This is a focused study plan of nine modules. We will specifically locate geographic areas, municipalities, neighborhoods, and individual properties to purchase for the purpose of renting for profit.
Right now I advocate multi-unit properties; however you can apply the sesame techniques to single-family homes if you like. There is a time and place in our markets for that, and it could work right now, but conditions are currently better for renting multi-unit properties.
This will not be a course on financing, though. You can find that in the instructor-led curriculum of Rental Profits Without the Pain a ten-week program where you participate and interact with other students. I highly recommend you take it, particularly if you are newer to the business or if you have only focused on single-family homes in the past, or if you have only focused on flipping.
Overview
First, we are going to talk about locating properties—areas to target; areas to avoid; the difference between high income, median income, and low-income areas, and a category I call “somewhere in the middle.”We’ll also talk about war zones, but do not advocate purchasing property there.
Types of properties, as you know, consist of single-family homes, small multi-units, and five-units and more. Of course the rules change when you get to five or more units. Those are now considered commercial properties, whereas four units and below are considered residential. Even though five and above can be residentially oriented, those and larger properties are still categorized as commercial.
For the purpose of this course we will focus on the smaller multi-units; however, the same logic applies to five or more. We do have another program, if you are looking to buy larger properties—it is a lot more advanced, but I do not recommend it until you have already been in the business for some time.
Within neighborhoods, we will also look at specific neighborhood characteristics: trees, parking, schools and parks, fire, police, non-residential areas. The bottom line is of course you should know your area. We will talk about analyzing the properties from a financial as well as a physical standpoint. You will use calculators and calculation sheets for practice, and with the physical analysis, you will receive rehab sheets for use in your homework.
We will also talk about specific owners to target. Those could be bank-owned properties, retiring investors, and estate properties. You will learn about making the offer and the importance of the after-repair value and the maximum allowable offer. We will talk about comps (i.e. comparable sales) to use in your analysis. You should receive those from a real estate agent, and I’ll give you tips about finding the right kind of agent to use.
Finally, we will cover a bonus section—the closing. You’ll learn what to look for at a closing, particularly when it comes to rental properties. This includes things like transferring deposits, assigning leases, and prorating rents, and of course, property management. If you do intend to go further with this business, I also highly recommend you look at a book available at myinvestmentservices.com called Turning Rental Problems Into Profit. Of course there is a training program for that, too.
The reason I created these courses is, sadly enough, because when I started investing there really was not a lot of information out there on managing properties. All the guides taught you how to buy properties, but nobody taught you what to do once you own them.
My first experience with Real Estate
When I was in college, I was blessed to have a roommate named was Socrates. Both his parents were Greek. His mother was born here in the States, but his father was born in Greece. So Mrs. Demet went to Greece to attend a high school graduation and came home with Mr. Demet. They lived south of Richmond, Virginia.
They were a great family. They took me in and treated me like one of their own. Mr. Demet was a great teacher, and fortunately for me, he was a generous teacher. He taught me right alongside Socrates. I could not have gotten a better education. As a matter of fact, the education I got from him has been worth more to me than the education I got from college.
After I graduated I got my first corporate nine-to-five job. Socrates and I again became roommates. Very good deal for me! We bought our first property together. Now we had gone out to find a property and being young college graduates living at the beach, we decided to buy a little townhome a few blocks from the ocean. It was great—of course it was going to be a chick magnet. We were going to live life. But before the day was out, Socrates’ dad set us straight. We got out of that deal, thank goodness because it would have been a losing deal. He then took us by the hand and showed us what to do.
Instead we bought a nice little property in Virginia Beach—478 Leslie Terrace—ten minutes from the beach, and two minutes from where I worked. It was a four-bedroom, two-bathroom home. We bought it from a guy in the Navy. We assumed his first mortgage, refinanced his second, and gave him a note and a mortgage for the third—which was his equity portion of the property after the first and second mortgages. Soc’s dad cosigned the second mortgage and showed us how to do everything. He did not give us any money, though. Instead of giving us a meal of trout and salmon, he taught us how to fish.
Socrates and I lived there, and we rented the other rooms out. Essentially we were able to live for about $50 a month, because the other guys’ rent paid our mortgage payment. I had about $3,000 in the deal altogether.
We were on the water every day after work. Soc bought a used boat and a used van to tow it, and we went water skiing all the time. We pioneered pulling stuff behind boats besides skis. We tried surfboards and other crazy stuff that we thought would work including just us on our backs. I saved a good bit of change because I wanted to buy more property.
I remember Soc’s dad telling us, while we stood at the dock of one of his beach homes, “If you boys do what I show you, you will not have to work for anybody else past the age of 35.” And thankfully for me, he was a real life example of success, someone who was actually investing in real estate and making money doing it.
I learned something very profound during this time. I learned I was not built to be sitting behind a desk in a corporate job, Monday through Friday, nine to five, for 40 years;I knew I had to do something about it.
But then guess what happened. I found the girl of my dreams, got married, and had children. At that point, Mr. Demet did not think it would be a good idea for Soc and I to try to hang on to the home together. Virginia real estate rules were complicated, and with me being married and him not, we decided Socrates would buy me out. I got $8,000 out of the deal. Remember I put $3,000 in, and got $8,000 out in about a two-year time frame. Not a bad return! A 266% return. I knew I would never be able to do that in the corporate world.
My new bride, Susan, and I bought our first house together. It was nice, new, just one mile from the ocean and only $85,000. Today that house is worth $350,000. Just a like a lot of other smart people I should have held onto it when we moved to Pittsburgh. But we needed the money. I know, you think I am crazy. Why would I move from the beach to Pittsburgh? Well, my wife was from Pittsburgh, and I felt like I needed a new beginning to pursue my dreams and make my way in the world.
I began focusing on my professional career—Computers in Banking. I worked so much at one point I actually had a cot in my cube. My daughter was not even three years old and Susan was pregnant with our son, Andrew. I got called into my boss’s office and was told I had earned a $500 bonus for all my effort. What a slap in the face! That was just about half a week’s pay and I had worked extra hours that much dozens of times over.
I learned a hard lesson. First of all, no one else was doing what I was doing, yet they were making the same amount of money I was. Second of all, I was just a number. Other than the people around me, no one who really mattered knew who I was or what I was doing. I was wasting my time.
I knew I had to do something else. Fortunately I had a valuable commodity… I had knowledge of a software system that allowed me to move to another bank in Pittsburgh. I had raised my salary by quite a bit from moving from Virginia Beach to Pittsburgh, and in short order, I increased it again by more than 50% in about an 18-month timeframe.
But I was not happy. My spirit was dying. I felt like I had lost my freedom, and I did not like being cooped up indoors all day. I am an outside person.
Suddenly I was 35 years old. It had been ten years since I had sold my portion of that property to Socrates. I remembered what his dad told me. I was now the age he had said when I would not need to work for anybody else.
I was maturing enough to realize I was living according to what the world expected of me—not what I wanted for myself. I never lost my desire to own investment real estate and since I was getting up at 5:00 in the morning to beat traffic and get a parking spot and be at work by 6:30 I got to see a lot of Carlton Sheets. I could almost recite his infomercial line by line.
I finally bit the bullet and bought his course. I studied it just like a school textbook. Then within six months, I entered into a contract to buy my first two properties—a pair off our plexesin a borough called West view, just right on the city line. It was my first solo foray into real estate. I was back in the saddle and a new chapter in my life had begun.
The lessons I learned from Mr. Demet were beginning to bear fruit and this is what I want to share with you. I believe with undying faith in the American Dream. It is alive and well for people including those who are from foreign lands like Mr. Demet. I further believe that investing in Real Estate is the best path to realizing the American Dream. He was a real life role model, showing me it absolutely could be done.
I know a lot of you guys reading this do not have that, but I hope you will use me as that example. But I don’t just want you to be like me… I want you to be better than me.
I am going to show you everything I did to accumulate a portfolio of 250 units in about five years. I started off with a pair of four lexes. I believe in real estate. I believe in the American dream. Yes, you can do it! In today’s economy it is more possible than ever. Prices are still relatively low, according to historical averages, and interest rates are as low as they have been in 50 years. What more could you possibly ask for?
My promise is to teach you what I have learned, and not just how, but why certain techniques work the way they do. This is something I found missing in a lot of courses I have taken and books I have read. I promise that if you follow the suggestions in this book that you will be Real Estate Investing for Rental Profits the Right Way!
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