A NEW YEAR!!!!!!

I will be the first to admit that I have been delinquent in my blog writing duties. But since it is a new year, I have been reviewing my goals not only for the year, but for my entire future. The good news is that I still plan on becoming wealthy.

Every January gyms across the country are loaded with new people trying to keep their New Year’s Resolutions to lose weight. By early spring, most of those people will not go to the gym again until next January when they make the same resolution.

Setting goals is a daunting task for me that I have never enjoyed. I always have the ideas in my head, but I have never been comfortable putting pen to paper to document it. The fear for me has always been having the proof at the end of the year that I have not accomplished the goals. Once I put pen to paper I become accountable for those goals. But last year I bought my first real estate investment and it has changed my perspective quite a lot. A lot of the fear that I one felt is gone. I am now officially accountable for every single one of the goals on my list.

The first few items are personal items that will not directly affect my financial future. After living in my house for two years I need to make a decision about how the living room should be furnished before another year goes by. I think it is important to have personal, family and business goals on the same list. We can all define ourselves in more than one way. All the aspects of life need to be tended to in order for us to grow as a whole. Too often we spend so much time and effort on one thing in life that all of the secondary and tertiary roles get lost.

Be reasonable when you make your list. If you think there is not enough time to accomplish an item on the list, then break it down into smaller components and set the goal for just the beginning steps. I don’t mean to tell anyone that they cannot accomplish anything they set their minds to do. I am just advising to keep in mind that some things are harder to accomplish over night then others. Time is also a limiting factor for all of these things that we do. Hours in the day are limited, and I tend to lose functioning after a certain hour of the night.

Renters

When it comes to our first real estate investment, we are relying solely on rental income as the only source of income. There are no coin-op washersand dryers on site or anything else that could bring in extra income. In away we feel that we are at the mercy of our tenets. We have not raised the rent on them We are considering a moderate increase once the repairs are all done. We realize that our tenets are below the national poverty line, and we do not want to put any extra pressure on them to pay us more money.The problem is that they do not pay their rent on time. It is not just one or two tenants that have this problem, but most of them have this problem. I think that it is not a problem of discipline, but a problem of the lack of money. So, we have been trying to think of a solution. We have discussed payment plans with our property manager, but she did not sound too hopeful.

I have made no secrets of my plans to be a philanthropist, and I genuinely want to help people like our tenants who are at the bottom of the financial barrel, so I have been trying to think outside the box for a solution. I have thought about starting a business where employees could work for me from home, so that I cannot only have these people as tenants, but as employees. The major problem I have with this is that my tenants do not have access to computers, and most if the jobs like this require internetaccess. I plan on doing more research for opportunities for people in these situations to see what sort of solutions area already out there. I had an idea, before we even closed on this property, to give everyone of our tenants, regardless of their payment history, a break at Christmas time. I was thinking of either a discount for the month of Dec, or a freemonth of rent depending on how well we were doing for the year. At this rate I do not know if we can pull it off for this year, but I still want to do something for these people. So, we are considering sending them gift cars to the nearest grocery store.

Rich Dad LIVE

This past Tuesday, my husband and I went to see Robert and Kim Kiyosaki speak live at a small college in NYC. It was an event sponsored by public television WLIW. We learned about the event when we caught one of his shows with fund raising breaks interspersed throughout. We made a donation and received two tickets to the event. If we had donated more we also could have gotten a set of some DVDs and books. We just went for the tickets. For anyone that has even tried to get into the city thru the Lincoln Tunnel between 5:30 and 6:00 will understand why we were late to the show. We missed about the first half hour. But once we sat down it seemed like he was discussing items that we had seem him give similar speeches about on tv. There was one item that we caught that he has promised to talk about during this seminar. He was going to reveal the next big thing in investing, or at least the next big thing in his opinion. I am sharing that revelation here with you now. SILVER. Silver is supposed to be the next hot item to invest in. Of course if everyone who listens to Kiyosaki invests in silver stocks, the price will go up. I know that he already owns some silver, and may even have ownership in silver mines, so it will be good for him too.

Discussing the future of silver was just the briefest portion of the seminar. He mostly spoke about what the tools are needed to be a successful real estate investor. He discussed what he refers to as the Financial IQ:

1- Make $
2- Protect
3- Budget
4- Leverage
5- Intelligence

He referred back to these 5 points several times throughout the evening to help solidify the points he was trying to make. He also stressed three important things that every investor needs.

1- Good Partners
2- Good Finances
3- Good Management

In fact he had a gentlemen with him who was his business partner and owned a management company. Unfortunately I do not recall his name. But he was a valuable part of the evening because he was able to discuss in some details how he has worked the numbers on some past real estate deals with Kiyosaki. He believed that an important part of investing in not just the property management, but the management of the finances of the purchase and sale of the properties. I would love to hear more from him. He actually had a product that he was selling that night, but we were not in the mood to spend any more money that night, so we did not even look.

To go back to some of the points above. He suggested starting businesses as the best way to make money to invest in. Of course it sounds a lot easier than it is for most people. But I think that it is excellent advise that I plan on pursuing. Unfortunately I missed most of what he said about protect, which I would love to see if he covers this topic during his TV programs. It sounds self-explanatory, but I think there may be some secondary definition or twist that he adds that I am upset that I missed. Budget and Leverage were two important points as well, that I did hear fully explained, and were pretty much what you would expect. Keeping a budget is important for any thing that you do. I also think that preparation of the budget is also important, especially when presenting the deal to investors. Kiyosaki is also a supporter of the art of leveraging one property to buy another. He is a believer in good debt. A lot of the examples that they discussed were deals where the property was reassessed and refinanced after purchase in order to pull out the initial cash investment in the property. He called this infinite leverage.

They glossed over the points of creative financing and using investors, which as points that we wanted to hear more about. So, at the end of the evening, after we got our books signed, we asked the other gentleman (He was more accessible that Robert or Kim.) and asked if he could share some of the gems of creative financing. Of course there is no easy answer to that question. He mostly said that networking is the key. Just getting yourself out there and letting people know what you do. So, I asked if it was the person or the deal that really sold investors. He believed that it was the deal first and then the people. This was my assumption too, since most people only care about the bottom line. But it was still good to hear it from someone with a lot more experience.

We closed on our first apartment building.

There were times when I wasn’t sure that we were ever going to make it to the closing table. Even the last few days were a little hairy at times. But we did, as a matter of fact, close the transaction. We are now officially Real Estate Investors!!!!!!!

There are a lot of steps to the whole transaction that I have not yet written about, but I plan to go over the whole thing in future entries. For now I am looking ahead to what we are going to do next. First we need to do is make sure that all of the terms are clear between the management company and us. They were employed by the seller, and we have decided to keep them on, and we want the transition to be smooth. Then we are going to go over the estimates that we have already received for replacing the roof and the siding, and arrange to actually have the work done this summer. I have no idea how long the work will actually take to get done, or how soon anyone can start the work, but we are hoping that the actual cost remains within 20% of the estimates. We were fortunate that the appraised value came in higher than the amount that we paid. So, we have $25,000 instant equity, plus the amount of cash that we put down. Once the work on the roof and siding is done, (and maybe a few other minor repairs) we are going to try to get secondary financing on the property and pull some of our money out for the next investment. I have no idea how much of a difference the work that we are doing will make on the appraised value of the property. The hope is that the value will increase more than the amount that the repairs cost.

Until then, I am waiting for the feeling of being a new real estate investor set in. It still does not quite feel real yet. Maybe it will feel more real when we lose on our second investment.

Subject To

The term Subject To is used to describe a certain method of buying real estate. Basically during the purchase the deed is transferred from the seller to the buyer, but the mortgage remains in the sellers name. You have ownership rights, but those rights are "subject to" the existing mortgages.

This sort of deal requires a very motivated seller who does not have a lot of equity in their property. There are any number of reasons that sellers might find themselves in this financial situation. It would be a good option for people who are facing foreclosure if they do not sell, as long as they are not already behind on their mortgage payments. You, as the buyer, structure the deal so that they sign the deed over to you, and you take over their mortgage payments.

There is much legality involved that I am just learning all of the details about, but there are also a lot of benefits. First of all, there are no mortgage qualifications, and no down payment or mortgage fees are required. It is easier to refinance the property once you own it than it is when you are first purchasing it.

This topic will require a lot more research before I would attempt it. I always thought that mortgages were structured to come due at the time of the sale of the property. There must be some legal instance where this sort of subject-to deal is allowed. It also seems like the sort of deal that can mostly be found on single-family houses, and not commercial properties. But it cannot hurt to ask for this kind of selling structure for any deal.

Personal Development and Real Estate Investing

You do not need to look very far to see that there is a connection between personal development and real estate investing. I have not done any research to discover where and how this may have begun, but I still find it very interesting. The information that is out there is telling people how to expand themselves personally and financially.

For some reason Real Estate investing is not a mainstream idea. When people talk about investing, they are referring to their 401K or IRA accounts. Some people even own mutual funds or tech stocks. They read Barron’s and hope to find the next break-out stock that will make them rich. Most people are just plain afraid to invest. We all fear losing money. We all fear losing all of our stuff.

Real Estate investing or any other type of investing is not taught in school. In school you learn a trade so that you can go out into the real world and get a job that will pay you enough to cover all of your bills. I am beginning to believe that investing needs to be taught in schools. The world is a rapidly changing place and we need to start to look at money in new ways.

This is where all of the gurus come in. People get to a point where they are not happy with their life, for whatever reason. Some people will reach out to try to find an answer to solve their problems. The gurus are there waiting telling people that if they want a better life, it is theirs for the taking. What is the number one thing that people think they need to make them happy? More money will make people happy. More money is the answer to your problems. Real Estate is an excellent way to make money and be your own boss. It all is very logical.

Money is referred to as the root of all evil, but it is also marketed as the savior.

Real Estate Business Systems

Real Estate Investing takes a lot of work, but it is the best source of passive income.

That sentence does not make any sense, does it? How can something be passive and take a lot of work to do? The answer is that it starts out as a lot of work, but with the proper systems in place it becomes passive (at least for the person who sets up the system).

I do not yet have our business system set up, and the details of its final form have yet to be worked out, (and will change a dozen times before reaching the end), but I know what my goals for it are. It needs to be able to run with very little input from me or my husband. The hard work comes in setting up those systems.

Once the property has been bought and all of the needed repairs and management put into place, I want very little to do with each property every day. I am not saying that I expect never to do anything for it ever again. The management company will send reports about the property, and I will need to make decisions in the future about any repairs that need to be made. But this should not take more than a few hours a month, if even that.

I do not want to have employees or even an office outside of my home that I need to go to everyday. I want to have client relationships with people and businesses. They will do whatever portion of the real estate process that they specialize in and just charge a fee. I do not ever want to deal with payroll or health insurance that is not my families.

I am not a lazy person. I was raised with good work ethics, but I want my time to be free for other investments. If I am too busy managing the details of properties than how am I supposed to have to time purchase and run hundreds more.

There is another side to this picture also. I hear so many people say that they bought real estate with “private investor money”. Those private investors are making passive income. They have money to invest and it is being invested in real estate. Other people are finding the deals for them and using their money to buy it. I am sure that some of those deals are not only set up based on a quick ROI%, but based on long-term equity in the property.

I am constantly amazed at how many ways there are to make money in real estate.

Why Invest in Real Estate

Why do we invest in real estate? Why does anyone? More importantly, why doesn’t everyone?

First of all, statistically it would just not work out if everyone invested in real estate, but there is certainly still plenty of room for newcomers in the world of investing. Every time I mention to someone, friend or stranger, that I am starting to invest in real estate, people have their doubts about me, but never about the fact that real estate is a good investment. Mostly people see it as something out of my league. As something that is reserved for people that are already wealthy.

I believe that fear motivated people not to try new things. I know that when I do not want to do something, I can come up with a dozen excuses within less than one minute. That is the same thing that people are doing to me when I discuss real estate investing. The fear they feel about trying to make these investments them selves comes out as doubt over my success. I am not trying to say that no one supports my decisions, but they all doubt that it will work for me in the long run.

In 5, 10 or 15 years I might just be wealthy from my investments it real estate. I also might not be. However those 5, 10 and 15 years are still going to pass me by. I would rather spend them trying to change my life, then not trying at all.

I am not slated to retire from the general work force for another 30 years. 30 years is an awfully long time. And in 30 years they may have risen the retirement age another 5 to 10 years. I am not a patient person, waiting 5 to 10 years to retire is going to be difficult for me. I would hate to see what I miserable person I would be in 30 years of jobs that I only marginally like.

So, why aren’t you investing?

To Become Wealthy: Learning Something New

I was reminded today of something I had learned about sometime last year that I was very excited about, and then moments later it was invalid. It is a method that some investors use to get back money at the closing. What happens is the buyer applies for a mortgage at an amount that is higher than what the seller really wants for the property. Of course that stated higher amount must be written in the contract. And then at the closing the seller gives the buyer cash back to help with the closing costs. It is a way of rolling the closing costs or a portion of the down payment into the mortgage costs.

When I first read about it I did not think it all that likely to be true. After all it was part of a no-money-down-deal or something similar. I do not really recall where exactly I first saw it, but since then I have seen references to it, and legitimate references at that.

So, while we were discussing our latest bid and the fact that the seller is willing to give us credit to redo the exterior of the building I thought that this might be one of those instances where we would get a mortgage for the higher amount and receive cash back at the closing to cover the repairs. Of course this really perked my interest. Cash in hand is a good thing.

But then when I inquired further with my realtor she told me that those sort of cash-back-at-closing deals are illegal in Texas. The credit we would receive for this property would be held in escrow until any work was completed, and then paid directly to the contractor.

What I learned today: Follow your first instinct. It will be the right one.

To Become Wealthy: The Secrets of Real Estate Investing

These are the worst kept secrets of the modern day. Every Barnes & Noble across the country has a section dedicated to Real Estate Investing. I just did a Google search for the term last week and came up with 83 million hits. This week the search brought up 93 million hits. Nothing is hidden from anyone willing to look and learn. However, that is where the secret lies. The secret is to figure out what you need to be looking for when you have no idea that you even need something. Most people want out of the Rat Race, but do not know their option to get there. I am giving you two options with this blog. People make money with blogs, and people make even more money investing in real estate. Keep reading, sign up and find out how along with me. I have not invented anything new.

For most of us that have not been fortunate enough to have been born with large trust accounts, we are born into the rat race. Dad works and most times so does Mom. We are taught in school the skills needed to get a job out in the “real world”. Continuing education is used in order to get a better job. We are conditioned to believe that we need to work for someone else until we can retire at 65. We believe that those of us that are fortunate or just lucky will get the really high paying jobs and may be able to retire early. Only those people who are truly gifted and industrious will be successful at starting their own business. You need to invent something new in order to succeed on your own. I believed these things my whole life. Until now.

If you know any real secrets about real estate investing, please share. There is no greater way to grow that to be able to share your knowledge with others.

To Become Wealthy: The Master Plan

Ultimately the question is ,”How do I want to live my life?” I never aspired to be a real estate investor. I have no training or formal education in this area. I am enjoying what I am doing so far, but it is far from what I would call one of my passions. However, I am passionate about making large bank deposits.

I am investing in real estate as a mean to an end. That end is financial freedom. To be able to do what I choose with my time. To not have to make a contract with someone for 40 hours a week of my time for only $40,000/ year. I want my time to be my own and my families. Time is the ultimate currency for me.

My husband has different reasons. His passions is to start a company of is own. He is a web designer and a graphic designer. He has some innovative ideas on how to run a business in this field. He plans on starting his own blog about it some day soon. So for him the money w make from real estate investing will free him up to pursue his passion and make a real go at his own business. Of course if it also frees up my time, I will be able to be by his side to help him along the way however I can.

We have done a lot of taking and planning for the next few years of our lives together. We have already survived the wedding and the first home buying. Now we are trying to figure out who should leave the rat race first. We have discovered that it takes a decent amount of time to look thru properties and prepare to purchase them. So we decided that if I stay home from work that I would do most of the work to manage the real estate investments and expand our portfolio.

I make less than he does, so in one way it makes sense for me to leave my job first. We are also planning on starting a family next year and the mother is traditionally the one that stays home with the children. This is something that I look forward to being able to do. Even though both of the grandparents are hoping to be able to take care of any babies during the work week, I would rather have that responsibility myself. My plan is to have any potential baby sitters come over during the day to give me the freedom to attempt to have uninterrupted time to manage our investments. Those of you out there that are already parents may be laughing at this plan, but I think I am allowed to dream.

The other option is for my husband to leave his job first to pursue his own design business. If he can do this free from most financial stresses his can take more risks, try more things, and do what he needs to do to take this business from just a start-up to a self supporting entity. All while I have the rat race job and the health insurance.

Health insurance. This is the real issue that keeps me in the rat race. I am too dependant on other people paying for it. I did a quick search for rates for small businesses. We are planning on holding our properties in an LLC that we would purchase the policies under. It would be approx $8-10,000/year for the two of us, more if we have any children. Of course we can just calculate this into our numbers and be done with it, but some mental block I have makes me worry about it. For me it is the largest issue that we face when deciding when to give up our day jobs.

Oh how I dream about giving up my day job……

To Become Wealthy:Starting in Real Estate

Most people work for their money, and they can become very rich doing that. But wealthy people have their money work for them and can become even wealthier with ease.
I have already begun to go down the road to a life of wealth. I began my journey thru education. I read everything I can about real estate. Some books are better than others, and I only read the good ones from cover to cover. As I go along I will mention those that have helped me in my journey.

I have heard time and time again throughout my life “There is no time like the present”, “Just do it.” and other encouraging things, but I was always too afraid to try, or did not know exactly what to “just do”. Well, my advice is not to just go out there and buy investments, but do go out and learn about them. Nothing could be simpler. In this modern day, you do not even need to buy the books. The bookstores offer you comfortable seating to read the books right there in the store.

So what are you waiting for?