I Invest In Real Estate
I love investing in real estate, and from time to time, I will tell the story of what I have done so far. I got started pretty much by accident, and the two houses in the picture were both key.
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When I moved to my current city, I had saved $10,000 to buy my first house. I had heard you could get one with 10% down, so I found the brick house, priced at $102,000. My mortgage person had good news. Because my credit was good, I qualified for an 80-15-5. I had to put down 5%, or just over $5,000. I had a first mortgage for 80% and a second mortgage for 15%. So I bought a $102,000 house for just $5,000 down (those were the days!)
This brings up a key concept that you must understand if you are interested in real estate: [i]leverage[/i].
I do not recall, but it is likely the house went up in value by 10% or about $10,000 my first year. [i]Leverage[/i] gave me a huge return on my investment. The house went up in value by $10,000, or 10%, but what was my return? My $5,000 cash investment had already increased by 100%! Leverage is why real estate is an even better investment than the stock market. Stock market returns are higher, but the power of leverage is great in real estate.
After I moved into the brick house, I learned how to paint, which made a huge improvement, and did some other things to make the house nicer. After I settled in, I noticed the white house next door. It w[i][/i]as vacant and a mess. I learned that the owner lived out of town (always an important fact in real estate investing -- could be a motivated seller). Also, even with my untrained eye, I could tell that there were a lot of repairs needed (another important fact). For many days in a row, I would walk out in my back yard and look at the white house. I knew that there was potential here, but wasn't quite sure what to do about it.
Then, one day, workers showed up at the white house. You can guess the rest. An investor had bought the house, and the next thing I knew, it was on the market and sold to retail buyers. Somebody had flipped the house. That got me moving!
I set a goal of getting into real estate investing using books and what I could find on the internet (audio streams - this was before YouTube!). Fortunately, the first book I bought is one I still refer to: "Buy It, Fix It, Sell It, Profit!" by Keven Meyers. I continued to read and prepare.
Then, three years after I bought it, I decided to sell and buy another house. I was very lucky. The house I bought for $102,000 now sold for $155,000. Again, let's think about returns. The raw return on the asset was impressive -- over 50%. But my $5,000 cash investment had returned about 10 times. If you want to invest in real estate understand [i]leverage[/i].
Now, I was certainly lucky in this case, and investors today may not have the same luck. But from time to time, life gives you opportunity. The question became for me: Was I going to just blow the money on a BMW or fancy vacations or was I going to use it to do something bigger and longer term? I chose the latter.
I ended up with about $40,000 in my bank account. I knew that this was my opportunity to get into real estate investing, so I very cautiously got started. I found a realtor who didn't know the first thing about investing, but was willing to learn, and we started to look. Eventually, I found my first investment property. Another interesting story for another day.
[image deleted]
When I moved to my current city, I had saved $10,000 to buy my first house. I had heard you could get one with 10% down, so I found the brick house, priced at $102,000. My mortgage person had good news. Because my credit was good, I qualified for an 80-15-5. I had to put down 5%, or just over $5,000. I had a first mortgage for 80% and a second mortgage for 15%. So I bought a $102,000 house for just $5,000 down (those were the days!)
This brings up a key concept that you must understand if you are interested in real estate: [i]leverage[/i].
I do not recall, but it is likely the house went up in value by 10% or about $10,000 my first year. [i]Leverage[/i] gave me a huge return on my investment. The house went up in value by $10,000, or 10%, but what was my return? My $5,000 cash investment had already increased by 100%! Leverage is why real estate is an even better investment than the stock market. Stock market returns are higher, but the power of leverage is great in real estate.
After I moved into the brick house, I learned how to paint, which made a huge improvement, and did some other things to make the house nicer. After I settled in, I noticed the white house next door. It w[i][/i]as vacant and a mess. I learned that the owner lived out of town (always an important fact in real estate investing -- could be a motivated seller). Also, even with my untrained eye, I could tell that there were a lot of repairs needed (another important fact). For many days in a row, I would walk out in my back yard and look at the white house. I knew that there was potential here, but wasn't quite sure what to do about it.
Then, one day, workers showed up at the white house. You can guess the rest. An investor had bought the house, and the next thing I knew, it was on the market and sold to retail buyers. Somebody had flipped the house. That got me moving!
I set a goal of getting into real estate investing using books and what I could find on the internet (audio streams - this was before YouTube!). Fortunately, the first book I bought is one I still refer to: "Buy It, Fix It, Sell It, Profit!" by Keven Meyers. I continued to read and prepare.
Then, three years after I bought it, I decided to sell and buy another house. I was very lucky. The house I bought for $102,000 now sold for $155,000. Again, let's think about returns. The raw return on the asset was impressive -- over 50%. But my $5,000 cash investment had returned about 10 times. If you want to invest in real estate understand [i]leverage[/i].
Now, I was certainly lucky in this case, and investors today may not have the same luck. But from time to time, life gives you opportunity. The question became for me: Was I going to just blow the money on a BMW or fancy vacations or was I going to use it to do something bigger and longer term? I chose the latter.
I ended up with about $40,000 in my bank account. I knew that this was my opportunity to get into real estate investing, so I very cautiously got started. I found a realtor who didn't know the first thing about investing, but was willing to learn, and we started to look. Eventually, I found my first investment property. Another interesting story for another day.
