When a typical investor who is not related to real estate sector considers the real estate investing, he usually has few defined set of techniques which are considered as investing. This usually involves first searching for the property and then striving to secure the finance from the lenders.
In order to secure this finance, the investor usually has to invest some of his own money for making the down payment. This was a more traditional way of making the investments. There are few slightly different techniques which move slightly out of these confines for garnering huge amount of profits or permit investors to move ahead without making use of his own money.
A technique in real estate investing which some investors usually start with is called bird dogging. Actually this is not investing as the investor here is not putting any of his own time or money in the deal. Here the bird dog will get his usual share on referring the deals to other interested investors. The bird dog here will get his share once the deal gets closed.
In another kind of technique a financing by seller is used for purchasing the house. Here the seller becomes the lender for this deal. As the deal finalizes, the seller usually lends the home equity to the purchaser and then the two sit together to finalize the payment details. The payment terms can usually range from principal only, interest only or any combination of these two.
Yet another technique which takes full advantage of the seller financing is where it allows the purchaser to take the responsibility of the loan of the seller which is in place currently. It can be accomplished in two ways: firstly the lender will allow the purchaser to simply take over the seller’s loan (also called assumption). Buyer’s credits must be approved before the bank transfers the loan to him.
In the second method, the purchaser takes the responsibility of the loan of seller is called ‘subject to’. Here the buyer simply buys out the real estate without establishing any contact with the lender. This may sometimes involve risk as some banks also include a acceleration clause in the contract which permits them to ask for the entire loan given by them to be repaid in the full when the property ownership is transferred.
Flipping is another popular technique of real estate investing which involves the purchase of property which is under priced. After purchasing the property is again quickly sold at the market value, sometimes after requisite repairs or renovation to add value.
While number of people may go for traditional for of financing for real estate investing, for a smart investor, looking for novel and more profitable techniques such as those discussed above would mean more profits for him.