniques such as those described above would mean more profits for him.