Strategy 1 – Covered call writing and Naked Put Selling
Assuming you don’t already own any stock, you can start off by doing naked put selling. With this strategy, you basically can get paid a commission to buy a stock from someone. With this strategy I would suggest you start off with a margin account. Note, you will need a minimum of $2,000 to open and maintain a margin account. With this strategy you can conservatively make 10-15% per month.
Strategy 2 – Call option buying and Put option buying
Buy a call option if you think a stock is going to go up. Buy a put option if you think a stock is going to go down.
With this strategy you do not need a margin account and you can start with as little as $100 if you find the right stock. With this strategy you can make upwards of 300% per trade!
Strategy 3 – Bird Dogging
This is also referred to as being a property scout for real estate. Basically you do the leg work to find and broker real estate deals. Once you have a contract signed, (for a price) you assign it to an investor/buyer who has the funds to close the deal. For example, let’s say you find a motivated seller (let’s call her Anne) that has a property worth $200,000. Because Anne is anxious to sell, she is willing to sell the property to you for $120,000. You tell Anne that you would like to buy her property but you just need two months to come up with the cash. Anne says this is fine as she won’t need the cash for two months anyway. You draw up a contract with Anne saying that she will sell the property to you for $120,000 and she will not accept any other offers during a two month time frame. You can make the contract official by placing $100 in an escrow account. Another thing you do is place two clauses in the contract. The first clause will state that you can get out of the deal if your business partner or advisor does not support it. This first clause gives you a way out if you can never come up with the money. The second clause states that the contract is assignable. What this means is that at any time during the two months, you can assign/give your rights to the contract to someone else. With contract in hand you find a real estate investor (let’s call him Bill) or someone looking for a house.
You tell Bill that you have a deal on a property. The property is worth $200,000 but you have a contract that will allow you to get the property for $120,000. Bill already has a potential $80,000 equity and can keep the property or sell it right away for a nice profit. You tell Bill that you don’t plan to buy the property but you can assign the contract to him for $5,000. Because you have done all the leg work and the property has the potential to make around $80,000, this idea would be appealing to Bill and he gives you $5,000, gets the contract and purchases the property. So you made $4,900 on an investment of $100.
Strategy 4 – Tax Lien Investing
With this strategy you can get paid to pay other people’s taxes. If someone falls behind on their property taxes, you as an investor can pay the property tax amount and once the person gets caught up, you collect what they have to pay in penalties. In states like Texas, a delinquent person has 6 months to get caught up and once they get caught up they have to pay fines of as much as 50%. At least 25% of whatever they pay will go to you. For example, if someone had property taxes of $5,000, they would have to pay about $7,500 to get caught up. If you had paid $5,000 for that tax lien, you would be entitled to $1,250 or 25%. In the worst case scenario if the home owner never gets caught up, you are allowed to foreclose on the property.
So there you have it, 4 strategies that you can do with little money. To be successful in investing you need to have a combination of three things. The three things are knowledge, money, and/or time. You do not need to have all three and you can probably get by with one if you do your homework.