Here are some great tips for increasing your profits as real
When you locate a note to buy, sometimes you can make a quick
profit selling to the man who is PAYING that mortgage. For example,
let's say you locate a $20,000 mortgage that you can buy for
$13,500. Go to the person paying on that note and offer it to him
for $16,500. He can refinance the house to get the money. He saves
$3,500 and reduces his monthly payment while you make a quick
OR TRY THIS: a note is less secure than a tax-deferred municipal
zero coupon bond (NOTE: use caution with muni bonds - some cities
and states are going bankrupt). Such bonds can be bought for about
50 cents on the dollar and are worth full value when they mature.
So, locate the holder of a $20,000 note and offer them a more
secure $20,000 in municipal bonds for greater security. You buy the
bonds for $10,000, so you purchased a $20,000 mortgage for $10,000
instead of the usual $13,500-$17,000. Now you can trade that
$20,000 note as a $20,000 down payment on an $80,000 piece of real
estate. That $80,000 home has only costs you $70,000. Or, you can
sell the mortgage to an investor - or the guy paying on that
mortgage - for a quick profit.
If a property needs to be fixed up, don't pay retail for new
materials. Buy the materials - lumber, brick, sinks, stoves,
electric service panels and other items from the local salvage shop
that tears down buildings and recycles the materials. It saves you
a lot of cash.
You can usually get huge discounts from places like Building 19
on things like paint, wallpaper, carpeting etc. And both Home Depot
& Lowes often offer discounts on pre-mixed paint - folks order
the paint, then decide the color is not right. Sometimes that paint
sells for as much as 50% discount.
While hunting for properties to buy, keep your eyes open for
buildings that need to be taken down due to storm damage etc. Offer
to take them down and remove the materials and debris, either for
free or you can charge a modest fee. Use the salvage materials for
If you do not have enough money to do the fix-ups, use
credit wherever you can - the payments are small and you can pay it
off later from your proceeds. Also, consider barter. Offer a
builder, painter, roofer etc. something of value other than money.
You can trade services for services, goods for materials etc. A
dentist I knew traded dental services in exchange for adding a
beautiful new pressure treated deck on his home. Or, if you own
equities in other real estate, offer them some of it, or the
interest on mortgages you hold, or even the monthly payments from
them until your bill is paid. Or simply show them the profit you
will be making, and ask them to wait to be paid until you cash
out, at which time you will pay a little extra.
Life insurance companies will often loan money when banks won't.
They are always looking for good investments, particularly in real
estate. Their rates may be higher, but your chances are better.
Get cash from your equities. Many "money stores" will loan up to
the full amount of your equity, or more. Because it is a loan, it
is tax free. Use the money to buy and resell more properties that
will repay the loan and still make you a profit.
With credit cards that allow cash advance options, borrow the
cash to quickly close a deal, then resell and pay off the loans
before much interest is due. The more cash used in buying a
property, the lower you can negotiate the price. This is also true
for being able to close quickly. For example, if you borrow $10,000
each on 8 cards for $80,000, you should be able to purchase a
$100,000 property for that $80,000 cash if the seller is in a hurry
to close. Then quickly flip for full value, pay off the loans and
pocket the $20,000 cash.
These methods put you in a high tax bracket. Remember all those
freebies you got - lawn tractors, furnishings, tools, equipment
etc.? If you sell them off you may get 50% of their value. But you
also have more money to pay out in taxes on that income as well, so
why not give that stuff away (except for antiques, etc.)? You can
donate these things to charities such as Goodwill and write off
100% of their value on your taxes. What you save on taxes will more
than make up for the loss from what you might have sold those items
for. You become a benefactor to many, while lining your own
If the property has a built-in asset such as an inground
swimming pool, don't let the seller include it's value in the
price. That was HIS toy, not yours. And it's not an asset - it's a
liability. It increases taxes, increases insurance and increases
liability. Explain to the seller that as an investor, you cannot
pay for liabilities. Later, as negotiations proceed, you can always
agree to pay about 1/2 the value of the pool in exchange for
getting the seller to cough up for closing costs, or toss in
something else of greater value than the pool. Remember - you
should not allow sellers to "tack on" to the price tag just because
they added a luxury that others may not want.
If you will be holding the property for income, try to get the
seller to accept a balloon or deferred down payment that you can
pay out of the excess rents. For example, if the down payment is
normally $5,000 that you do not have and you estimate a net profit
of $300/month from the rents, offer to pay the seller $2500 cash
each year for the next 2 years. You then get in without any down
payment out of your pocket.
You can also try to barter for your down payment. Offer the
seller your "second" car, your boat, or equity you might have in
other real estate. You can even barter your services: if you are a
builder, for example, the seller may want a new addition built on
his new home. There is no law that says a down payment must be in
If you have $500 overdraft protection on your checking account,
why not get 3 or 4 additional accounts at other banks - all on the
same day (so when they run a check, your other accounts do not show
up). Set up overdraft protection on each. With 5 of those accounts,
you now have an instant line of credit in the amount of $2500 which
is likely to come in handy for repairs, down payments or other
Although you may buy low, you may not be able to find someone to
buy at full market. Instead, refinance high to get your equity out,
then resell at your leisure.
Don't forget to look under "Rentals" and "Apartments" when
looking in the classifieds for properties. Often, the owner will
consider selling, especially if the ad is for "Lease with option to
buy". In many cases, these sellers are motivated and flexible
because the place is empty, costing them money.
If you own apartment buildings with more than 4 units, consider
installing vending machines and a coin laundry to increase
Lease nice properties - either homes or apartments - and then
sublet for a profit on each. If you can obtain a lease on a
$100,000 home for $750/month, you may be able to sublet for
Is your child is ready for college? Will the tuition wreak havoc
with your finances? Not necessarily. Cash in some of the equities
you own and buy a 4 bedroom home in the town where your child will
be going to college. Own it free and clear. Then make your child
the building manager. Lease the other three rooms out to 6 other
college kids BY THE FULL YEAR, making certain their parents sign
the lease agreement if the student is under 21. Those rents will
pay most or all your child's college costs. Your child, of course,
can have a private room.
Meanwhile, your child has no housing expense because the child
has a room in the house. As building manager you can also pay
him/her a management fee, tax deductible for you, and the money
pays for the child's books etc.
On holidays your child can come home or you go to visit, and all
the expenses are tax deductible because you are meeting with your
hired building manager. It's a legitimate business expense.
As the child prepares for graduation, contact the parents of
students who will be attending the college the following year and
show them what you did. Surely one will buy the house from you. The
proceeds from any appreciation will pay off the remaining college
loans, if you have any.
To save on closing costs, first negotiate the asking price down
(example: asking price of $90,000 negotiated down to $82,000).
Then, negotiate the seller into paying ½ the closing costs.
He will probably refuse. That is when you offer to pay an extra
$3,000 for the home if he will use that extra $3,000 to pay $3,000
in closing costs. He still gets the same amount of cash at closing,
but you have saved $3,000 in cash by having the closing costs
"merged" into the mortgage instead of paying as lump sum at
closing. You pay an extra $20/month on the mortgage, but you save
$3,000 in cash, now.
Now take the $3,000 cash you saved in the previous tip and pay
off your short-term debts - credit cards, car payment, etc. This
will lower your monthly expenses by about $200 each month, which
you can now use to pay on your mortgage. You have transferred up to
5 years of high interest debt on depreciable assets into 30 years
of low interest debt on appreciable assets (and it is tax
These are just a few of the great tips you will discover in "The Simple Man's Guide to Real Estate"