When making investments, there are two factors that will affect your success: your return on investment, and your timeframe. There are some investments that might make you a lot of money in 20 years, and some that will earn you a little in three weeks. But when it comes to ROI, the figures speak for themselves. Try these types of real estate investment to get the most out of your money.
1. The Lonnie Deal
The Lonnie Deal technique is named after a man called Lonnie Scruggs, who came up with an idea. First, you buy a mobile home or manufactured home with cash – this is important, because most owners will make a quick deal for cash at a low price. Let’s say you spend $6,000 in cash to purchase a home that is worth more – perhaps even up to $14,000 or $15,000 with the right makeover. Then, you can put in $1,000 to fix it up and make it sale-ready. That brings your investment to $7,000.
Now, the clever part. You create a deal wherein the new owner can purchase the home from you with a payment plan. $4,000 up front for a deposit, followed by $199 a month for the next seven years, working out to a value of $15,000 plus an increased fee of $1,716 over time to cover the payment plan at 12%. Now, their payment of $4,000 brings your current investment down to just $3,000, and you have guaranteed income of $199 a month for the next seven years. Not bad!
2. Real estate wholesaling
This technique requires an eye for the market, but if you already have one, you’ll be in a good position. First, spot a home in need of work which is under-priced on the market – following economic trends will help you find someone who is behind the market value. Let’s say you see a home which requires $50,000 in repairs, but could sell for $500,000 when finished. With your investment, you can put it under contract for $300,000 with a $100 deposit.
Now, you sell it to a rehabber, who pays perhaps $330,000. $300,000 goes to the original seller, and $30,000 to you. Make sure that you get them to compensate your $100 deposit, and you’re looking at a $30,000 profit on a $0 investment in perhaps a week. Meanwhile, the rehabber will put in months of work for $120,000 in profit – meaning you’re way ahead of the game in terms of turnaround.
3. Passive investments
The great thing about passive investments is that you can hold onto them for as long as the market is good. This means you may make a huge ROI as time goes on, with no limit to when you need to stop bringing in that profit.
A good example of a passive investment is purchasing an apartment building. You can then hire a management company to do all of the work, while you collect ground rent, rent from tenants, and other income minus their fee. You can also buy up residential or commercial properties with the same idea.
If you keep an apartment building for 20 years, imagine how high your ROI will be – especially if you are then able to sell it for equal to or more than you paid for it! Inflation almost guarantees you will be able to do so after years have passed, barring a house market crash.
It’s always risky to invest, but real estate is one of the markets that tends to be the least risky and the most lucrative. That’s why it’s a fantastic way to get a huge ROI.