by David Lindahl
There are only three reasons to be in Real Estate. If any one tells you any differently, then they don’t understand real estate investing.
The three reasons to be in real estate are Cash Now, Cash Monthly and Cash Later. Let’s take a closer look at each one of them.
Cash Now. Let’s face it, we need money to live and pay the bills. With out this cash we would have to go back and work for “the man”. If you’re not a full time investor, this is a reason why a lot of people are afraid to quit their job and work for themselves.
Cash now is the money that you get from “Flipping” properties. Whether it be from Wholesaling, Rehabbing, Subject To, Lease Option or Pre-Foreclosures we need the cash from each of these investing models to put food on our tables and clothes on ours (and our children’s) backs.
Cash Now is good. Having rehabbed over 450 properties in just a seven year period, (I use each of the above methods to acquire my properties) I’m used to those big checks coming in. But then I realized that if I didn’t continue to get Cash Now through flipping properties, then I would not have any cash coming in at all. Which meant I was not as free as I thought I was.
So I changed my strategy. While those big rehab checks were coming in, I put some of money in my account so that I could live, and then I started to put the rest of the money in Apartment Houses.
Owning smaller Apartment Houses is virtually the same as investing in single family houses. If you’re doing your marketing, you run across Apartment Houses all the time. If you are like most investors, you probably just ignore them and continue to search for the next single family deal.
Apartment houses will give you greater Cash Monthly. In just a short time, you can build yourself a substantial passive monthly income just from your apartment houses. That’s how Robert Kyosaki does it in Rich Dad/Poor Dad.
Cash monthly will give you freedom. Freedoms to do what ever you want when you want. I’m not telling you to stop buying and flipping single family houses, that’s Cash Now. I’m saying to get Cash Monthly (apartment houses), use some of your Cash Now (single family flips) and buy yourself some freedom!
Pretty soon you will be building an empire. You’ll have enough Cash Monthly to be able to take a month off in the summer or what ever else your freedom desires! If you were only flipping single family houses and you took a month off in the summer, you wouldn’t have any income coming in.
Do You See How Cash Monthly Will Give You Freedom?
You can get some Cash Monthly from owning single family houses long term but not as much and not as fast as owning smaller apartment houses. And it’s a lot riskier to have all of your money in single family houses.
What happens if you lose your tenant in your single family house? You loose all of your income. You’re going to have to dip into your own savings to pay the mortgage until you get a new tenant. That hurts!
If you loose a tenant in a three family house, you’ve only lost one third of your income. The other two floors will cover your mortgage until you get another tenant. That’s just one of many reasons that owning small apartment houses is smarter that owning single family houses, but that’s another article all together.
Now that you have Cash Now and Cash Monthly, Cash Later takes care of itself. It comes when you sell, exchange or refinance those apartment houses somewhere in the future.
You see, with apartment houses you have an appreciating asset. No only is it appreciating every month but your tenants are paying off your mortgage. So between the appreciation and the mortgage pay down, your equity just gets bigger and bigger!
You can sell your property and get a boat load of cash. If it’s creating a lot of Cash Monthly, you may want to keep those checks coming in. If so then you will want refinance to get you cash out.
Not 100% of your cash, which will only get you in trouble. You should take out about 75% of your cash leaving 25% equity in the building, that way if there is a down turn in the market, your protected. Not only that, at 75%, you should still have a decent positive cash flow. Did you know that you do not pay tax on any of the money that you take out during a refinance?
Now take that money and go buy some more apartment houses and get some more Cash Monthly! In doing so, these apartment houses will start appreciating and the tenants will begin to pay down your mortgage for you. You’ve just increased your net worth because you have increasing equity in one or two more buildings instead of the building that you started with.
Can you see how your empire is being created? Can you see how it can be created in a short time? Holding single family houses will make you money. Holding apartment houses will make filthy stinking rich! Which do you prefer?
by Ron LeGrand
Everyone has a comfort level in which they live and work. That level is determined by several factors and can be changed with practice and time. We have a choice of what we do each day, how we spend our time and how much money we make.
This may come as a surprise to some people who are convinced their income is someone else’s choice, not theirs. Nothing could be further from the truth. Your income is the result of one thing and one thing only….
What You Choose To Do With Your Time
“But Ron, you don’t understand. I have a job. I’m not in control of my salary, my boss is. He tells me when to come to work and how much I can make.” I guess you’re right. You’re not in control and maybe you never will be.
At least, not without a major attitude change. Listen, if you’re reading this article it means you know the opportunities available to you as a real estate entrepreneur. So if you’re still employed, you’ve chosen to do so. No one forced you. It’s your decision and therefore you have chosen to exchange dollars for time which is a sure-fire recipe for being broke.
Does this mean I think everyone should immediately quit their jobs and start doing real estate? Absolutely not. This business is not for everyone. Being in any business for yourself is also not for everyone. However, if you’re reading this, my guess is you’re not in that group. You want more out of life than a dull job and you want to see some real money for a change. Am I right?
Maybe you aren’t employed anymore and you’re feeling pretty smug because you’re now on your own flying free. No job! No boss! No traffic jams! No one giving you orders! Well, congratulations! But before you get too full of yourself maybe we’d better look a little closer. You see, there is a down side. You have no job which means no paycheck and no boss making decisions for you. You’re on your own to decide what you do every day and worse.
No One To Blame When You Screw Up
It’s you against the world. You’re on fire. You haven’t been this excited in a long time. No place to report in the morning. You can do what you darn well please. You see, my friend, that’s what scares me. What will you do with all this new-found freedom? How long will it be before you fill your days up with activities that accomplish nothing except filling your days?
If you’re not careful your poor time management habits and low expectations will lead you right back to doing no more than just making a living. You’ll replace your old job with a new one and simply change bosses. A new dufus will replace the old one.
Have I hurt your feelings? Tough! Get over it. Remember, I’m on your side. We’re in this together and it’s my job to help make you better than all the employed or unemployed drones just drifting out there waiting to die. Just because you don’t have a job anymore doesn’t mean you’re going to be rich. Rich people don’t waste all day thinking like a job slave and spend their time killing time. The rich focus on what produces the most revenue with the least work.
I’m No Different Than You
If it will make you feel any better, I’m no different than you. I wasted a lot of years killing time. That’s why I’m so adamant that you don’t do the same. So, let’s talk about getting off to a good start. If you’re way past a start, let’s discuss amending your ways so you can begin making more money.
Incidentally, that has nothing to do with having more time. It involves using that time the best way you can. Whether you’re part time or full time you, have a choice of the deals you participate in. You can either make a few thousand dollars because you feel comfortable with the easy stuff, or you can make a hundred times more on the same deal using no more money or extra time to do so. Again, you get to choose. No one else. Let me explain.
Get Out of Your Comfort Zone!
For years I dealt with low-priced junkers, usually in low income areas. I’d either wholesale for $2,000 to $6,000 or retail for $15,000 to $20,000. It was all I knew, my comfort zone. The thought of buying anything worth over $60,000 petrified me. I wouldn’t even let myself think about it. I was happy making two or three times over what I used to make from my job so why bother doing anything better and upset the apple cart? Besides, I had bought and sold hundreds of houses. I had to be smarter than anyone else I knew.
The more money I made the more I allowed myself to think bigger. Gradually I learned there was more to the business than cheap junkers and small dollars. I began to learn the “pretty house” business. My threshold kept rising higher and higher as I learned that it’s just as easy to make more as it is to make less.
Now, you may be thinking it was easier to make more because I had more to work with. That’s the same stupid thinking which held me back all those years. Here’s some hot news right off the wire:
If You Can’t Make Money Without Money,
You Can’t Make Money With Money!
Recently I decided to work some deals with students in all parts of the country. When I see them at events I make them the offer to call me to discuss those larger house deals they’re presently throwing away, because the numbers scare them. I tell them if the deal was doable, I might agree to be their partner.
Consequently, some called me with deals. At this time, I have about ten or fifteen deals in various stages of production. Let me use a couple of deals to prove my point. In many cases, including yours my friend, it’s not the lack of money holding you back, it’s the lack of knowledge on how to structure the deals so you don’t need money!
Real Life Deals
In Atlanta we found a pre-foreclosure worth $300,000 in a lovely area. The loan was $196,000 with $27,000 in arrears. The second was $28,000 and delinquent. The first had filed foreclosure and stopped because the owner told them he had a plan to bring them current.
During this time, the owner called my student and finally said he’d deed the house to him if he wished. The student let the deal pass because the numbers were scary and the exit strategy wasn’t clear.
Then I got involved. We now own the house without a dime out of pocket to the first mortgage and we haven’t made a payment yet. The second agreed to discount to $4,000 from $28,000 so the total debt is about $200,000. The house sold for $265,000 and will close in two weeks. We let it go cheap instead of spending $15,000 on repairs. We also feel by the time it closes the first will get discounted $25,000 to $50,000.
The net profit will be between $65,000 and $115,000. The total cash outlay was $4,000 because we chose to pay off the second while they were willing to discount $24,000 and before they learned the house was sold. That was a good example of leveraging our brains instead of our wallets. Incidentally, how many houses will you wholesale to make $65,000 to $115,000? We only did one.
It costs nothing to aim high. But wait! That’s only one little deal. I personally negotiated another student deal in Orlando. The appraisal the seller gave us was one year old at $910,000. He agreed to sell for what he owes at $513,000. The house is in a gated community on 2.8 acres with a screened in pool and tennis court. It has 7,500 square feet of beautiful living space and looks even nicer since the seller is leaving $25,000 worth of furniture.
We’re raising the money to buy from a private lender who learned the business from me several years ago. This same lender is available to anyone in his area. Nothing special happened because I was involved. Nothing, except the deal is now done instead of lost.
We did not need a dime of our own money or credit to do this deal. It just took guts and a clear vision of the exit strategy. More than anything, it took expanding out of our comfort zone.
What’s the next deal? I don’t know but I bet it’s better than the last house you flipped. I’m sure it’s better than your last year’s W-2 showed. But don’t worry. I can’t expect something like this to come your way, can I? After all, there’s too much competition where you live and it probably won’t work there anyway. Surely there aren’t any sellers with more expensive houses that would even consider selling for less than retail price.
Yes, I’m being sarcastic. At the same time, I hope I’m making a point you soon won’t forget: Do what everyone else does and you can expect to get what they get, Do what they fear, and they’ll wish they had what you’ve got.
I just made that up, looks like a good overhead to me. Seriously, don’t you think it’s time to get your head out of the sand and begin to think much bigger? It’s free. Figure out what scares you and fix it. If it’s lack of money, it can and will be fixed with more knowledge.
The More You Learn, The More You Earn
Here’s a brief re-cap of a few more deals presently in the works with students. A $300,000 house in lovely shape with a $145,000 mortgage that’s $17,000 behind. The seller has deeded it to us. We won’t put up a dime. You figure the profit.
A $191,000 home requiring $10,000 in repairs. We paid $112,000 cash, borrowed from a private lender.
A $500,000 house on the ocean. Seller agreed to finance for $435,000 at 6% with nothing down! We’re trying to raise the money for the down payment (chuckle, chuckle)!
A house worth $180,000 with a balance of $135,000 that’s current. Seller is deeding and will wait until we sell it for her. She’ll net $10,000 which was previously agreed upon.
I Think You Get the Picture
Speaking of millionaires, how many of these kinds of deals do you need per year to make a million bucks? Not many. Good news! They’re more plentiful and easier to do than junkers. All you need to do is expand your comfort zone just a little and increase your ability to construct and present offers. You can make more or continue to make less. It’s your choice.
by Richard Roop
Do you dream of creating substantial income and wealth through real estate investing? Many people have. If others have done it, you can too. What does it take to turn your dreams into reality? Books? Tapes? Seminars? No. Coaching, consulting or mentoring? No. If it just took studying how to make money in real estate, then all us “real estate enthusiasts” would be rich. You can learn all the best approaches. You can own all the proven tools and systems. You can discover the best strategies and tactics. But that’s not enough, is it?
I’m a big believer in not reinventing the wheel. There’s a lot of great information readily available on how to start, build and grow a profitable real estate investment business. And what I’m talking about is the part-time or full-time activity of buying properties at a discount… and then selling them for a profit. Let’s clearly define what I’m taking about since there are many viable approaches to real estate investing. I’m speaking about houses… making big money buying single family houses.
You sell them right away or down the road. You sell them “as is” or newly fixed up. You close on your contract or flip the deal to another investor. You create reliable monthly income and a fat back-end check… or you collect most of your profit immediately after buying the property. That can be through a quick flip transaction, a simultaneous closing, by over borrowing on “no bank qualifying” loans… or by quickly getting the house occupied with a down payment or sizable purchase deposit. Yes, you want numerous strategies to get in and get out. Studying other successful investors is a great strategy to expand your skill set for negotiating with buyers, sellers and those who might help fund your deals.
So I love building a library of books, tapes and newsletters. You might say one of my hobbies is attending seminars, boot camps and conventions. My favorite topics are creative real estate investing, direct response marketing… and personal growth and success. In fact, I’ve earned an MBA in all three areas. But I’ve never been to college. In my world, MBA stands for Mentors, Books and Audiocassettes. You can become an expert on any topic if you study it consistently for 5 years. However, having expertise on wealth attraction or profit making subjects only plays a minor role in creating actual bottom line results. You know this. You know “would be” entrepreneurs or investors who have all the knowledge and tools they need to succeed. But struggle. There are several key factors to being successful. But they all come down to the ability to take decisive action.
Fear and lack of confidence can be paralyzing. Greed or desperation can cause you to make poor decisions. Anger or envy will never help you achieve your goals as effectively as positive self-motivation and determination. When will you begin focusing on those things that are most important to you? Have you decided to do whatever it takes to make your dreams come true? Don’t beat yourself up pursuing fantasies of financial prosperity and independence. If you are truly committed, you’re taking action. Are you acting on what you already know? You cannot fail if you take action and make adjustments along the way. You can only fail by giving up. Do you know what you want? Are you dedicated to achieving it? Have you considered why it’s important to you? When will you make it happen? Do what you need now to create the results you want. Otherwise, drop it and pick something you’ll be totally congruent about.
Goals should excite and motivate you. They provide direction and focus. There’s nothing like the pursuing a worthwhile dream or idea. Success is a journey, not a destination. Are you on track? Or are you still getting all your ducks in a row? If you want to make hundreds of thousands of dollars, even millionsbuying and selling houses, now is the time to crank things up a few notches to make it happen. You’re ready, aren’t you? I’m assuming you’re like many other aspiring real estate entrepreneurs. That means you probably know enough already to begin a new chapter in your life. Clarify your goals if you need to. Set some deadlines. But creating results requires action. Do it now. If not now, when? Yes, you need more information. You want to acquire more knowledge. That will always be the case. You want to always be learning since you’ll never know it all. But realize the best education comes from feedback and experience. Without action, you’ll get little feedback or experience.
Don’t wait for everything to be perfect or ideal. Dead people don’t buy houses. Buying and selling houses is one of the best ways to achieve financial goals. My belief is that you attract money by providing value in the marketplace. It’s not luck and it’s not speculation. It’s providing real solutions and opportunities to home buyers, home sellers and private investors. There’s no secret to how you can do that. Much has published on it.
Sometimes it’s best to over-deliver, creating a vacuum which sucks rewards to you with seemingly little effort. Put out good stuff. You cannot not get it back. That’s my contention. For a superior advantage, treat your real estate investing like a business. You want a monthly plan with milestones along the way. You work it each week. You can create all the personal income you need from buying and selling houses to meet your monthly requirements. You can also build substantial wealth through real estate by not selling everything you get your hands on. Sell just enough to live your preferred lifestyle… a frugal one at that… for now. Keep building your portfolio of houses. Buy three and then sell one or two if needed for cash flow needs. Your equity in real estate can consistently grow faster than any other savings or investment plan. You can build a solid financial foundation through new acquisitions, principle reduction and appreciation.
The values of a partial list of houses we maintain have grown $404,000 and $584,000 during each of the last two years I checked. That’s almost a million dollars in 24 months without regard to the cash or equity I created from new purchases, or the equity built through tenant-buyers paying down my loan balances.
Do this. Creatively buy several houses each year with little or no money down, using other people’s money… or using other people’s existing mortgages. The resulting cash and equity you capture can surpass what most people would consider a nice annual income from a job or career. Double or triple your purchases each year and you’re really on your way. As a business and marketing consultant to real estate entrepreneurs, I have found the average net profit per deal to be around $27,200. According to the most recent census data, U.S. workers who make over $250,000 a year are in the top 5% of all annual income earners. Doctors tend to be the highest paid professions reported with an average of $110,000 annually. You can enter the top 5% bracket from buying and selling just 9 or 10 houses a year. Or earn as much as a doctor with just 3 or 4 deals a year.
I’m convinced anyone can buy one house per quarter while keeping with their current full time occupation as long as they;
1) have the desire,
2) get properly trained,
3) take action, and…
4) understand there is no failure, only feedback.
Consider your financial aspirations. Take an inventory of your values… those things that are most important to you. Write down some SMART goals. You know they are SMART if they are:
A-chievable (and written A-s If Now)
T-imed (and written as T-oward what you want)
You can bet that 19 of the 20 who read up to this point will not take the next step. And you have all you need now to take this important step. Move closer to being in the top 5% of earners by “acting as if” you were already there. Or take action now to your maintain your already high ranking. Generating profits is the ultimate measure of business and investing success. It’s a good thing. Not the only thing, but a good thing. Take a few moments now. Decide what you adamantly want for you and those you care about, now and in the future. Go at it with a passionate fervor that will make others take notice… and perhaps inspire great things from them as well.