If a deal is bad and doesn’t promise great rewards, then it is really hard to raise cash. Good deals seem to bring out the greed in people. So when a person finds a good deal, the deal will often attract cash because it promises rewards.
But many times it is also possible that you find a good deal but you can’t obtain it because you can’t get the funds to pay for it. To put it another way, if you are prepared, which means you have the knowledge and the experience, and you find a good deal, the money will come to you or you will find the money. This can be compared to a betting game on a car racing competition. No matter how good the car is, no one would bet on it if an average driver is at the wheel. But cash will easily pour in from people to bet on a race car with an expert driver having a proven track record. Similarly, people will provide you funds if you are trustworthy and capable at what you do.
Thousands of people are looking for opportunities to invest their money in order to make more money. These people don’t have the time, the inclination, or the experience to look for deals or to do all the hard work themselves. As such, they’ll be happier to be a business partner with you. Or if they are savvy investors, they’ll bring you in as a junior partner for as much as 50% of the deal just for finding, say, a great real estate deal and managing the details of the business for them. In essence, you act like a hunting dog for them. And that’s how you get started: you put up your time and expertise, whereas they come up with the cash for the investment venture.
Most people will tell you that you can’t buy real estate with no money down. Some 95% of the time they are right because most sellers are resistant to any kind of creative financing. But as an investor, you are looking for the 5% of the sellers who are in desperate need to sell their property now. Hence, they are willing to consider even unconventional solutions.
Again, just because you don’t have cash doesn’t mean that you can’t acquire something you want. Instead of paying cash, for example, you can offer personal possessions or professional services, or can even trade one piece of your property in exchange for a property someone else has. Simply offer him something you can do without. At worst, the seller will say “no” to you. But he might say “maybe” or “yes.”
Let’s look at another example of how to close a real estate deal with no money out of your own pocket. Suppose you locate a real estate property valued at Rs.10,00,000 that you can buy for Rs.6,75,000 cash. Let’s say, you call on a private hard-money lender and find out that he is willing to lend up to 75% of the value of the property. But his catch is that he would charge you a 14% interest plus 10 points (a point is 1% of the amount of the loan). In other words, he will lend you Rs.7,50,000 but he will deduct Rs.75,000 (that is, 10 points) from the amount he gives you. This being the arrangement, you will end up with only Rs.6,75,000, which is just the exact amount you need in order to buy the property. That means you will have acquired that real bargained-property valued at Rs.10,00,000 with “Other People’s Money” (OPM). Of course, now you have a Rs.6,75,000 loan to pay back with accruing interest for as long as you keep it. But here’s the good news: you could put that property on the market and sell it quickly for Rs.9,00,000, which is still a lot less than the market value. Even then, you can get a profit of Rs.2,25,000 (Rs.9,00,000 – Rs.6,75,000), minus the interest charges. This is called flipping the property for a quick sale.
Just imagine: you invest 30 hours in a month to scan through 25 properties to find 5 properties that show potential for making money. Next, you write 5 different offers on all properties and present them to these potential sellers. And let’s say, one seller agrees to your terms and accepts your proposal for one of his run-down buildings. If you have adequately done your research and negotiated well, you could get tens of thousands of Rupees, if not lakhs, at the time of closing the deal. And that could be like earning at least Rs.500 an hour. Then, suppose you spend an additional 30 hours in the second month to clean up the property and fix up the house, you could dramatically increase the value of that same property for sale or rent. That could be another earning of Rs.500 per hour for your extra effort.
Now, suppose you had a deal like that every month? Or two? In one year, it is quite possible for you to be earning a lot more than most bureaucrats in Nagaland. That’s why I would recommend to NOTwait for government jobs. In fact, don’t even wait to buy real estate. Buy properties and wait, because they can be more reliable income streams in ever growing amount for you.
