This is part Six of the series of articles about creating a real HYIP. If you have not read the previous articles from this series, you need to do this before to proceed:
- The HYIP Business - Is It Really A Hopeless Situation?
- The Real HYIP Can Exist
- Creating A Real HYIP - Set Your Basic Concepts
- Generating Profits For Real HYIP - Invest in Trading
- Create Profits For Real HYIP - Invest in Sport or Financial Betting
Many of the investing gurus will tell you that there is no safest investment than Real Estate. How does this sound when the property prices in USA are dropping like crazy? Probably you think the gurus are mistaken, but the fact is they can't go wrong. The property prices can go down in a short (or not so short!) period, but longer term they always grow.
And a time of a market panic is the best time to buy. But I am not going to talk about catching the market moment here. This is not a sustainable model for a high yield investment club. Why? Because you want a strategy which works smoothly all the time.
The most important thing to remember is that you won't go wrong with buying a property as long as it is not overpriced. The property always remains a property.
The question is how you can profit from it. Let's explore the opportunities.
Make Profits By Renting And Selling
This is the simplest and the first method which comes to people's minds. You buy a property and give it for rent. You take the rent payments, but at the end the property is still yours. And in most cases its price even goes up.
Depending on the market conditions a residential property can be rented for a monthly fee which is about 0.5% - 1% of it's total price. That makes 6% - 12% ROI per year. Better than banks, but not hot at all.
The figures can be better if you invest in commersial property, but still won't be very hot.
The better time in the business comes when you are about to sell the property. Obviously you should not do this when the market is in bear stage. Keep giving it for rent until the conditions change. In normal market environment the property prices raise with different rate in different countries, but almost always beat the bank rates.
Now here is the key:
If you choose a propery in a growing region such as Asia or East europe you can add up to 20% increase of the price per year. And this 20% is on top of the 6% - 12% that you are taking from the rent. How does 25% per year sounds to you? Not bad.
But there is a lot more to be done than that.
Leverage Your Real Estate Investment
If there is anything that the banks are always ready to lease money for, it is real estate. It's very, very easy to get a mortgage for a good property and you can do it even if it is in building stage.
The only thing you need to make sure is that the mortgage payments are lower than the sum of the rental payments you get plus the increase of the property price.
Let me give you an example with a property in East Europe. Here you can buy a nice two bedroom flat for $100,000.
You need to have at least 20% of this amount, i.e. only $20,000. The rest $80,000 you can get from the banks for just 6.5% yearly interest.
You must choose payment terms which allow you to pay equal parts on the principal.
Let's get 3 years as an example. From such a property you can take $500 rent monthly. This means for 3 years you have $18,000 of your investment returned to you.
Wiht a 25 years loan you need to pay to the bank for these 3 years around $25,000.
A conservative prognosis for the raise of the property price of only 15% per year means that you will be able to sell the property for $150,000 at the end of the third year.
You will have to pay another $64,000 + some small fee to the bank in order to cover the entire debt at once, so lets say the total $65,000. So you sell the property for $150,000, give $65,000 to the bank and you are left with $85,000.
So you have:
Paid
$20,000 initially
$25,000 debt payments
------
$45,000
Received
$18,000 from rent
$85,000 pure profit from the sale
-------
$103,000
This means $58,000 profit or 129% compounded pure profit for 3 years (or close to 32% profit each year). And this is on conservative estimation of only 15% raise per year. Now that is not bad at all, is it?
Just to show you an example, if the raise was 20% you would have sold the property for $173,000 and thus made $108,000 or 180% compounded profit for 3 years (equals to 41% yearly profit).
Do you see how powerful your real estate investment can be if you leverage it? Heck, this works even if you invest only your own funds, now imagine what will happen if you invest other people's money by creating a HYIP.
You can go even further if you buy old properties and recover them or if you find underpriced properties. There is really so much to do with real estate that I need to write a whole book only for that. If you are interested to learn more on this matter I can recommend you take a look at the following books:
- FLIP: How to Find, Fix, and Sell Houses for Profit by Rick Villani, Clay Davis, and Gary Keller
- Real Estate Investing for Dummies by Eric Tyson and Robert S. Griswold
- Commercial Real Estate Investing 12 Easy Steps to Getting Started by Jack Cummings
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