Category: Real Estate (Page 2 of 3)

Why I Pay Cash for Real Estate

Here’s my background. I paid off my $280k mortgage is six years. $32k of student loan debt in a year. I’ve purchased several rental properties with cash while serving overseas in the military.

Why don’t I use financing? Why cash? How do I afford that? (Rich Uncle? No.)

Real estate is a powerful way to make money. Debt can be a powerful tool. With a chunk of money, let’s say $200,000, you could buy one property with cash.

You could also, with that same money, buy five houses worth $200k each with mortgages and 20% down.

Leverage gets you 4 extra houses!!

Some people find ways to use no money down and buy properties. Some even find a way to take cash out of these deals. These are obviously riskier than cash or 20% down.

Everyone makes the decision to invest in real estate somewhere along this spectrum of risk. There are pros and cons at both ends.

I want to share with you why I’m at one extreme end of the spectrum, and how it’s worked for me.

It’s worked despite the fact that I’ve been serving in the military over the last 16 years, moving every few years, and mostly living overseas (including currently).

Click here to continue reading this guest blog post.

Bringing Structure to Investing in Real Estate

This is Rich, but I didn’t write this post!!  This is my first guest post.  It’s a big deal because I’ve turned down several offers for guest posting on my site.

I met Richelle from www.lifelibertynproperty.com at FINCON16 and was impressed with her professionalism and liked her blog.  We chatted and decided we should guest post on each-other’s blogs.  Both she and her husband had their own real estate portfolios before they met, and now they are an awesome real estate team! It’s a great article.  Enjoy!

Bringing structure to investing in real estate

Understanding your preferences in investing will definitely help clarify your goals and path to success. Simply put, knowing the investing style that best suits your persona can turbocharge your investing because the distractions are removed. Some people refer to this idea as “knowing your lane”.

It is tempting to get caught up in the excitement of investing and the prospect of being in real estate. Often, however, budding investors end up spinning their wheels without gaining any traction. Taking the time to focus on your personal goals and identifying your investing style can be invaluable to your overall consistency and growth.

Real estate investing is similar to role playing

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You Are Not Awesome at Picking Stocks!

Think you are good at picking stocks?

To illustrate how un-awesome you are, let me first share how awesome I am.

When I was just getting started out investing in 2001, I put all the money I had, $4,000, into an index fund. I called my bank and said put it in the S&P 500 index. Warren Buffett taught me well.

The savvy salesmen on the other end of the phone who was clearly more experienced than Warren told me I was crazy to invest in that. I could make money twice as fast if I invested in their aggressive growth fund.

NOW I’M AWESOME!!!!!!

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You did WHAT with your IRA?!?

How and Why I bought rental properties in my IRA

Yes, I may have done something stupid.

I certainly did something unique.

I sold all the investments in my IRA and bought rental properties! (My Wife’s too!)

The rental properties are held in the Roth IRA as investments, and the rental income accumulates as cash inside the IRA.

And I’ll show you how it made me FILTHY RICH!!!

I did it, and you can too!!!!!

filthy-rich

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The One Secret to Buying Rental Properties Dirt Cheap!

The story of my third rental property in Alabama

A while ago, I met a fellow military member who owned six rental properties that he acquired over two years. I had him explain how he did it, and decided I would do it too!

I bought house #1 in cash for $30,000. It needed a lot of work and was quite the challenge to remodel (This is an understatement).

I bought house #2 in cash for $45,000, but this one was move-in ready! Didn’t even have to vacuum. Way easier.

How did I get an awesome deal on these and house #3??

It takes a certain personality to do this.   I was uncomfortable doing it at the beginning.

Truth be told, still am today. But it’s essential.

Luckily, my wife has no problem doing this:

The secret is:

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How Much Money Will I Make From My Rental Property?

This is a short, simple, down-and-dirty tutorial to so you’ll know how much money your rental property will make before you buy it.

Going from simple to complicated, the first thing to understand is the 1% rule, which is easy to do in your head, and can save you the trouble of breaking out the calculator for properties that are overpriced.

1% Rule

The 1% rule is quick and easy. Monthly rent should be at least 1% of the acquisition price. The acquisition price may be a higher number than the purchase price. It’s purchase price plus the money to get the house ready to rent.

Example.

$80,000          to purchase house                plus

$20,000          remodeling                            equals

$100,000        acquisition cost.

$100,000 home should rent out for at least $1,000 a month, or it would not be a good investment.

          What is the logic behind the 1% rule?

If a house will give you 1% of the purchase price each month in rent, then it gives you 12% of the purchase price each year.   That apparently means the investment makes 12% a year!!!!

          WOW, THAT’S AWESOME! I’M RICH (ON MONEY!!)

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Prospective Tenant? When in Doubt, Just Say No!

I had a chance to avoid an eviction.  I don’t think you can avoid them all, but this one, yes.  I didn’t listen to the obvious warning signs.

My experience with purchasing my first rental property was scary enough to give up on real estate investing for the rest of my life!

Actually, my wife recently remarked to me that she was SHOCKED when, after going through the stress of purchasing the first rental property, she realized I wasn’t going to stop. She said she thought I had enough!!!

If you haven’t read about my first rental yet, read about it here.

After I bought this house, I discovered the seller had concealed the fact that something under the house had pushed up the floor almost two feet in the middle of one of the rooms. It was quite the ordeal figuring out what it was and how to fix it.

Also, while the house was vacant, someone decided to climb into the crawl space under the house and steal all the copper plumbing.

So I guess real estate investing isn’t for me!

  • But my love for real estate runs too deep!
  • My threshold for self-punishment still not met!

I had a desire to succeed in real estate.

I decided to get back on that horse and keep riding!

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How I Bought a Rental Property With Cash and Without a Clue

After moving back to the USA from Japan in 2012, I started a new job in Alabama.  I met a fellow military member who shared my passion for real estate.  Meeting him had a profound effect on my life financially.

What he did with real estate is exactly what I wanted to do.

And he was wildly successful.

His Background

When I met him, he had been living there for two years.  In that time, he purchased four houses with cash, remodeled them mostly on his own, and rented them out providing substantial cash flow each month (especially without a mortgage!)

He bought in the range of $25-35k, putting a few thousand and sweat equity into them, then renting them out for around $750 a month.  The numbers were REALLY working for him.

If you apply the 1% rule to these properties, a house that totaled $40k in cost to rent out should pull in $40o to be “worth it.”

These were almost double that.

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The Flippin’ Truth about Flippin’

I’m going to tell you what I’ve learned flipping six houses in D.C., all while living overseas.

Next, I’ll share exactly how much I made (and lost) on each of these flips.

I’ll close out with my recommendations on flipping as an investment strategy.

          Let’s get started!!!

So I flipped a house in D.C.

It was the subject of my last post.  I detailed how I go from no clue about flipping to trying it once.

Now I have a small clue.

          How did I do?

I cashed a big, fat check for:

$16,908

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The Best Damn Finance Book I’ve Ever Read

First, a little about me and my website:

  • I paid off $32,000 in student loans in a year.
  • Paid off our $280k mortgage in 6 years.
  • Flipped several houses in Washington D.C. to help me build income for real estate investing.
  • Purchased twenty rental properties with cash.

My website is all about helping others to get out of debt and create passive income from real estate.

But you can not mess with real estate until your finances are straight.  You gotta go get Jim’s book! (or at least read his website)

cover graphic

“Spend less than you earn–invest the surplus–avoid debt”

The central theme of Jim’s website and book.

It’s hard to believe the Path to Wealth can be this simple.

But in his book, you’ll see it is.

I got to admit. I love this book! My review is going to sound a little over the top, but it’s a damn good book!

I’ve been big into finance and real estate books my whole life. I’ve read them all.

stack of books

Ok, way more than this!

About a year ago, I stumbled across financial independence and early retirement websites and it opened up an entire new world to me!

I began seeking out all the top blogs in this field, and one that kept coming up was jlcollins.com.

To put it bluntly, his Stock Series was the most comprehensive explanation of investments I have ever read. There is so much noise and confusion out there in the finance world, and he slices right through it and tells you what’s really important.

He makes it easy to understand the complex world of money. His approach to investment is so simple, it’s alarming!

I followed his blog closely and eagerly awaited new posts.

When he sent out an email explaining he was writing a book and soliciting help from his readers for proofreading, I jumped at the chance!!

The only reason I volunteered was because I wanted to read the book ASAP!!!

As luck would have it, I was selected to be a proofreader, and had the opportunity to read the book before publication. (Actually, I’ve read it about 20 times. Occupational hazard!)

The book is exactly what I was hoping it would be.

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