Retired at 30 on Rental income

[whereshegoes]

Originally Posted by travelpunk

We must have gone to the same seminars or studied under the same mentors these past 10 yrs (well, longer than that for me...the old fogey that I am)!

You know what they say....Great Minds, Think Alike.

[freespiritz]

That's awesome! I wish I could do something like this but I'm pretty clueless. I know my ex is dabbling in real estate now (also in Alberta!) which got me thinking about it, but I don't really know where/how to start.

[whereshegoes]

There is a lot of info out there. Do some research on Real Estate Investing. Call a realtor and pick their mind. Go talk to a few banks. See an investment specialist. They are all there to help you and most of them should give you advice and much of it will be free.

Learn about your market (or the one you want to invest in) and find out what it will take. The start taking the steps towards making it happen.

I wish you success! Just remember to persevere and believe in your self.

[Joker]

Here's a relatively painless way to do it, and to build equity:

Find a place with a second apartment to it. Live in the main part, rent out the apartment. Use this to build equity, and sell it. Within one tax year (for the US punks), roll into another apartment building to avoid paying huge taxes on it.

Rental income covers the mortgage. Start socking the extras money away to pay for maintenance.

Eventually, using the equity from the first property to purchase another. Banks will allow equity from the first property to secure the second. Again, rental income covers mortgage.

In the US, anything you put into the building in terms of maintenance equals a tax write off, as does the interest on the mortgage as well.

Lastly, and this is the most important thing: Never do long-term rental contracts. Strictly month-to-month. This way if you have a tenant you don't like, mail them 30 day notice and they have to be gone. Keep in mind, states have different laws regarding this, but in most its a 30-day written notice. Without having reason, as well.

Oh, and before I forget-- make sure you have a lawyer draw up a rental contract that prevents you from being sued. And outlines your tenants responsibilities.

[travelpunk]

Great advice, gang!

I, for one, spend thousands of dollars each year for my education. It is an investment in me. The knowledge helps me in my own investments and that of my clients.

One of my first clients was about to sell her only house because she had many medical bills, I coached her on how to create a better living by not selling it. She now has 6 properties, all purchased with little or nothing down and has called me regularly for 3 years thanking me for showing her a way out of the rat race.

We will all get old some day, but those who take matter into their own hands and chooses to get in the game, will come out for more victorious than those who expect the government to take care of them through social security and pensions.

Make it a great life !

[voyd]

This can work if you are in a hot real estate market (typically along WC).

I think having several properties may tie you down in that area, though - due to the on-site managing and maintenance needed.

But yea, it's tough to beat 50%/year returns and essentially passive income... Your rent can cover your mortgage and in a hot market, you can then flip it fairly quickly for a quick profit. Talk about making money the smart way!

[LiveFreeorDie]

Another good source for general business education is the Wall Street Journal. Every day there are great articles on everything from real estate to financial markets to global manufacturing. Increasing your business IQ across many different subjects can really help you identify or think of areas where you yourself may be able to develop a niche opportunity.

For example, there is a good article in today's edition about a guy that buys low end reposessed houses from banks, generally sight unseen. These are the lowest of the low, in bad/poor neighborhoods. He pays anywhere from $5,000 to $30,000 for them. He then turns around and sells them through self-financing to low-income borrowers. No lawyers, no home inspectors, no real estate agents - he uses hand-written for sale signs offering his terms. He offers say $500 down and $400 per month for 15 years. He charges 12% interest. He is then able to sell these loans within 3 to 6 months to financial companies that buy sub-prime loans. It's constant churn and he probably clears $10,000-$20,000 per home in profit, if not more.

You have probably heard in the news lately about the sub-prime meltdown. This is resulting from some of the larger mortgage companies that went a bit overboard in their lending over the past couple of years and now, with rising default rates, these companies are losing a ton of money. Well, this is going to cause a lot more homes to be dumped on the market for cheap by banks who do not want to deal with them.

It is seeing and understanding niches like this (and being willing to handle all of the work involved) that allow some people to make a ton of money.

BTW - the guy in the article mentioned above never went to college and he clears about $1 million a year. It's not rocket science but it should be food for thought.

[Joker]

Though the ethics of preying upon low-income, high risk folks via loans is questionable, there are elements there that in proper application can make a ton of money for the seller.

Turn and burns when done properly can make shitloads of capital for the seller. BE CAREFUL though- there are often catches. Baltimore city has/had a program where a person was sold a piece of property well below market value in a neighborhood targeted for "development" in the hopes that the buyer would renovate and thus help to improve the neighborhood. The catch was the buyer was to live there for XYZ years, and couldn't turn and burn it. Lotta lawsuits still pending from that one.

But if you do it properly, its a goldmine.

For instance- most people aren't aware that Home Depot and Lowes hardware mega stores have contractors they use for anything from landscaping to kitchen cabinets, electrical, and plumbing. The best part about it- their long term, in house financing with its interest-free options can be used to pay for it. And it's all turn key and guaranteed by the company.

EG: You buy a home on foreclosure in a decent neighborhood where property values are on the rise. Home sells for $130K, where the average is $180+. Needs approximately $20K worth of work. Mortgage using your current home as collateral, go to home depot, get their folks to do it as fast as possible (within a month, ballpark, to get everything squared), and put it back on the market, having only made a single mortgage payment, possibly two. Sell for market value, realize $30K income.

The risk is if it doesn't sell, you are speculating heavily on the market and expecting to roll it quickly. If in the case it doesn't sell, you now have a very nice rental property. And can rent it out until it does get better in the market.

[voyd]

Originally Posted by Joker

EG: You buy a home on foreclosure in a decent neighborhood where property values are on the rise. Home sells for $130K, where the average is $180+. Needs approximately $20K worth of work. Mortgage using your current home as collateral, go to home depot, get their folks to do it as fast as possible (within a month, ballpark, to get everything squared), and put it back on the market, having only made a single mortgage payment, possibly two. Sell for market value, realize $30K income.

The risk is if it doesn't sell, you are speculating heavily on the market and expecting to roll it quickly. If in the case it doesn't sell, you now have a very nice rental property. And can rent it out until it does get better in the market.

Well, don't forget your seller's costs and cost of owning (mortgage, property tax, utilities, maintenance, etc). Since the seller (not the buyer) must pay most of the realtor costs/fees/etc - and with those additional monthly costs...you will have to sell your property for ~5% (ballpark here) more just to BREAK EVEN.

Now, in a hot market that is appreciating at 20% a year, big deal. But in a slow market where property values might be holding steady, barely creeping up at a % or 2 a year or even dropping - you will have to play your tighter margins much more carefully.

The REAL key here is thus how hot your market is. If it's booming up in double digit %'s per year - you're pretty much green-lighted! It will be hard to lose and easy to make money. But if it's shaky or plodding along at 2% a year...don't expect an easy cash cow.

[Joker]

Absolutely, Voyd. The Baltimore metro area is experiencing a bit of a downturn in the market especially in the city. 10 years ago, neighborhoods that all of the sudden became trendy to live in were being redeveloped and rowhomes were selling for astronomical prices. Everyone that could get in did. The speculation on the next "hot" neighborhood is intense. But now the bubble has broken and many of the "hot" areas are going cold. In the burbs there was a severe lack of inventory, so home prices were artificially high.

Now its beginning to correct itself and rightfully so. It priced a lot of folks right out of the market. Those that got in and out at the right times made bank, those that didn't will have to wait a few years. Case in point- a friend and his wife bought a rancher for $315K about 5-6 years ago. It had 1.5 bath 3 BR and an unfinished basement, (the half was the master bath!), and was about 45 years old. Original owner had never done anything but put an occasional coat of paint on it. Ryan finished the basement, redid the bathrooms, redid the kitchen, and put a deck on it. New driveway, etc. stuff to make the house marketable.


He sold it last year for over $550K with about $50K in improvements invested. That same house most likely would sell for tops $475K now. Good for him they got out when they did.

[voyd]

^ Yea, they stress location in real estate.

But the other critical factor is timing...with all investments, really. You have to ride the bubble as it blows up, but get out before it pops. Dot bombs, real estate, whatever - all the same thing. The biggest growth spurt occurs when the trend starts going mainstream.

The question right now is - what's the next big thing???

[Twoguns]

I really is a great Idea to make money off something you own, I started slao at 18 (not as hard as it seems to do, there are ways), I got my first house in texas for a real bargain and have 15 acres of land, my lil get away, when I joined the military, I rented that place out and refinanced it and got another house, after seeing how much money I could make I now have those two houses and I just got 3 duplexes in a growing town. Now that Im out of the military and working in Iraq as a firefighter and making great money doing it, Ive got in to franchising companys and Im in the middle of opening my first mens saloon called knockouts in fort worth Texas www.knockouts.net, which is looking to be a great investment plus they run the place for you and I just pay the money to open it. Im only 22 and Im preparing after racking up money over here for a few years and opening a few more places to lay back and watch the green grow, and see the world. Its not hard to do really. Just research your ass off, you will get turned down a lot but someone will help you. Once you get the ball rolling it becomes so easy. Dont get screwed though........ Hopefully by 25 I will never have to "work" agian. by the way look for forcloser properties.

[Twoguns]

sorry that was all misspelled and messed up, long day in Iraq , bedtime!!!! :D

[Slacker]

Any of you realtors?

And you had to have a decent initial investment to do all this?

I would LOVE to do something like this, but I'm in college, have college debt, and have a little (>1000) credit card debt. I work part time an dont make hardly any extra money.

The way I see it, you all have a decent (probably full time) job and had that initial investment to get going, am I wrong??

[Diorama]

^ That's what i'm thinking slacker. Seriously it's easy to talk about this but everybody had to have some cashola to begin with!! Like I said my roommate and myself looked into buying an apt together and between the TWO of us we could not afford one. Maybe if I lived in buttfuck, saskatchewan (no offense saskies) I could afford a place. But Vancouver has one of the hottest markets in Canada. Okay I'm jealous i admit it! I just don't see how someone in my situation could afford property .

[TheJake]

as the godfather once told me

"jake, just do it. Every third person has the money you need and they need something to do with it."

[Joker]

Originally Posted by Slacker

Any of you realtors?

And you had to have a decent initial investment to do all this?

I would LOVE to do something like this, but I'm in college, have college debt, and have a little (>1000) credit card debt. I work part time an dont make hardly any extra money.

The way I see it, you all have a decent (probably full time) job and had that initial investment to get going, am I wrong??

My dad is, and has been since i was a fetus.

Here's the way it works-- you get a first time FHA loan and get that small piece of property and build on it from there. Bigger risks, bigger potential rewards (and losses!) But 10% down is a good place to start. Then mortgage the rest.

I happen to rent, but thats because i don't want to mess with ownership and the things that go with it, and i don't plan to be here long.

Keep in mind, there's a few things to consider when you own:

1. You are responsible for the upkeep of the property. This means if the washer overflows and floods your basement, there is no landlord to call to replace the carpeting, etc. Same goes with all stuff on the property. its YOUR responsibility.

2. You are responsible for property taxes, homeowner's insurance, etc --the unknown many folks forget. Sort of like buying a really nice fast car because you can afford the payment, but forgetting to budget for the tires, the insurance, the gas and the car insurance. They are levied according to appraisal of the property. And you can't not pay them.

3. You are however, seeing equity built in place of your mortgage and investments to improve the property, and that is good especially when it comes to sell or refinance your mortgage. Equity is essentially money in the bank.

4. Once you get past those hurdles, you could easily rent it out for more than your mortgage if the market allows, and most importantly, start making some cash.

[travelpunk]

Good advice everyone .

Very impressive, 2G's! Those of you wanting to start a business, but don't know how to create an effective system to run it, look into buying a franchise like 2G's. Former NBA legend Magic Johnson has 35 Burger Kings, Athletic Clubs, Movie Complexes, TGIFridays, and other types of investments that make up his $700 million empire.

Buying into a franchise, you already have an effective system in place. just pony up the franchise fee (or partner up with someone who has cash)follow their steps, and booyah!

That's right, jake. Basically, we all have access to everything we need As far as getting into the real estate game. Always keep this in mind- "money is attracted to good deals."

If you are dead broke and you found a great deal on a piece of property, for example 75% below the market value of the property, do you think you can get someone to pony up the money or credit to go in on the deal with you and split the profit? The answer is yes, no matter what the real estate market looks like, because you're buying way below the market value.

Ie: You find a property worth $400k (it would sell no problem at this price). You negotiate to buy it for $300k (you may get a lot of turn downs, before you get one. OR, you get a foreclosure, estate sale, etc...)
You don't have a penny, BUT you can get someone to qualify to buy it with their cash or credit for the mortgage. You sell it without a realtor for a firesale of a price of $375k. You split the profit, maybe $30k plus each, after closing costs.
I would venture to say that you can find ANYONE to do that deal with you. Your relatives, family, friends, friends parents, friends of your parents or friends of friends parents, your coworker, boss, Dr, veterinarian, coach, mailman, whoever.
Before you negate any of those options of financial/credit sources in your head, try it first.
Everyone wants to invest, they just don't know how to.
Come up to them with a solid plan and facts to support your case, and you just may be surprised on how many sources you will have at your disposal.
All it takes is one deal, and you can be on your way to getting out of the ratrace faster than you ever imagined.

Education. So many books on how to buy with nothing down/creative financing, that you just need to start educating yourselves at any bookstores. I spend hours and hours perusing through books at Barnes and Noble. Bought tons of them too.

It's not easy to do all this, but it's not as hard as you think either and it's actually fun doing it and learning the skills to become a better investor.

Kind of like taking your first backpacking trip. Fun, lots of research to do it right, scary thinking of all that can go wrong, exciting when you've actually pulled the trigger and doing it, rewarding once you're in motion and happily ever after with great memories and skills to do it again, and again, and again, while getting better at it each time.

Now go, and make it happen !

[Twoguns]

Grat advice travelpunk, one thing to look into when opening a franchise is angel investers, those are people looking to invest in a startup company of a smaller freanchise to build some money and usually sell there half of the biss back to the owner. www.inc.com (which I started reading on as a freshman in highschool) is a great site to go to for everything to do with franchising and business ownership. Starting off was very difficult for me at a young age and took some of my parents help for a co-sign on my fisrt house and land. READ READ READ, there are so many good books and websites to get you going. The good thing about getting a good franchise is they have there own brokers, managers, and staff that they hire just for your area or store. When I started I was a club promoter and I worked at chilis bar and grill. Not much money. I bought a really cheep house fixed it up my self and rented it out. Also refinance after two years of ownership. It not only knocks your payments down, but gives you the money to start something new. I dont even live in the states and I get monthly and weekly checks for doing nothing but renting. I do have a great job now that pays 6 figures but I also work in Iraq, and in a war zone even as I type this, but it does help persue my investing. Plus I should be retired like I said at 25 if all goes well. I just have to pay taxes and sighn somepaper work for my saloon, which I have no problem doing becasue I have a whole company of reps that have my back when I have trouble. Remember when franchising the company makes a lot of money of of you so they will bust there ass to keep you open and succesfull. I hope this helps a lil with anyone that wants to do what Im doing. you can email me for more websites and info. toldtrueguy@hotmail.com

cheers

twoguns

[travelpunk]

one thing to look into when opening a franchise is angel investers, those are people looking to invest in a startup company of a smaller freanchise to build some money and usually sell there half of the biss back to the owner. www.inc.com (which I started reading on as a freshman in highschool) is a great site to go to for everything to do with franchising and business ownership.

Excellent advice, 2G's. There's a couple of golden nuggets for you aspiring entrepreneurs!

I've learned so much from inc.com throughout the years, too. Many of you are the same age range as 2G's, but as you can see, he took the time to educate himself and more importantly, took action and rolled the dice.

Now, he's planning on retiring in 3 yrs! Good golly, miss Molly!

So now, anyone who has an interest in not only securing your financial future, but being able to do all the things you've wanted to and travel to all the places that you've ever wanted to go to, and leaving the place that you hate spending 40 hrs work weeks for bosses you don't like, has no more excuses!

Take action