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12 Ways to Get Property without Using Your Own Money

There are various ways to acquire property even if you have no money.
1. Partner with People
Find people who have what you don’t have—a lot of money and a lot of
credit and very large cushions. Draw up a business plan that says, for
example, together we’re going to buy 100 houses over the next five
years. You have the energy and the expertise to find good deals and

manage them, and your partner might be a busy doctor, a lawyer, an
accountant, or a retired executive who has a lot of money but is making
only 3 to 5 percent return in decent years on his or her investments.
These professionals would like to make 11 or 12 percent and reap
some tax advantages and appreciation to bring their actual return to
15, 20, or 30 percent. However, don’t tell them that because it could
scare them. When you start promising people returns of more than 15
percent, they get nervous.
Draw up a plan to buy a house that’s worth $200,000, which you can
get for $180,000. Your partner goes down to the bank and signs a few
papers. The bank loves to lend money to people with good credit who
have secure jobs and a financial cushion—unlike a lot of self-employed
people like us. So have your partner borrow the funds to purchase the

house. Whose name is on the title of the house? Your partner’s name or
the name of your corporation or trust. Together, you determine what
percentage of the house you each own: 50-50, 70-30, or whatever you
agree on. Agree that you make all the decisions about renting and managing
and making repairs, while your partner’s name is on the loan
papers.
Your partner would get some tax advantages for being in rental real
estate—up to $25,000 a year write-off for the depreciation against regular
income. (Do consult with your accountant and your partner’s
accountant to find out all of the advantages.) As the managing partner,
you get all the control.
Five years down the road, if a house needs major repairs, your financially
strong, deep-pocketed partner borrows another $10,000 (or takes
another $10,000 out of a bank account or retirement or savings) to fix
up the house. Then, another 10 years down the road, properties that
were worth $20 million are now worth $28 million because property
value has gone up and the debt has gone down—from $18 million to
$15 million. You sell the houses you bought together and split the profits
according to the percentage arrangement you made earlier. All the
debt is paid off and your financial partner does well. You’re both happy
and you’re both better off. Your partner has the money, and you have
the expertise, time, and energy.
I know of at least 20 investors in the United States who own more than
200 properties, and their names are not on one bank loan or deed. They
have zero liability for lawsuits because they have zero liability on the
debt. They have recruited strong, informed partners who have clear
written agreements and who understand that there might be a bad
SECRETS OF BUYING AND SELLING REAL ESTATE

month or two. Partnering is one of the best ways to buy property, so
find a good financial partner.

Real Estate Is Not Real Estate: It’s Creative Finance

The week I wrote this section, I
bought and sold four properties. I closed on two in a single day and had
three under contract for the following week. I’m a full-time real estate
investor.
My job and your job is to find a deal and put it under contract. Learn all
the ways to make money: buying real estate, creative finance, flipping
properties, lease-optioning real estate, mortgage brokering, and money
brokering. Then choose which way you like the best and run with it.
Real estate is unique in that you can get into it without using any of
your own money.


Have you ever tried to get in the stock market and make money? It can
work; however, you have to buy a stock at the price it sells for on the
day you buy. Let’s say the price of a company’s stock is $100 a share. If
you want to buy it, you have to pay $100 and pray it goes up. If it goes
to $120 in a year, you’ve made $20 for every $100 you spent on that
stock. That’s a 20 percent return on your investment, which is a good
return.
You must be able to take into account that, historically, the stock market
has between about a 9 and 13 percent annualized return—an average of
11 percent over the past 40 or 50 years. So if you’re making 11 percent
or more, you’re doing great in the stock market. Unfortunately, for
many, their stocks have gone down 10, 20, even 30 percent in the past
few years.
However, to buy that $100 stock, you have to give the bank or brokerage
firm (or whoever makes the transaction for you) a commission, plus
you have to determine where that $100 comes from. If you have excellent
credit, the brokerage may lend you half of the $100 and you still
have to put up $50 of your own cash. That’s what some people do when
they invest in the stock market. Considering commissions and borrowing
expenses, how much are you really making on the appreciation of
that stock?
I recommend you consider investing in real estate for a better, longterm
investment because of the features that make it unique, some of
which follow.
SECRETS OF BUYING AND SELLING REAL ESTATE

Welcome to the Profitable Business of Foreclosures

Many consider foreclosures to be the most lucrative aspect of real estate
investing for several reasons:

1. Less competition—“underground.” The foreclosure marketplace is
often tagged as the “underground” of real estate investing as
opposed to the usual retail world of real estate. This means less
competition from retail or uneducated buyers.

2. Less competition—specialized knowledge. While you do not have to
be a brain surgeon to be successful in foreclosure investing, you
should have above-average acumen to understand the legal aspects
of foreclosures in the state (or states) in which you will be doing
business. (Each state has its own set of laws pertaining to foreclosures.)
Many investors and wanna-bes will be discouraged by the
additional complexity in the foreclosure business.

3. Overpaying and overleveraging in the retail market. In many parts of
the country, real estate has experienced a rapidly escalating market
in a relatively short time. In this type of market you have a frenzy of
buying, in which anxious and highly emotional retail buyers overpay
for properties and, in many cases, also overmortgage them. These
types of buyers often find themselves in over their heads with other
types of debts as well (e.g., leased automobiles and credit cards).
When the economy slows down and companies start to downsize,
these homeowners often lose their jobs. Recent substantial stock
market losses worsen this recessionary scenario even further.
Homeowners find themselves in a financial bind, unable to meet


to flip properties, you will follow the appropriate Goldmine strategies in
Section 41 and 42 and take the position that you are not a dealer and do
not start off as a corporation (with its many disadvantages). Instead,
start off as an LLC partnership (or as a limited partnership if your state
heavily taxes LLCs) as per Goldmine Section 6. Because you are taking
the Goldmine position that you are not a dealer, your flip profits will not
be subject to Social Security taxes. With a partnership as a pass-through
entity, you can also use rental losses from your keepers to offset the flip
profits to reduce income taxes in addition to the Social Security taxes.
Also, because you are taking the Goldmine position that you are not a
dealer, when you sell you can defer income taxes on the gain via a 1031
exchange (covered later). If you hold any of the financing, you can defer
income taxes on the gain via installment sale reporting

The 1031 Exchange: Avoiding Taxes by Trading In for Another Property

With commercial real estate, when your property has increased in value, you
have the choice of simply selling the property outright and getting a big
check at the closing table (after taxes, of course) or using the magic of a
1031 tax-deferred exchange, which allows you to make even more money.
A 1031 tax-deferred exchange allows you to roll over money that you get
from the sale of your old property into a new property while deferring
paying taxes. So, if you’ve made $200,000 in the first commercial property
that you’ve invested in, you can sell this property and buy a second one by
using the $200,000 as a down payment.
When it comes time to sell your second property, you can take your original
$200,000 in profits from the first property, along with whatever you made in
the second property and continue to roll over the gains again into yet another


Accounting expenses
Be sure to deduct your accounting and bookkeeping expenses, and don’t let
us catch you doing your own accounting or bookkeeping! Your time is much
more valuable than that! Instead, hire someone to take care of your books for
you. And remember that everything you spend in this category is completely
deductible as an expense in your real estate business.
Consulting expenses
From time to time, you’ll likely want to bring in consultants to help you strategize
or to guide you through an area in which you don’t have expertise, such
as condo conversions. Paying these consultants is an expense to your business
and therefore fully deductible. Here are some consultants who you may
use and whose payments are deductible: appraisers, financial planners,
mentors, and architects.
Many tax advisors cost of researching your business and educating yourself
is deductible as well. Going to real estate-related seminars, buying books,
tapes, trade magazine subscriptions, and dues to professional organizations
usually are too.
Home office expenses
For most real estate investors, it’s great working from home. Our friends often
tease us about walking into the kitchen and grabbing a cup of coffee, and then
arriving at our offices about 30 seconds later. The good news is that all of your
expenses for your home office are completely deductible. That includes the
cost to heat or cool your office, to clean your office, and other things that
people have to pay for even though they don’t have a commercial real estate
investing business. (By the way, your dog and the family piano can’t be considered
expenses — no matter how much better they help you work.)
Office equipment such as computers, fax machines, copiers, and phones can
be fully deducted. And don’t forget the beautiful leather office furniture and
mahogany desk and shelving!

Finding a job as a property manager

You can get hired as a property manager in two ways. One way is to work
your way up through the ranks. Working as an assistant manager under the
wings of an experienced property manager is a good way to start. We don’t
know about you, but starting from the ground up, is the most fulfilling way
to the top of the ladder in our opinion. The second way is to get your college
degree and apply for a position. Most hired property managers typically
have degrees in real estate, business administration, accounting, and finance.
Great property management companies love new graduates whom they can
train and groom from scratch.
When you’re ready to look for that job, start at the very top of the food chain.
Simply call local property management companies and ask whether they’re
hiring. Job turnover in this industry is no different than any other, so positions
are always opening up. Send your résumé or general qualifications to as many
property management companies as possible, and then follow up with a phone
call. These actions will put you in the best position to get hired, or at least
interviewed.
The property management industry in your town or city is a small world.
Believe it or not, everyone knows everyone. Secrets are hard to keep and
maintain in this industry. Contracts that management firms win, firms that
lose customers, firms that don’t pay their vendors, and firms that can do no
wrong — this information is out there on the street for everyone to know and
discuss. We don’t know how it gets out there, but it does. When you think
about it, you can’t really control your reputation, but you can control your
integrity and conduct. Therefore, no matter where you are, make sure that
you mind your business.

Put Power in Your Search Engines

It’s easy to look for a house online in any city. You just go to the city’s multiple
listing service (MLS) and see what’s out there. With this service, you see
prices, pictures, property features — you name it. But for commercial real
estate, no such service exists in each city. The next best things are independent
online listing services for commercial real estate. Two companies have
filled this niche, and they did it in a big way. One company is LoopNet and
the other is CoStar Group.
LoopNet, Inc., (www.loopnet.com) refers to itself as the largest commercial
real estate online listing service in the world. It’s an easy-to-use Web site that
lists properties that are for sale and for lease worldwide. LoopNet reports
to have more than 500,000 commercial properties for sale and for lease on
its Web site. You can also search for brokers nationwide who specialize in a
field that you’re interested in. LoopNet even provides reports on recent sales
and closings nationwide in hundreds of cities. LoopNet is a powerful way
to get immediate access to deals and commercial professionals of a broad
nature. It’s a great starting point for investors to contact brokers to get their
investment ball rolling.
CoStar Group, Inc., (www.costar.com) calls itself the number one commercial
real estate information company in the United States and United Kingdom. And
judging from its extensive Web site and the wide range of services offered it
would be difficult to disagree with its status as number one. CoStar offers a
commercial property listing service that’s similar to LoopNet.
CoStar has the most comprehensive database of property information we’ve
ever seen in one Web site. If you’re looking for an investment property for yourself
or client, or if you want to expose your property (or your client’s) to millions
of people, CoStar can get the job done. When you need detailed, accurate,
and up-to-date information on comparable sales, this company sets the bar;
it tracks more than 1.9 million properties in its database. CoStar is invaluable
for finding commercial deals of all types and for advertising your business. It’s
also a powerful networking tool for any commercial professional or would-be
professional.