New Ideas For Creative Real Estate Investing

Years ago I watched a late-night television infomercial selling some course on creative real estate investing. As I recall, the author of the course suggested - among other things - that you could use your car for a down payment and get sellers to finance everything. You could also split a home into a duplex he said. He really did have a lot of creative ideas for investing, but it wasn't clear that any of them had ever worked for him or if they were just ideas he had. For this article, then, I want to stick to true stories - creative techniques that have actually been used.

An investor I know used to buy run-down houses, fix them up and sell them for a profit. He was always looking for new ways to buy for less or add more value to a home. In a competitive market with many investors looking at the same properties he had to take creative real estate investing very seriously to find the opportunities.

One project that I helped him with was a bi-level home with two bedrooms. Like many homes of this type, the lower level was unfinished, a basement of sorts, but with larger windows than you normally get on a basement. Other investors had passed on the property because there wasn't enough profit to be made cleaning it up and reselling it. My friend saw the potential of that lower level.

He chose a corner with a window and had two walls built. An outlet, a ten-by-ten-foot piece of carpeting, and a door completed the bedroom. Total cost: $1,500 or so (this was more than fifteen years ago). Now it was a three bedroom home. He made repairs and improved the landscaping, but that bedroom alone probably added $10,000 to the value of the house. Few investors at the time were thinking about adding bedrooms to homes, because they assumed that doing so was a $10,000 project. They didn't notice that the corners of basements already had two walls, a floor and ceiling - most of a bedroom.

This same investor met his match with a small house that had no place to park a car. When he bought the property he assumed the city would approve paving what little front yard there was. They refused. Between the house and the neighbors fence there was about six feet of space. My friend tried to buy five feet of the neighbors property (promising to pay the cost of moving the fence as well) to create enough space for a narrow driveway. The neighbor refused. A home without a place to park in a town where it was illegal to park on the street at night was a tough sell. He managed to make a couple thousand dollars anyhow after cleaning up the house and wholesaling it to another investor.

The other investor found the solution. A month later I rode by and saw that he had actually removed the living room wall and moved it in four feet. Higher up it angled back out to the roof line. Sure enough, there was a car parked in the space created below. I'm not sure what the engineering challenges or costs were for this, but I do know that he sold the home for more than twice what he paid. That's a great example of creative real estate investing.

Creativity At Every Step

Many books and articles on creative real estate investing focus on financing. That does seem to be the biggest challenge for many investors, but don't limit your creativity to how to borrow. As the examples above show, you can also get creative in adding value to the investments you make. In fact, look for creative alternatives at every step.

For example, to save money selling a small piece of land, I skipped using a real estate agent in favor of just offering good terms. I got a higher price in that way too. And then I closed the deal sitting with the buyers in a restaurant (not recommended these days), to save the cost of a closing company.

A friend bought a home and soon after sold half the trees on it (they were too thick for his tastes) to a lumber company for several thousand dollars. It looked the same to me afterwards. It made me wonder if there were some opportunities around to buy land, sell the resources (another local sold the gravel that made up a hill on his land), and then sell the land for as much or more as the original purchase price.

To find properties you might train your kids to screen listings online for you. To help finance deals you might buy a smaller home to free up equity for investment. Offers can include services or things other than money as part of the down payment. Property uses can be changed to increase value (making a duplex into a single-family home sometimes makes it more valuable - or vice-versa). Creative real estate investing is definitely not limited to finding new financing options.