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Old 01-02-2006, 03:19 PM   #1
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This is a topic that I've always been passionate about and have jumpstarted started my portfolio 12 months ago, with the intention of leaving the rat race (working for others- pay check to paycheck) ASAP.


Most people study their asses off on every topic under the moon, except their financial statement.


Learning the difference between an asset and a liability is key, and the idea is to create a cashflow coming in that is greater than your monthly out-going expenses.

This cashflow should be passive, meaning that with little or no effort of your own, this cashflow keeps coming in.


One way to achieve this is through investing in real estate.


And just so you guys know, I subscribe to the "creative financing" school of thought (LFoD ).

Yep. Like you see in those infomercials "Buy property- nothing down." Although they are about selling seminars, a good proven author can show you some priceless education.

Anyways, any other investors out there?


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Old 01-02-2006, 03:59 PM   #2
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A buddy of mine spent some good coinage going to those real estate seminars. I forget the guy's name who puts them on, but he always has his info-mercials running.

He hasn't really put any of it to use though...I know the basics of how it all works, there's been countless times he's talked my ear off about it.
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Old 01-02-2006, 04:38 PM   #3
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Not yet, but when we get a little more comfortable we're going to start looking into investment properties. Probably in the next couple of years.
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Old 01-02-2006, 04:52 PM   #4
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You know what it takes to sell real estate? Brass balls..ALWAYS BE CLOSING!

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Old 01-02-2006, 05:08 PM   #5
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I've been looking into this for a while now but i'm just not quite settled or educated enough to jump in. I've read a few books and hounded numerous people about the ins and outs of real estate investment, so i know a little about the topic, but not enough to feel comfortable investing my money in it. But i think there's only so much you can learn through books and talking, the rest is learned through practice, i've just gotta grow the balls to do it.

If anyone can offer any handy advice on the subject i would be most grateful.

Quote:
Originally posted by travelpunk@Jan 2 2006, 03:19 PM
Learning the difference between an asset and a liability is key, and the idea is to create a cashflow coming in that is greater than your monthly out-going expenses.

This cashflow should be passive, meaning that with little or no effort of your own, this cashflow keeps coming in.
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Old 01-02-2006, 07:09 PM   #6
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HAHAHA!!!! Always Be Closing!

There's a good deal of people in my company (not directly my centre but in PA and NJ) that have real estate certs and do it on their off time. Maybe when I get a bigger savings and settle down for good.
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Old 01-02-2006, 10:15 PM   #7
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I have not gotten into the whole purchasing Real Estate and reselling area. I had looked into it and took a few courses at the community college to get into the rules and regs... but never was able to develop the plan to get funding. With the economy the way it is here, older homes have begun the slide to bottoming out. So I don't think it will be a hip thing to get into here right now.

However I do invest in REIT's on the NYSE. Which is a form of Real Estate Investing.

Realty Income - O - Price $23-26 - Div: $.11325/share/month
Home Properties of NY - HME - Price $42-46 - Div: $.61/share/quarter
Arden Realty Inc - ARI - Price $28-32 - Div: $.42/share/quarter
Avalonbay - AVB - Price $65-70 - Div: $.68/share/quarter


There are several others but these are the ones I have followed the most. I have owned the first 3 and just never got around to buying Avalonbay, although the dividend vs share price is also a factor. Realty Income has issued a dividend every month for the last 36 years, so they are very reliable and have steady growth.

That is about as far as I get into Real Estate at this point in the game... I figure it is safer to put my money into a company that can wheel and deal in massive real estate projects then for me to try to buy/sell a house quickly here in Detroit.
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Old 01-02-2006, 10:26 PM   #8
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I want to just get into the note business. I was selling the packets to people so they could go get rich but well the market is hot down here in AZ. And like tp says if i put 40 offers in and just get one taker then i can make 5 grand without really doing anything.

So now i need the know-how to put the offers together and the ability to find the investors to sell the notes too!
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Old 01-02-2006, 10:58 PM   #9
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Okay, here's a few things to remember:

Real estate will not get you rich quick unless you are willing to take HUGE gambles.

This being said, it is one of the most stable investments one can make and assuming the section of town you buy in doesn't go to shit overnight, you can make dependable income quite easily.

I will give you this:

When my folks got married in 1978, they bought a rowhome with an apartment in the basement. The intention was to rent it out and thus pay their mortgage so they could save for a bigger/nicer place. This took two years. They relocated when Mom was pregnant with me, and though only two streets away, they had their own place entirely. They were able to invest and then move to their current home. They've done many renovations to it, but each time did it in a way that made the home more attractive to future buyers. Don't ever renovate for your needs, think about the resale value. This means don't necessarily do the awesome avant garde architecture, keep it within reason and you open up the marketplace of potential buyers. Not everybody wants a monument to themselves.

They have bought and sold several properties and used equity in each to fund the next.

He has done the "Turn and Burn" thing as well- fixer uppers, quick turn around, and then selling at a profit, but here is the important thing: If you choose to do this, be prepared to do it quickly because rehabing yourself will cost you FAR more money than you want to spend.

The way he does this:

He finds a property going to auction bc of bankruptcy. He rents it to the current owners for a predetermined amount of time **usually 60 days** with clearly stated rent agreements allowing them to move on, find their own place, etc. In a couple cases he has saved them from foreclosure by buying cheap from them to satisfy their obligations to the banks. Once they have moved out, he then has a team of contractors (sometimes he uses independants he knows, sometimes he just goes to Home Depot and uses them.) While vacant, he has them blitzkrieg the property with average stuff (appliances, floors, cabinets, windows- not the top of the line stuff, but not the bottom) and then sells it as quickly as possible. The two months or so he is paying the mortgage is offset by the type of loan he takes out and thus he makes a profit. IE: Buy a $100K property that could be worth $175K if maintained, put $25K into it and sell it for market value. Instant $50k profit.

But there is a catch: in the US, tax laws are set to allow this, but you have to do it right-- IE: if you own an investment property (Apartment house, for instance) and you sell it outright, you pay a far higher penalty in taxes if you don't reinvest it into another rental property. So, if you plan on renting it out, then be prepared to buy the next one within the current calendar year or get nailed on capital gains taxes. There are other loopholes for turn and burns but they escape me. A good financial advisor can fill you in.

I only wish i had realized this when I was younger so I could play the market like that. FTR, though, its been roughly 7 or 8 years since he last did a turn and burn.
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Old 01-02-2006, 11:01 PM   #10
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I would suggest going to visit your local library (aka Border / Barnes & Noble) and read a few books if you get the chance. Then try and find someone you know with real estate experience and ask them for help. This is the cheapest method.

While I haven't gotten much into the notes section, it is something I would like to venture into, but until I can get access to a better market I am keeping it on hold.
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Old 01-02-2006, 11:19 PM   #11
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I don't know a thing about Detroit, but I'd imagine that the real estate is quite low. If that's the case, don't look to flipping properties. Instead, I would focus on creating passive income.

For example, I have a client that picked up 4 properties in the outskirts of Chicago that all rent for positive cashflows.

Her most recent transaction was a triplex for $85,000. Her total mortgage with insurance and taxes come out to roughy $650 per month. Total monthly rents collected are $1,500.

That is a positive cashflow of $850 per month. Do that ten times and you have $8,500 a month in passive income coming in- regardless if any of the properties appreciates (go up in value)!


These deals don't exist in Cali. Period. Values are way, way too high and receiving a positive cashflow is next to impossible if you're coming into the deal with nothing down.

However, you can still get a good deal nothing down, if you know how to structure the deal properly and perhaps even get cashback at closing...if you're a good negotiator .



As an investor, you are constantly looking for either great terms or great prices or both. And, in a down market you can pick up properties nothing down all......day...... long.

All this talk about a "real estate bubble" doesn't phaze me one iota. In fact, should the market turn downwards to correct itself, there will be screaming deals for investors, and I'll be a kid in a candy store should that happen !


Those of you who are thinking about it and are waiting for a couple of years....DON'T! Why walk when you can run?!!!

You can acquire property nothing down, receive rental income, and in a couple of years your property may even appreciate. If you bought it right and chose an excellent location, that is.



Quote:
Have you by any chance read the rich dad series of books TP???
Yes. I have roughly 5 books from his RichDad book series as well as his 9 CD set that I listen to in the car. Excellent, excellent, excellent!

Although, the author Robert Kiyosaki has numerous real estate holdings, he is not a real estate guru. He is a cashflow expert. And ultimately, I would like to become one too.


Financial education is extremely important as NO ONE can or will take care of your future, but you! Your government won't, your company, your family or friends, nada...And if they do contribute something, it won't be enough for you to enjoy life the way you ultimately want to.


I can tell you all, from experience, that YOU CAN buy property nothing down. Done.


And yes...A,B,C, baby !






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Old 01-03-2006, 09:44 AM   #12
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I recently bought my first home. I currently have people living with me to help cover the mortgage (they rent from me) and one day hope to have enough equity in the house that maybe I can use it to purchase another rental property.

Right now I am still redoing the house, since it was a partly renovated home that was left part ay through but right now is almost done again. Luckily I am able to do this one my opwn thanks to my Fatherbeing a contractor and me growing up around the trades. This has helped a ton money and timing wise.

I guess I will have to wait a few years and see where I am at then, but I think I am on the right track.

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Old 01-03-2006, 10:30 AM   #13
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This is a great topic!

I have a bit of rental property now that I have owned for a few years and its worked out great. It's a two family. The nice thing about real estate assets is that they can act as continual source of capital assuming the market continues moving up..i.e. buy one place, after two years, if you have some equity, you can use it to buy another place, etc. Now you have two places. Market goes uop some more, maybe now you have equity enough to buy 2 more places...it keeps rolling and keeps multiplying - all it takes is one.

No money down deals are great when you can find them, but keep in mind that usually these are reclamation projects, in shady neighborhoods, desperate sellers, etc. If you are going to own property like that, you need to be prepared to manage it - deal with late or no rent, evictions, fixing all sorts of shit all the time, etc. In my neck of the woods, the sellers have not been desperate for a LONG time, so a more traditional approach is needed (i.e. normal bank level down payments - though those levels are much much less now then even 5 or 7 years ago).

I will close and say real estate is great as a long term investment, but make sure you are ready to have to manage the property and make sure you have some cash in the bank to cover the mortgage if you wind up with a deadbeat or two, or a hot water tank goes and floods a newly finished basement - happened to me this year I also recommend the book route, versus an expensive seminar (just my opinion - I think its cheaper). You want to learn about tenant law, finance/accounting, how to model cashflow (which drives value of the property) as well as all the ways to make the best deals.
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Old 01-03-2006, 11:05 AM   #14
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As for myself,

I do have my own home that I am paying the mortgage on, and looking into getting 4 units to rent out. I also have some investments outside of the house

Roth IRA
Self-Employed Pesion
Mutual Funds
Deferred Compensation


And I am also working on generating passive income through a financial service industry. I don't want to work for anyone either, I have done it for about 5 years in engineering, and this march 2006 I will be quitting my engineering job and dedicating full time to the financial service industry working for myself.

I have read these books, and they have helped me a lot, hope they can help you guys:

1. 177 Mental Toughness Secrets of the World Class
2. The Riches Man in Babylon
3. The Automatic Millionaire
4. Beyond Positive Thinking
5. Think and Grow Rich
6. Rich Dad Poor Dad


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Old 01-03-2006, 12:33 PM   #15
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Alright! We got some homeowners and investors in da house!



Well, I can tell you that in that creative financing world, "nothing down" doesn't necessarily mean no money down, it actually means - none of your own money down.



Quote:
(i.e. normal bank level down payments - though those levels are much much less now then even 5 or 7 years ago).

This is true. When I first studied these nothing down techniques, banks didn't have 100% financing options, so we were trained to ask the sellers to carry back a second mortgage or structure some other type of creative financing offer.

I am in the mortgage industry now and many lenders will lend you now 100% of the financing.


This past year I purchased my primary residence and partnered on a couple of other investment properties using 100% of the banks money.

In addition, we structured the two investment properties so that the sellers pay for all of our closing costs (one was about $6,300 and the other came out to $9,300 in costs picked up by the seller).
In addition to that, this one that just closed this past week, we got the seller to credit us back 3% ($19,600). Booyakasha!

Now, we can't spend that money or reinvest it...yet. It has to cover any negative cashflow until we can refi it to consolidate both loans.


Newsflash* I just got off the phone with an appraiser for the first investment house we purchased about 3 1/2 months ago. It's up about 30% from where we bought it, so we're going to refi it (tax free, since we're not selling it) and after we payback initial investor money of $10k plus closing costs, we three will walk away with $8-$10k each to either reinvest or do as we please. In addition, we are lease-optioning this house so the tenant can either purchase it (for the appraised value 12mos from now) or walk away from it. The purchase is at a minimum of 25% more than what we bought it from.


This is the power of investing in real estate as opposed to the stock market .
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Old 01-03-2006, 12:54 PM   #16
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I'm so confused... I need to hit a library.
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Old 01-03-2006, 01:08 PM   #17
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Yo peaski,

Find these books (and the other ones that llemus listed) and youŽll unlock some major keys to the financial freedom vault, as well as shift your paradigm.

Nothin Down by Robert Allen


Rich Dad Poor Dad by Robert T. Kiyosaki


Cashflow Quadrant by Robert T. Kiyosaki



This is some of the absolute best education that I have ever had in my life. Of course, it doesn't really mean anything without any action .
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Old 01-03-2006, 05:24 PM   #18
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Awsome, there's been some excellent info in this thread for a n00b like me.

You know, sometimes it takes the smallest things to motivate people, and i have to say that this thread has made me get off my ass and get the ball rolling. I have a friend who is into what joker called "Turn and Burn" property investments, and he does quite well out of them. So i am going to call him tonight and get all that i can out of him. He'll be a great source of info i think, seeing as he has the experience and he loves seeing young people succeed, he's actually played a fairly major role in getting me to where i am now.

Another mate of mine has been thinking about property investment for a while too, he has his own house that he is paying off, but he wants to invest in more. I just went and had a bit of a talk to him about it and now he's got some things in motion....and it all started because of this thread.

A couple of questions for you gurus out there. We have a couple of property investment possibilities, but we really don't know too much about the taxes and laws relating to what we want to do. If we take the "Turn and Burn" option, what are some of the taxes and fees that we may be looking at paying??

Also, in your experience, is it better to do these things solo, or with a group of people. I have three other people that are interested in trying this trun and burn investing. If i decide to jump in and do this, should i just put up the cash on my own, or get more poeple involved??

Another option we have, which has already been discussed but never acted upon, is to go into building and selling with a group of tradesman mates i have. There would be 5 of us, each investing 50k, building the house ourselves (among us there is an electrician, a plumber, a concreter, a builder, and me - the lacky), and selling it. These other blokes in the group have a fairly good idea about how much it would cost us to buy the land and build the house and how much we could sell it for, but we don't have much of an idea about the laws and taxes involved in doing so. So, do any of you guys know anything about this side of property investment??


Sorry for all the questions, but this is something that i am very keen on doing.

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Old 01-03-2006, 07:10 PM   #19
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Okay, this is strictly my opinion, which means really nothing (except to me) BUT.....depending on where you are in the country, the Turn and Burn can be very risky...especially now where some markets are on the cusp of flattening out or possibly declining. This is not all markets by a long shot, so you need to make sure you know your market and what the drivers are.

Me personally, I wouldn't touch those scenarios. They are just too risky for my blood. I want property that I expect to keep for awhile and let the rental income pay for the financing. It will appreciate over time, but maybe not the next 6 months or a year. The other good thing is that the rental income increases over time, but your mortgage stays the same(unless you refi)...this means profit margin increases over time. At the end of the day, I like to think long term, not get rich quick - but hey, that's me and it's why I am not a billionaire like the Trumpmeister.

Just keep in mind, if you buy a place, renovate it, but then cannot sell it quickly enough to recoup your purchase price, closing costs (if you paid them..see Tony's note above) and renovation costs plus profit...then what do you do? How long do you sit on it to wait for a buyer who will earn you a profit? What if two months go by...you are paying a mortgage, taxes, insurance and cannot spin the property. Can you afford to do that? When do you cut your losses?

Also, you pay more tax on the gain/profit (as its a short term capital gain) versus if you hold for........I think 2 years. Similar to stock trading. If you do like Tony did, you buy, the property appreciates and then you refi to take cash out - you don't pay taxes and don't need a buyer, or to pay a real estate commission to sell the property. It's a cash cow...keep it around and milk it. Just understand there will periods of appreciation and there may be periods of no appreciation but is the bottom going to fall out like a Fidelty mutual fund? Not likely.

As Tony's point alluded to, you can sometimes pull more money out of a home's equity by refinancing then selling. Banks have become rather lenient on what they will give you for an appraised value for the refi. In theory the appraisal should be market value, but usually its highend market value, but you might not be able to find a buyer for the appraised value. I had an appraiser ask me once what value I was hoping for, I told him, and he said okay, no problem. Good luck.
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Old 01-03-2006, 08:23 PM   #20
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Quote:
Originally posted by travelpunk@Jan 3 2006, 03:19 AM
I don't know a thing about Detroit, but I'd imagine that the real estate is quite low. If that's the case, don't look to flipping properties. Instead, I would focus on creating passive income.


[snapback]96176[/snapback]

The biggest issue with Detroit is the whole economic downturn we have been having. Housing prices skyrocketed as they did in the rest of the country, but now we have builders building new homes and selling them for less than homes that are 40 or 50 years old. But most people still aren't willing to lower their home prices when they are selling. For instance in a post WWII neighborhood of cookie cutter Aluminum sided houses that are approx. 800-1100 sq ft... people are asking for $110-140k. But you can go buy a brand new brick home 1200sq ft for $89k. These are in the suburbs. In the city, property taxes are so high that you have to charge a premium for rent, but no one wants to pay a premium unless they are getting something for it. Really your only choice is to do HUD Section 8 housing, which then leaves you to rebuilding the damn place everytime someone moves out.

Right now, I am gonna hold off on the real estate here. In a good 5-10 years the market here will crash and there will be so many homes up for forclosure that they will be a dime a dozen from the banks looking to unload them. Then merely remodel and work with the good and demolish the bad and rework the property.

Just some examples, on my buddies street alone, which is 3 blocks long (so about 70 homes) there are 13 houses up for sale. 10 of those 13 have been on the market for well over 3 months. My parents have been trying to sell their old condo for 9 months now. The big issue is that new homes have been built continuously for years and years and they finally reached the point where there are not enough people to own all the houses in the area. Quite the contrast I am sure to the southwest.


But I must say, congrats Tony on the income properties. Great work taking advantage of refi deals and getting a little spending cash. The southwest is a hot market right now and I wish you the best of luck
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