Creative Real Estate InvestingCreative Real Estate Investing is simply non-standard methods for purchasing real estate. The standard method for buying a piece of property is getting pre-approved for a loan, finding the house of your dreams (or not), having 20% of the purchase price for the down payment, calling the agent whose name is on the sign in front of the house and proceeding from there. (See REI School) Creative Real Estate Investing involves buying a piece of property outside this standard method. Many people find creative real estate investing attractive because they don't have 20% of $350,000 as a down payment. (That's $70,000, by the way!!) For many markets in the U.S. which have home prices in the $300's or greater, it is impossible for many folks to afford a home. So, creative real estate investing offers the opportunity they need. One major creative real estate investing technique that is widely used is No Money Down. This technique is being utilized by real estate investors as well as by new home builders. Beazer Homes, KB Homes, and others realize that many people don't have upwards of 20% as a down payment for a new home. So these new home developers offer incentive programs and sometimes offer Zero Down programs if you finance the home through them. New home builders also offer very low deposit programs. One new home I purchased had a deposit of only $5,000 for a home that cost over $300,000. That's about 1.5% as a down payment. This was an incentive program. Plus, I got the home at a discount because Beazer Homes offers discounts to teachers, officers, and firefighters. (Tell them Kelli DuCloux referred you!)
Rent to Own HomesAnother Creative Real Estate Investing technique is Rent to Own Homes. I originally heard of rent-to-own when I discovered that there was a store that "sold/rented" furniture and household items to people.The concept of rent to own homes is where a renter answers an ad for "Rent-to-own" home or lease option. The basic idea is that you pay the amount that it would cost to rent the home PLUS an additional amount that serves as an accumulation of a down payment. In other words, the additional amount is like a structured or forced savings plan. Each month you pay the landlord/owner an agreed upon amount that is over the amount of the rent. Then after a certain amount of time has elapsed, you now have enough for your down payment. Here's an example. You find a nice home that is available on a rent to own basis. The rent is $1,000 per month. On top of the rent, you must pay an additional $400. At the end of one year, you have paid $400 times 12 = $4,800 in additional payments. At the end of two years, you have accumulated $9,600. This is almost $10,000 which would be a 10% down payment on a house that costs $100,000. The rent to own home program is a good way for someone who doesn't have $10,000 right off the top to "save" for a home. Plus they are getting the benefits of that home now because they get to live in it immediately. They don't have to wait to save up that amount and be stuck living in an apartment. In essence they can have the pride of almost-ownership in a nice home and neighborhood environment. This creative real estate investing technique can be used by investors if they find a nice home, negotiate with the owner and create a good deal. Let's use the example above but instead of $400 per month, the investor (you) negotiate it down to $250 per month. Then, as a "creative real estate investing student" you find a renter who will pay you $450 per month extra. So, you now make an extra $200 per month! You didn't have to pay any taxes. You didn't have to actually purchase the house. And you certainly don't have to fix any clogged toilets, leaky faucets, or broken A/C units. One of the great benefits with rent to own homes, is that the tenant/buyer is responsible for ALL repairs. Remember they are renting this home to OWN it. So just as with any house you purchase you are the responsible party for all "fixits". Also, landlord/owner is officially still responsible for paying the taxes until the home is actually deeded over to the renter/buyer after the two or three year time period has been reached and all payments made on time.
Real Estate Investing BookI took a condo that cost me $25,500 and used it to purchase four other pieces of real estate. Read my "The Little Condo That Could" story.
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