By Mike Enemigo
How can you “sell” something if you don’t own or buy it first? What could be better than “controlling” real estate without buying that real estate? So WHO makes money in real estate? The seller makes money. The real estate agent, bank, appraiser, lawyer, insurance agent, and even the city, county and state tax collectors make money. The BUYER pays something, even if he buys a distressed fixer-upper for no money down. His profits, which end up being the biggest of all, are deferred.
Each year schmucks across this country who want to “Get Rich Quick in Real Estate” fall for the same old sucker-pitch. They buy courses, tapes, manuals and books on “How to Buy Distressed Properties,” “Buy with No Money Down,” “Buy Tax Lien Properties,” “Buy Fixer-uppers.”
In regular cycles of about ten years each, however, the markets become too crowded. It starts with everybody and their dog making money from ever-rising prices. Then all at once, the bubble bursts. Values often sink below the mortgage loan amount, and equity is wiped out. The financially strong or those who bought at the start of the boom hold on for an inevitable recovery. The weak hands are foreclosed upon. Those who bought cheap and are not highly leveraged can usually rent and hold on for a recovery –unless they made the mistake of buying in a bad location like, say, Detroit. Real estate you buy must be in a great location where there are jobs, or other reasons for strong demand.
Real estate BUYERS have to make the monthly payments, pay the interest and principal, pay the taxes and assessments, and pay the cost of upkeep and maintenance. When they decide to sell they usually pay a six-percent commission to a local real estate agent. Of course they can sell directly to a new buyer.
But here is a risk-free way to make money in real estate without investing anything:
You could become a real estate agent/broker and earn commissions for selling, but being a real estate agent/broker requires a few courses and a license. It is a full-time job that only pays well when the market is active and rising. It allows you to discover opportunities (bargain deals and partners) to build your own real estate empire, but it also requires a lot of work. There’s nothing wrong with working, but here’s the Lazy Man’s Way to Riches in Property.
If you aren’t a banker, appraiser, lawyer, insurance agent, or tax collector, and you want to be on the profitable selling side in real estate deals, consider using Real Estate Options. What is a real estate option?
A real estate option gives you control of a piece of real estate WITHOUT BUYING IT! By having an option on a piece of real estate property, you have the exclusive right to either buy that property or NOT to buy it. The choice-option is yours. It is an “exclusive” right. That means that NO ONE ELSE can buy or sell that particular real estate property during the term of your option. It can be a lot, a house, a condo/apartment, a store, factory or warehouse. Any real estate.
During the period of your option, the owner keeps paying all of the inherent costs of the property such as taxes, assessments, upkeep and maintenance. He also collects the rent. In many cases, you as a tenant can get an option to purchase your own rental property from the owner. How? You ask! “Mr. Landlord, your place is worth about $100,000. Would you give me the option to purchase it during my tenancy for $100,000 using any rent I have paid as the down payment?” As often as not, you will get an option. If you ask! In real estate, all such contracts must be in writing. But contract forms are usually free on the internet.
What could be better than “controlling” real estate without buying that real estate? Let the owner keep paying the taxes, maintenance and costs. During the option period you can either sell the property, or sell the option itself, for a profit.
If the seller sells the property to someone else, while you hold this exclusive option, you are entitled to any monies the seller receives over the price you have agreed to pay for the property. Or, if the seller sells the property for less than what he agreed to sell it to you on your option, you are legally entitled to collect the difference from the seller.
“Exclusive” means “exclusive” under the law. When you hold an option on a real estate property, you “control” the sale of that property until your option expires. No one, not even the owner of the property, can buy or sell that property, legally, without first satisfying your option. You own the exclusive right to buy that property, or not buy that property, or sell that property to someone else, or sell the option itself to someone else.
When you use an option, you are NOT BUYING REAL ESTATE. You are buying the exclusive right to buy (or not buy) that real estate. That means you also have the exclusive right to sell the property as well.
Using an option, you also have another advantage. You will usually be dealing with “prime,” or at least acceptable and presentable real estate properties. If you deal with “distressed” properties, you are often dealing with “garbage” real estate. Of course, at the right price, anything can be sold.
Suppose the apartment you occupy as a tenant needs some tender loving care (TLC) to make it shine and worth more than your option price? You fix it up, advertise, show it, and with any luck, you can make $50,000 profit on your option price of $100,000. If you don’t get a buyer, assuming you have been paying, say, $1000 a month in rent for 2 years, you can go to a lender, show you have paid a $24,000 down payment in the form of rent, and get an 80% loan with payments similar or for less than the rent you have been paying. That’s a no-money-down deal. When the smoke clears, you own your apartment and are paying less than you did to rent it.
It is easier to get a loan with evidence that you have been able to afford rent around the same as the future loan payments. Thus, you can use an option to buy an apartment you formerly rented. In this case, if the place is really worth $150,000, you have bought it for around half of value. The seller does not need a broker, and is probably going to be very happy to avoid the 6% broker’s commission on a direct deal.
This is one way both insiders and novices can make money in real estate. It’s done every day by people in the know. Like YOU!
About the Author:
Mike Enemigo is a former drug dealer. He’s now a successful “prisonpreneur” who’s turned his dirty hustle clean. With over 25 books published and many more on the way, he’s America’s #1 incarcerated author. He’s passionate about entrepreneurship and he’s written several books which teach prisoners and street hustlers how to make money legally so they can avoid the traps of prison and crime. Among these books are Hood Millionaire: How to Hustle & Win LEGALLY! (also published as Get Out, Get Rich: How to Make Money Legally When You Get Out of Prison!), and CEO Manual: Start a Business, Be a Boss! (Also published as The CEO Manual: How to Start Your Own Business When You Get Out of Prison!). For more information on Mike and his books, visit thecellblock.net, where you can also subscribe to his blog, The Official Blog of The Cell Block, where he and other TCB authors provide raw, uncensored news, entertainment, and resources on the topics of prison and street-culture from a true, insider’s perspective. Be sure to also follow Mike on all social medias at @mikeenemigo and @thecellblockofficial.