Investment Properties Guide

Posted: Buying Investment Property

Are you wondering how to succeed in real estate?
Leigh Robinson said it perfectly:

“Be prepared to work 24/7/365, longer when necessary.  Be willing to do menial work when necessary.  Find a mate who shares your goals and will work as hard as you will to reach them.  Avoid having a family before you make your first $250,000.  Seek out someone local who has achieved more than a modest success in real estate investing; treat that person to a fine meal; ask for advice; listen; and learn.  Waste no money on expensive tapes and seminars promoted by hucksters with get-rich-quick promises.  Study William Nickerson’s classic How I Turned $1,000 into Five Million in Real Estate in My Spare Time, and adapt its techniques to fit your circumstances today.  Avoid partnerships unless the partner has expertise, experience, or connections you lack.  Understand that your lack of money is no reason to forma  partnership with someone who has money.  Learn how a professional appraiser appraises a property.  Study and follow the market for different kinds of properties.  Identify and number of fixer-upper properties, and make offers based upon location, financing, condition, current income, and potential income.  Avoid becoming attached to any property before, during, or after ownership.  Fix up and trade up again and again.  Borrow for investment purposes only.  Pay your debts on time.  Learn how the time value of money affects your business dealings.  Take fewer risks as you accumulate more assets.  Cultivate relationships with an accountant, an attorney, a banker, an insurance agent, a loan broker, a real estate agent, and a Jack or Jill of all trades.  Hire on-site management.  Handle off-site management yourself.  Hire help to do those things which somebody else can do for you equally as well as you might do them yourself so that you can concentrate on doing those things which you alone can do to achieve your goals.  Stay out of court except for evictions.  Learn how to evict, and evict promptly.  Expect setbacks and take them in stride.  Be unflappable.  Keep your word.  Be fair.  Be available.  Be tough.  Be patient.  Be flexible.  Live beneath your means.  Complete a financial statement every six months to take stock of your assets.  Give back to your community.  Good luck!  Self-made millionaires need a little bit of luck, too.”
The lesson behind Robinson’s words is that we cannot expect success unless we are very willing to sacrifice for it.  There is no type of easy, get-rich-quick real estate investment.  No money down is a terrible option for most people, and we should all avoid anyone who says otherwise.  There is no real estate investment strategy which will provide for you lots of spending money in the beginning steps.  It takes a long time to be able to do this.
We must all thank Mr. Leigh Robinson for his words, and we should all study them carefully.  This is REALLY how to succeed in real estate.

Posted: Buying Investment Property

The Pyramiding Power of Capitalism and Real Estate

When somebody puts his or her money into stock, it grows. It grows linearly, but it does not grow geometrically. When something grows geometrically, it is growing at a much, much faster pace. Whoever figures out the power of pyramiding will be rich. It is the secret force of capitalism that separates the rich and the poor. It is the only way to become filthy rich. If you take advantage of it, you, too, will be rich.

This secret power is the power of borrowed money. Borrowing money is the surest way to riches. The middle class and the poor always try to avoid debt, and that is precisely why they remain poor and middle class. It is not their fault though, for the only debt they know of is consumer debt, which is bad. Some debt can be good; some debt can make you rich.

Every fortune in history was built upon debt; borrowed money is the driving force behind every millionaire’s fortune. So, you are probably thinking, “How can I tap into this power of borrowed money?” The answer is simple: invest in real estate! Real estate is full of borrowed money! Banks practically throw it at you. All you need is 20%, and they’ll give you the other 80!

Compare this to stock investment. You put in $20,000 into stock; you put another $20,000 into a property worth $100,000, and you borrowed the rest from the bank. We’ll say the bank is charging you 5% interest on your loan.

Time goes on, and both of your investments appreciate exactly the same amount – 6%. What does that leave you with? The stock has made you $1,200, and the real estate has made you $6,000, minus the $4000 that you owe for the loan, for a total of $2,000. The stock made only 60% of the real estate’s earnings. So, the real estate has made you 10%, but the stock only made you 6%. Clearly the real estate is the way to go.

But, it gets even better. What happens if your investments made 8%? Real estate would have earned you $4,000, but the stock would have earned you only $1,600 – only 40% of the real estate’s earnings. Do you see how real estate really is taking advantage of expontential growth?

What about the second investment you make? Say our investments make 8%, so now we have $21,200 from our stock and $24,000 from our real estate. We invest it again. We buy $21,200 worth of stock, and $120,000 worth of real estate, borrowing the other $96,000 at 5% interest. This time our investments earn again 8%, the stock earning $1,696 and the real estate earning $4,800. The stock, in this case, only earned 35%. It keeps getting better with time; real estate continues to earn a higher and higher percentage of the amount of capital invested, but stock is linear progression.

Real estate truly takes advantage of borrowed money, the essence of capitalism; it takes advantage of the pyramiding power of other people’s money.