Many books, seminars and other promote "Foreclosures", "No Money Down", and other things as a means to get wealthy quickly So the precise question is, If you studied a book/seminar/course, did you get Wealthy from Real Estate?
i read " nothing down" in college. followed the book to the letter, bought a bunch of properties with nothing down--- all worked till things started going wrong---the fledging nothing down empire collapsed, almost breaking me in the process. being a landlord is the WORST! yeah, the stuff works, but takes much more capital and know how than they tell you---some have to learn the hard way. surf ps. i do know several who became wealthy following nothing down, so maybe its just bad luck on my part....
Gotta agree with surf. Having bought several programs including those on TV and read many books I feel they make it appear a lot easier than it is. Repairs, advertising costs, vacancies, bounced checks and I can go on and on. I even have a real estate brokers license to lower my costs (buying and selling). With that being said, IF you have enough capital and your also getting tax relief for owning the properties they may be the best way to put excess capital to work. Going the no money down with a shoestring budget is a great way to get sent underwater. I sold all my rentals in a time frame window of 2-3 years ago. Will start to buy again in 12-24 months when there is blood on the streets from the selling and the sellers just want to get out.
I read that "Nothing Down" book many years ago when it first came out. I think that advising someone with little or no capital resources to buy a property with nothing down is akin to telling a shoestring trader to put everything on one or two positions. Hey, it just might work. And those are the guys who will give glowing testimonials. But we'll have to agree to ignore the overwhelming majority of adherents for whom the bell tolled (because they ran headlong into it).
They love to do those little tables showing "cashflow = rent - expenses" Of course the rent is based on 0% vacancy, so you always have "$400 monthly from a 2 family". And of course, they say to have someone manage the property but don't bother telling you that eats up all the "cashflow" and then some. And of course, the property doubles in value in 10 years, so you can retire in 5. True landlords have their share of tenants who refuse to pay, cannot pay, disappear overnight, make you go through courts to get them out, inflict damage, etc. I wonder how many of these authors actually followed their suggestion of "just aquire 3 rental properties a year for 10 years", without blowing out their brains after one too many calls from a tenant who is unhappy with the tenant upstairs (noise, etc.) and the landlord had to move an hour away for some valid reason.
You can not do it with no money down. However, if you have enough money to put 25% down, you could by at least one rental assuming the credit markets free up and you have good credit. I went to a tax sale foreclosure auction in Los Angeles, but there was nothing worth buying. Some idiot over paid for a house in Compton, guess he was too stupid to know that is gang land. Other fools bought land in the middle of the desert. Finally, the really good houses were pre-bought by the escrow companies or banks and never made it into auction. So basically a waste of time, but you got to see alot of people that wasted their money on real estate courses there. I do own property but its in another country and has been well managed by an American. It has also gone up in value.
A buddy of mine went to a seminar. Bought about a half- dozen single family homes in Detroit. Basically, you either end up with cash flow or equity, seldom both. These homes were cash flow. If people paid the rents, etc. These were homes that held their value but like all homes, they needed furnaces or water heaters replaced among reg maintenance. The maintenance ate the rent or when it didn't, the effort hardly was worth the money, because no equity was being built. I suppose their is a tax benefit on the depreciation side, but this is sometimes a give back at the time of sale. Ended up selling them all, just a wash out.
I've made a considerable amount of money over the years in real estate. Did I do it because of a seminar? No....but I did attend a few. And I would have to say that I generally learned a few things when I attended a seminar. I also read a large number of books on the subject. If I recollect, my first was a book by William Nickerson, called "How I Turned $1,000 into $1 Million" or something like that. Later he revised the title to "How I Turned $1000 into $5 Million". I highly recommend this book, although I think the book is now a collectors item. One of the first things I learned in real estate was the principal "Make your profit going into the deal". So I always bought properties for less than they were worth, that I could immediately resell if I chose to, at a profit. It's possible to do this in real estate because real estate is not an efficient market. What this in all likelihood means is that you can't go to the best neighborhood in town and buy properties that will make you money. Likewise, you can't in all likelihood buy properties that you yourself would live in, or that your wife likes. What you need to find is the guy who cannot sell his property at all, because a bank will not loan against this property as collateral. It's in terrible condition. No retail buyer will buy it because a) they can't get a loan and b) they don't have the cash to buy it and fix it up. If you do have the cash, or have a way to get the cash, then this is one way you can make alot of money in real estate. Now later, when you have rehabbed this property, you can resell it for a profit and get your money out of the deal. Or, you can refinance it, get your cash back on a tax-free basis, rent the property out, and then use the cash again to buy another property. The "deal" in real estate is almost always some combination of a property that is in terrible condition, combined with an owner who HAS to sell for some reason. I've bought properties from lenders for example that were in terrible shape, that the lender had failed to sell to retail buyers, and had become extremely motivated to get the property off their books. What they needed was a guy who had cash to buy and fix up, which was me. There only problem was that I pay extremely low prices (make my profit going into the deal). I've done these types of transactions over and over again. I bought a house a few years ago that had a dozen cats living in it for years. No one could even walk through the house it stunk so bad. I bought that one real cheap. I bought another house from a landlord whose tenant had moved in a large number of dogs, and then had left them in the house unattended while he worked. You could smell this house from the street. Houses needing foundation work, roofs, furnaces, plumbing, wiring, houses where the front porch had fallen off. Now, none of this was easy necessarily. The houses weren't growing on trees. But they were out there. Sometimes these sellers found me....I got to be known as a guy who would buy problem houses. The guy who I hired to clean out the houses and haul the trash off would refer people to me. My lawyer referred people, my accountant. Even my barber. But I only bought houses where I could make a significant profit on the deal from day one. If I could not make the deal pencil out for me, I didn't buy. I also bought a number of houses with little or no money down. Here what I did was assume the existing loan. At the time most of these loans were either FHA or VA loans that were freely assumable without qualifying. LOL. Those were the terms on FHA loans that were originated prior to 1989, and VA loans prior to 1988. Here's one example, I assumed an FHA loan of $15k on a 2 bedroom house. I gave the woman who owned it $4K cash to assume her loan, provided she would use my wife as a realtor to buy a new house that she wanted. She agreed. So the commission my wife earned was approximately $4k. So I got in the house for no cash out of pocket. The monthly payment, with taxes and insurance, was around $200 per month. I rented the house out for $525. I had the house rented for 5-6 years, during which time I paid the loan off with some option money that I gave some of the renters. Eventually, the last renter exercised his option to buy the house for $50K. I don't really remember exactly what I made on this little house, but it was alot given the fact that I had no cash in the deal at all. The real estate business is a business. You have to know how to pencil your deals out. You have to know how to pencil a rental out as to whether it will be profitable as a rental. And to operate rentals you will need to have some cash behind you because they take cash periodically to do things like replace the roof. I believe that todays market will provide some young people an opportunity to build fortunes. What you need is knowledge. I'm old enough now that I'm probably not going to buy more real estate unless I just can't resist. I'm more than occupied trading the markets...more my speed. But, I've said it before. My orignal goal was to build a stable income to supplement my trading income. It was a good idea then. It still is in my opinion. OldTrader
Old Trader, You're probably the guy I need to talk to, I have a doozy of a project I bought several years ago. Probably what I need in the way of advice is encouragement to take the first step. I've been watching the place fall down for five years, that's how bad this situation is. This is a "I love it, I hate it project"