Let’s Get Rich

I looked at several ways to make enough money so that if I worked or not I would have enough money to live my lifestyle. I deceived I needed a business. I had a vending business, a video store and real estate. Although they all made me money the only one that took virtually none of my time was real estate. So real estate is a business that I can own and take weeks off at a time and the business still makes me money month after month.

In Houston Texas you can buy a single family house for around $100k with a payment principal interest taxes and insurance) of around $600 per month. That house will rent for around $1200 a month. If you take out a little for a buffer you can put $500 a month in your pocket. So if you buy 10 of them you will have $1million in real estate and make around $5,000 a month.

You may ask how you can afford $1million?  You don’t, you need to borrow that $1million.  Dave Ramsey promotes debt is evil and he is correct when you look at credit card and personal debt. Income producing debt is the only way to get rich. If you have to wait until you save $1million you won’t get there until you are 50 years old. What you want to do is get there in 5 years or less. I always say that retirement is wasted on the old. You want to retire and travel to tropical locations but you want to do it while you still look good at the nude beach.

Let’s look at debt. If you have $100,000 and you buy a rent house and charge $1200 month for rent you will make $12,000 per year. That is 12% on the money you employ. That is good but what I would do is put down $10,000 on that house, take out a mortgage for $90,000. The PITI on that will be around $600 per month. Rent it for the $1200 and you make about $600 per month. That will make you $7,200 per year but since you only have $10,000 in the deal you get a yield of 72%. Of course you can’t live on $7,200 per year but since you have $90,000 left over from your pile of $100,000 you can do it nine more times. So you now have 10 houses yielding $7,200 per year per house for a total of $72,000 per year.

It gets better. The loans that we use are hard money which funds the money to buy the house and fix it up. The beauty of this is you don’t have to buy houses that are habitable, which is one of the requirements of an FHA loan. So you buy this house and it needs carpet appliances paint and one major system. Because of that you buy this house for $65,000, borrow the $10,000 to fix it up along with the $65,000 to own the house. Once the rehab is done, refinance it into an FHA loan and boom you end up with that $100,000 house for $75,000.

2 thoughts on “Let’s Get Rich”

  1. The problem I see with your theory is that just because a house needs $10,000 in repairs does not mean you will get a outstanding deal on the purchase price. The seller or seller’s agent can easily get comparable sales prices in the area and put the house on the market for fair market value minus expected repair costs. Information is so easily obtained that their are very few that are not aware of the value of what they are selling.

    1. Marc you are absolutely right. What you are looking for is “The deal” Just because the house is for sale does not mean that it is an investment grade house. There are always houses that are for sale that are not at market prices. There are several reasons that houses are for sale below market price. For example the 3 “Ds” Death Disease, Divorce. But ultimately what I look for is cashflow. If I can buy a house that will cashflow (the difference between operating costs and the rent I can get) this house can be a good purchase.

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