People often say to me, "Ty, if financing real estate is so easy, why don't you give us a few real-life examples of how it works?" Here, to answer that question, is a recent letter received from a successful user of easy real estate finance:
"I read your book 'How to Make Millions in Real Estate in Three Years Starting with No Cash' two years ago, and I started using your methods immediately. My first two deals weren't so hot (I was too eager to close and didn't do enough up-front due- diligence), but I'll make money on them all the same. These were two small commercial strips in Chicago, IL. I bought them with basically no money down (for one property the seller held paper; the other was financed through the SBA [Small Business Administration]).
"It was on my third try that I really hit a home run. This was an industrial center we acquired with a construction loan. I renovated it, and leased it up within 8 months (a year ahead of schedule). For this deal I raised most of the equity from friends and family, after negotiating the bank down to a 10% equity requirement.
"So here's where I am, barely two years after reading your book: Total cost of three properties = $4,670,000; current value, based on rent roll = $6,730,000. That's about $7-million in property value bought with only $150,000 of my own money--ALL of which I borrowed with 2nd and 3rd mortgages on my house. After paying ALL monthly mortgages AND expenses, I'm clearing about $20,000 per month. Thank you warmly for your encouragement and advice in your books, newsletter and telephone calls." By Letter from IL.
This reader built an income of some $240,000 per year for himself in just two years time! And much of his income will be sheltered by the legal and legitimate depreciation of his properties.
This is a good example of what well-planned real estate financing (borrowing) can easily do for you. Also, his equity (what he owns of these properties) is: $6,730,000 - $4,670,000 = $2,060,000. So this ambitious reader converted some $150,000 of borrowed money into more than $2-million in property value in just two years. He "grew" his borrowed money by nearly $1-miilion per year, when you factor in his $150,000 investment of borrowed money!
We call the financing this reader used "Zero Cash Financing." Why? Because NO MONEY COMES OUT OF YOUR BANK ACCOUNT OR YOUR TROUSER POCKET OR PURSE! By carefully figuring your costs, including the loans you take to buy an income property, you can get a Positive Cash Flow (PCF) from each property every month! In fact, you MUST have a PCF from EVERY income property. If you can't get a PCF, don't buy the property.
And if you have trouble "working the numbers" of an income property, I'll be happy to do it for you free of charge if you're a subscriber to one of my two newsletters, International Wealth Success Newsletter and Money Watch Bulletin. You'll quickly learn if a PCF is possible from an income property you select!
To learn more and subscribe to either of my newsletters, just go to iwsmoney.com
and click on IWS Newsletter or Moneywatch Bulletin on the left side navigation bar.
We have many other letters and examples showing how readers of our books, courses and newsletters are earning large incomes using easy real estate finance. All of these letters are available for viewing at our main office in New York. Look for more letters detailing actual cases in future posts on this blog.
2 comments:
I've read your books and blog with great interest. In today's mortgage market meltdown, banks are requiring 20% down on even 4 unit properties, which previously only was required on commercial 6 unit and above properties. In the meantime, most sellers overprice their property in relationship to rent roll, and buying a property with zero down and with positive cash flow seems nearly impossible. Sellers don't want to hold paper, and don't care to do creative financing. Any ideas?
Real estate is still the best overall source of wealth building that we have. I strongly believe, that with equity growth, tax sheltering, and income that comes from real estate, it is a solid investment to grow your retirement nest egg and we have a responsibility to plan for our retirement. However, my concern, is that the late night infomercial gurus, and many "zero down" programs focus exclusively on the financing aspect of the deal, but not focus enough on proper due dilligence: for instance, proper title search. If a property is sold by an overly motivated seller, who is in pre-foreclosure, they may be too many liens against the property that require proper title search, or the buyer inherits all the legal issues of the seller. Not enough focus is placed on positive cash flow, of income a property produces relative to price. Too much focus is placed exclusively on getting a property with zero down and not enough focus is placed on whether it is a good deal or not overall. If the property were not able to be purchased with zero down, is a good deal in itself? Does it offer any built in equity up front? Does it offer positive cash flow? Does it offer long term growth, or is in a rough area that is not likely to appreciate? Any real estate purchase has to be judged on these characteristic: cash flow, liquidity, growth or appreciation and overall condition, and clear and clean title. Getting it for zero down should not be the main focus I feel
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