Content of the material
- The Requirements and Cost
- Long-term Rental Properties
- 4. Alternative Real Estate Income
- 3. Option a Property
- How It Works
- Why would a seller choose one over the other?
- Why You Should (or Shouldn’t) Invest
- How to Get Started in Real Estate Investing
- Other Ways to Invest in Real Estate
- 11. Become a Relocation Specialist
- Work Open Houses
- The difference between real estate agents and realtors
- What I Learned
- 4. Contract flipping
- 6. Commercial Property Rentals
- 1. Online Real Estate Investing Sites
- How It Works
- What You Gain
- What You Risk
- Expanding your Referral Base
- Make Friends with New Home Builders
- Realtor Referrals
- Lender Referrals
- 8. Commercial real estate
The Requirements and Cost
Real estate licensing requirements are determined at the state level. Ensure you understand the process for each state you want to obtain a license from.
While there may be some reciprocity between states, there may be requirements for additional coursework or exams from one to another.
Here’s a list of things you may have to do (and pay for) before showing your first house, and earning your first commission check.
- Take a real estate pre-license course. These real estate school courses vary in content, length (weeks vs. months), presentation (online vs. in person), and cost. You can expect to pay at least $200-500 per course. There may be textbooks and other materials you have to buy as well.
- Submit a license application. Check to see if you need to apply for a license and register for electronic fingerprinting. In Florida, the fees for these combined costs is almost $150, and prices may be even higher in other states.
- Pass a licensing exam. Licensing exams run from $40 to as much as $300-each time you take the exam. Study materials may be included in your pre-licensing course, but you may also decide to purchase other real estate exam-prep materials. Passing the test the first time saves money on paying to retake the exam.
- Find a real estate brokerage who will work with you. After you pass the exam, you’ll need a broker to activate your license and to work under. This Real Estate Express article highlights five essential steps to follow in choosing a broker. Brokers take a percentage of your commissions or charge a flat fee per house you sell. You may also have to pay the broker monthly fees for business services and amenities they provide you as an agent.
Long-term Rental Properties
Long-term rentals are my personal favorite investment. Why? Because they’re relatively passive and because you make money in four different ways!
- Renters are paying down your debt
- Renters are also putting money in your pocket
- Tax breaks
With only two properties in my current rental portfolio, I’m still pocketing nearly $1,000/month. But the real win has been in terms of growing my net worth. The two properties have increased in value by a total of $431,000 in just a few years!
There are hundreds of resources for investing in real estate, but my favorite is The Millionaire Real Estate Investor by Gary Keller. This is the book that got me started in real estate investing. It’s simple enough for anyone to pick up, but thorough enough to guide investors to netting millions.
Sidenote: If you haven’t already read The Millionaire Real Estate Agent (also by Gary Keller), I highly recommend that as well. It provides step-by-step instructions to take your real estate business from a single-person enterprise to a team-based empire.
4. Alternative Real Estate Income
You can still make money in real estate even if you don’t have the capital to purchase a property. There are several ways you can invest your money in real estate projects and receive your fair portion of the profits.
Here are some of the ways you can make money in real estate as a lender.
Real Estate Investment Trusts (REITs): In a real estate investment trust, the owner of multiple commercial properties sells shares to investors. If you buy shares, you’ll be entitled to dividends generated by the profits from each property. It’s a great investment option if you don’t have a lot of capital to invest.
Mortgage Investment Corporations: Mortgage investment corporations (MICs) are similar to REITs, but they hold entire mortgages. You’ll get paid interest that’s generated from rental payments at each property.
Real Estate Investment Groups (REIGs): Real estate investment groups are private groups of investors with their own unique structuring. These are typically suitable for only seasoned investors.
Some other ways to make money in real estate include:
Real Estate Options:You pay a premium to buy a property during a specific period, at a predetermined price. Then, you’ll try and find investors who are willing to pay more for the property. Essentially, you’re earning a real estate commission, but the risk is higher (although the returns can be a lot higher if done successfully).
Short Sales:A short sale is when you purchase a property from a lender who’s behind on the mortgage. This is a complicated transaction and not recommended for beginning investors.
Real Estate Agent:Real estate agents connect real estate buyers and sellers and earn commission on transactions.
Property Manager:You can start a business managing commercial and residential properties for other real estate investors.
Long story short: there are plenty of ways to make money in real estate!
Just like blog, a YouTube channel gives you a platform to generate income in multiple ways. You can earn money directly through affiliate links, ads, and sponsored posts. Or you can use YouTube as a launching point for your product or service sales. Or you can use it simply to serve your clients and attract new prospects.
Just as you niche-down with your blog, you should niche down with your YouTube channel. YouTube is the perfect vehicle for the home maintenance and repairs niche. You create step-by-step “how-to” videos for common home repairs. How to fix a leaky faucet, how to change an air filter, how to install a light fixture.
But don’t those videos already exist?
Yep, they sure do! Which proves that there’s money to be made there; people are actively seeking that information. So find a way to put a spin on your videos to make them stand out. Not to be sexist, but simply being a woman is an advantage in this niche. More single women are buying homes, and they want to know that women can handle home repairs. If 1 of the top 10 search results shows a woman rolling up her sleeves and unclogging that drain, which video do you think the average single woman will decide to watch?
Not lucky enough to be a woman? Spin your videos in your own way. Appeal to fellow Packer fans by always wearing your cheese head and jersey. You’ll stand out and be memorable.
3. Option a Property
A third way to make money in Real Estate investing without money or credit is to “Option” a property.
How It Works
This type of transaction is similar to a Lease Option, but very different as well. Consider it a Lease Option’s cousin, who is much hotter and more fun.
Here is the simple difference between the two:
- Lease Option: the seller has agreed to take a monthly payment for a specific amount of time, with a set purchase price to come at some point in the future. I do not accept any less than 5 years for these transactions and try to get ten years.
- Option to Buy: the seller is not accepting monthly payments. They have simply given you the exclusive right to buy a property at a certain price for a certain period of time.
Why would a seller choose one over the other?
Let’s look at a few circumstances and reasons that may persuade a seller to decide one way or another.
- With an Option, the seller can continue to live in the house. At the same time, he/she will continue to make the monthly payment and take care of all maintenance and repairs. The seller may not want to accept monthly payments, with the idea of someone else is living in their house. While they may be motivated to sell, the thought of someone else eating dinner and walking around naked where they raised their children may be too much for them to handle.
- They may not have the time required for a Lease Option. If a seller is ten months behind on their payments with foreclosure knocking on the door, and you (the investor) don’t want to make up those payments and there is still a TON of equity in the house, an Option may be your only choice, short of paying cash.
- With a straight “Option” the seller has nothing to lose. You have a set amount of time to buy their house, which you will only do if and when you find a buyer at a higher price than you have an Option for. In this type of transaction, your target audience is not the B/C credit buyer, but rather the individual with cash or the ability to go to a bank and get a loan.
Why You Should (or Shouldn’t) Invest
The positives for you the investor, are as follows: You are not dealing with tenant buyers, repairs left by tenant buyers, angry sellers, evictions, lawsuits, monthly payments with no tenant-buyer… the list goes on and on.
The negatives are you do not make any money at all unless you successfully find a qualified buyer within the time allotted in your Option to buy. The seller benefits because they pay no Real Estate commission, and they have the privilege of living in the house while you are trying to sell it.
How to Get Started in Real Estate Investing
- Decide whether or not you want to buy and sell, buy and rent, or choose another type of involvement (management, staging, etc.) in real estate.
- Choose which type of property, commercial or residential.
- Get preapproved for private lending.
- Learn the punch lists for inspections and appraisals, so you’ll know what to look for in a property.
- Network. For example, to set realistic rehab goals, enlist a local contractor for estimates. Establish relationships with key players such as inspectors, appraisers, agents and lenders.
Other Ways to Invest in Real Estate
One option is an informal residential real estate option, which requires that you pay a fee, or premium, to have the right to buy a house for a specified period for an agreed-upon price. You then find investors who will pay more than your option price for the property. In this case, the premium you get is essentially a finder’s fee for matching a person looking for an investment with a person looking to sell—no different than a real estate agent’s commission, really. Although this is income, it doesn’t come from owning (i.e. holding the deed to) a piece of real estate.
Other options include:
- Short sales—this involves purchasing a home from a lender when the mortgagee is behind on payments. Short sales can be a time-consuming and complicated proposition.
- Lease options—these are what the name implies. When you lease with an option to buy in a bull real estate market, where prices are rising, you may be able to complete the purchase later at a lower, pre-set price, or make a profit by selling your purchase rights.
- Contract flipping—instead of flipping houses, this type of flipping involves the transfer of the rights of a purchase contract to another buyer. If you can locate distressed sellers and motivated buyers and bring them together, you may be able to make a profit this way.
11. Become a Relocation Specialist
If you’ve ever moved across the country, you know firsthand that it is a massive undertaking. Relocation specialists are real estate professionals who take this burden off movers by helping them sell their current property, find and purchase a new one, and orchestrate details like packing, hiring movers, transporting vehicles, and processing visas.
Since relocation specialists have to deal with varying laws and regulations in different states and countries, you have to pass an exam and become a Certified Relocation Professional. Being a relocation specialist may be ideal for real estate professionals who are passionate about traveling, seeing diverse cultures, and have strengths in organization, planning, and communicating with clients.
Work Open Houses
Many potential homebuyers start their house hunt by heading to open houses. That’s why an open house is a great place to meet unrepresented buyers. If you’re working for a reputable company, it likely paired you with a mentor. Ask if you can assist at one or more of their open houses or if they know another agent who would be willing to let you.
Representing buyers is less lucrative than listing and selling homes, but it’s an excellent place to start building your network and getting referrals.
The difference between real estate agents and realtors
You’ve probably heard the terms real estate agent and realtor used interchangeably, but there’s one main difference between them. A realtor is a licensed real estate agent or broker who is a member of the National Association of Realtors.
Along with paying membership dues, a realtor agrees to uphold the association’s standards and code of ethics. Although becoming a realtor isn’t required, it may help you market yourself as an expert and gain the trust of more clients.
What I Learned
Typically, that first year is all about the buyer, and my business was no different. But toward the end of the year, I learned there are ways to generate more listings early on and transform your business more quickly, to where you don’t have to show houses from 9 to 5 every day.
One way to do this is to pull up expired listings and For Sale by Owner. Call and tell them what you have to offer as a real estate agent, the benefits to them as the seller, and the steps you’ll take to get their house sold. If you’re looking at how to generate expired and FSBO listing leads, check out the post I made on the REDX for real estate.
My advice to an agent who is just starting is to take every networking opportunity possible and to keep learning. Go to training and conferences, watch YouTube videos, and network with people who have been where you are now. Learn from them.
Because the truth is, the hustle pays off and will give you the flexibility down the road to do more of the stuff you love and less of the stuff you don’t. My business today looks much different than when I first started. I have a lot more freedom in my day to give back, help agents, and continue building my brand.
And you can get there too!
4. Contract flipping
One way that you can make money from real estate without having to put up very much capital or credit is to flip contracts. All you have to do is find a distressed seller and a motivated buyer, then bring them together. While locating a distressed seller might seem difficult, Clothier has systemized the entire process for doing this. The trick with contract flipping is to identify the distressed seller and locate a ready-to-go buyer.
By bringing these parties together, you’ve cut out the need to go hunting for a buyer after you’ve entered a contract. That situation presents more risk. Instead, by locating the sellers and the buyers beforehand, you can easily enter into a contract with the confidence that you won’t get stuck having to close escrow on the property.
To do this, you have to be able to identify either vacant homes or homes that are behind on their mortgages. That’s the tricky part. You’re effectively trying to find distressed sellers, but homes that are already vacant are primed for an opportunity like this.
6. Commercial Property Rentals
Commercial real estate is one of the fastest ways to make money in real estate. This means flipping properties and developing them, adding value to properties in order to increase their net incomes through renovations and upgrades. You’ll also consult on projects that might take more seasoned real estate investors to see to fruition.
1. Online Real Estate Investing Sites
Online investing sites have changed the game in recent years. With these sites, you can own fractional shares of real estate projects. What this means is that you can get exposure to real estate, but you don’t need to come up with huge sums of capital or deal with tenants. This is a strictly passive income strategy.
For other sites, you must certify that you have a net worth over a certain amount or make a certain amount of money per year.
How It Works
With Fundrise, you can start with as little as $500. You open an account and select from a number of portfolio options. Fundrise charges a management fee of around 1% per year, which is fairly low compared with other options, and its 2021 annualized return was 22.99%! You can see how my Fundrise account has performed here.
What You Gain
Investing this way, you gain a ton of freedom and you gain exposure to the real estate asset class with very little money or effort.
What You Risk
You don’t get to really use any local expertise you may have, and you don’t necessarily get the pride that comes from visiting a real estate project that you wholly own, improve, and can see easily. For some people, that’s a big draw to investing the old-fashioned way!
Get Started With Fundrise
Expanding your Referral Base
While maintaining a strong presence in your network is essential, there are other ways to boost your referral base and build your network.
Make Friends with New Home Builders
One of my favorite ways of expanding my network was to make friends with new home builders. There are so many new home communities out there, which means the opportunity here is vast. I would bounce between several communities each weekend, bringing coffee, offering to bring them lunch, or just popping in to visit for a half-hour here or there.
My primary goal was to build a working relationship and see how we could work together to achieve the common goal of selling houses. Regularly getting in front of them showed them that I was hungry for business, and I was willing to work for it.
Nine of my twenty-eight transactions that first year were listings I obtained through the relationships I built in the new home community. Builders would have a client come in wanting to buy a house but had a house to sell, and I was the man for the job. I would also offer to do open houses on inventory homes, or sit in on their model home as needed.
Over time, I had established such a presence in the different builder communities that I was asked by several managers to speak at their weekly sales meetings. I developed a move-up program called New Home Now. I’d bring tacos or donuts to the sales meeting, and go over my background, my unique marketing plan, what I would do for sellers, and the details of my move-up program.
I wish I would have kept the momentum up with this, as it was a great way to build traction, boost production, and gain confidence in what I had to offer.
As you have certainly gathered by now, real estate is all about relationships. Another great relationship to foster is your network with other real estate agents in the area.
Realtor referrals generally occur when an agent has a buyer or seller interested but cannot help them for one reason or another. The agent may be out of town or focusing their business on listings, for example.
Or, the referral could come from an agent outside of your MLS. Maybe you met an agent at a conference and exchanged numbers. Or you reached out to agents from your hometown.
Here, an agent in Mississippi could have a seller in their area, wanting to buy a home in Texas. That agent will, of course, help the seller in Mississippi, but will reach out to you to help the client find a home they love in Texas, putting money in your pocket.
Working with lenders is an integral part of the real estate process. Typically, I’ll refer two lenders I recommend to my clients. It may be strange to ask your preferred lender to send business your way, but in the end, you are both working toward a common goal.
I didn’t realize the potential until later on in the year, but I did see two transactions came from lender referrals in 2013.
8. Commercial real estate
One of the great opportunities in real estate for making a considerable amount of money is to invest in commercial real estate. Commercial real estate developers focus not only on flipping properties but also on developing them, adding value to properties in order to increase their net incomes through renovations and upgrades. They also consult on projects that might take more seasoned real estate investors to see to fruition.
Ali Safavid, founder of 5209 Investments, says commercial real estate is one of the most lucrative sources for both income and profits in the real estate market. As long as you can find ways to add value to the exchange, investing in commercial real estate can be one of the largest income generators you’ll find.
People always need office space and retail to run their businesses. These physical locations are bread and butter in the real estate niche. As you grow, you can find ways to open up shopping malls, develop large scale buildings and more. But you have to start somewhere.