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Article reprinted with permission from www.deividscjuksa.lv
This will be an article about how, with creativity and persuasion, you can generate income from real estate without investing a single euro. Each of these 5 ways comes from personal experience.
I decided to write this article because I see that people are getting interested in real estate again and many are asking how to raise funds. These are not the only ways, but they are the ones I have personally implemented and I would not recommend reading this article as “know-how”, but more with the idea of broadening your views on how you can make money from property. You may be able to find your own way of getting started.
ALL IT TAKES IS AN OPEN, CREATIVE MIND AND A WILLINGNESS TO WORK.
1. Short-term rental business
I have 2 stories here and in both cases I did not invest a cent of my own money.
First. A gentleman from Switzerland who bought an apartment in the centre of Riga so he could stay there 2-3 times a year and spends up to 20 days a year in Riga. On other days the apartment is unoccupied and during the conversation I suggested that the apartment could be rented short term on booking.com, that way he could go to Riga when he needs to, booking in advance, and earn income the rest of the time. We agreed to split the income 70/30. 70% for the owner, 30% for me. We agreed that the owner would provide all the bed linen, household equipment, furniture and other things, and I would take care of the guest management. On average, we earned around €600-750 a month, minus expenses of €100-150. And BINGO135-195eur/month. without investing your own money and experience in the short-term rental business. Probably, if such an agreement were to be repeated today, I would definitely move the percentage split closer to 50/50.
There are many owners who prefer not to manage their property themselves and this is a great solution to hand over the management to someone else and receive an income every month. An even easier method is to agree a fixed rent for the owner and leave all other income to the property manager.
Second. When I was looking for a new apartment, I found one that I really like, and I’m living in it now. As I was not ready to move in until 2 months later, I signed a contract with the landlord that required me to pay a security deposit and the first rent payment after 2 weeks. During those 2 weeks, I found a group of 4 people who needed a short-term apartment for 1 month. We agreed that they would pay before moving in. I used the money to pay the owners of the apartment and rented it for a second month through booking.com. As the apartment was unfurnished, I also had to arrange with the furniture sellers that I would pay for the furniture after one month. I cover my rent and utility bills from my second month’s booking.com income, as well as my furniture supplier. An apartment I like, acquired when I was ready to move and the furniture was called in by short-term tenants.
2. Onward supply (the term wholesale is used in English)
First, the term wholesale. This is the term for the following situation: you find a property that the owner is willing to sell for €30,000, sign a cash contract with a payment deadline of ~5 days or deposit 5-10% of the asking price (this amount can be borrowed). You know that the repair costs €10,000 and after the repair it would be possible to sell for €55,000. You offer this opportunity to your investor base for a fee of, for example, €5,000. This way you can get income from the property transaction without ever becoming the owner and without investing your own money, the investor gets a property with the possibility to earn €10 000 after renovation.
The main objective of this method is to find an attractive deal in order to transfer the opportunity to someone else for a fee.
I remember such a deal in Zolitude without ever even looking at the property. The numbers said it all.
3. Double funding
This is how I bought my first rental apartment. Most of it was financed by the owner himself at 4.17% per annum for a 12-year term, and I borrowed the rest privately (admittedly, I used a small amount of my own money here too, but I could just as easily have borrowed it all privately).
I will show you a practical example and it will be particularly useful for those who qualify for the ALTUM programme.
I really like small one-room apartments, so I’ll take a central apartment of 20m2 for €25 000 as an example. Such a property can be rented for ~ €220-250/month. The purchase will require a down payment and other expenses of up to €2,000. Monthly payments at 2.5% p.a. and a term of 30 years will be €53/month. You can borrow this €2,000 from a friend, relative or someone else and offer to pay €120 for the next 2 years. 220-100-53 = €67/month This way, without investing your own money, you get a property that will generate €67-100/month. €167-200/month for the next 2 years and €167-200/month thereafter, plus the balance of the loan.
4. Management
Find a partner who owns property or has spare cash to invest.
With a partner who already owns properties, offer to help manage finding tenants, property maintenance and other day-to-day activities for a fee. These services are often used by people who do not have property as their primary occupation or who live far from investment properties. Lives in Ludza (or London) but owns flats in Riga. Agree that you will receive 10-20% of the property’s income for management. The breakdown depends very much on the situation and the workload.
With a partner who has spare funds. Agree to find properties worth investing in, manage the repair and sale process and share the profits. Depending on the investor’s appetite, this can be 50/50, up to any other split that satisfies both parties.
5. Mediation
The market price for brokerage services ranges from 3-5% of the transaction amount. Meet the intermediaries and offer to attract buyers. Collaborative brokers are usually prepared to split their remuneration for attracting a buyer to their client’s site with the other bringing the buyer. I am one of them, and I am happy to share the reward with people who can bring a buyer to one of my properties.
And there are countless other ways to generate income from property without investing your own money, but with energy and creative thought. I am always ready to talk about any of these methods in more detail in private if you are willing to work with me.
BE PREPARED THAT WITH ANY OF THESE METHODS, YOU MAY AT FIRST ENCOUNTER A LOT OF RESISTANCE FROM THOSE WHO ARE OFFERED ALTERNATIVES THAT ARE NOT “STANDARD”, BUT THERE ARE ALWAYS PEOPLE WHO HAVE HAD POSITIVE EXPERIENCES OR SIMPLY TRUST YOU AND BY FINDING THE RIGHT PERSON YOU WILL BE ABLE TO SOLVE THEIR PROBLEM AND GIVE YOURSELF A WAY TO MAKE MONEY FROM PROPERTY WITHOUT INVESTING YOUR OWN MONEY.