Tag: rental property

This article now appears in Inman News.

Key Takeaways

• Get in the office early, and leave late. Work while those other real estate investors are sleeping.
• Ignore popular thinking, and do you.
• Hang around people with happiness, joy and optimism, and all of that positive energy will rub off on you.

Many investors we know bought 20 or 30 investment properties before they were 30 and financially retire.

Your odds of retiring early in real estate investing will soar if you practice these three habits regularly:

1. Work hard.

There is no substitute for applying as much effort as possible in real estate at every moment.

Many top producing CEOs say that they get up at 6 a.m. and often do not lie down at night until after 9 p.m. Those producers are dead on the money. In my first five years as an investor, I clocked countless 18-hour days.

Most of my packed days were filled with calling as many as 100 people as I looked for deals and capital. I never surrendered. Sometimes I had to speak to five or more people to find the one who could loan me money.

Get in the office early and leave late. Work while those other real estate investors are sleeping.

2. Ignore popular thinking.

Author John Maxwell wrote in the best-seller “How successful people think” that high achievers think differently than others. They often ignore what most people think and sometimes do the opposite of what conventional wisdom states.

In my real estate investing, I reject the conventional wisdom that I should buy attractive properties in nice parts of town. My reputation in my city is a real estate investor who buys distressed houses.

I purchase only at 20 percent to 30 percent under market value and for cash flow. I do not care about appreciation, and I rarely rent my houses. Instead, I owner-finance houses to subprime borrowers, which defrays most of my repair and ongoing maintenance costs.

I recognize the value in real estate investments that many other people do not see; I then developed a business model that capitalizes on this fact.

For example, I purchased this house for only $15,000. No one wanted it, and 30 days later, I sold it for $20,000 (a $5,000 profit) to another investor. Then, he resold it with owner financing at 12 percent.

He has bought three more houses from me since that deal. I made about $3,000 on each of those deals, so my bottom line profit on a house no one wanted: $14,000.

3. Hang around positive and focused people.

The psychological researcher Barbara Frederickson did some amazing research a few years ago. It detailed how thinking positively has a positive effect on the brain.

Her clinical study had five subject groups, and each one was shown a different film clip. The first two groups watched clips that produced overall positive emotions, such as a happy married couple having fun with their children outside. The third group saw a neutral clip; this was the control group.

The other two groups viewed clips that stirred up negative emotions, such as a couple arguing, people fighting and children crying. After, every group was asked to think of themselves in a situation similar to what they watched. They then were told to write down what they would have done in such a situation.

The test subjects who viewed negative clips wrote the least. Subjects who viewed happy scenes wrote the most.

This research suggests that if you as a real estate investor experience positive things, including joy, optimism, happiness and love, we open ourselves up to more profitable and beneficial experiences in real estate.

I totally agree with this.

When many of our investors got into real estate investments, they had debt and little cash. But they found investors who were successful who mentored them.

They were very positive people, and their goals were much higher. They wanted to make $15,000 or $20,000 per week.

These positive people helped our investors on being wealthy and successful. They absorbed their enthusiasm and joy, and realized they could do it too.

They taught us to learn as much as possible about my local San Antonio, Texas, real estate market to find the best under-market value deals. They also taught our investors to be patient and they got wealthier.

We learned from them to make small ($1,000 or $2,000) profits on many deals or to make $4,000 on a flip.

We never focus on making big profits on one deal. Rather, we do 50 houses in a year and make $250,000 — that’s big bucks in Texas.

Hang around people with happiness, joy and optimism, and all of that positive energy will rub off on you.

No matter your position in real estate investing, you can apply these three lessons to greatly increase your investing success and wealth.

But remember: Pass on these positive habits to other real estate investors, so they can benefit, too.

This article now appears on Inman News.
Key Takeaways

• I often get houses back in even better condition than when I sold them.
• Although some sources say the entire process takes three months, in my experience, I get a house back in 60 days or even less.
• The foreclosures happen fast, I get $5,000 down again from every new buyer and I continue to buy houses and owner finance them.

The first few years after the real estate crash led to a flurry of investors snatching up foreclosed properties, rehabbing and renting them out, then reselling a few years later at a profit. For some it worked out, but for others, the appreciation never materialized.

My real estate investing business deals with foreclosures as well, though indirectly: I buy distressed houses, rehab and resell with seller financing (investing for pure cash flow, not appreciation). I never mind taking back a property.

In fact, as an owner finance specialist in affordable homes in San Antonio, Texas, foreclosing on a property can be mega profitable.

Yet it amazes me that some investors I meet are terrified of a foreclosure. In fact, I just met a couple from California who would not invest in part because of the fear of getting a house back. I respect their position, but I know it’s completely wrong.

Here’s why:

1. I get the house back in better condition 95 percent of the time

I buy houses in San Antonio for 20 percent to 30 percent under market value, perform $20,000 in rehab and resell with seller financing. A typical deal will be:

• $60,000 wholesale purchase price of a distressed home in a rising neighborhood
• $15,000 in rehab — just enough to resell it
• Resell at $89,900 with $5,000 down, 10 percent interest and a 30-year note

For example, I recently sold this house with owner financing after the investor did $10,000 in rehab:

I upgraded the flooring, painted inside and out, added central air, leveled the foundation and added a third bedroom. Enough rehab was completed in this area (at low, wholesale prices) to resell the house in a week. However, the roof will need to be redone in a few years, and the kitchen needs more cabinets.

The owner has a lot of pride of ownership in his or her new home; for most, this is the buyer’s first house. So they make improvements, often $10,000 or more. Then, three years later, someone loses a job, and I have to foreclose.

In almost every case, the house has been upgraded by the previous owner. So next time, I will resell this house for $95,000 and $5,000 down again.
In almost every case of foreclosure, the house has been upgraded by the previous owner.

I have gotten a house back three times before and got $1,000 per month with $5,000 down each time. That is a great return on investment.

2. I can foreclose lighting-fast in Texas

When I have to foreclose, it’s an easy process in Texas. Although some sources say the entire process takes three months, in my experience, I get a house back in 60 days or even less. In a few cases, the former owner simply hands me the keys and I put it back on the market the next day.

On my last foreclosure, I spent $1,000 for the entire legal process and had it done in 45 days.
On my last foreclosure, I spent $1,000 for the entire legal process and had it done in 45 days.

I should note that foreclosing is not what I want to do. Once a family is 30 days behind, I call them and attempt to work it out. In many cases, a child got sick or someone lost their job.

I know their financial situation because they provided me with proof of income and assets during the qualification process. So, I try to get them to tap their 401K or other assets to get caught up and get them through this trying period. If we cannot work it out, the foreclosure proceeds.

3. I deal in volume, so some foreclosures are necessary

My investors and I buy hundreds of houses per year. There is little question that at some point, some percentage of those houses will be in foreclosure. It can be 5 percent in boom years, and 20 percent in recession years.

I accept and embrace that. Fortunately, San Antonio, Texas has a strong, stable real estate market with a diverse industrial base. There always is strong demand for affordable homes in my city — regardless of market conditions. Houses foreclose, and houses are quickly resold.
I accept and embrace that at some point some of my investment homes will be in foreclosure.

The foreclosures happen fast, I get $5,000 down again from every new buyer, and I continue to buy houses and owner-finance them. Even though I’ve done my share of foreclosures in the past 15 years, I still managed to financially retire in this business with $40,000 per month in cash flow.

So, don’t fear foreclosures in the real estate investing business. It’s merely part of the investing landscape and a golden opportunity to make more profits.