Smoke and Mirrors, Math and Magic - Posted by David Butler America’s Note Network
Posted by David Butler America’s Note Network on May 20, 2000 at 22:51:05:
In a word - YES… it is possible, and sometimes it is smoke and mirrors! I graduated out of college with a business degree in 1976. On my way home, I picked up a book, WINNING THROUGH INTIMIDATION, to read on the plane. For some, the message is to be obnoxious and overbearing in negotiating deals. The real premise of the book however, was “Do Your Homework”. Probably wouldn’t have sold as well with that title. The context was real estate oriented, so all of a sudden, that made me think of real estate as a career.
On the plane, I also wound up reading an ad for Mark O’Haroldsen’s HOW TO WAKE UP THE FINANCIAL GENIUS INSIDE YOU. So, by the time I got home six hours later, I had decided to become a real estate investor.
A short time later, I became a real estate agent, while at the same time ordering all kinds of different books on the subject. In early 1977, I got my first listing. Then a lady called for a place to rent. I signed the lease for my listing… now I had to find a way to buy it.
By borrowing $10,000 on a 10% first mortgage to my grandmother, and $3,500 more from a brother-in-law, I had a 50% ownership in the property with no-money down, paying $13,500 cash for the home.
Eight months later, I my brother-in-law wanted out, so I had another friend give me $5,000 for 50%. I paid my brother-in-law back his $3,500… and now I still had my 50% share, plus $1,500. About 18 months later, my new partner and I sold the home for $26,000 with $6,000 down, and a Wrap mortgage for the balance, at 12%, payable over eight years.
Over the next few years, I did eight more of those deals. Some where pretty good size, like the 13 unit and 1.5 acre property I bought with a group of doctors, which had paid handsomely over these past 22 years. In between, I have done a few “flips” off of foreclosures, some subdivision land flips, and a lot of note investing. Even now, a lot of my deals have partners in them. More firepower, less risk, and really keeps my cash at a minimum level invested.
There are over 150 ways to do nothing down deals. The key to how risky they are, depends on your circumstances, and your effort. Many beginners start without a clear plan, and get way ahead of themselves in terms of what they have learned.
These message boards are loaded with a lot of good articles and free information that bears a great deal of study. Their bookstore on this site is loaded with some pretty good courses too. The two site hosts are active investors themselves, and practice what they preach.
Franklin Roosevelt said “The only thing we have to fear, is fear itself”. In real estate investing, that is generally true, but I would add that “The only thing we have to fear, is ourselves”… study hard and get well grounded on the business. That’s the only way to follow the best advice ever given - INVEST IN WHAT YOU KNOW.
Fortunately, right here on this site, you can become an expert before risking any deal… and a pro after getting a few deals under your belt. But you have to put in the time, and learn to walk before you run. For some, it may come faster than for others, but build the foundation, losing your fear in the process. Knowledge is power, and it should be easy to pull the trigger on any deal, once you have done your homework.
If you come on to these boards, and outline a deal, and then ask for other people to tell you whether or not it is a good deal, I would have to say that you have not learned yet, nor have you done your own homework. That’s the clearest sign that you are ready. When you know for yourself that it is a good deal, and don’t need any one else to tell you. That’s usually the safest bet too, in my experience!
Hope this helps, and best wishes for your success.
David P. Butler Vice President, Broker Relations