Wealth building through real estate investments begins with one house at a time. Often, when you hear people talk about real estate investing they are talking big numbers. You hear about the millions to be made in the market, especially now when everything is on sale. You hear stories about the people who own 50 or more single family homes or bought a package of 10 investment properties. What gets lost in the hype is that the vast majority of these investors began with just one house.
My story, like many successful real estate investors, begins with one small house in Texas. It took me awhile to buy this house. I made lots of offers before one was accepted, and I walked away from a few deals for a variety of reasons most of which had more to do with fear than with the numbers. Finally, one of my mentors looked me in the eye and said, “Buy this house.” So I bought a house that no one else would buy, held my breath (and my stomach because the butterflies were giving me a stomach ache) and signed on the proverbial dotted line.
Every successful investor has a story like this. Most of us are just like you, scared of making a wrong choice, but determined to change the financial future of our families. Finding a mentor you can trust and following their advice makes that first purchase easier and more successful.
Our first rental investment property in Texas was a diamond in the rough. Once cut and polished, we captured $36,000 in equity (based on a recent appraisal for a re-fi in March of 2010) and a cash flow after all costs of $429.00/month. This from a house that no one wanted to buy! I remember my mentor telling me, “Someone lives in every house on this street and someone will live here too. The question is, will you be the one who profits from it?”
The next house came shortly after with an equity capture of $21,000 (based on a re-fi appraisal in February 2011) and $324.00/month cash flow after all expenses.
The third house represents an equity capture of $27,000 and $290/month in cash flow. All of these properties have an ROI (Return on Investment) of 43%/year or more.
A picture is forming, right? For most of us, it is not one big deal that takes us from a J-O-B to retirement. It is taking the first step and following the correct road map that leads you, over a period of about 5 years, to the retirement you have dreamed of. I am not there yet, but I am well on my way and I am already enjoying the benefits of my real estate investments. I quit my J-O-B in January of 2010, in order to focus full time on my real estate related investments, and I am having a blast!
Just these 3 investments represent $84,000 in unrealized capital gains. Every month my renters increase this number by paying my mortgage. In addition, they provide $1043.00 in additional income for my family. Although real estate values may fall some more before they recover, my renters will not move out. They will continue to pay rent each month because they like where they live. I will not sell the properties until I can realize the capital gains I need to move to the next step of my 5 year retirement plan. In addition to my rentals, I have flipped several properties and I am a hard money lender (with an annualized return of 12% last year) helping others to get started in real estate investing.
My properties are the best product at the best price in the neighborhood so they rent quickly. My renters are happy to find such a nice home. The neighbors are delighted to have the blight in the neighborhood transformed into a beautifully updated home, increasing the value of every home in the neighborhood. The vendors who participated in the deal, from appraisers to roofers, are happy to have work in a time of recession. The social value in our model of real estate investing is priceless.
We plan to buy 6 more rental properties before the end of 2011. With a conservative estimate of $15,000 in unrealized capital gain in each property, and a cash flow of $250 a month, this will add over $90,000 to our net worth and $1,500 a month to our cash flow. We are perfectly positioned to sell our investment properties whenever the market recovers and roll that money (tax free through a 1031 exchange) into a multifamily investment that generates a solid return and requires minimal oversight as a passive investor.
We will continue to invest a portion of our funds in Hard Money Loans to others, generating a great return on our investment and providing others with the opportunity to get started in real estate investing.
Because we are teaching our 3 children (ages 20, 19 and 17) the business, we will flip several properties this year in order to help them make the money they need to acquire their own rental properties.
We are one year in to our 5 year retirement plan, and we are doing well. Where are you? Find a mentor you can trust, one who has successfully invested in real estate through up and down markets. Develop your own personal road map from J-O-B to the retirement of your dreams. Take the first step along your personal route to success by buying one property. Then buy another, and another, and another. Wealth building through real estate investments begins with one house at a time!