This post discusses real estate investing and investing deals.

For new investors worried about the risks of real estate, getting a master lease and subletting a property on a “by room” basis to special needs and student tenants is a great way to make a good profit without the risks of property ownership.

 

Today, many investors are a little wary of residential real estate deals because of market conditions. Now, savvy investors have been telling these folks that a good investor can make money in any market, but gun-shy newcomers remain hesitant. Many worry about being stuck with a property that doesn’t make a dime and is impossible to sell. For anyone who does even a small amount of research and uses common sense, this is very unlikely, but still…

 

Luckily for the timid, there are a number of residential real estate deals that make a tidy profit at little risk. All of these deals involve not taking ownership of a property, which means no fuss about property taxes, loans, insurance, and all the rest.

 

One of the best such deals involves subleasing. Here’s how it works. Find a property owner who is trying to sell a property without much success or is holding onto a property and not able to find tenants. Create an arrangement that lets you sublease the property in exchange for a fee that lets the property owner cover the mortgage and related property costs. Then, offer the rooms on a “per bed” basis with all utilities and furnishings included. Special need tenants and students are often on the lookout for these sorts of places, that don’t require large sums of rent up front and don’t require credit checks.

 

All you need is a master lease that lets you rent the property and maybe some networking with a special needs organization that can supply you with a steady stream of pre-screened tenants. This sort of system can take some managing, which is why it might be good to find a long-term tenant who can take care of some daily management business in exchange for a reduction in rent.

 

The nice thing about this arrangement is that it helps everyone out. The property owner gets some money from the property – at least enough to cover the basic costs of holding on to the property – and gets to avoid break-ins, code violations, vandalism and other problems associated with vacant properties. The tenants enjoy affordable housing with no credit checks. And you enjoy a nice profit after you pay for utilities and the rent you owe to the property owner.

 

Many investors are leery of such residential real estate deals because they assume that special needs or student tenants are non-desirable. This is actually not the case. Both types of tenants generally get some form of regular income – student loans or pensions – that let them take care of the rent. Plus, many live long-term in these sorts of arrangements (even if apartments are rented on a weekly basis). Many investors who initially worry about these tenants and arrangements find that the tenants are often less trouble than the renters who pass muster with references and credit checks!

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This entry was posted on Monday, August 25th, 2008 at 12:23 pm. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.