Becoming a millionaire is not easy but it’s doable in real estates. When people say real estate investment is hard, I concur with them. However, I told myself that if these people will learn the ins and outs of the industry by heart, I think that they will consider real estate investment as the best option available today.
You don’t need to be a hardcore investor in real estates. The most basic thing to do is the buy-and-hold strategy for the type of property that you are capable of buying with as little down payment as possible. In general, lenders will require you to pay 20% of the purchase price upfront. If you don’t have the money yet, you can pay a down payment as low as 3%. Doing so will require you to get a private mortgage insurance which will make you pay more money in the long run. However, for now, buying a house for only 3% down payment is doable in your situation.
Another way to buy a house is through the all-money-down technique. This is how it works. If you bought a house for $100,000, you need to pay 20% of its total price which is $20,000. Then you need to pay $3,000 for the closing costs, which make your total acquisition cost to $23,000. With all-money-down technique, you will pay the entire price of the house which is $100,000 plus the closing cost of $3,000 which makes the acquisition price to $103,000.
Supposing you make a renovation for a total cost of $5,000, you now invested $108,000 into your property. Then, you can have the house rented out in which you get an income every month. In this case, you can go to the bank and get the property appraised with the intention of doing a cash-out refinance.
When the bank sees the renovation and you are using the house to get an income, your property’s value can be as much as $114,000. If you will apply to refinance your house, the lender can give you 80% mortgage on the $114 appraised value which gives you a mortgage of $91,200. Since you originally put $103,000 and you received a refinance mortgage of $91,200, you get back $11,800 of your money.
One secret of getting rich in real estates is to use the profit that you receive from your first investment to buy another one, then another one. By doing this, you have 2-3 sources of passive cash flow every month. If you will continue buying a new property from the income you receive, you will end up having thousands of dollars earning every month.