Save and invest later is the mantra of tradition. Typically, people work for their active income and then invest that money into assets such as the stock market and real estate. While this approach works and works well, there are ways that are even better. Enter creative investing, a world where the possibilities are only limited by your imagination, creativity, and confidence or lack thereof. There are so many ways to invest creatively that get you into real assets with little to no money of your own. This is the world of investing in real estate utilizing creative finance. Anyone can do it at any level with any amount of money. It is a focus based on solving problems, making connections, and taking part in collaboration over competition. Before we get into some of the juicy details, lets first break down the traditional investment strategy.
Traditional investing
The traditional approach is very simple. You take the money you earn from active income such as your job and you put it into assets such as the stock market and real estate. Typically, people use tools like retirement accounts to make sure they are putting enough money away every month so that it will be able to grow and sustain them for after they retire and are no longer able to produce active income. Also, a lot of people choose to invest money into real estate and save up for a down payment to put down on an investment property. While these traditional methods do work and are better than keeping active income in a savings account to collect dust, there are ways that blow this approach out of the water. The only thing that holds anyone back from achieving more is mindset. Creative investing allows you to flex your financial muscles and gain wealth at an extremely fast pace!
Creative investing
Buying real estate can feel scary, and we’ve all been told we can’t buy it unless we have a ton of money saved up. It is for this reason that 95% of people avoid it completely and just simply dump their money into stocks (which doesn’t mean I don’t love stocks, there is just a better way to build wealth and then later diversify into the stock market). The truth about this is that the wealthiest people in the world all have one thing in common, they own real estate, and they didn’t save up for conventional loans or pay all cash to get where they are now. The truth is, there are so many ways to get into a business like real estate with little to no money of your own. Having the knowledge and education to find great deals is a superpower that will allow you to leverage your skillset in exchange for people with money to invest their funds with you. This is just the tip of the iceberg when it comes to no and low money down real estate investing. First and foremost, before you attempt to do any sort of investing that could impact you or those you work with negatively if you have no clue what you’re doing, take the time to learn the basics at the very least. Without sound fundamentals, there is no way you could be successful at anything let alone creative real estate investing. Secondly, the most important thing you could do as a beginner in real estate is find deals. Spend time learning how to get leads, talk to sellers, and analyze deals. This will allow you to present your findings to a seasoned investor who doesn’t have the time to do all of that allowing you the opportunity to either pitch them on going in the deal with you as you act as boots on the ground (most of the work) or arrange compensation for yourself and let them take the deal off your hands. Shopping the deal for other investors to buy is what is called wholesaling, and it involves putting properties under contract and then selling the contract to other investors collecting an assignment fee from the difference between your contract price and what the end buyer is willing to pay for that contract. This is an amazing way to earn some active income and open your eyes to the opportunity of real estate.
Creative real estate investing methods
There are many methods of creatively investing in real estate. In this section, I will briefly touch on two that I love in particular. There are many complexities and variations to these strategies I won’t get into here, however in future posts I will get into the nuts and bolts a lot more in depth.
The first strategy is called seller financing. What this basically means is that the seller owns their property free and clear and is willing to take the place of the bank and hold the note on the property meaning that you will pay them monthly payments likely with interest instead of the bank. Some sellers want some money down, and others could ask for no money down. The big advantage for the seller in this scenario is that they don’t have to pay large capital gains taxes when they sell their property up front. They will also be receiving passive income every month spread out over time to allow them to sustain their lifestyle without all the headaches of being a landlord. This is a popular strategy many investors use to their advantage when there is a situation that would fit this particular form of financing.
The next strategy is called subject to investing. In a nutshell, buying a home “subject to” means you are purchasing a home subject to the existing mortgage. The mortgage will stay in the seller’s name, however the deed will be transferred over to you in this scenario making you the owner of the property. Essentially, you as the buyer would just continue to make the payments on the existing mortgage in place of the seller in this transaction. This strategy works well with people who really want to sell their home for whatever reason, but have little to no equity and can’t list it on the retail market without paying realtor fees and other fees out of pocket after the transaction closes. A risk to subject to investing is that the bank can call what is called the due on sale clause. While rarely put into effect, the due on sale clause states that the bank has the option to call the note (mortgage) due on the property upon sale. If you want to find out more about this, I recommend you check out Pace Morby’s YouTube Channel, as he is the creative guy in real estate.
Putting it all together
With these cash-flowing assets acquired for little to no money out of your pocket, you will be able to use some of that cashflow to then go ahead and invest in stocks, crypto, bonds, or more real estate, etc. Passive income from real estate with little to no money of your own allows you to gain infinite returns from time spent putting together these types of deals, and allows you to take the cashflow and invest it into other assets. For me, getting into creative real estate investing was a no-brainer starting point, and I hope this post has helped you realize the potential you have to build wealth no matter your current means!