#6 – Sweat Equity Method

Using this method, you’ll partner up with an investor with cash, and you’ll do the dirty work.

This is really a good deal for the investor, and can put you into a position to make occasional windfall profits.

The ideal investor has six figures to invest minimum (or you have several investors whose funds total over six figures). Note: Don’t pool people’s money unless you know what you’re doing – it can violate securities laws if you’re not licensed. Better to keep everyone’s investment separate.

Anyway, these investors will usually be anxious to make the double digit returns available from tax liens, but they’re unwilling or unable to commit the time to learn and do the tasks associated with tax lien investment (remember, it’s not passive!)

You however, love this stuff! You’re willing to wait to be paid in order to build your future real estate portfolio.

The Deal with the Investor

The deal with the investor is pretty simple: You will invest their money directly into tax liens that you’ve researched and found to be well secured by the underlying property. You’ll buy the liens directly in their name, and when the liens pay off, the checks will go straight to the investor.

Your share of the interest? NOTHING!

However, the kicker is, the investor waives his right to participate in any windfall profits from properties you may get when the redemption period expires. YOU get to buy them for whatever the investor would have received if the lien paid off. You should also be able to negotiate 1 year of financing at 10% interest from the investor if you wish, to give you time to sell the property, refinance it, or get it ready to rent.

Using the rent, you could work out a little longer-range financing deal with the owner and pay most properties of in a few years or less.

I wrote a full 3-series article about this here: Tax Lien Certificate Sweat Equity

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