Re: Does this really work? - Posted by HR
Posted by HR on February 12, 2001 at 06:39:25:
This stuff really can work… but differently than you might think. If you have seen some late nite infomercials, put aside the notions of easy money, quick money, effortless money… but that’s the path to no money. If you will learn some simple (not rocket science) techniques and put in diligent effort, yes you can make money. Great money, in fact.
I’ll give you a simple example.
The whole key to this, David, is that there really are people out there that own houses that don’t want them. Now, I know the first time I heard that, I didn’t believe it. They don’t want their house, probably the most expensive asset they own? Yes, it’s true, and for many reasons: they inherited it and it needs work or is in a marginal part of town; they are amateur landlords who never got sufficient training to landlord well, so they became burnt out; the bank owns it (and banks hate owning property); etc. I have found that, usually, a “don’t wanter” has a property needing work in the less than best part of town.
I recently concluded a deal with a guy like this. He had bought a property at a foreclosure auction years ago in a tough part of town. He owned it with 3 other folks. They let it get run down and vacant. I saw his fsbo sign and called. They were impossible to get ahold of (a good sign; if they are tough for me, they are tough for everyone else too; that’s what I want; little competition. I also used bait I knew he’d eventually chomp on: “I got cash and I’m looking to close on something quick.” To a guy respondingly slowly to his answering machine, this ad will get a better response than the usual, “hi I’m calling about your house on…” Learn to put psychological tricks to your advantage…). I kept calling every couple weeks, though, and finally got the lead seller on the phone.
We met in person and hemmed, hawed, and haggled our way to a deal: $12,000 price. I’d give him $3000 down December 2000 at act of sale, and then give him another $2000 June 1, 2001. Then, every June 1St from 2002-2005 I owe them $1750. This is a no-interest loan, one annual payment.
I’ve put $18,000 into the house fixing it up. It will be rented in March for $850/month on the governments section 8 program. The payments and security deposit will pay the next $2000 installment. I’m going to find someone that wants a 12-15% return on investment and give them a second on the property, paid off over the next four years. This house will still have a positive cash flow, and it will be paid off free and clear in four years. It is currently worth $60,000. (I could sell it, but I have other properties I rehab and sell; this one I want as a rental keeper).
Could everyone do this? Well, technically, everyone COULD. Would they, though? No. I’ve developed my re biz to do significant rehabs, and I will work in lower income areas others won’t. In my experience, that gives me deals others pass on. I got the 3k from profit from another re deal. I got the 18k from my home equity line of credit. I will find the private investor thru my local real estate investing club. Everyone could certainly do this; you just have to do the things that put you in a position to do all this.
If you do it, is it profitable? Unbelievably. Is it easy? No. It takes a lot of work. Is it rocket science? Hardly. And like anything else, once you have it down, it really becomes easy. It’s getting to a certain level of competency that is the challenge.
Good luck. Check the archives and posts below on how to get started, recommended reading, etc. It’s all there in the archives!