Want to buy Real Estate in the US with very little money? Watch this video to learn actual legal strategies to do this. Real Estate has made countless millionaires and you can grow wealth for you and your family. The wealthy fully understand how to use Creative Strategies in Real Estate and you should too.
How to enter real estate with very little money
Real Estate is an excellent industry to enter into. The US, in particular, is a great place to buy real estate largely in part to the country drafting laws and regulation to make it easier to buy real estate. What I want to talk about in this video is how to take advantage of these laws.
The first way a person with very little money can enter the real industry is to do what many people in the real estate industry call “Bird-Dog”. Bird-dogging is a term that is named after the hunting dog that goes and brings back birds to the hunter. This is exactly what a person looking to enter into the real estate market can do: find houses and deals for real estate investors.
Real Estate Investors are looking for deals all the time and you can find those deals. The option contract is a great legal contract to help you when you are bird-dogging for great real estate deal.
An option contract is a legal contract that allows a person to have the option to buy a piece of real estate within a certain time frame. For example, if you want to buy a house a 90-day option contract, you don’t have to buy the house right away, you can buy it anytime during the 90 days. During that 90 days, the homeowner can not sell the house to anyone else, it is yours alone to buy. Once that 90 day time period is over, the house can go back on the market to sell.
But, for those without much money to actually purchase the house, the option contract is important because you can sell that option contract to an investor who will then buy the house. A well-written option contract will have an assignment clause that allows you to assign the option contract to anyone you want. You can find real estate investors at your local real estate to find out what deals they like and then you can go find those deals. If you can’t find a buyer, you just let the option contract expire and you be locked in to purchase a property you can afford. This way all parties win.
This is a just a way for individuals to get into real estate. Whether you have money or not, it’s ok. I get it, generational cycles of poverty are real. But someone has to stop that cycle and you can be it. This is one just one of the many contracts, you can use. Another way is to have a Double Closing, where you have two purchase and sale agreements - one with the seller and another with the investor.
It is important to check the laws of your country and particularly in the US because all states are different and the state may or may not require you to have a real estate license to do this.
U.S. GOVERNMENT HOUSING VOUCHERS
Another way you can do this is to use U.S. Gov Vouchers. If no one in your family, has had any significant amount of money, they can use government vouchers such as Veteran’s VA voucher, disability, section 8 voucher to help qualify to buy a home.
In addition, you can buy a multi-unit apartment where you live in one of the apartments and rent out the other remaining apartments. You can use a regular residential mortgage to buy up to 4 units. So the same type of mortgage loan you use to buy 1 house, you can use to buy a duplex or 4-plex or quad. What so important to understand that the future rental income of the units that you’ll rent out can be used to help you qualify for the loan to buy the entire apartment.
Understand the laws and the rules you can use to grow your wealth for you and your family.
Focus on maintaining good credit. If you are a young person or foreigner in the US with no credit, you can build credit with secured credit cards. If you need to fix your credit, start making plans to fix your credit. You can download some free forms to use for credit repair at GlobalLaw.tv/contracts.
Believe, have a plan, and take action. Create a professional presence. Give people a reason to treat you in a professional way and make your dreams a reality.
Creative Financing for Real Estate
When individuals are looking to acquire real estate, they should learn about some the creative real estate strategies that beginning and smaller investors use. One particular way is Seller Financing.
Typically, in a real estate transaction, there are 3 parties: the Buyer, Seller, and the Bank. The buyer gets a loan from the bank, the bank pays the seller for the house, and the buyer makes monthly loan payments to the bank. However, with seller financing, the seller becomes the bank. In Seller Financing, the seller owns the property outright and doesn’t have to worry about paying a mortgage to a bank. Therefore instead of the 3 parties, it’s just 2 parties where the seller serves as the role of the bank. They create a contract where the buyer makes monthly payments to the seller and the seller can ease into retirement with monthly payments.
The seller is the bank and not the landlord and doesn’t have to worry about fixing anything. If the buyer stops, paying, the seller can foreclose on the property just like any bank would. Seller financing is great for buyers because it allows the buyer to obtain real estate if he has bad credit or is self-employed and doesn’t have steady income statements to show.
PRIVATE MORTGAGE NOTE SELLING
Now that the seller has become the bank, he can sell some of those monthly payments he receives from the buyer. This is called Note Selling. Note selling allows a person to sell the future rights of income in order to get a lump sum right now. For example, if a person is receiving $1,000 a month = $12,000/ year. He can sell the rights to collect the $12,000 in exchange for a lump sum payment of $10,000 right now. This can allow the person to use the $10,000 to do things such as make improvements or use as a down payment on a new property. The buyer of the note benefits because the buyer just made a 20% ROI on his money. You can find buyers and sellers at your local real estate investing club.
HOME EQUITY LINE OF CREDIT
Another way to finance real estate is using HELOC. If you have some equity already on a property you own, you can use the HELOC to potentially make a downpayment on an additional property. But you have to very mindful of the dangers of financial leverage because if you lose one property, that can make you lose the other property because you have leveraged the equity of one house’s property to acquire the other.
Tax Liens are a great way to acquire property. When individuals don’t pay their property taxes, the city or state may sale the tax lien. Real Estate Investors will buy these properties at auction for pennies on the dollar. Once the owner’s right to get the property back ends, called the right of redemption, they’ll own the property outright. The investors can rehab these properties and rent them out. Do this with enough properties and sell them as a package to another real estate investor. You can then use the profits to buy a similar type of property taking advantage of Section 1031 taxes, buy a small hotel, or start a tech center.
Hard money lending is another way to acquire property. Bernard Reese discusses this in the above video.
Real Estate Investors has to learn to work as a team. Work with real estate agents and other to make your deals a reality. If you don’t have the money, that’s okay because you can bird dog or pool your resources with your friends to purchase a property. Pooling your resources with people of like interest and in the same industry as you are very important. You’ll be able to split cost as well as have a larger marketing budget. You’ll have to balance personalities and egos, but it’s always better to have 5% of millions than 100% of basically nothing. You all will figure it out. Just find the right people.
LAND TRUST FOR WEALTH CREATION
The Real Estate Industry is a great industry to use to build and grow wealth. One of the legal strategies that can be used to protect your wealth is legal trusts.
When investors own the property outright 100% and without a mortgage, placing the property in a limited liability entity such as an LLC is a great legal strategy. The can help the investor have a separate identity from the property. Thus, if something bad happens only the asset of the house would be liable and not the investor’s personal bank account and assets.
DUE ON SALES CLAUSE
But many times investors rent out property that still has a mortgage on it, which is very understandable. If you can make a worthwhile profit on your property by renting it out, it makes sense to do it. But, often times these individuals will place their property into LLCs to take advantage of the legal strategies and protection that an LLC has to offer. But, they have to be mindful most mortgages have a due on sales clause meaning that if you transfer ownership to anyone else including legal entities, the entire amount of the mortgage will be due immediately. This can be a person’s worst nightmare because they won’t have the money to pay the entire mortgage off. Most banks, particularly large banks won’t enforce as long as the mortgage is still being paid, so for practical purposes, you might be ok. But, there is another legal strategy you can use and that involves a legal trust.
GARN-ST GERMAIN ACT
The Garn-St Germain Act allows individuals to place property into trusts and the banks won’t be able to enforce the due on sales clause. So if you have a have a mortgage on the property, learn the legal strategies to navigate the laws and build wealth. This trust is also called a land trust gives you a level of legal separation because the trust technically owns the assets. Therefore, future lawsuits or creditors cannot come after you, the investor. In law, it is critical to understand that control in some cases is more important than ownership particularly when it pertains to trusts. While the trust owns the property, you still control the trust because the real estate investor is still the beneficiary of the trust. You can rent out the property, renovate and rehab the property, and even dissolve the trust anytime you want with a revocable land trust and put the property back into your name.
Trusts are excellent tools to pass land to your heirs. You can place the land in a trust and once you pass away, your children or whoever the beneficiary are will receive the land. Estate Planning is very important because you don’t want to leave your loved having to take care of things you could have. A sample Living Trust can be found at Globallaw.tv/contracts.
REAL ESTATE - TAX LAW STRATEGIES
The tax laws in the U.S. has allowed the real estate industry to be a premier industry to build wealth. The tax code in many ways was written by business owners and landowners. Therefore it would make sense that it to benefit them the most. Both Residential and Commercial Real Estate benefit from the tax code.
RESIDENTIAL REAL ESTATE
Pertaining to Residential Real Estate, if you have a house or apartment and you sell the house at a profit, you can exclude up $250,000 of the profit from being taxed and $500,000 for married couples. That’s helping you build tax-free wealth when you follow the requirement such as owning and living the house for at least two years.
COMMERCIAL REAL ESTATE
For Commercial Property, there are tax law advantages. The first one is to take advantage of Section 1031 of the Internal Revenue Code. Section 1031 allows entrepreneurs to defer paying taxes on the gain they receive when they sale commercial property and buy a similar property. It is important the property be of like kind. In addition, the properties must be business or investment property in order to receive the tax saving. The original intent was to help farmers when they are swapping livestock. But, eventually the provision came to be used for real estate.
OPPORTUNITY ZONE TAX PROGRAM
Opportunity Zone Tax Program is a real estate tax law incentive created by the Tax Cuts and Job Acts signed by President Trump. This program encourages private investment in low-income urban and rural communities. It has some similarities to the Section 1031, but with the Opportunity Zone, you can use more than profits from real estate to invest into the Opportunity Zones. The Qualified Opportunity Fund are the investment vehicles used to invest in the Opportunity Zones. The Qualified Opportunity Fund are set up as either a partnership or corporation.
Depreciation and Cost Segregation are also tools to use to minimize your taxable income. Yonah Weiss discusses it in the above video.
It is important to understand how the tax laws benefit and maximize profits. Real estate is a great avenue to build wealth.