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Are you interested in investing in real estate without having to deal with tenants, toilets, and trash?
It’s possible.
You can control property without taking title and without having to deal directly or indirectly with a property management company.
How?
Buy purchasing real estate notes that have a low loan-to-value ratio.
Here’s how it works…
- A real estate investor wants to buy a $100,000 house in a non-volatile market.
- He puts down $50,000, and YOU provide him with the other $50,000 for the purchase of the investment.
- The investor agrees to pay you $375 each month for 5 years, then pay you the $50,000 back (at 9% interest).
- In your deed of trust, you state that if he (the borrower) doesn’t pay you back as specified, you get full ownership of the $100,000 house.
Real estate notes are considered the most secure way to invest in real estate because you are incredibly well protected against the potential downside. Think about it: the only way you could lose money in the deal mentioned above, is if the borrower stopped making payments on the property and the value of the property went from $100,000 to less than $50,000.
How likely would that be?
It depends.
That is one of the reasons why it is so crucial to invest in markets that derive their prices from rents, rather than speculation.
Take a market like Birmingham, AL—one of the most stable markets in the country. During the biggest real estate crash in the history of the US, prices only came down 5-8% in the neighborhoods where investors would buy for cash flow.
Again, that was during the biggest crash in history!
If you consider that to be the worst-case scenario, you should be extremely confident loaning up to 50% on a property that has shown a history of price stability.
Few people are even aware that buying real estate notes could be an option for them.
Is it the right investment tool for you?