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The Real Estate Fisherman - How small time 'mom & pop' investors can earn $100,000 annually - create financial security and a worry free retirement
Jay P. DeCima
Verlag BookBaby, 2019
ISBN 9780962102370 , 410 Seiten
Format ePUB
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The Real Estate Fisherman - How small time 'mom & pop' investors can earn $100,000 annually - create financial security and a worry free retirement
CHAPTER 1
IT’S TIME TO GO FISHIN’
Make no mistake about it – you can make a ton of money investing in real estate almost anywhere, anytime and regardless whether the economy is good or bad. Perhaps more importantly, most people can learn the skills fairly easy, and eventually earn more money than they ever dreamed possible.
Contrary to what many folks think – it doesn’t take a lot of money to get started once you learn how to invest in the right kind of properties to begin with. New investors, without a great deal of money to start, should concentrate on acquiring affordable rental properties, because they generate spendable cash flow much faster than other types of real estate!
In these chapters, I’ll share my trade secrets and show you why investing my way can be your ticket to financial freedom and a worry-free retirement if you’ll stay the course and follow my directions.
TWO IMPORTANT FREEDOMS
Successful investors should always be concerned with two different kinds of freedom! The first kind is the one most people generally talk about, financial freedom – the end of money worries, tight budgets, and trying to save enough for a rainy day. Financial freedom, for most people, means going on expensive trips, shopping wherever they please, and never running out of money. Simply stated: for the great majority of folks, it means living the life they’ve only dreamed about.
The second kind of freedom is called personal freedom, and it becomes extremely important after you’ve achieved the first kind. Money will quickly lose its insatiable appeal if there’s never any time to spend it. In fact, many people will gladly give some away in exchange for more personal freedom.
CASH FLOW KEEPS YOU GREEN AND GROWING
Over the years, investing for cash flow (my number one priority), has paid big dividends for me. Cash flow is what I always advise new investors to think about first. It’s the fundamental reason for investing in the first place. When you have cash flow, or money coming in, you are growing financially. I call this “green and growing.” When you are green and growing, all things are possible, investment-wise. Without money coming in, nothing grows; except discontentment and the constant worry about pending financial disaster!
Making cash flow a top priority is one of the most important differences between smart investing – which is what most of us believe we’re doing when we buy a property – and speculating, which most of us should definitely not be doing. I’ll be the first one to admit, smart investing may not be nearly as exciting as speculating. However, it’s much healthier financially. Folks who intend to stay in the real estate investing business for the long haul have no good reason to speculate until their bank account is large enough to sustain a heavy jolt – that means taking a loss!
TWO POWERFUL WEALTH BUILDERS
Adding value to older, rundown, multi-unit residential properties is one of the fastest, most predictable ways for new investors to achieve cash flow in the shortest amount of time. The reason for this is because these kinds of properties allow the maximum use of two powerful wealth builders – namely, leverage and compounding.
Leverage allows investors to “put up” a small amount of money (sometimes none) to purchase and control an expensive income property – for example, $30,000 to acquire a $300,000 property. In leverage lingo, that’s a 10 to 1 leverage ratio, which is considered very high.
For instance, let’s say an investor cleans, paints, and makes inexpensive improvements to his $300,000 property, so that after one year its value has increased to $390,000. In this example, he’s earned a whopping 300% return on the $30,000 he paid down. In just one short year, his initial down payment has grown to $90,000 more equity or ownership! No other kind of investing I know of can earn three times its original amount in just one year’s time! This kind of leverage, when coupled with the awesome power of compounding, can earn ordinary Mom and Pop investors extremely high profits. It’s the magic that can turn small-time, ordinary real estate investors into wealthy tycoons.
Compounding can create extraordinary wealth for investors who will buy and upgrade income-producing properties. Renting them out and allowing them to grow in value is the fastest way to build long-term wealth. Allow me to explain why: buying, improving, and keeping your property works something like an interest bearing savings account, where both the principal and interest are allowed to accumulate and keep growing bigger and bigger. The results will simply blow you away!
Let’s say for example that I convince you to put $1000 per month in a bank account that pays you 12% annual compound interest. You must promise me you’ll never withdraw or borrow any money, including interest or the principal for 20 years. Can you guess how much you’ll have earned at the end of 20 years? Would you ever imagine you’d be a millionaire? Well, almost anyway! You’d have $989,255 in your bank account.
Wow Jay, that sure sounds like an awful lot of money – but I’m just kinda thinkin’ out loud here – 20 years equals 240 months. When I multiply $1000 per month times 240, I only come up with $240,000! That’s quite a bit shy of a million bucks! Where on earth does the rest ($749,255) come from? The answer, my friends, is compound interest earnings. Compound earnings will make you filthy rich if you allow your profits to keep earning more profits.
You might be thinking – sure Jay, all this sounds just “peachy” – but where am I supposed to find $1000 every month for twenty years? You’ll be using your leveraged real estate, that’s where! Remember the $300,000 property that we increased in value to $390,000 in just one short year?
You’ll recall, we only paid $30,000 down – but after just one year of fixing, cleaning, and selected improvements, we created $90,000 worth of additional value! Had we instead invested our $30,000 down payment to earn interest income – say 12%, which would be considered very good today, our total earnings at the end of one year would be a mere $3,600. Making profitable improvements, like painting and clean-up work, earned us 300% in just one year because we forced up the value of the entire property, not just the down payment portion! This is the result of 10 to 1 leverage, or as it’s often called, forced appreciation. It’s the awesome power of leverage at work! There’s just one small catch to this forced appreciation business: you must choose the right vehicle (the right kind of property). A property that allows you to quickly jump in with a minimum down payment, and begin making profitable improvements right away! Underline this next sentence and keep repeating it to yourself! Buying the right vehicle (the right property) is the secret to success using this strategy. You simply can’t drive to the mountaintop in a regular passenger car – you need a more powerful vehicle. Properties like my Cherry Street (Chapter 2) are a perfect example of the right vehicle.
Having no money for the down payment should never stop investors who are ready and willing to substitute their personal skills, such as labor, in lieu of a cash down payment. Beginners have said to me: “Jay, I’m willing to spend everything I’ve got to become successful, but here’s my problem – I just don’t have any money right now.” My answer to them – okay, fine! How about let’s use what you have right now? Quite often, for beginners – what they have right now is time and ambition. Assuming they have both, I’ve got some wonderful news. Time and ambition, mixed with training and education, such as my home study courses, or investor training seminars, will give new investors enough knowledge to get started immediately. The opportunity is now. It’s time to fish or cut bait!
Getting started ranks at the top of my list for becoming a wealthy investor. In fact, starting is the biggest difference between investors who become financially independent – and those who only wish they were. Many folks have high hopes and the best intentions, but they always seem to be waiting for something to happen. Whatever is supposed to happen seldom does. Waiting to save up the money for a down payment is probably the world’s most overworked excuse for doing nothing. Many successful investors I know started with hardly any money at all. Instead, they use personal efforts, called sweat equity.
MULTI-UNIT PROPERTIES ARE BIG LEAGUE...
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