It is easy to become a millionaire in real estate. Thisis something I tell many people. I often get a confused look from them. You don't need to know everything about real estate toinvest. It is best to start with a simplebuy-and-hold strategy, purchasing any type of property that you can afford with
the least amount of money. The way youpurchase a property with the least amount of money depends on your financial
situation, and which types of mortgages are available to you. It's difficult for me to give you the best advice asguidelines for mortgages and government intervention change daily. I can show you how I managed it for years using the"all-money-down" technique that I mentioned earlier in the book. However, I will give you a brief refresher course.
You may need to pay 20 percent of the purchase price ifyou buy a $100,000 house using conventional methods. This will add on top of
closing costs which will be approximately $3000. This example shows thatyou would need $23,000 to purchase $100,000 worth of investment property. You could buy a $100,000 property using the all-money downmethod. This would include putting $100,000 down and closing costs of $3000. You now have $103,000 down and can invest $5000 more toimprove the property. Now you have$108,000 in total. After you put theproperty up for rental, you find a tenant. Your empty investment property now
makes money and is profitable. You nowwant to refinance your cash-out loan by going to the bank. The property is appraised at $114,000. This is because youhave fixed it up and it's a money-making enterprise. A bank will lend you an 81% mortgage to finance theappraisal of $114,000, giving you a mortgage amount of $91,200. Original deposit was $103,000. You were then granted amortgage for $91,200. Your out-of-pocket expenses are now $11,800.
You can save $11,200 by using the all-money down methodas opposed to conventional methods of buying property. You will have a highermortgage payment and less cash flow from the property. However, you also have
$11,200 to purchase the next property.
Sometimes, the homes that you purchase will cost you$10,000. Other times, you'll make a profit. Sometimes you might beable to get paid to purchase a house. This has happened to me a few times. To build a portfolio of properties worth millions ofdollars, the goal was to keep buying more. Although you will make a profit, most of the cash flow isgoing back to fix up the properties and deal with any vacancies that may arise
in real estate. You can use the $10,000you make from your buildings' cash flow to purchase additional properties or
expand your portfolio.
I've repeatedly said that cash flow is not something youwill find of great value. While the cash flow can help you pay for the necessities andmake you money for future deals in the long-term, it will not be enough to
cover your expenses. In the end, you will have to work hard for very little. When you have ridden the cycle from bottom-to-top andcreated a gap between the value of your portfolio and the amount you owe on the
mortgages for the building, the real surprise is when you realize how much you
are actually making. As you build equityin your buildings, your net worth will gradually increase.
Let's say, for example, that you buy one property peryear for five years at $100,000 each. The property's value has increased slightly over the years,while the mortgage payments have decreased. Your net worth is the difference. It can be exciting to begin to see these changes throughoutyour investment career, especially when there is a rising market.
You should expect to be able to survive on the income youearn from your job, while the rental property business's profits are used to
fund its operations. There will be a time when your career and real estateinvestments become conflicted. It can bedifficult to be in two places at the same time, and eventually it will catch up
to you. This conflict was easy for mebecause I wanted to do real estate. But if you love what you do and want to
keep it going through your entire life, you will have to make tough decisions. While you could continue your day job, someone will have tomanage your portfolio.
It is possible to build a seven-figure net wealth inequity by investing only in real estate. Join real estate investment groups and read as many booksabout the subject as possible. You'll makefriends with people who are in your industry, such as those in the mortgage
industry, once you start making investments. As a way to expand your industry knowledge, I recommend youget involved with as many people as you can.
My friend, who is intelligent, took this advice andstarted moving quickly. He bought two properties in his first year. But by thesecond year, he was doing $300,000.000 flips and purchasing multi-unit
investment properties with a partner he had. First, I don't like the size of his deals and secondly, Ifelt he was growing too quickly. AlthoughI would not have any problem with his rapid growth if he didn’t have a job I
advised him to slow down. He had to evicttwo people in the second half 2009, as his $300,000.00 flip wasn't selling. His partnership was already experiencing tension due to thefact that he was carrying the mortgage and his $300,000. flip. It won't be easy. As your portfolio grows, so do yourproblems. The workload.
One thing I can add about the problems in real estate isthat they come in waves. Even though I owned many homes, there were six months when Ididn't have to change the doorknob. Then all of a sudden it was chaos. Two vacant apartments, an eviction and a total of threevacancies would be my responsibilities. Itpours in real estate. At least, that's how it turned out for me. Two separate times during summertime, one year and the nextyear, I was overwhelmed with all sorts of problems. You can't leave a vacant property sitting around and waitingbecause it will cost you money every day that it isn't rented. It is of paramount importance to get it renovated andre-rented.
It doesn't matter how bad it sounds, it will all be worthit. It seemsthat, no matter how much I earned in my career, I learned the hard way that I
can never save. You can start to improveyour lifestyle and your income, and your bills will go up as well. Real estate is almost like a bank account. You can't touchit without selling a building. It continues to grow and benefit from itself. It's amazing to realize that your $550,000 portfolio hasexperienced a 10% increase in value over the past year, and that you are up
$55,000.
