Using Other People's Resources
by Lanard Perry
One way to think of OPM (Other People&s Money) working for your benefit is to think how most people expect to make earnings from Investing in Fixer-Uppers
First off, most people would want to purchase the property itself. They could do purchase the property through any number of ways, including purchasing the land out of their savings or taking out loans to pay for the property.
This method, while good in itself, has some limitations. If you use your savings to buy property for a venture – and for some unforeseen reason, the venture goes bust and you are unable to sell the property, then you may have practically thrown your life savings out the window.
You can make other people's money work for you here. For example, what if you take a 95% seller's financing plan. This means you only pay for around 5% of the property's value. Then, you proceed to lease or lease option the property to tenants. The money you make from the rentals can be used to pay for the loan.
Three House Flipping Basics
In the end, theoretically speaking, you would have only paid 5% cold cash for the property, and made the property itself – with the help of its tenants – pay for the property the rest of the way. If the property costs $100,000, then that means you only pay $5,000 to own the property after some time – with extra income to boot. Not a bad proposition now, is it?
This is, in effect, having other people pay for something you will own in the future, and is one of the smart ways to make investments.
You could also use other people's resources such as time and expertise when trying to make money from fixer upper. For example, if you aren't well-versed in renovating properties, why not have other people do it, and make a profit at the same time.
How? Take for example a home that is sold by a distressed owner – house unkempt, needing repairs. Now, as a fixer upper yourself, the first thing you would want to do is think of how you can purchase and renovate the place, and then sell it on the market.
But what if, instead, you make plans to purchase the property and then show the property to other fixer uppers who may want to the take the property from your hands and do the hard work of renovating and selling the property on the market.
You can then sell the property again to this joint venture partner and have them renovate and sell the property. Just don't forget to take your profit from the pay you will be asking of them for the property! This, in technical terms, is called flipping.
If you look at it closely, you will have had made somewhere close to what most people in the same business make without even having to do the hard work required of them – remodeling, renovating, and marketing.
The technique there, however, is that you will have to be aware of how to choose potentially great properties. If you have an eye for that then it won't be much of a problem.
If you do this, you will have effectively used other people's expertise and time in helping you make a good profit. This is a great way to leverage others assets to work for your advantage.