Posted by Jackie in Dallas on May 20, 1999 at 11:12:33:
Thanks for the post JP.
For all you new folks that are trying to figure out “is this a deal?”
Just read the post above. If it doesn’t fit into one of the categories, then it’s not a deal - it’s that simple.
Make Your Profit Going IN to the Deal - Posted by J.P. Vaughan
Posted by J.P. Vaughan on May 20, 1999 at 10:35:44:
This is a reprint of part of Terry Vaughan’s article “The Winner’s Edge.” I hope you find it helpful.
Make your profit going into the deal, or don’t do the deal!
When you make your profit going into the deal, you are playing the game when the odds are in your favor to win.
It’s possible to structure many real estate transactions so a profit is assured before you enter the transaction. Profit from any real estate investment should take one of these three forms, or a combination of them:
Cash–at the completion of the deal.
Positive Cash Flow–as a result of the transaction.
Equity–in the piece of property.
Cash at the completion of the deal is the result of any “buy low, sell high” strategy. Any time you can buy a property for less than its current market value, and re-sell it for more than you paid for it, you will make money. Investors who want to make quick profits, use this approach.
Positive cash flow occurs whenever the mortgage payment and all expenses on a property are less than the income generated by the property. Investors who would rather invest in real estate for the long term use this approach. They prefer to earn a monthly income from their properties.
Equity can occur in either of two ways. First, at the time of purchase, whenever the purchase price is lower than the true market value of the house, there is existing equity in the property. Second, when the value of a property can be greatly increased by relatively minor or inexpensive fix-up or repair, you are creating equity.
Make your profit going IN to the deal, or don’t do the deal!
Instant inflation - Posted by John Behle
Posted by John Behle on May 20, 1999 at 13:50:25:
I don’t consider anything a real investment if I don’t make profit going in as Terry described. I started with the “buy everything you can and hold on for dear life” philosophy. Inflation may make you a millionaire - if you survive.
As I learned more, I realized I didn’t have to buy mediocre deals. Then as a matter of principle I decided I would buy marginal or mediocre deals.
The key is and always has been in finding the deals. Learn and focus on that area. If you even have to ask the question whether a deal is good or not - or find yourself trying to “rationalize” a deal - that can be a good sign to back off. Look for the great deals. They are there. I’ve always liked the statement “Once in a lifetime deals come around about once a week”.
Marginal deals eat up your time and profits if even a little thing goes wrong. A second principle to look at is to combine your “job” with your “investments”. You can get paid to invest. Too many investors have just created another job for themselves. Granted it may be a better job, but what if something happens. Does your income continue? Does each step you take secure your financial future better? Does every deal provide you a residual?