2 Comments

Residential

So you want to invest in Real Estate, but don’t want to work hard

Here is your answer.  Buy turn key properties.  These are properties that are originally distressed deals that have been rehabbed, have a tenant in place, and with the presale analysis will cash flow at least $300/month.  Impossible you say.  Not so.  Very possible in certain locations.  One prime location is outside of Detroit.  You can get some great deals inside of Detroit as well, and use Section 8 to rent them, but there are a number of other issues too many to mention here, that cloud the picture for inside Detroit…so I prefer the Detroit suburbs.

Why does this work so well?

Easy answer.  There are so many properties available that can be bought for so little money, in areas that are middle to higher middle areas, that the supply side is huge.  These properties can be bought and fixed up very economically.  This allows us to add a profit margin for the initial investor to make it worth their while, but not enough to make the end sale price scare off the end buyer/investor.    These houses usually are bank owned…or about to be bank owned, so the deals are great.  They also need a little, sometimes a lot, of work, but this can also be done quickly and cost effectively.  This is because the criteria to buy these homes initially says they must be in order for the deal to even be considered.

How are the deals so good if the finished product should be worth much more than the initial cost?  Every real investor knows the answer to this.  The rehab cost is the same to replace a cabinet (or Kitchen) if the cabinets(s) are cosmetically “unappealing”…or trashed.  However, to the seller, since most homeowner buyers don’t see this rational, or most likely they just don’t want to have to replace the Kitchen, they will not offer much (if anything) for the “trash house”, when a house in much better condition is right down the street, or in some cases right next door…and also for sale.

The Investor will buy these Trash Pits

The investor sees these trash pits as goldmines and will buy them up whenever they can.  The seller, after not being able to sell these houses for a long time, will lower the price to get more interest…and eventually take the offers given to them.  There are ways to convince these sellers sooner, but that is another post at another time.  The investor sees profits since their costs to rehab is the same, but the cost to buy is much lower.  This gives the deal either a higher equity when bought, a higher cash flow when rented. or both.  The problem, is most investors, after they’ve tried and failed at their rehab foray’s, would just as soon not have to do the rehab.  If you’ve ever seen the real estate investor shows on HGTV you can understand how this happens.

Equity vs. Cash Flow

So, which would you rather have, Equity or cash Flow?  I know my answer, how about you?  I sued to like Equity (as part of both) but the “trophy” that is equity is fleeting.  Just look at most homes over the past decade.  This is one of the reasons we have so many renters out there for this system.  You can’t spend Equity unless you refinance (then it isn’t equity anymore) or sell.  It just sits there losing value.  Yes, it loses value…even if you assume (not necessarily something you can count on…see last 10 years) appreciation.  The 10 years before the last decade were an anomaly.  You can’t count on appreciation at that speed and level…ever.  The facts are simple.  Your equity just site there, and most wealthy people understand the value, and need, for the speed of money.  It’s the speed that produces true wealth, not the bank account…which is what Equity in Real Estate is just another form of.

Cash Flow is current. Cash Flow is now.  Cash is power.  Cash is King.  The more you control, the more financial power you have today since you control where that cash goes next.  The idea is to build properties that generate the most cash possible.  Which leads to my next question.

Would you buy an Upside Down Cash Flowing Investment?

Now, the key word in the above question is Cash Flowing…OK, two words.  Would you buy a property that had negative equity, but cash flowed over $300/month…after taxes, insurance, mortgage, etc…?  Most real investors would, if they could get financing.  See the banks are going to want equity.  This is a problem though only if you are looking for lien-able financing.  If you use cash, or other forms of non lien-able financing (like lines of credit, etc…) this is not an issue.  Your tenant still pays of the debt for you, regardless of the equity.  The only time you worry about the equity is when:

  1. You want to refinance, which can still be done when the tenant pays off the debt.  Actually, you can refinance right away since the property will have associated debt but no lien-able debt.  Here’s one more thing to think about here.  You can get part of your cash in out this way…TAX FREE, since it comes back to you in the form of a loan.
  2. or, You want to sell.  Why would you sell…at least at this point?  You’re making positive cash flow to the tune of $300/month or more.

The System

Here are the steps of how to do this in order of appearance:

  1. Find the deals.  Make friends with Real Estate agents that have access to these deals.  I don’t mean just access to the MLI.
  2. Line up initial financing.  These deals are so cheap you can use your own money since you will get it right back when you sell (remember, this is a system to produce this deal over and over again).  This being said, how about making this offer to family and friends making “whatever they claim to be making” in their other dying investments?
  3. Find your rehab person.  Look first to other rehab investors.  They already understand the concept of time and money as it relates to this type of deal.  You may be able to get them to put up the money to buy.
  4. Line up your renter(s).  There are waiting list available for this.  This is not hard to do.
  5. Line up your end buyer.
  6. Execute the plan.
  7. After you sell the end cash flow property to the end investor/buyer, you take the money (initial investment and profits) and…
    1. Use the initial investment to pay back the financing to buy, or just pay them their ROI and use that money over again (actually, over and over again) and repeat steps 1 – 6 above..
    2. Take the profits and…well, that’s up to you.  I have my own extension of this program.

My Program

This is my program.  This is what I love to do.  This is what I teach others to do…or just provide others with…the end cash flow properties that is.  So if you are interested in buying one of these cash flow properties, with:

  1. Rehab done
  2. Tenant in place
  3. Cash Flow at $300/month
  4. and,…financing available for both front and back end
  5. …just ask.  joe@3Venterprises.ws
Advertisements

2 comments on “Residential

  1. […] also use this a great tool when I do my Real Estate Turnkey Program.  My turnkey Program is where I put a tenant in place and sell it to an end investor looking for […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: