I’ve been very busy thankfully in this economy/market and it has made me reflect how lucky we are to be involved in this business…I know for many the ease of finding necessary capital is tougher now vs the past but the deals are plentiful if you have found the financing…Lets be realistic,the whole point behind the landlording/cashflow part of RE investing is ROI/ROC (Return on investment/Return on capital)…IMHO there has been no better time to start a cashflow business if that is what your goals are (not my particular goal because I’m not a good landlord)…Prices are beaten down,interest rates are low (even though conventional funding is near impossible to get) which means ROI is higher than the past…I’m also learning from my borrowers and reading more books about my craft and learning about different areas such as tax liens…I’m sure there are some who will read this and say different but this economy/market is full of oppurtunities if you are looking in the right place…If you are looking in the wrong place it will break your spirit and most likely your finances…What I have reflected on today was how people wanted into RE for all the wrong reasons during the bubble era…Even if this economy/market stays this way for 10 more years the survivors and investors that have accumulated and or created a portfolio throughout this period will be awarded tremendously in the future…The years fly by and you have to get started at some point…I’m not one to preach but time waits for no one…Find your niche,work hard at it and get out there…There will be a time sometime in the future when we will all say " I knew I shouldve bought real estate back then when the market tanked"…
Good thoughtful post. So many people saw everyone else making money in RE during the run up that they decided to jump in for an easy buck. Some got lucky and got out. I truly think a few years down the road lots of housing will be looked at like the beaten down stock that brought huge returns. People that didn’t buy in this era will be asking “what if?”
Cash flowing deals are out there if someone wants them bad enough.
My favorite part of this post is the title…
“The FREEDOM of real estate investing.”
Most people in this world are SLAVES, they just don’t KNOW IT until it’s too late.
They have JOBS that keep them on a credit fueled treadmill that only stops when they DIE, or are too old to continue running.
Look at the MAJORITY of Americans biggest investment…THEIR HOME…They LOVE to tell people how they paid $22,000 for it in 1972 and NOW it’s worth $150,000!!!
The only PROBLEM is…They leave out the EQUITY LINES they used to take vacations, put in a pool, VINYL SIDE the house, put in a new furnace, ect…By the time they finish…THEY’VE PAID THE BANK BACK THE FULL VALUE OF THEIR HOMES IN INTEREST PAYMENTS!!! They’ve MADE NOTHING!!!
Here’s what I LOVE about real estate investing…
It allows me to DEPOSIT HUNDREDS of THOUSANDS of DOLLARS into my bank account every year…I ROUTINELY deposit more money in a single year than MOST Americans will ever SAVE IN THEIR LIFETIMES!!!
I’m not bragging about this…A N Y O N E can do it…BUT…You must be willing to work HARDER than ANYONE ELSE when you start out…You must DEPRIVE YOURSELF of “THINGS” If you can do this…Real estate WILL make you rich!!! And that WEALTH is were TRUE FREEDOM LIVES!!!
No JOB (unless you enjoy it)
No BILLS (you can’t pay off)
NO taking anyones BULLSH*T
F R E E D O M
fdjake is right…I made most of my wealth from 2006-2009 and I lived well below my means…Had I lived above my means I wouldn’t have the amount of liquid capital to play with now…You can never have enough income streams and in real estate you can easily make numerous different kinds of income streams…Whether its landlording…flips…mortgages…hard money…tax liens…etc…But you need capital…Once you have the capital you have the power…Without the capital its like going to a gun fight with a knife…(sorry for the poor analogy)…Work hard at your craft…Live below your means…Save it as much as humanly possible…And when you see and arb opp take it…
Great posts you guys. You two mentors are a big reason why I log in here almost every day.
You are right, FDJake, NO ONE ever mentions how much interest they paid on their house. I don’t even like to think about it. Just now I am getting to where most of my loans are what I consider “right side up”. That means that more principal than interest is being paid each month. That fact gives me hope. I like those big chunks of principal being paid down, even though it worsens the tax situation and makes the business LOOK profitable. But you can’t eat equity.
The hope is that one day I too, will have capital with which I can invest or lend. That will come with paid-off properties grinding out money each month. Or sold properties with the new owners sending me checks every month. Until then, it all gets rolled back in.
Spent the day yard-selling and buying. Converted unusable inventory to cash, and bought a microwave, desk and chair and a gorgeous couch. For the next 2 furnished units.
The economy is brightening here! Restaurant and hotel parking lots are jammed with cars. We have been 100% full for the last four Mondays, when we do our weekly “who’s paying rent?” tally. We are starting to creep our prices back up. We took a 30% discount when there was a lot of vacancy.
So things are looking up out here on the prairie. Even though I don’t have capitol yet I got equity, and I got rent coming in the door each day. Bills are being paid and we are trying to pay for rehab right out of revenue so there’s no new debt.
Please keep up with the inspiring posts!
One way you can add SUBSTANTIAL profits to your business is by buying and selling certain property.
This has become easier in our current economy because houses that need substantial work CAN NOT get bank financing…I can now buy these houses for literally PENNIES on the dollar. I intentionally market to these types of homes. I BUY them, and sell them FAST.
I’m not talking about flipping in the sense that most people think of flipLping.
Buying,rehabbing, and then selling to a person that intends to LIVE in that home.
I do that occasionally, but the BULK of my business revolves around FINDING great deals BEFORE anyone else knows they are for sale, closing the sale quickly, then taking that property and LISTING IT so the HERD INVESTORS can FIGHT OVER IT.
The last 6 properties I’ve purchased have all sold within 2 WEEKS of being listed.
I INTENTIONALLY put that 2 week window on these properties to create a sense of URGENCY and COMPETITION!!! The best part is the CASH CHURN!!!
You can EASILY pull a MINIMUM of 30% to even 100% profit on each property in a 2 week period.
But it gets BETTER!!!
After some time you will have a nice 6 figure bank account. At that point you start KEEPING some of these properties, not so much for RENTALS (which is what they are)…But for EXCHANGE.
Back when I was building my business, I would take the deed into my bank on a house I paid $25,000 for ALL CASH…and EXCHANGE that deed for a $100,000 line of credit.
It doesn’t take long for those little dumps to add up to a HUGE amount of available CASH for you. Banks LOVE making these loans.
As you know…The MORE money you have available the more MONEY you can make in this business…LEVERAGING those little houses that I picked up for peanuts meant every $25,000 property was REALLY $100,000 in CASH…In essence, you are TURNING THE TABLES on the bank…Instead of being on that TREADMILL and paying the bank LONG TERM interest (where THEY have the upper hand) you’re paying SHORT TERM interest and making a LOT MORE than the bank is!!! And…you’re doing it with THEIR money!!!
Here’s how this works…Most banks today won’t make a mortgage on a home with a CESSPOOL in my state. Another deal killer is rotted sills, bad roofs, bad plumbing, ect.
banks won’t loan people money to BUY these homes…BUT they WILL do a home equity line of credit for YOU if the house has equity. And if you’re paying CASH for these properties you have 100% equity. As you know a cesspool is not a concern for a TENANT, as long as it functions, they could care less. Roofs are easily overlaid, plumbing easily repaired. So that little DUMP a bank wouldn’t make a mortgage on, becomes COLLATERAL for your new HELOC!!!
So…You purchased this little GEM for $25k, cleaned it up a little, got it rented…Then walk into your bank with the deed and THEY go out and see a newly painted, CLEAN, NEAT little rented house that appraised for $125k…OH…THEY ARE OUT THERE…I BUY THEM ALL THE TIME…In this economy these properties are abundant.
How many of THOSE do you need to make your dreams come true???
Obviously that RESOURCE gets you to the point we’re discussing here tonight.
Thanks for the information-dense lesson; I had to print it out so I could study and digest it little by little.
In this financial climate your bank will lend 100K on a HELOC, but not a secured credit line? On a house purchased for 25K? But that’s AFTER your spit 'n polish rehab, right? Now you’ve paid for an appraisal and it’s valued at 125K?
I am familiar with your finder’s fees–million dollar idea–and one that I used over and over when I was selling real estate. I can do that one in my sleep. I haven’t had property feelers out because I now have FIVE unrehabbed houses that I need to finish, one-by-one.
I’ve been working like a dog here (okay, I love it) to build up this furnished rental house business out of scratch in a place where people said it couldn’t be done. Now it’s done. By that, I mean I can leave for even two weeks and my small, efficient staff just continues to rent out places and pay the bills. It’s even more profitable when I’m gone since I’m not out spending money or rehabbing.
To follow your plan, which is great and doable, it looks like I need to get my real estate license in this state. I’ve got to have MLS access to determine property values. I’ve been unable to find a real estate person here who wants to feed me info., especially on cheap stuff. I think I could do a lot more if I had that fingertip MLS access. I can guesstimate property values, but they are all over…from a few thousand to multi-million, and within just a short distance.
I need to find out–are there “herd investors” here? Who are the investor buyers? Are there any flipper buyers left?
I am listening to rookieNYC too, on the “multiple streams of income” plan and I like it. Gotta have money to make money.
I am listening and I am listening. And I am thinking.
Im pumped for investing! Cant wait till I save a little!
I am listening to rookieNYC too, on the “multiple streams of income” plan and I like it. Gotta have money to make money
In all fairness at times I forget how important capital has been the last 2-3 years…It plays such a huge part in everything I do business wise that having the hassle of having to look for financing everytime I want to do a deal would be frustrating and quite possibly take the wind out of my sails.So many deals are done so fast that I think I would have lost them if it wasnt for having the capital ready…Fdjake and I cant emphasize how important having capital is…The old saying money makes money is so true and you dont realize it until you have it and you are in a business that you need it…There are many businesses that you dont need capital,but you collect it…Real Estate,lending,etc you need capital, and alot of it…
One of my close friends who taught me the private mortgage business said on many occassions that I was fortunate I didnt need a line of credit or bank to do deals…Using personal capital makes the deals so much more solid and I will give an example how…I have 2 particular clients that I had to refi them 2x because they could not sell or refi in time to meet the deadline for their loans terms…Had I been using borrowed money and not my own personal capital I may have been forced to make different decisions…Being that these were quality borrowers and they were upfront I refinanced them and they were extremely appreciative to put it mildly…They had to come up with prepaid interest/points/legal fees but they didnt lose their properties…Having capital gives you an immense amount of control in many different situations…Being the bank is imho the most important aspect of RE investing…To have to constantly look for capital for deals in this climate would kill %90 of the money I derived from my investments lately…
Multiple income streams should be the goal of any investor…A wise man once told me “the best money you can make is the money you do nothing for”…This is the same businessman who told me “never buy a property that you cant take your kids at midnight to collect the rent”
OK…Here’s a recent example of a property that would work PERFECT for this technique. Just for clarity, I sold this house to another investor. I no longer need the leverage this method provides but DID years ago when starting out.
This home was located on a 1/2 acre lot, 2 bedroom ranch, 1 bath, needed a roof, has a cesspool, interior needed clean up and paint.
Scenario #1…You buy this house for $25K from a DESPERATE SELLER. You decide to flip the property to a HOMEOWNER…The first thing a home inspector writes up is the CESSPOOL, then he hits the roof, then the sill which has rotted due to water damage from the roof leaking into a wall…Your BUYER gets DENIED a MORTGAGE on the home due to FHA INSPECTION GUIDELINES!! So…You’re looking at a new $EPTIC $Y$TEM, A tear off re-roof, fixing rotted sills, opening walls to get at those sills, that will guaranteed lead to plumbing and electric upgrades by building code. (if you’re doing a certain amount of repair based on percentage, some areas MAKE YOU upgrade everything) So this is a house you can EASILY get BURIED IN!!!
Scenario #2…You buy this home to RENT/EXCHANGE…You fix the roof for $2500 (overlay) which stops the water from entering the wall, which halts continued wood rot of the sill, you paint the interior ($500) and clean the place.
At that point you RENT IT…It is now CLEAN, has a NEW ROOF, and is generating INCOME…Your TOTAL outlay including closing costs MIGHT be $29K
Because you purchased this home in such terrible condition, and it was NEVER on the MLS, you STOLE IT!! You walk into your bank with the deed, they appraise a CLEAN, NEAT, RENTED HOME for FAIR market value which in this case would be $125K to $150K…At that point you either use it for a secured credit line or a HELOC…You can decide which is EASIER to get.
Either way you are EXCHANGING a LIMITED amount of YOUR CAPITAL for a LARGER amount of your BANKS.
You then use these funds for quickturn over flips that make you %30% or more on money you MIGHT be using for 30 to 60 days TOPS…Once you sell your flip properties you COMPLETELY pay off the line and MAYBE have made 2 or 3 monthly payments, which WITH INTEREST would be a FRACTION of what you would pay taking a entire loan.
If I can BORROW $100K of my banks money and REPAY them a total of $400 in interest on that money over a 1 or 2 month period, using a HOUSE I paid $30K for???
YOU DO THE MATH!!!
Also…Once that HELOC is paid down to ZERO there are NO MORE PAYMENTS unless I have the opportunity to make 40% on the BANKS MONEY AGAIN!!!
You need to run the numbers on these properties…Not ALL will work for this…What you need is a property that needs a LOT of work but can be spruced up for short money.
We all know these types homes. The roof has been leaking for years and if you plan on SELLING the home you’ll start spending BIG $$$ as you tear into each system. When someone’s BUYING that house with a MORTGAGE its going to get INSPECTED and things need to be repaired correctly or the house will not sell. BUT…if it’s a RENTAL a completely different criteria can be used.
Hey FDjake I came back to the forum! Remember when we fought over your ford option investment? How did that end up? (it must have been a great return). it’s good to be back!
Those options more than tripled in value. A 300%++ return.
I still have a large position in Ford which I intend to hold for YEARS.
Ford will be NET debt neutral a full YEAR ahead of expectations (Net debt neutral means they will have enough CASH on hand to pay down ALL their outstanding debt if they chose to do so by 2011) Ford just posted $1.7 BILLION in earnings for the last QUARTER!!
The next milestone for FORD will be the RETURN of the DIVIDEND!!!
Go back and RE-READ all my earlier posts about this investment. The FORD FAMILY has given ALAN MULALLY HUGE incentives to bring that dividend payment back. He will receive MILLIONS of shares of stock when this happens. This will also allow PENSION FUNDS, and other RESTRICTED MUTUAL FUNDS to POUR MONEY into this stock. A lot of pensions & funds are NOT allowed to buy stock that does NOT pay a dividend.
This stock is like owning McDONALDS back when everyone thought they were FINISHED and the stock was $10/share…I remember reading articles written by obvious MORONS that stated AMERICANS were more HEALTH CONSCIENCE now a days and McDonalds business model was OUTDATED!!! :banghead…And NOW McDonalds is $75/share!!
We all know how that BRILLIANT DEDUCTION turned out. Americans are the FATTEST PEOPLE ON EARTH…the RECESSION was the BIGGEST BOOM to McDonalds they could have ever had as Amercians ate .99 cent HAPPY MEALS to weahter the economic down turn.
Let’s look back at exactly HOW FAR things have come for FORD.
FORD…Once DEAD and BURIED…Is NOW the DARLING of the American car buying public because they took NO BAILOUT MONEY!!
TOYOTA on the other hand…are the RECALL Kings of the AUTO Industry!!!
Ford…No more HEALTH CARE PAYMENTS to retirees!! Thanks to VERBA!
Ford…a LANDMARK new contract that allows new HIRES to start at $14/hour (like TOYOTA) Now let’s THINK about this FOLKS…Gee, I WONDER what happens to PROFITS when you start HIRING additional workers to meet new demand (Ford just announced they are hiring 2500 new workers) and those new workers START at $14/hour instead of $36??? Could that MAKE the company MORE MONEY??? Ah…Y E A!!
And BEST OF ALL???
As this recession lingers on and people KEEP their old junkers…The day when they MUST buy a new car gets CLOSER and CLOSER as FORD adds CA$H to it’s war chest, refines it’s model lineup, cuts costs, and trims expenses. At the present time the AGE of the U.S. auto fleet hasn;t been this old since WORLD WAR II…You remember that right??? WHEN THEY STOPPED MAKING NEW CARS!!!
That DIVIDEND WILL BE back.
The New contract will make FORD SUPER COMPETITIVE.
Ford is moving to a 12 platform system for PLANET EARTH (that means the entire company will produce only 12 platforms WORLDWIDE instead of 49 in 2003, and every car and CUV will be built off those 12 platforms cutting costs by BILLIONS!!
And all this will take place as the PUBLIC endures the GREAT RECESSION which will lead (in my opinion) to RECORD PENT UP DEMAND for new cars as the entire U.S. fleet hits the replacement cycle at about the same time.
At that point all the WALL STREET EXPERTS will be RECOMMENDING this stock at $40++. :banghead Watch…This movie gets RERUN every 10 to 15 years!!!
HOLD THIS STOCK!!!
What you’ve seen so far is a JOKE compared to what is coming.