Re: Good Idea…improved upon - Posted by del-ohio
Posted by del-ohio on August 20, 2003 at 18:57:44:
Brent has good advice.
My viewpoint, to expand upon what he is saying.
Learn how to buy with little or none of your own money, keep enough so that WHEN something goes wrong YOU don?t become the “motivated seller”.
Learn how to buy properties at a discount, always negotiate and always buy properties that have positive cash flow, after, figuring all expenses including vacancies, repairs and maintenance.
Something for you to think about. …
If you have the ability to finance two properties now with 20% down. If instead, you figured out how to buy with 10% down, you could buy four properties with the same amount of money. If you learn to finance with, five percent down, you can buy eight properties.
If you learn how to buy and finance with the owner carrying the down payment, your growth is pretty much limited to what you can handle.
Another great strategy, when the owner is not willing to carry the down payment on a good deal. We finance through our bank at 80% of appraised value or selling price whichever is less. Then we use equity in another property for the down payment.
Again with this scenario it does not take any of your cash. It takes knowledge as Brent was suggesting.
To give you an example of how this works. This is what we did. In Jan we started to do creative RE almost full time.
We purchased our first property a five-unit apartment/office building for 55,000, did about 15,000 in renovations and increased all the rents. The building then appraised for 152,000. We used the equity in this building as a down payment in the next property.
We kept growing from there. Buying other good deals, getting the owners to carry down payments, if that did not work we used equity from previous other properties for the down payments. This is what we have done now on all twelve properties we have purchased so far. We have none of our cash invested in the properties.
We have cash if we need it but its a lot more fun not using it to buy properties. I prefer to use it for education, vacation or the occasional toy.
Depending on the area you are in you may not be able to find a deal with these kinds of numbers, however this is the concept that can make you wealthy with very little cash.
Personally, I have had more fun the last seven month than I have had in a LONG time and I have made more money in this same period that in did in the previous three years combined, and I wasn?t doing to shabby before.
As important as education is in the real estate game. The most important thing is to start, DO SOMETHING, don?t wait forever to get it right, the most important thing is to START and LEARN. And get it right as you go.
If you keep your full time job and do nothing more than put 20% down, and buy one $100,000 property per year, in a good neighborhood with an appreciation of 5% annually. According to Diane Kennedy CPA (Ms. Tax Loopholes) this is what your assetts will be for each of the next ten years.
Hey, not too shabby, in 20 years you might be able to live off your real estate income.
Something to think about.