Real estate investment strategies

From: alexhormozi

It is possible to engage in wealth creation strategies through real estate with little to no upfront capital [00:10:00]. These methods focus on leveraging value and market differences rather than large personal investments.

Leveraging Debt and Other People’s Capital

A fundamental approach in real estate is to borrow money to acquire an asset and then have someone else cover the payments [01:06:00].

Tenant-Paid Mortgages
- In real estate, you can borrow capital to buy an asset, such as an apartment building, and then place tenants in the property who pay rent. This rent covers the mortgage, effectively paying off the loan that you never personally had [01:10:00].
- Example: A person purchased a 14-unit apartment building using borrowed money and sold it four months later for $500, 000 m ore t han t h e p u rc ha se p r i ce, makin g a s i g ni f i c an tp ro f i t ina s in g l e t r an s a c t i o n < a c l a ss = " y t - t im es t am p " d a t a - t = "01 : 29 : 00" > [01 : 29 : 00] < / a > . T hi s in d i v i d u a ll a t ersc a l e d t oco mm erc ia l re a l es t a t e, f l i pp in g p ro p er t i es w or t h$ 10 million for $13 million and completing 30-40 such transactions annually with minimal staff [01:42:00].

Refinancing for Profit

Another strategy involves refinancing a property for more than its purchase price, often with no money down [01:57:00].

Identifying Underpriced Properties
- Seek out properties priced significantly below their market value [02:01:00].
- Process: Secure a property under contract for a low price (e.g., a $100, 000 h o u se f or$ 80,000). Negotiate further for a lower upfront payment (e.g., $70, 000) an d ha v e t h ese ll er f inan ce t h ere mainin g d i ff ere n ce (e . g .,$ 10,000 over five years) [02:13:00].
- A bank may finance the majority of the original contract price (e.g., 80% of $80,000), allowing the buyer to profit from the immediate equity created [02:29:00]. This concept can be applied to properties of varying values [02:35:00].

Selling Real Estate Contracts (Options)

This method involves securing a contract or “option” to buy a property at a certain price and then selling that contract for a profit without ever owning the asset [02:41:00].

Understanding Options: An option is a contract that grants the right to buy something at a future date for a price agreed upon today [02:45:00]. The person holding the option hopes the asset’s value will increase, while the seller of the option receives a small payment for the contract itself [02:54:00].
Execution:
- Contact many property owners, offering 20% below what you believe is the market rate [03:09:00].
- Eventually, an owner might agree to sell significantly below market value (e.g., an $800, 000 o ff er f or a p ro p er t y w or t h$ 1 million, especially if they acquired it very cheaply) [03:14:00].
- Once a contract is signed, you can then sell this contract to a real estate investor for a higher price (e.g., selling an $800, 000 o pt i o n f or$ 900,000), making a profit without putting any money down [03:28:00].

Commission-Based Sales (Real Estate Brokering)

Earning a commission by selling expensive properties is another way to generate substantial income without asset ownership [03:41:00].

High-Value Commissions: Selling a skyscraper valued at $100 mi ll i o n c an y i e l d a 3 - 4$ 3-4 million on a single deal [03:45:00]. Similarly, selling a $20 mi ll i o n res i d e n cec an res u lt ina 5$ 1 million, without ever owning the property [03:51:00].

Acquiring and Combining Businesses

This strategy involves taking over existing businesses, often with no money down, by offering the previous owners a share of future income or profit [05:15:00].

Case Study: A person combined four small information businesses, each doing approximately $1 mi ll i o nann u a ll y, in t oo n e l a r g ere n t i t y < a c l a ss = " y t - t im es t am p " d a t a - t = "05 : 18 : 00" > [05 : 18 : 00] < / a > . T h eyo ff ere d t h e p re v i o u so w n ers t h e i rc u rre n t in co m e f or t h e n e x ttw oye a rs in e x c han g e f or t h e b u s in ess, e ff ec t i v e l y a c q u i r in g t h e m f or n o m o n eyo u t o f p oc k e t < a c l a ss = " y t - t im es t am p " d a t a - t = "05 : 33 : 00" > [05 : 33 : 00] < / a > . T hi scre a t e d ana sse tw i t ha$ 4 million top-line revenue and $1.5 mi ll i o nin p ro f i t . T hi sco mbin e d a sse t co u l d t h e nb eso l df or a s u b s t an t ia lp ro f i t (e . g .,$ 5 million sale with a $2 mi ll i o n cos tt o p a yo ff se ll ers, res u lt in g in$ 3 million profit) [05:43:00]. This demonstrates a way to make over a million dollars without initial capital investment [05:58:00].

Arbitrage

Arbitrage, in general, refers to selling the same item between two different markets where it is priced differently, profiting from the disparity [06:44:00]. This concept extends beyond specific real estate transactions but can be applied in various forms within wealth creation strategies and investment strategies.

Principle: If Bitcoin is $19, 000 in J a p anan d$ 19,100 in the US, one can buy in Japan and sell in the US for a $100 profit [06:51:00].
Application: This also applies to physical products or lending money, such as borrowing at 1% and lending at 6% to earn a 5% difference [07:06:00]. Seeking out arbitrage opportunities is a key strategy for generating significant income [07:21:00].

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