Re: Carleton Sheets Course - Posted by Mike
Posted by Mike on November 22, 2000 at 22:01:10:
The CS course focuses primarily purchasing single family houses with none of your own money down, for the purpose of renting them to generate a positive cash flow. He does touch upon other types of deals such as apartments and mobiles. The course talks about: finding suitable properties, inspecting the property, making an offer, structuring the financing, creative ways of getting the down payment, and managing the property.
Sometimes you can have a true “nothing down” deal. This usually involves finding a house for sale with a very motivated seller who has a lot of equity in the property and will carry financing, or a property that has an assumable mortgage. More frequently, nothing down means not using your own money. You can use a line of credit from your bank, a credit card if the limit is high enough, or something of value such as a boat or a collection of bonds.
I bought a 6 unit building using techniques and strategies from the CS course. First of all I determined projected cash flow and found that there would be enough of a cash flow, after operating expenses to support a certain level of debt. This allowed me to determine how much I could pay for the building and be confident that I could afford to make payments. The asking price was $378,000. I offered $294,870 (always use an odd number). We settled at $308,560.
I used $25,000 from a line of credit, found a partner who put up a like amount, and had the seller carry $28,550 in paper. Our payments are $1502 on the first mortgage, $605 on the second (amortized over 5 years) and annual operating expenses projected at $850 (taxes, city utilities -sewer/water/garage, insurance, maintenance) for a total of $2957. Monthly income is 6 X $700 = $4200 for a positive cash flow of $1200+ per month. After five years, the second will be paid off and will add that $605 to our cash flow. At the end of 5 years, the first will have $201,000 owing and we will have a positive cash flow of $1850 per month. Hopefully rents will go up and the value of the property will increase.
As a post-script, my partner bought a pub in a different town and I have since bought him out…using strategies from the CS course to structure the buy out to my advantage.
Hope this helps, and good luck!