So what type of investments would you make? It is impossible to list every one here, because the really successful investors find opportunities other don’t see. Some general investments would be:
1) Finance a property rehabber (“flipper”). Again, since you are acting as the bank, you are the one that determines the level of involvement you want to have, the terms, the timing, etc. You can require a down payment, you can release funds only after specific repairs are made (essentially a line of credit), you can meet the contractors, etc. Anything you put in the contract is fair game. It is your money, so you should protect yourself to the extent with which you feel comfortable. Just like you do not need to participate in every deal you see, the rehabber is not obligated to work with every lender. That’s the beauty of what we are trying to build—a true network of people working together to build their own real estate portfolios (or“empires”, if that’s what they choose).
2) Finance a multi-unit acquisition. You can finance the whole thing, part of the total, just the down-payment, or whatever else you choose. You could create a balloon payment with a high interest rate after a certain amount of time, or a low rate with a percentage of the rent for the duration of the loan. Again—it’s all up to you.
3) Do a combination deal. Maybe you like the high interest paid on your investment, but want to become more actively involved. Some of our contractors will let you buy a property and defer most of the labor payment for a portion of the proceeds (maybe you pay him a predetermined draw up front, and say—25% of the profits). This frees up cash flow for you to do a bigger deal (or more deals at once), and also gives the contractor the highest motivation to do the best job he can do.
4) Lease-option. It’s pretty simple, really. You buy the house and collect an “option” fee (say 5-10% of the selling price) up front while someone leases the property from you. You collect rent from someone you know will take care of the property until the agreement expires or they buy the home outright. If they don’t fulfill their lease obligation as outlined or cannot exercise the option (buy the house from you), you keep their option deposit, and find someone else to sell or rent to. If they exercise the option, you get cashed out and collect the profit you already pre-determined in the sales price. You can do this yourself, of course—but we are more than willing to help set you up with contractors, property management firms, and potential buyers. You choose what you need us to do.
5) Buy "Paper". Sometimes other investors have a great deal with a lot of equity on the back end, but they will sell the deal to you at a discount because they prefer the cash flow now. For example, say an investor bought a small horse farm for $150,000, and their monthly payment is around $1300. They have the place rented for $2750 per month for 24 months (and a possible 3rd year at the seller's discretion). The renters have an "option" on the house for $225,000, and plan on cashing the seller out within the 24-36 month time horizon. This seller has a projected profit of $35,000-$50,000 in cash flow alone for the rental period, with about another $80,000 pay day when the option is fulfilled. You may be able to "buy the paper" on this house for, say, $225,000 now. The seller would only make $75,000 (instead of $115,000-$130,000 before), but he is cashed out. Your mortgage payment would be higher, of course, but with rates dropping, you would still net around $1100 per month (or $25,000-$40,000 over the rental period, not to mention the tax benefits). That's still a lot of money for putting your name on a mortgage and collecting a few rent checks, isn't it? By the way, if you think this is a ridiculous example--think again. This is an actual deal we just closed last month. Sorry, though--it's not for sale...
The above examples are pretty straight-forward, and are only the tip of the iceberg. Once you start talking about the options, you will see the opportunities are almost endless in the current environment.