This is a Once in a Generation OpportunityPosted on May 12, 2011 by
Recently, while having lunch, I bumped into a realtor friend. She asked how things were going. Then, leaning forward, asked, “Are you and Kim going to survive this terrible real estate market?” It’s funny how many times we’ve been asked this question.
Folks, Jack Miller– one of my primary real estate investing teachers (God rest his wise soul) – said it best: “This is a once-in-a-generation opportunity!” By this, he means that there has never been a better time to buy investment real estate.
Think about it. When was the last time you saw (1) So many homes sitting unsold on the market; (2) So few buyers looking for homes; (3) Home prices this low; (4) Interest rates this low; (5) Sellers this motivated; (6) Banks with so many properties in inventory; (7) This many foreclosures each month, and (8) Lenders so eager to agree to a Short Sale? The simple answer is – NEVER!!!
When will real estate values rebound? I don’t know. But, as long as we can buy single-family houses for less than it costs to build them, does it really matter?
Is real estate still the best investment in America? Absolutely! People will always need a place to live. It’s hard to live in a shelter made out of stock certificates.
How are rentals doing? Currently, all of the rentals we manage are occupied. In the last four years, we’ve only had three vacancies.
Are we buying houses? Over the past few years, we’ve averaged over 2 deals per month.
Can a real estate investor get a mortgage? Ahhh, the $100 question. Rarely do we use institutional financing. Fact is, we’ve only used institutional financing twice since 2005. With experience, we’ve learned that creative financing is the better way to finance our deals.
By “creative financing,” I mean Subject-To deals (buying the property subject to the seller’s liens), Private Money Loans (you borrow from an individual rather than an institution) or Owner Financing (your loan comes from the seller and is based on the seller’s equity).
Here’s an example of one of our creative deals: A seller owned a free-and-clear mobile home worth $17,000. He wanted to move to a stick-built house. He needed $3,000 to move. We agreed to buy his mobile home for $4,500 and give him $3,000 down if he would carry back an unsecured note for the $1,500 balance at 0% interest and monthly payments of $100. He agreed.
By the way, the $3,000 down came from one of our private money lender.
We then sold the mobile home for $16,900 with the following terms: $500 down with monthly payments of $375 on a 6-year note at 18.1% interest. Total earnings on this deal: $22,500 ($27,000 [purchase price + earned interest] – $4,500) with no out-of-pocket investment!
Folks, there has never been a better time to buy investment real estate! What’s stopping you?