A person can make money with houses (and mobile homes) many ways, here are ten of them:
1. Buy low and sell high simply by using negotiating skills and market savvy. Bear in mind that every listing is acquired from an owner who is willing to sell at a price where he or she receives less than full market value, even knowing that the house is going to be sold for more money. Negotiation is a very highly paid skill.
2. According to CNN, a $300,000 house in Las Vegas last year appreciated at more than $12,000 per month. In a fast appreciating market, sellers are motivated by greed. Except in cases of financial or personal distress, low offers don’t often work; but full retail offers with delayed closing sometimes do. So, you can buy high, subject to any debt, let prices rise, then sell at the higher price.
3. Buy houses in good areas on good terms to hold as long term rentals and let tenants pay them off while they appreciate and throw off tax sheltered income. The most common mistake that would-be investors make is to buy cheap houses and duplexes that attract the worst tenants and which require the most management effort. Untried investors usually flee the market and turn down any future opportunity that involves management. If they focused on decent houses in decent areas, they’d attract decent tenants; and be able to hang in there for years of effortless management while their tenants made them rich.
4. Buy a “fixer” on easy terms, fix it up, and resell it at a higher price and terms. Houses that need repair are hard to sell, so any buyer has an edge on negotiating easy terms. I prefer a zero interest, single payment note due when I sell the house. This allows me to use my cash for fix-up rather than payments.
5. Lease a “fixer” at a low rent and Option it for a low price. Pay rent while you fix it up to sell. This enables you to control a house with little more than a month’s rent and deposit while you add value by restoring it to full market value.
6. Lease/Option a house with a percentage of the rents to apply toward the down payment and purchase price, rent it, and build equity with the tenant’s rent.
7. If you’re renting your quarters you’re losing a profit opportunity in this fantastic market. Lease/Option an up-scale house. Negotiate a high percentage of the rents applied to the purchase price and move in. You’ll be making high payments but you’d have to pay rent somewhere and this way, you’ll be building equity.
8. Do the above, but with a Net Lease that makes you responsible for all repairs, taxes, mortgage payments, and insurance. When a Tenant with an Option has a “preponderance of the Badges of Ownership” under a net lease, he is treated as the owner under the “Substance Over Form” doctrine. This qualifies the house for a Section 121 tax-free residential sale. You can repeat this process every two years.
9. Where houses are too expensive to make sense as rentals, sign a purchase contract with a low earnest money deposit and with an extended closing date. Let the house appreciate while you market the house, then at closing, instead of buying and sell the house, simply sell your contract to another buyer.
10. In very hot markets, houses have appreciated to the point at which virtually every house sells at full retail value; but constructions costs have risen at a much lower pace. One way to take advantage of this situation is to buy a house that would be improved by increasing the living area for a per-foot cost that’s less than the retail per-foot costs, then to sell it. In the San Francisco Bay area, more living area can be added for about $175 per square foot, and sold for about $550 per square foot. Adding 500 square feet at a cost of $87,500 increases the value by $275,000. If you live in such an area and can find and acquire suitable properties, and can get permits, you can make a lot of money with just one house per year.
