How to make a million pounds in real estate investment
I remember starting out as a real estate investor I had learned a very simple, yet mind-blowing strategy to make a million pounds in real estate. The concept was taught by Marshall Reddick, who is an avid real estate investor, and to date, he has over 200+ real estate rental properties in his portfolio.
It could not have been said better than Marshall himself. To make a million pounds in real estate, you must:
1. Borrower a million pounds
2. Have someone else pay it back for you
Simple as that. How does it apply to real estate investing, you may ask? Well, all you need to do is purchase enough investment properties worth a million pounds total, and have them rented out. That essentially is borrowing a million pounds in mortgage debt, and have your renters pay back the debt for you.
For many people, borrowing a million pounds may seem out of reach, but just as you would eat an elephant one bite at a time, so is buying real estate properties – you buy one house at a time. Unless you live in California, there are still many states that you can purchase a home for around 100k. Even if you are residing in California, you will need to stretch your vision and reach out-of-state.
Many people fear owning a property, let alone owning an investment property out of state. However, as a true real estate investor, you must put yourself in the mode of a business owner. Real estate investment is a business, and like any business, it may come necessary for you to hire people to work for you. That’s what realtors and property managers are there for. In order to really expand your real estate investing business, you must get comfortable with hiring property managers to manage your properties.
We have all heard good debt and bad debt, so don’t let the concept of owing money scare you off – especially when you can have someone else pay it back for you! As an added bonus, real estate value on average has never gone down in value in history. You hear people losing money in real estate because they could not hold on to their properties and they let them go at unfortunate times. Even if real estate value do go down, you should never fear because you have someone else paying your mortgage – your renters. As good as the concept of making a million pound in real estate may sound, fear not and take the first step in your real estate investing.
How to Convert Your Real Estate Notes into Quick Cash
If youre a real estate investor needing quick cash, selling your notes could offer a fast, easy solution.
It can happen to anyone. You find yourself in a situation where you need a chunk of cashinstantly. Maybe you have to handle an emergency or simply want to free up funds to invest elsewhere. Whatever the case, selling mortgage notes can put money at your disposal within a matter of weeks.
Selling mortgage notes allows you to convert small monthly payments into an almost immediate lump-sum of cash. You wont have to wait to recoup the bulk of your investment. Plus, you can avoid the risk associated with owner financing. And you can spend the money however you want; its yours and there are no strings attached.
Mortgage note buyers purchase a wide variety of privately-held mortgage notes, including promissory notes, land sale contracts, deeds of trust, contract for deeds and other debt instruments secured by virtually every type of property. They can work with you if youre receiving payments on residential, commercial and other types of property.
Some examples of the type of notes you can sell, include:
Residential Notes For houses, townhouses, condominiums, apartment buildings, and mobile homes
Commercial Notes For office, retail and industrial
Vacant Land Notes For developed land, undeveloped land and land not designated as a specific-use property (such as farm land or waste storage)
How It Works
Selling mortgage notes simply allows you to receive cash now for your future payments. You may be eligible to take advantage if youve sold your home or an investment property via owner carry-back financing or seller financing and are now receiving payments on that note. You could be cashed out in two to three weeks, receiving the funds by check or electronically.
Most note buyers prefer to buy real estate secured notes that are in the first lien position or wrap around the first lien position. If you have a second lienwhere theres a bank or another investor with a more senior lien against the propertyyou may be able to sell the note. However, the price that you get won’t be nearly as highunless the buyer has at least 30 percent of his own money as a down payment or in built-up equity.
Heres how the process of selling notes works: You need to contact several mortgage note buyers and request a quote. They will probably ask you to submit copies of the deed of trust or mortgage, the note, title policy, and closingsettlement statement. If there is no recent appraisal or title policy available, they may be ordered at the note buyers expense.
Each of your notes will be evaluated on a case-by case-basis, with a number of aspects considered. These factors include the purchaser’s equity, payment history, seasoning of the note, credit rating of the buyer, term of the note and the remaining balance due on the note.
A Variety of Ways to Sell Notes
If youre like most note sellers, you may automatically think of selling the entire note. That could be the best route if the note represents a high value and this is the best fit for your financial situation.
However, you also have the option of selling only part of the note. This could be ideal if you like the interest rate youre earning on the note, but just want to receive part of the cash now. Over the long run, a partial payment may be able to provide you with a much higher rate of return.
For example, lets say you sold a house for 120,000, the buyer gave you 20,000 as a down payment, and you have a 100,000 note at 7 percent for the next 15 years. You enjoy getting the income each month, but need 30,000 for another investment or to pay off debt. You could opt to receive that 30,000 in exchange for buying the next “x” number of payments, after which the note would go back to you for the balance of the term.
Or as another option, you could take a lump sum of money now, plus receive part of the payment each month thereafter. If youre not sure which option would be better, dont worry. A note buyer can work with you to determine the best solution for your needs.
Tips for Selling Your Notes
Most mortgage note buyers focus on making the process relatively simple, easy and fair. They offer competitive pricing, complete confidentiality and hassle-free closings. However, the note purchasing business isnt highly regulated, so be sure to locate and work with a reputable company. Here are some things you should keep in mind about purchasing notes:
Up-front fees: There should be no up-front fees. A good note buyer isn’t going to charge you just to provide quotes or check the buyer’s credit.
Closing and other costs: There should be no points, closing costs, or other garbage fees at any point in the process. Any fees are already included in the pay price to you.
Appraisals: Note buyers normally require you to pay for the appraisal or the title policy ONLY if the property appraises for less than the sales price or there are problems with the title that prevent the purchase. However, these payments should cover just the buyer’s actual costs.
Credit checks: Be sure that the note buyer checks the credit of your property buyer up front. Unscrupulous buyers have been known to quote one price and then lowering it toward the end of the process. They often use the excuse that the “property buyer’s credit was low”. This is a twist on the old “bait and switch” scam, and its completely unethical.
Written Agreement: Ensure that the seller gives you a written purchase agreement covering the purchase price, contingencies, etc. Also, dont hesitate to ask questions about anything that is not clear. Any items that are not spelled out in black and white are part of the agreement. Its that simple.
Selling real estate notes is easy, and it can be a great way to generate a lump sum of cash for other uses.
Opting for cash out refinancing is one method that I would recommend to someone that is serious about building out their real estate investment and property portfolio. You are able to take out a new mortgage with a principal that is larger than your current mortgage. Many a person has been able to do this and get a lower interest rate and with the added bonus of getting the cash they need for their investment venture.
The home equity that we have in our possession is really the part of our home that we own. This is built by the payments that we make to our mortgage and through the appreciation of the value of our homes. This means that our home equity is often trapped and unavailable to us unless we take home equity loans or refinance our mortgage. Cash out refinancing allows us to access this equity. We are able to use this cash from the equity that we get and reinvest it into our property portfolio.
Broken down simply in the form of an example we will see how the equity is made available. Let us say that you own a home and that it is mortgaged to the sum of 200,000 and you have repaid a certain amount. Let us say that that amount is 100,000. Then you have available to you a sum of 100,000 for equity and this is money that can be utilised for your investment.
You can take the option of cash out refinancing by getting a new mortgage for your home to the original value. This means 100,000 is given to you in your hand for whatever purpose and you may have a lowered mortgage payment as well. There are many factors that will make this option a desirable one for you and you must evaluate the market circumstances as well as the personal situation that you are faced with and the purpose for which the money is intended.
Interest rates on mortgages fluctuate from time to time and it is important that this be considered as well as other factors. It can be simple for you to reach for the option of refinancing when interest rates are low but there is a factor of the expenses to consider before this is thought worthwhile and as such a balance is needed in this decision between where it is viable to refinance or not viable as the case may be.
It is up to you to do the necessary research and determine the feasibility of the option to your circumstances. The circumstances on the market will also influence the benefits or disadvantages of this type of refinancing and all this has to be considered in the decision making process. It is no easy decision to decide to refinance your property so ensure that you are fully capable of meeting the payments required and that there is little chance that you will be unable to do so. Only opt for a refinancing plan that meets your budget.