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9 Ways to Get Rich (Part 2 of 3) |
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Risk level: High
You can make a lot of money fixing up run-down houses and selling them for a quick profit, but you need cash to venture into this business.
It’s tough to get a mortgage for a property you plan to flip, but a home-equity line of credit against your primary home is a good source of funds for first-time flippers. Short-term bridge loans from private lenders, known as hard-money loans, are a higher-risk way to get the cash -- and charge higher interest rates.
Look for ugly ducklings in upscale neighborhoods where the market has picked up. Before buying a property, research recent sale prices for nearby homes to get an idea of what you can make, and find out how long the homes were on the market.
Successful flippers usually sell their properties in 30 to 60 days, says Letitia Patterson, a real estate agent who has invested in properties in the Detroit area.
Don’t forget to factor in the expenses you’ll incur while you’re holding the property, along with closing costs.
Justin Pierce, a real estate investor who flips properties in the Washington, D.C., suburbs, says he starts by estimating the sale price of a fixed-up home. Once he comes up with that number, he subtracts buying and selling costs (typically 10% to 15%), a profit margin of 15% to 20%, and the cost of repairs.
With those numbers in hand, he can determine how much he will offer.
#5: Become a Landlord
Risk level: Medium
The average interest rate for a 30-year, fixed-rate mortgage on a rental property is only about 4%, according to mortgage Web site LendingTree.
That means your monthly rental income should cover the mortgage, which wasn’t possible when rates were 7% or higher, says Michael Corbett, an adviser to the real estate Web site Trulia and author of Before You Buy! Plus, the National Association of Realtors projects that average apartment rents will increase 4.6% this year, following a 4.1% increase in 2012.
Once you’ve purchased your first property, you can use the equity to buy additional properties, typically through a cash-out refinancing, says Doug Lebda, chief executive officer of LendingTree. Most lenders won’t let you take out more than 80% of the equity you have in the property.
Fayz Khan, a former auto engineer, ventured into the rental market in 2008 because he believed he could earn better returns in real estate than he could get from the stock market.
He now owns eight rental properties in the Baltimore area, and the return on his investment has far exceeded his initial expectations. Khan and his business partners are exploring opportunities in North Dakota, where the oil boom has led to an acute housing shortage.
#6: Go Viral With a Video
Risk level: Low
You don’t need talent or money to cash in on YouTube. In fact, all you need is a camera, something unique to share and plenty of luck. “A lot of people make over six figures a year on YouTube,” says Ross Ching, a commercial and music video director.
A good one-off viral video is under three minutes and it gets you hooked within the first ten seconds. But it’s tough to be a one-hit wonder.
A more reasonable goal for amateur filmmakers is to score viral fame with a YouTube channel. That means making a series of videos, each of which can run a little longer than three minutes.
Try highlighting a specific skill or theme -- say, cooking or standup comedy. Your videos will drive traffic to one another while you perfect your craft and earn “subscribers.”
Reach out to media outlets and bloggers with a link to your video. Don’t expect your audience to find your video without some direction. A link-back on a popular site can skyrocket views.
You can earn cash with YouTube advertisements, which can run about $2 per 1,000 views. But the real money is in endorsements and product sales.
Industry experts estimate that Korean pop star Psy earned about $8 million in 2012 from his addictive YouTube music video Gangnam Style. As his video accumulates views, his single racks up iTunes downloads and he picks up lucrative contracts, such as his pistachio-promoting Super Bowl commercial.
Source: Kiplinger
