As we enter this holiday season, and this time of giving Thanks, we are reminded of the “power of appreciation”. If you truly want to bring into your life everything that you desire, then start with appreciating all that you have now. Here’s how it works – you bring into your life whatever it is that you focus your thoughts upon. So, if you focus on all the lack in your life, you get more lack. But if you focus appreciation on all that you have, you get more of what you want.
We’re often asked: "But how can I appreciate not having something?" Our response is that your desires are the life-blood running through your veins. You always have new desires. You’ll never fulfill them all, because no sooner is one fulfilled that ten more are born. It’s what keeps you alive. Can you imagine living each day with the thought that you have already fulfilled every desire? That there is nothing else to achieve? Of course not. There would be no purpose to life. So desires are not the lack of something; they are the promise of what is yet to come. How exciting! All that you want - you’ll have.
Knowing that there is no lack – only desires yet to be fulfilled, you can relax, appreciate, and enjoy all that is already in your life. If you want to be happier, and fulfill your desires even quicker, try this exercise: take a few moments several times a every day to notice and appreciate some of the things in your life that you would miss if they were no longer in your experience. For instance, you might appreciate the home in which you live, the electricity which powers your house, the softness of your bed, the laugh of your loved ones, the sounds around you, the multitude of colors, the smell of Thanksgiving and Christmas dinner cooking, the PC on which you’re working. When you realize the importance these experiences play in your life, and the void their absence would make, it is easy to feel appreciative of all that you have.
Don’t mistake that we’re saying settle for what you have. To the contrary, we’re saying enjoy what you have, while fully anticipating the fulfillment of all you desire. The point is to fully appreciate everything you have, which will lead to experiencing everything you want.
Sunday, June 14, 2009
The Only Three Reasons To Be In Real Estate
There are only three reasons to be in Real Estate. If any one tells you any differently, then they don’t understand real estate investing.
The three reasons to be in real estate are Cash Now, Cash Monthly and Cash Later. Let’s take a closer look at each one of them.
Cash Now. Let’s face it, we need money to live and pay the bills. With out this cash we would have to go back and work for “the man”. If you’re not a full time investor, this is a reason why a lot of people are afraid to quit their job and work for themselves.
Cash now is the money that you get from “Flipping” properties. Whether it be from Wholesaling, Rehabbing, Subject To, Lease Option or Pre-Foreclosures we need the cash from each of these investing models to put food on our tables and clothes on ours (and our children’s) backs.
Cash Now is good. Having rehabbed over 450 properties in just a seven year period, (I use each of the above methods to acquire my properties) I’m used to those big checks coming in. But then I realized that if I didn’t continue to get Cash Now through flipping properties, then I would not have any cash coming in at all. Which meant I was not as free as I thought I was.
So I changed my strategy. While those big rehab checks were coming in, I put some of money in my account so that I could live, and then I started to put the rest of the money in Apartment Houses.
Owning smaller Apartment Houses is virtually the same as investing in single family houses. If you’re doing your marketing, you run across Apartment Houses all the time. If you are like most investors, you probably just ignore them and continue to search for the next single family deal.
Apartment houses will give you greater Cash Monthly. In just a short time, you can build yourself a substantial passive monthly income just from your apartment houses. That’s how Robert Kyosaki does it in Rich Dad/Poor Dad.
Cash monthly will give you freedom. Freedoms to do what ever you want when you want. I’m not telling you to stop buying and flipping single family houses, that’s Cash Now. I’m saying to get Cash Monthly (apartment houses), use some of your Cash Now (single family flips) and buy yourself some freedom!
Pretty soon you will be building an empire. You’ll have enough Cash Monthly to be able to take a month off in the summer or what ever else your freedom desires! If you were only flipping single family houses and you took a month off in the summer, you wouldn’t have any income coming in.
Do You See How Cash Monthly Will Give You Freedom?
You can get some Cash Monthly from owning single family houses long term but not as much and not as fast as owning smaller apartment houses. And it’s a lot riskier to have all of your money in single family houses.
What happens if you lose your tenant in your single family house? You loose all of your income. You’re going to have to dip into your own savings to pay the mortgage until you get a new tenant. That hurts!
If you loose a tenant in a three family house, you’ve only lost one third of your income. The other two floors will cover your mortgage until you get another tenant. That’s just one of many reasons that owning small apartment houses is smarter that owning single family houses, but that’s another article all together.
Now that you have Cash Now and Cash Monthly, Cash Later takes care of itself. It comes when you sell, exchange or refinance those apartment houses somewhere in the future.
You see, with apartment houses you have an appreciating asset. No only is it appreciating every month but your tenants are paying off your mortgage. So between the appreciation and the mortgage pay down, your equity just gets bigger and bigger!
You can sell your property and get a boat load of cash. If it’s creating a lot of Cash Monthly, you may want to keep those checks coming in. If so then you will want refinance to get you cash out.
Not 100% of your cash, which will only get you in trouble. You should take out about 75% of your cash leaving 25% equity in the building, that way if there is a down turn in the market, your protected. Not only that, at 75%, you should still have a decent positive cash flow. Did you know that you do not pay tax on any of the money that you take out during a refinance?
Now take that money and go buy some more apartment houses and get some more Cash Monthly! In doing so, these apartment houses will start appreciating and the tenants will begin to pay down your mortgage for you. You’ve just increased your net worth because you have increasing equity in one or two more buildings instead of the building that you started with.
Can you see how your empire is being created? Can you see how it can be created in a short time? Holding single family houses will make you money. Holding apartment houses will make filthy stinking rich! Which do you prefer?
The three reasons to be in real estate are Cash Now, Cash Monthly and Cash Later. Let’s take a closer look at each one of them.
Cash Now. Let’s face it, we need money to live and pay the bills. With out this cash we would have to go back and work for “the man”. If you’re not a full time investor, this is a reason why a lot of people are afraid to quit their job and work for themselves.
Cash now is the money that you get from “Flipping” properties. Whether it be from Wholesaling, Rehabbing, Subject To, Lease Option or Pre-Foreclosures we need the cash from each of these investing models to put food on our tables and clothes on ours (and our children’s) backs.
Cash Now is good. Having rehabbed over 450 properties in just a seven year period, (I use each of the above methods to acquire my properties) I’m used to those big checks coming in. But then I realized that if I didn’t continue to get Cash Now through flipping properties, then I would not have any cash coming in at all. Which meant I was not as free as I thought I was.
So I changed my strategy. While those big rehab checks were coming in, I put some of money in my account so that I could live, and then I started to put the rest of the money in Apartment Houses.
Owning smaller Apartment Houses is virtually the same as investing in single family houses. If you’re doing your marketing, you run across Apartment Houses all the time. If you are like most investors, you probably just ignore them and continue to search for the next single family deal.
Apartment houses will give you greater Cash Monthly. In just a short time, you can build yourself a substantial passive monthly income just from your apartment houses. That’s how Robert Kyosaki does it in Rich Dad/Poor Dad.
Cash monthly will give you freedom. Freedoms to do what ever you want when you want. I’m not telling you to stop buying and flipping single family houses, that’s Cash Now. I’m saying to get Cash Monthly (apartment houses), use some of your Cash Now (single family flips) and buy yourself some freedom!
Pretty soon you will be building an empire. You’ll have enough Cash Monthly to be able to take a month off in the summer or what ever else your freedom desires! If you were only flipping single family houses and you took a month off in the summer, you wouldn’t have any income coming in.
Do You See How Cash Monthly Will Give You Freedom?
You can get some Cash Monthly from owning single family houses long term but not as much and not as fast as owning smaller apartment houses. And it’s a lot riskier to have all of your money in single family houses.
What happens if you lose your tenant in your single family house? You loose all of your income. You’re going to have to dip into your own savings to pay the mortgage until you get a new tenant. That hurts!
If you loose a tenant in a three family house, you’ve only lost one third of your income. The other two floors will cover your mortgage until you get another tenant. That’s just one of many reasons that owning small apartment houses is smarter that owning single family houses, but that’s another article all together.
Now that you have Cash Now and Cash Monthly, Cash Later takes care of itself. It comes when you sell, exchange or refinance those apartment houses somewhere in the future.
You see, with apartment houses you have an appreciating asset. No only is it appreciating every month but your tenants are paying off your mortgage. So between the appreciation and the mortgage pay down, your equity just gets bigger and bigger!
You can sell your property and get a boat load of cash. If it’s creating a lot of Cash Monthly, you may want to keep those checks coming in. If so then you will want refinance to get you cash out.
Not 100% of your cash, which will only get you in trouble. You should take out about 75% of your cash leaving 25% equity in the building, that way if there is a down turn in the market, your protected. Not only that, at 75%, you should still have a decent positive cash flow. Did you know that you do not pay tax on any of the money that you take out during a refinance?
Now take that money and go buy some more apartment houses and get some more Cash Monthly! In doing so, these apartment houses will start appreciating and the tenants will begin to pay down your mortgage for you. You’ve just increased your net worth because you have increasing equity in one or two more buildings instead of the building that you started with.
Can you see how your empire is being created? Can you see how it can be created in a short time? Holding single family houses will make you money. Holding apartment houses will make filthy stinking rich! Which do you prefer?
The Importance of Knowing Your Local Real Estate Investing Market
How well do you know your local real estate market? The answer to that question will have a lot to do with whether real estate investing provides a lucrative future for you and your family or rueful memories of what might have been.
By knowing your local real estate investing market, you’re able to keep your finger on the pulse of your local community and to stay abreast of changes in trends, sales prices and rental rates. Knowing immediately about these changes is critical to your investing future. Here’s how each of these three areas will affect your future:
Trends – National media outlets report gloom and doom outlooks for real estate, but even in the most depressed real estate market there are isolated pockets and neighborhoods with property values that are increasing. If you don't know your local real estate market, you're simply taking a wild guess as to value. When negotiating with a homeowner, it's imperative that you know what the property is worth. Otherwise, you run the risk of overpaying or offering too little, which could offend the property owner and get you kicked to the curb with your hat in your hand.
Another reason you want to know your local real estate market is because certain areas within a given community make better investments than others. If you invest your hard-earned dollars in an area that is declining, property values could fall and some or all of your investment could be at risk. By keeping an eye on trends within your local real estate market, you can more readily take advantage of opportunities to get in on the ground floor of an investment and ride the wave of property appreciation, which will have a positive impact on your bank account.
Sales prices - How much is property worth in your local real estate market? Do you have a clue? You need to be cognizant of local sales prices -- especially now -- because property values can change very rapidly. In today's volatile investing environment, it's not unusual for the value of a property to fluctuate by $10,000-$15,000 in a given month. If you have a property that you're considering selling, you can gain or lose a tremendous amount of money in no time.
Rental rates - Current knowledge of your local investing climate is imperative when determining what rental rates are in a particular neighborhood. If you do a cash flow analysis on a property and you assume that it will rent for $1,500 per month and in reality it will only generate $1,100, you could have a problem, especially if you were anticipating a positive monthly cash flow of $200. If the rent a property can command is $400 less than you anticipated, you would have a monthly loss of $200. Negative cash flow sets the stage for a constant drain on your financial resources, and could eventually cause you to rethink your commitment to real estate investing.
Today's real estate investing climate makes accurate and timely information critical to your success. If you don't know your local real estate market, you could be in serious trouble. An excellent way of developing a proper and accurate knowledge of your local market is by trailing an experienced mentor who knows what he or she is doing. In addition to teaching you how to analyze current market conditions, you'll also be able to better understand what to look for in your local real estate market.
Real estate investing is a great way to expand your financial opportunity, but a failure to know and understand all of the variables within your local market can very quickly erode opportunity. Learn your local real estate market and make this your best year ever!
By knowing your local real estate investing market, you’re able to keep your finger on the pulse of your local community and to stay abreast of changes in trends, sales prices and rental rates. Knowing immediately about these changes is critical to your investing future. Here’s how each of these three areas will affect your future:
Trends – National media outlets report gloom and doom outlooks for real estate, but even in the most depressed real estate market there are isolated pockets and neighborhoods with property values that are increasing. If you don't know your local real estate market, you're simply taking a wild guess as to value. When negotiating with a homeowner, it's imperative that you know what the property is worth. Otherwise, you run the risk of overpaying or offering too little, which could offend the property owner and get you kicked to the curb with your hat in your hand.
Another reason you want to know your local real estate market is because certain areas within a given community make better investments than others. If you invest your hard-earned dollars in an area that is declining, property values could fall and some or all of your investment could be at risk. By keeping an eye on trends within your local real estate market, you can more readily take advantage of opportunities to get in on the ground floor of an investment and ride the wave of property appreciation, which will have a positive impact on your bank account.
Sales prices - How much is property worth in your local real estate market? Do you have a clue? You need to be cognizant of local sales prices -- especially now -- because property values can change very rapidly. In today's volatile investing environment, it's not unusual for the value of a property to fluctuate by $10,000-$15,000 in a given month. If you have a property that you're considering selling, you can gain or lose a tremendous amount of money in no time.
Rental rates - Current knowledge of your local investing climate is imperative when determining what rental rates are in a particular neighborhood. If you do a cash flow analysis on a property and you assume that it will rent for $1,500 per month and in reality it will only generate $1,100, you could have a problem, especially if you were anticipating a positive monthly cash flow of $200. If the rent a property can command is $400 less than you anticipated, you would have a monthly loss of $200. Negative cash flow sets the stage for a constant drain on your financial resources, and could eventually cause you to rethink your commitment to real estate investing.
Today's real estate investing climate makes accurate and timely information critical to your success. If you don't know your local real estate market, you could be in serious trouble. An excellent way of developing a proper and accurate knowledge of your local market is by trailing an experienced mentor who knows what he or she is doing. In addition to teaching you how to analyze current market conditions, you'll also be able to better understand what to look for in your local real estate market.
Real estate investing is a great way to expand your financial opportunity, but a failure to know and understand all of the variables within your local market can very quickly erode opportunity. Learn your local real estate market and make this your best year ever!
The Ethical Real Estate Investor
Many people have a very 19th century view of real estate investors. They think that we are modern-day "robber barons" who prey upon distressed or ignorant people, take advantage of them, and laugh all the way to the bank. The truly sad thing is that some real estate investors think this of themselves, and think that in order to get ahead, they must behave unethically. The truth is that, in the long run, it pays to be a scrupulous investor. Do you really expect referrals if you "take advantage" of people? Of course not. Envision yourself as a problem solver and your business will be much more successful - and you'll be able to sleep at night.
Help People With Their Problems
PT Barnum said, "There's a sucker born every minute". But in today's world, "suckers" are a little harder to find. The Internet makes knowledge much more widely available, and people are generally more savvy then they're given credit for. In fact, ignorance is much more likely to err on the side of overpricing a home than underpricing it, and besides, do you really want to make your living by taking advantage of people? Doing so will likely come back to haunt you. Instead, you should focus on finding people with problems. It's your job to help them.
There are thousands of properties across the United States that people desperately want - need - to unload, and they're willing to do so at a discount and with favorable terms. Perhaps the owners have been involved in a divorce, received a job transfer, or they're under a tremendous amount of financial distress. Don't think of yourself as "taking advantage" of the situation. Think of yourself as extending a helping hand. The sellers will be able to detect the difference in your attitude and will respond differently to you. And after all, they need to sell. It's hurting them each day that their home is on the market. If you come along and are able to negotiate mutually agreeable terms, then it is a win-win situation.
Be a Full-Time Problem Solver
The surest path to real estate investment success is to focus solely on helping troubled people solve their problems. Many distressed sellers are embarrassed about their situation, or don't want to tip their hand for fear that you'll take advantage of them. So simply ask the following questions of anyone you find through a classified real estate ad. Why are you selling? When do you need to sell by? What are your plans after you sell? What is the minimum amount of cash you need in your pocket as a result of this deal? What do you plan to do with the proceeds from the sale of your home? If we were to close within a week and I paid cash for the full purchase price, what's the best deal you could give me?
Do not act like an interrogator. Strike up a conversational tone. Truly desperate sellers will be anxious to talk to you. Keep the conversation moving and get all of the information you need. Casually ask the same question in different forms more than once to make sure their story remains consistent. As previously stated, many distressed sellers are embarrassed of their situation. Do your best to make them feel at ease.
You Can't Solve Everyone's'S Problems
There's two requirements for every deal I do with a motivated seller:
1. I make money
2. I solve the seller's problem
If I can't do both, I won't do the deal. This is a good rule to live by, since doing one without the other is not good for your business. If you help the seller and don't make money, you are working for charity (which is fine, but keep it separate from your business). If you make money and don't help the seller, you are a slimeball! Don't waste time on the phone with people who don't need your help. Unmotivated sellers take time away from your real vocation - lending a hand to those who need it. Stick to your principles and you will not only be conducting yourself like a Good Samaritan, you will be building a real estate investment empire in the process.
Help People With Their Problems
PT Barnum said, "There's a sucker born every minute". But in today's world, "suckers" are a little harder to find. The Internet makes knowledge much more widely available, and people are generally more savvy then they're given credit for. In fact, ignorance is much more likely to err on the side of overpricing a home than underpricing it, and besides, do you really want to make your living by taking advantage of people? Doing so will likely come back to haunt you. Instead, you should focus on finding people with problems. It's your job to help them.
There are thousands of properties across the United States that people desperately want - need - to unload, and they're willing to do so at a discount and with favorable terms. Perhaps the owners have been involved in a divorce, received a job transfer, or they're under a tremendous amount of financial distress. Don't think of yourself as "taking advantage" of the situation. Think of yourself as extending a helping hand. The sellers will be able to detect the difference in your attitude and will respond differently to you. And after all, they need to sell. It's hurting them each day that their home is on the market. If you come along and are able to negotiate mutually agreeable terms, then it is a win-win situation.
Be a Full-Time Problem Solver
The surest path to real estate investment success is to focus solely on helping troubled people solve their problems. Many distressed sellers are embarrassed about their situation, or don't want to tip their hand for fear that you'll take advantage of them. So simply ask the following questions of anyone you find through a classified real estate ad. Why are you selling? When do you need to sell by? What are your plans after you sell? What is the minimum amount of cash you need in your pocket as a result of this deal? What do you plan to do with the proceeds from the sale of your home? If we were to close within a week and I paid cash for the full purchase price, what's the best deal you could give me?
Do not act like an interrogator. Strike up a conversational tone. Truly desperate sellers will be anxious to talk to you. Keep the conversation moving and get all of the information you need. Casually ask the same question in different forms more than once to make sure their story remains consistent. As previously stated, many distressed sellers are embarrassed of their situation. Do your best to make them feel at ease.
You Can't Solve Everyone's'S Problems
There's two requirements for every deal I do with a motivated seller:
1. I make money
2. I solve the seller's problem
If I can't do both, I won't do the deal. This is a good rule to live by, since doing one without the other is not good for your business. If you help the seller and don't make money, you are working for charity (which is fine, but keep it separate from your business). If you make money and don't help the seller, you are a slimeball! Don't waste time on the phone with people who don't need your help. Unmotivated sellers take time away from your real vocation - lending a hand to those who need it. Stick to your principles and you will not only be conducting yourself like a Good Samaritan, you will be building a real estate investment empire in the process.
The Choice Is Yours
I came across some interesting figures put out by the Bureau of Statistics and the IRS. Thought maybe some of you would find them interesting, too. Twelve percent of Americans over sixty-five are living, or trying to live, on incomes of less than $5,000. Only four percent of people over sixty-five have annual incomes of $30,000 or more, and only three percent have incomes over $50,000. The average annual salary of a full-time worker with a high school education, is $24,180 ($11.63 hr). For a full-time worker without a high school education, it's $16,848 ($8.10 hr.) It goes on to say that fifty-eight of the working people have taxable incomes of less than $25,000, and only two percent have taxable incomes of $100,000 or more. How could only two percent be making $100,000 or more, while the vast majority is making only $24,000?
It's All in the Choices We Make
The only logical explanation has to be education and knowledge (or maybe I should say the lack of education and lack of knowledge), and the choices we make as we go through life. If you choose to be "average" (and it's your choice), then you will get average results. If "average" is your comfort zone and you're happy living in that zone, good luck. If you're happy working your job, and you're earning all the money you need, congratulations. If your job will provide you with the kind of retirement income and security you want, congratulations again. If not, then you obviously have to get out of your comfort zone, make the necessary effort and commitment and do something the average person doesn't do. Approximately one million workers are being "downsized" (a polite way of saying, "You're fired") each year. For years, many of these people were happy in their comfort zone and failed to learn how to do anymore than what their jobs required. Their choice was to continue doing the same thing they had always done, even though they had the choice and the chance to learn to do better.
Recently, on the evening news, there was a story about a woman being "downsized" after twenty-seven years on the same job. Her job was inspecting TV's coming off the assembly line. For twenty-seven years she was in her comfort zone and did nothing to improve her knowledge or education and learn to do anything different. Is there a lesson to be learned here? As the saying goes "If you continue doing the same thing you've always done, you will continue getting the same thing you've always gotten." (Unless you're "downsized.")
Education and Knowledge
Over the years, Joanne and I have spent thousands and thousands of dollars going to many seminars. Not that we could always afford to go, but rather because we couldn't afford not to go. We had a choice, and our choice was to spend the money to get an education. Being in the two percent bracket is much better than being "average" and in the fifty-eight percent bracket. And we don't have to worry about being "downsized." Education and knowledge doesn't get downsized. (But according to some of our friends, we just got "lucky.") I've heard it said many times that you will pay for your education at some point in your life. And you get to make the choice when you will pay. You can pay when you are young, healthy, and able to work, or you can pay when you are old, sick, broke, and unable to work. The choice is yours. When do you choose to pay for yours?
How Much Does it Cost to Remain Ignorant?
I gave a seminar several years ago, and whenever I think of that seminar, two men instantly come to mind. One was a plumber that called saying he wouldn't be able to attend the seminar, but would like to stop by and buy my books, which he did. He said he sure would like to attend, but he had a plumbing job he just had to do that day. (I never heard from him again.) The other man was about ready to retire from the Marines after twenty-eight years service. He called me about two months after the seminar saying he had done two mobile home deals. He "thought" he did okay, but he didn't really know because he didn't know how to use a calculator. He wanted me to give him a crash course in using one.
After thirty minutes or so on the phone, he got the hang of it and punched in the numbers on one of his deals. In fact, he punched the numbers in several times; he didn't believe the answer he kept getting. After I agreed with his numbers, there was a long pause. Finally he said, "My God, Lonnie. This stuff is scary." The Marine paid $295 to attend that seminar to learn how to make his money do the work, so he wouldn't have to. He learned how to make more money on one deal than he got from a month's pay being a Marine. Now, can you tell me how much it cost that plumber for not attending the seminar? Let's suppose he made $500 on that plumbing job that he just had to do; but how much did he lose by not learning what the Marine learned--making his money do the work? The next day, and probably every day after, he has to do another plumbing job to get a check. The Marine can do a simple mobile home deal and obligate somebody else (maybe a plumber) to send him a check for years.
What's Your Choice?
The records show that ninety-five of the people who reach retirement age will need some kind of help or a part time job in order to live a decent life. Those people had the same opportunities and the same choices to make as we did. They just made the wrong choices. They chose to be "average" all their life. I may be getting old and lazy, but I'm still learning. You might finish school, but you never finish your education. Also, we'll get the chance to spend time with some very good friends and meet some nice people we've never met. You can't put a price on that. So, what will your choice be...the two percent bracket or the fifty-eight percent bracket? When do you chose to pay for your education, now or later? Are you willing to settle for being "average"? The choice is yours, and I hope you make the right one because you will have to live with the results of your choice. The best investment you can make is in yourself.
It's All in the Choices We Make
The only logical explanation has to be education and knowledge (or maybe I should say the lack of education and lack of knowledge), and the choices we make as we go through life. If you choose to be "average" (and it's your choice), then you will get average results. If "average" is your comfort zone and you're happy living in that zone, good luck. If you're happy working your job, and you're earning all the money you need, congratulations. If your job will provide you with the kind of retirement income and security you want, congratulations again. If not, then you obviously have to get out of your comfort zone, make the necessary effort and commitment and do something the average person doesn't do. Approximately one million workers are being "downsized" (a polite way of saying, "You're fired") each year. For years, many of these people were happy in their comfort zone and failed to learn how to do anymore than what their jobs required. Their choice was to continue doing the same thing they had always done, even though they had the choice and the chance to learn to do better.
Recently, on the evening news, there was a story about a woman being "downsized" after twenty-seven years on the same job. Her job was inspecting TV's coming off the assembly line. For twenty-seven years she was in her comfort zone and did nothing to improve her knowledge or education and learn to do anything different. Is there a lesson to be learned here? As the saying goes "If you continue doing the same thing you've always done, you will continue getting the same thing you've always gotten." (Unless you're "downsized.")
Education and Knowledge
Over the years, Joanne and I have spent thousands and thousands of dollars going to many seminars. Not that we could always afford to go, but rather because we couldn't afford not to go. We had a choice, and our choice was to spend the money to get an education. Being in the two percent bracket is much better than being "average" and in the fifty-eight percent bracket. And we don't have to worry about being "downsized." Education and knowledge doesn't get downsized. (But according to some of our friends, we just got "lucky.") I've heard it said many times that you will pay for your education at some point in your life. And you get to make the choice when you will pay. You can pay when you are young, healthy, and able to work, or you can pay when you are old, sick, broke, and unable to work. The choice is yours. When do you choose to pay for yours?
How Much Does it Cost to Remain Ignorant?
I gave a seminar several years ago, and whenever I think of that seminar, two men instantly come to mind. One was a plumber that called saying he wouldn't be able to attend the seminar, but would like to stop by and buy my books, which he did. He said he sure would like to attend, but he had a plumbing job he just had to do that day. (I never heard from him again.) The other man was about ready to retire from the Marines after twenty-eight years service. He called me about two months after the seminar saying he had done two mobile home deals. He "thought" he did okay, but he didn't really know because he didn't know how to use a calculator. He wanted me to give him a crash course in using one.
After thirty minutes or so on the phone, he got the hang of it and punched in the numbers on one of his deals. In fact, he punched the numbers in several times; he didn't believe the answer he kept getting. After I agreed with his numbers, there was a long pause. Finally he said, "My God, Lonnie. This stuff is scary." The Marine paid $295 to attend that seminar to learn how to make his money do the work, so he wouldn't have to. He learned how to make more money on one deal than he got from a month's pay being a Marine. Now, can you tell me how much it cost that plumber for not attending the seminar? Let's suppose he made $500 on that plumbing job that he just had to do; but how much did he lose by not learning what the Marine learned--making his money do the work? The next day, and probably every day after, he has to do another plumbing job to get a check. The Marine can do a simple mobile home deal and obligate somebody else (maybe a plumber) to send him a check for years.
What's Your Choice?
The records show that ninety-five of the people who reach retirement age will need some kind of help or a part time job in order to live a decent life. Those people had the same opportunities and the same choices to make as we did. They just made the wrong choices. They chose to be "average" all their life. I may be getting old and lazy, but I'm still learning. You might finish school, but you never finish your education. Also, we'll get the chance to spend time with some very good friends and meet some nice people we've never met. You can't put a price on that. So, what will your choice be...the two percent bracket or the fifty-eight percent bracket? When do you chose to pay for your education, now or later? Are you willing to settle for being "average"? The choice is yours, and I hope you make the right one because you will have to live with the results of your choice. The best investment you can make is in yourself.
The Bona Fide Purchaser
You get a deed from a seller in foreclosure. Before you can record the deed, the seller gives a second deed to your competitor. The competitor records his deed at the country first. Who wins? This is an interesting issue that most investors don't seem to grasp. First, understand there are two issues here: one is ownership, the other is notice. The recording of a deed is NOT necessary to transfer ownership of real estate. The simple act of executing a deed and delivering it to the buyer passes ownership.
The recording system gives constructive notice to the world of the transfer of title to property. Recording simply involves bringing the original deed to the local county courthouse or clerk and recorder’s office. The original deed is copied onto computer or microfiche, then returned to the new owner. In addition, the county tax assessor usually requires the filing of a “real property transfer declaration,” which contains some basic information about the sale.
There is a filing fee for the deed, which runs about $10 per page. In addition, the county, city and/or state may assess a transfer tax based on the value of the property or the selling price. This makes recording a deed an expensive proposition in states that charge 2% or more of the purchase price. If you are taking a deed in anticipation of doing a short sale or other deal that has a small chance of success, keeping a deed in your file cabinet until the last minute may be the only option. Just understand that if you don't record, you run the risk of another investor beating you to the punch.
Every state has a recording statute which dictates who wins in a battle over ownership in the case of a "double deed" scenario as described above. Most states follow a “race-notice” rule, which means that the first person to record his document, wins, so long as he is a bona fide purchaser. A bona fide purchaser is one who:
• Received title and recorded in good faith, and
• Paid value, and
• Had no notice of a prior transfer
In a foreclosure situation, an investor often gets a quitclaim deed for free. So, if a subsequent purchaser gets a deed for nothing, then records first, he is NOT a bona fide purchaser. Also, if he had notice of a prior transfer, even unrecorded, he is not a bona fide purchaser. If he acted in bad faith, he is not a bona fide purchaser. In short, the BFP rule protects an innocent buyer who really did lay out money and get a deed in good faith. Foreclosure investors often act in bad faith, convincing a seller to give a deed to a property that was already transferred.
The practical side of the issue, however, is proving your case. If you get a deed from a seller, then your competitor gets a deed and records it and is not a bona fide purchaser, what do you do? The bad news is that you have to hire a lawyer to commence a lawsuit to contest his title. This may not be worth the effort if there isn't much profit in the deal. It may make sense to simply record a lis pendens to hold up the re-sale of the property by the other investor, then settle out of court. Of course, you should consult with an attorney before proceeding if you are in a situation where you are uncertain of your legal rights.
The recording system gives constructive notice to the world of the transfer of title to property. Recording simply involves bringing the original deed to the local county courthouse or clerk and recorder’s office. The original deed is copied onto computer or microfiche, then returned to the new owner. In addition, the county tax assessor usually requires the filing of a “real property transfer declaration,” which contains some basic information about the sale.
There is a filing fee for the deed, which runs about $10 per page. In addition, the county, city and/or state may assess a transfer tax based on the value of the property or the selling price. This makes recording a deed an expensive proposition in states that charge 2% or more of the purchase price. If you are taking a deed in anticipation of doing a short sale or other deal that has a small chance of success, keeping a deed in your file cabinet until the last minute may be the only option. Just understand that if you don't record, you run the risk of another investor beating you to the punch.
Every state has a recording statute which dictates who wins in a battle over ownership in the case of a "double deed" scenario as described above. Most states follow a “race-notice” rule, which means that the first person to record his document, wins, so long as he is a bona fide purchaser. A bona fide purchaser is one who:
• Received title and recorded in good faith, and
• Paid value, and
• Had no notice of a prior transfer
In a foreclosure situation, an investor often gets a quitclaim deed for free. So, if a subsequent purchaser gets a deed for nothing, then records first, he is NOT a bona fide purchaser. Also, if he had notice of a prior transfer, even unrecorded, he is not a bona fide purchaser. If he acted in bad faith, he is not a bona fide purchaser. In short, the BFP rule protects an innocent buyer who really did lay out money and get a deed in good faith. Foreclosure investors often act in bad faith, convincing a seller to give a deed to a property that was already transferred.
The practical side of the issue, however, is proving your case. If you get a deed from a seller, then your competitor gets a deed and records it and is not a bona fide purchaser, what do you do? The bad news is that you have to hire a lawyer to commence a lawsuit to contest his title. This may not be worth the effort if there isn't much profit in the deal. It may make sense to simply record a lis pendens to hold up the re-sale of the property by the other investor, then settle out of court. Of course, you should consult with an attorney before proceeding if you are in a situation where you are uncertain of your legal rights.
The 3 Easiest Ways to Make Money In Real Estate
I once asked my handyman what was the easiest money he had ever made in his life. His answer was that although he had been in many small businesses and had done countless handyman/contracting jobs over the years, the easiest money he made was in roofing. He explained how that roofing work is higher risk work that many folks dislike and fear doing, therefore the mark-up is tremendous.
He especially likes smaller flat or semi-pitched roofs. For about $250 in materials he could charge $1,000 for a roof which he could install in a day. Larger, shingled roofs have even better mark-ups, although more time consuming.
I then began asking myself the same question. What was the easiest money I had ever made in business or investing?
There are 3 ways or modes (versus tools and techniques) that came to my mind quickly.
1. By far the easiest money I have ever made was from real estate appreciation. I have been fortunate to have been in the game long enough to ride two giant waves of appreciation and inflation. The price runup that occurred in the mid to late '80s, and the current bubble we have going now. Any dummy can make money in real estate during strong seller's markets. It makes you feel smart, but the main smart thing you really did to achieve it was to be smart enough to buy it.
2. Next, buying discounted property through patient tracking and buying of properties is the next easiest money I have made. Like when I bought a $20,000 house for $2,800. Nuts, but true. Or, like the $20,000 purchase with 100% owner financing which was resold via lease option for $39,000.
Thoughtful and determined deal making is the second easiest way to make money in real estate. The cliche is true - you make your money when you buy. One caveat: Lower-income grade deals must be outrageously benefically-priced to be worth the risk. Solid, middle-grade properties need not be "steals" to be good buys. A few years ago, I bought 2 houses from my attorney at decent to fair prices, but they were in excellent areas and have ALL brick exteriors with new roofs. They weren't steals, but they have appreciated by $20,000 each since acquisition.
3. Lastly. Rents. This takes time as I mention over and over, but once properties become seasoned and rents rise and debt drop off - rents are easy money. The problem - few have the future sight to maintain their hand in the game. It is a wonderful business to learn. Most landlords don't work very hard.
4. Rehabs and Interest Profits. Yes, these could be debated as easier than rents, but without rents you can't get number 1 - Appreciation and Price Inflation from governmental debt-driven inflation. And, you pay a lot more taxes, therefore limiting your net worth growth.
He especially likes smaller flat or semi-pitched roofs. For about $250 in materials he could charge $1,000 for a roof which he could install in a day. Larger, shingled roofs have even better mark-ups, although more time consuming.
I then began asking myself the same question. What was the easiest money I had ever made in business or investing?
There are 3 ways or modes (versus tools and techniques) that came to my mind quickly.
1. By far the easiest money I have ever made was from real estate appreciation. I have been fortunate to have been in the game long enough to ride two giant waves of appreciation and inflation. The price runup that occurred in the mid to late '80s, and the current bubble we have going now. Any dummy can make money in real estate during strong seller's markets. It makes you feel smart, but the main smart thing you really did to achieve it was to be smart enough to buy it.
2. Next, buying discounted property through patient tracking and buying of properties is the next easiest money I have made. Like when I bought a $20,000 house for $2,800. Nuts, but true. Or, like the $20,000 purchase with 100% owner financing which was resold via lease option for $39,000.
Thoughtful and determined deal making is the second easiest way to make money in real estate. The cliche is true - you make your money when you buy. One caveat: Lower-income grade deals must be outrageously benefically-priced to be worth the risk. Solid, middle-grade properties need not be "steals" to be good buys. A few years ago, I bought 2 houses from my attorney at decent to fair prices, but they were in excellent areas and have ALL brick exteriors with new roofs. They weren't steals, but they have appreciated by $20,000 each since acquisition.
3. Lastly. Rents. This takes time as I mention over and over, but once properties become seasoned and rents rise and debt drop off - rents are easy money. The problem - few have the future sight to maintain their hand in the game. It is a wonderful business to learn. Most landlords don't work very hard.
4. Rehabs and Interest Profits. Yes, these could be debated as easier than rents, but without rents you can't get number 1 - Appreciation and Price Inflation from governmental debt-driven inflation. And, you pay a lot more taxes, therefore limiting your net worth growth.
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