Welcome to Week 12 – Today, we look into Chris’s approach to Acquiring Properties
Some industry “gurus” with questionable ethics teach ways to buy houses with little or no money down, but these tactics have no place in Chris’s book – or his portfolio. Buying real estate requires some cash. Bank financing is as hard as ever, and requires significant money down, even on a property in fairly good condition.
But it is possible to buy a house for very little money. It may be in rough shape, and require tremendous effort – or cash to bring it up to serviceable condition. In Springfield and similar towns across America, a low to average priced house can cost 25 to 30 thousand dollars, and rent for $550 to $600 a month.
Buying low and improving requires less money up front, and allows you to improve the property as you have cash available. This is preferable if you have cash or bank financing. The interest and principal required to service bank debt is going to impact your profit to some degree, and your cash flow to a substantial degree. (In Part 4 of the book, The Landlord Advantage, Chris digs deeper into these concepts.)
Now let me tell you How Chris Rebuilt His Portfolio after the Crash:
A couple years after the crash and his bankruptcy, he was anxious to get back into investing. However, after the hard lessons he’d learned, he was not interested in borrowing money. Unencumbered real estate – without debt or mortgage – is a very beautiful thing. And his goal was to acquire as much as he could afford.
Chris had an investor client who was in the habit of buying multiple properties at sheriff sale and tax sales, when the prices were at rock bottom. They were typically in very bad shape – many of them literally uninhabitable. His investor friend would then sell them to Chris via land contract at a substantial markup. Chris would fix them up using earnings from his brokerage business, drawing from his growing property management department.
The purchase prices ranged from twenty-five-hundred to $10,000. As a rule, he would make an interest only payment for six to 12 months while he put the property back in service. After the initial period, they would term out the loan over 30 to 36 months. His investor client was very happy, and within five years, Chris was able to accumulate over a dozen cash flowing properties, free and clear. Chris continues to work with this investor to this day, and the arrangement has been mutually profitable. Again, a good deal is when both parties benefit.
We have covered a lot of different topics in this section. The key take-away is this: assess your market and identify the best opportunities, but also, assess your personal goals, objectives, attitudes and motivations. There is no right way to invest in real estate, but your approach must be situational. Your plan has to make sense where you are. And while it may change over time, you have to have a plan.
We’ll be back next week, with an introduction to: The Landlord Advantage
For a free copy of the full book, A Real Estate Investor’s Guide to Profitability, email FreeBook@ROOSTRealEstateCo.com and we will send you one. Or download a free e-book version here: MakeRealEstateWork.com/free-book