Investment Capital is Everywhere

I was brainstorming to find money to get my current project off the ground. Where do you find money that isn't being utilized and invested to it's highest and best use? Here are a few ideas that I thought of this morning:
1. savings accounts
2. money market accounts
3. certificate of deposits (cd)
4. stock market accounts/portfolios
5. bonds
6. mutual funds
7. home equity lines of credit (heloc)
8. whole life insurance policies
9. retirement accounts (401k, roth, sep, self-directed ira, etc.)
10. seasoned llc's (lines of credit)
11. commercial lines of credit
12. bridge loans
13. home-improvement loans
14. "hard" money
15. venture capitalists and angels
16. non-profit organizations (assets=collateral)

The next questions is how to get access to these sources of money. Who has the access?
1. friends
2. neighbors
3. past clients
4. previous/current investors
5. current investment owners
6. business owners (of successful businesses)
7. referrals
8. employees/employer/coworkers

And what do they need to feel secure enough to lend that money?
1. promissory note
2. trust deed
3. great deal (low risk)
4. personal guarantee
5. sufficient return on investment
6. reasonable time-frame (short)
7. control/ownership
8. confidence in your ability to perform

IRAs Not Safe in the Stock Market! 2 Trillion Lost in Last 15 Months!

Trillions of dollars have been lost in the stock market over the past few months! It seems that trusting someone else with your hard earned retirement money is not the best move, although there was a boom just a few years ago. This recent story shows what has happened over the past year to most peoples retirement accounts:

USA Today

CNN Money.com

US News & World Report

Yahoo! News

Breitbart.com

Fox 21 News

PerthNow News

So how do you protect your nest egg, how do you guarantee that it will still be there when it's time to retire? The answer is to take resposibility for it and put it where you're sure it will grow. I've been introduced to a copmany that allows a true self-directed IRA account. This company is Entrust Arizona. They allow you to move your current IRAs into their IRA plans. By doing that you gain 100% control and 100% responsibility for your retirement funds.

Once you're in control you have unlimited options for investing. You can invest in real estate, provide personal lending, private lending, promissory notes, gold & silver, etc. My personal favorite in income producing properties! Not only does your account benefit from the positive cash-flow but your purchased asset will be paid for by the tenants, your property will appreciate in value and it all grows tax-deferred without worry or need of the 1031 tax deferred exchange! This is an amazing and powerful opportunity to take control of your retirement and guarantee that it will continue to grow!

Carry On

It's easy to fight when everything's right,

When you're mad with the thrill and glory.

It's easy to cheer when victory is near

And wallow in fields that are gory.

It's a different song when everything's wrong,

When you're feeling infernally mortal.

When it's ten against one and hope there is none,

Buck up little soldier and chortle,

Carry on, carry on! There isn't much punch in your blow

You're glaring and staring and hitting out blind,

You're muddy and bloody but never you mind,

Carry on, Carry on.  You haven't the ghost of a show.

It's looking like death, but while you've a breath,

Carry on, my son, carry on.

(Robert W. Service quoted by Brian Tracy, "Success is a Journey", p.103-4)

I have been feeling a bit frustrated with the people I've been talking to lately about investing in my projects.  Life would be easy if we were in the lending frenzy of 2 years ago but things are not like that now.  So putting money together for a project has become the most challenging part of the task.  Right now I have a project that shows an estimated profit of about $100,000.  I need about $50,000 for the initial investment (and cost to change), property's current value is $380,000 and the future value is $540,000.  The worst case scenario is that we hold this property long-term with a positive cash-flow.  But everyone is so scared of the market that they are not thinking clearly anymore.  

I have additional projects that could move forward if the financing was there but this is one of those moments when things look bleak (feeling infernally mortal).  But I'll keep pushing forward.  There are level headed investors who'll recognize a good deal when they see it and I'll still make these projects work.

Embarking on a New Endeavor

"Whenever you embark on any new endeavor, you will be beset by countless little problems, details, unexpected irritations, difficult and dishonest people of all kinds.  They go with the territory.  They are an unavoidable part of the price you have to pay to accomplish anything new or worthwhile." (Brian Tracy, "Success is a Journey", p.84)

It seems to me that whenever you start a new project or begin a new idea there is a learning curve, a discovery of things you never knew you never knew.  The little problems and details come up because, at the start, you are unprepared for the situation.  But life teaches you what you need to know, if you are willing to learn from the experiences.  Most of the people I have dealt with so far, are unwilling to learn and falsely believe that everything should just work for them (maybe because they are somehow special).  But once you learn that thing you are prepared to work through or deal with those issues.  

Dishonesty is just something you have to deal with and be prepared for.  I believe that most people are honest, or trying to be so.  There are, however, enough people who allow themselves to be dishonest that you have to be prepared for the situation.  When we are preparing for a project we get at least 3 bids.  The lowest and the highest bids are often filled with problems.  The lowest bid provides a number, better than the rest, but then you find all the hidden charges on the back-end.  The highest number just builds those back-end cost up front.  So the middle bid is usually the most honest bid.

In spite of the problems of starting something new or worthwhile, it is still worth it.  We don't abandon ship just because there is a storm or something unpleasant.  We learn how to deal with the problem or learn how to avoid the problem in the future.  But we must learn to press on and make our visions of the future a reality.

New Source for Leads

Where do you go to find buyer leads.  Sellers are announcing themselves all over the place but buyers seem to fly under the radar.  But I've been discovering the secret hiding places of some of these potential buyers...

Construction Companies...quite often these companies have people who want to build a home and are looking for the right piece of ground to build on.  The right construction company may be a source of many lot purchase leads.

Sub Contractors...everybody knows somebody who wants to buy or sell real property and if you have a good relationship with the sub contractors they can lead you to many prospects.  This is especially true when the prospect wants to build a home and the sub contractor will get the opportunity to do their trade in the project.

Construction Lenders...obviously these people know who's applying to build a home.  Most of the time these people already have a lot, a house plan and a builder for their home.  But there are a few instances when people will actually start the process with the lender.

Remodelers...what about the person who gets a remodel bid and it is just more than their budget will allow?  Quite frequently the answer to this dilemma is to buy a different house and sell the one they are in.  2 leads instead of one.  And the contractor already has the bids for the work to be done if the property was to be purchased as an investment (and later resold with a listing agreement).

The Actual Project...if you're working on a project that needs work, maybe the best source of buyers are the contractors and sub-contractors who would be working on the project.  These people will make the money for the work they would have done anyway and they make the additional profit by enhancing the property value.  Then they need to sell the property (which means listing agreement) and attracting new potential buyers and investors.

I've discovered that the local Home Builder's Association is a great source of leads for an investing realtor.  They know their work, they get paid for it, may be the buyer/investor, and a listing source in the future!  It's time to develop a working relationship with the local contractors.  You will provide them additional work and they will be/produce buyers and sellers.  What a win-win opportunity.

The First Step

"I learned later that every successful enterprise, great or small, begins with a leap of faith, a driving into the dark, into the unknown.  Nature is kind to us in that she never lets us see to far ahead.  If we really knew all the difficulties, disappointments, temporary failures, and heartaches we would experience, most of us would not start out at all.  This applies to new businesses, careers, marriage, having children--and almost every other human endeavor."

(Brian Tracy, "Success is a Journey", p. 24)

Don't Quit

When things go wrong, as they sometimes will,

When the road you're trudging seems all uphill,

When funds are low and the debts are high,

And you want to smile, but you have to sigh,

When care is pressing you down a bit,

Rest, if you must, but don't you quit.

Life is queer with its twists and turns,

As every one of us sometimes learns,

And many a failure turns about,

When he might have won had he stuck it out;

Don't give up though the pace seems slow,

You may succeed with another blow.

Success is failure turned inside out,

The silver tint of the clouds of doubt,

And you never can tell how close you are,

It may be near when it seems so far;

So stick to the fight when you're hardest hit,

It's when things seem worst that you must not quit

--Author Unknown

Make a Decision

Most people seem to make a big deal out of making a decision.  But this is a bad sign of their ability to progress through life.  Making decisions should be as natural as breathing (according to Charlie "Tremendous" Jones).  Our job in life is not to make decisions, that should come naturally.  Our job is to make our decisions right.

We are never going to be in a position to have all the facts and all the information to make the "right" decision.  So we need to take the all the information that we can get and make the best decision we can.  Once the decision is made we need to work to make that decision the right one.  And we can only learn for ourselves, through our decisions and the resulting consequences.  So we need to make it a habit to make decisions and then make them right.

Knowledge is Power

I'm working on a small 4-unit condo conversion and right now I'm collecting the information for my deal binder (all the bids and numbers, zoning ordinances, and other important information regarding the project.  In talking about this project with a potential contractor I suggested he talk with the city about the conversion to make sure that the work he is bidding is the work required by the city for the conversion.

The next day I get a call from this contractor who is concerned about the work above what I asked him to bid (he was bidding the firewall only but discovered that we need a survey, plat map, cc&rs, hoa declaration, etc. and we had to go through the planning commission and city council for approval).  I already knew these things are have bid that work.  BUT...he was also told that a new change in the building code required a pressurized sprinkler system through out the building!  So he started bidding that work as well.  This is where a little knowledge pays big!

I went in to talk with the chief building official (don't talk to the inspectors, talk to the person with the final word) about getting an inspection to make sure I've accounted for all the important changes.  In that discussion I asked him about the sprinkler requirement.  He told me the same thing he told my (potential) contractor.  However, having already had this discussion with him I had him pull out the building code and show me the definitions.  Amazingly, I was right...a town home has 2 sides exposed with no one living above or beneath!  As a town home the property falls into a different category and does NOT require a sprinkler system.  He couldn't believe it (even though we had discussed this a couple weeks ago) and had to double check with the other code book.  A few minutes later he emerges and verifies that I was indeed correct.  So in my pre-inspection he is going to discuss the "new" discovery with the inspector to make sure that he is aware of this vital point as well.  

That little bit of knowledge is going to save me thousands of dollars in upgrades and cost to change.  In fact, it is probably the difference between a successful project and not doing the deal.  In this case knowledge really is power (and a lot of money!).

Seasoned LLCs - A Great Place For Investment Equity!

For people with an unstoppable vision and desire anything is possible. And it is just a matter of time before the way will present itself. One of my friends just started a business brokering seasoned LLCs. Why is there even a market for seasoned LLCs? Because an established business can acquire financing that new business cannot. What does that mean?
A new business has no track record and the lending industy isn't very excited to take a chance on a business that is just trying to figure things out. But the same business, in 2-3 years down the raod is no longer "new." That means they have worked through the initial start-up problems and have survived so now they are worth taking a chance on (less risk). These companies can usually get SBA loans and Business Lines of Credit around $40-50K and very reasonable rates. (Keep in mind this is intended to be business debt, not commercial spending money.)
A saavy investor can purchase any number of seasoned LLCs and each LLC can get it's own line of credit up to $50,000. If they invest it with a company like ours they can take 2 LLCs ($100,000) and invest for 2 points, 12 % and 5% of the net profits. That means they can get $2,000 (for points), $12,000 (for interest for the year), and $5,000 (of the net profits) or something is the range of $17,000 return on the investment. If it costs 7% to borrow the money (or $7,000) and you make $17,000 then you have made an extra $10,000 for the year! Not bad considering that none of the invested money was actually your in the first place. And just about any one can qualify for this type of investing if they have better than average credit (680 FICO score or better).
I've been excited about this idea for a couple months now, ever since I learned about the power of seasoned LLCs. But it wasn't until this week that I discovered a consistent source of seasoned LLCs that could be purchased at will. This can be a powerful resource for investment capital for my real estate projects (based on our Foundation to Success criteria).
Consider...if each client had just one seasoned LLC with $50,000 in available credit...how many projects could be purchased? What if we combined this concept with the Equity Builder Program? Each tenant works to improve their credit to be able to purchase their own home. Once their credit is good enough to buy a home they would also be in a position to become an investing client using a seasoned LLC! If they added an additional $10,000/year in investment income, that gets pretty close to paying a reasonable mortgage payment...so once their credit is good enough they can start investing and the investments would pay for the house they just bought! And it would provide a new source for $100K investment capital on a regular basis!

The Ant Philosophy

Jim Rohn gave the following:

"Over the years I taught children about a simple but powerful concept - the ant philosophy. I think everybody should study ants. They have an amazing four-part philosophy, and here is the first part: ants never quit. That's a good philosophy. If they're headed somewhere and you try to stop them; they'll look for another way. They'll climb over, they'll climb under, and they'll climb around. They keep looking for another way. What a neat philosophy, to never quit looking for a way to get where you're supposed to go.
Second, ants think winter all summer. That's an important perspective. You can't be so naive as to think summer will last forever. So ants are gathering in their winter food in the middle of summer.
An ancient story says, "Don't build your house on the sand in the summer." Why do we need that advice? Because it is important to be realistic. In the summer, you've got to think storm. You've got to think rocks as you enjoy the sand and sun. Think ahead.
The third part of the ant philosophy is that ants think summer all winter. That is so important. During the winter, ants remind themselves, "This won't last long; we'll soon be out of here." And the first warm day, the ants are out. If it turns cold again, they'll dive back down, but then they come out the first warm day. They can't wait to get out.
And here's the last part of the ant philosophy. How much will an ant gather during the summer to prepare for the winter? All he possibly can. What an incredible philosophy, the "all-you-possibly-can" philosophy.
Wow, what a great seminar to attend - the ant seminar. Never give up, look ahead, stay positive and do all you can."

What a great philosophy. I think we all need to think a little more like ants.

Deal or No Deal

My partner, Keith, found a nice duplex that was For Sale By Owner. He called for additional information and discovered that the property was being sold for $355,000 and that the seller would be willing to seller finance everything at 8% with a $10,000 down payment. The 2 units were renting for $1,380/month. The property was intriguing so we set up a time to preview the property and before the showing we had a chance to do a little research.

At 8% (interest only) the mortgage payment would be about $2,367/mo. The rents total $2,760/mo. Figuring a 20% expense rate we'd have $552/mo going towards insurance, maintenance & repair, vacancy and other miscellaneous expenses. So our cost of running this property is approximately $2,919/mo. This creates a potential $159/mo negative cash flow with $10,000 out of our pockets to get into the deal. While the property is in average condition and the basements have been finshed good, we'd have some initial costs for upgrading, maintaining and bringing the property into conformity with the city ordinances. The interesting thing is that the seller was promoting this property as a $200/mo cash-flowing property and as a turn-key operation disregarding the city and the landscaping & maintenance issues.

Our thought going into the discussion was that we could do a twin-home conversion on the property to increase its value. Our researched showed that the property was be worth about $350,000 upon completion of the conversion, $175,000 per unit. Our conversation with the seller revealed that he had done marketing as individual units and had received several (3) offers at $175,000 which confirmed our research numbers. So after we invested money into the property it would be worth less than the purchase price?!

Needless to say we haven't even written an offer. As I stuggled with this property I couldn't find a solution or upside to make this deal work. The seller owes about $325,000 and has a fixed payment (for 5 years) at about $2,600/mo. He lived there about 6-7 months to get the 100% owner financing and now he can't refinance or get out without a sale. We can't purchase the property for more than $280,000 (80% of future value) assuming no additional costs or repairs. We might pay more if the property would cash-flow using seller financing but that doesn't work either. I keep wondering if there was another approach that might work for this property. So far I haven't been able to figure one out.

Equity Builder Program in Action

The Equity Builder Program (EBP) is an amazing tool to help everyone achieve a win-win transaction. The premise behind the EBP is that it works like a rent-to-own (or lease option) but without a specific property to purchase.

The tenant gets an opportunity to build credit toward the purchase of a property while they work through whatever credit issues they need to resolve before buying their home. Imagine, they pay down more principle through this program than if they actually purchased the property!

The owner gets a higher than market rent, has long-term tenants, cash-flow property and an easy to manage property. The tenant must behave in order to get the purchase credit. It makes an average deal a great opportunity!

I have been trying to get a house rented in a traditional fashion for nearly a month. There have been several lookers but no takers. The home is old and needs some updating. We found a family that is struggling with credit issues due to a recent divorce. They are trying to rebuild their lives and need a place to start. They now have a house big enough for the family, building equity, have a home they can eventually purchase and they are thrilled to death. We have a house that would just break even that is now has a positive cash-flow, tenants who proactively want to improve the house and reduces the management headaches of the property. This is truly a win-win situation.

(We advertised this house for rent at $1,050/mo, $1,000 deposit, 1 year contract; we rented it for $1,250/mo, $1,500 deposit, 2 year contract)

Self Deception - A Common Problem

I'm in the process of re-reading the book, "Leadership and Self-Deception: Getting out of the Box," by The Arbinger Institute. This book explains that our lives are shaped and determined by our personal self-deception. I love the examples that is shared in the preface of the book:
"To give you an idea of what's at stake, consider the following analogy. An infant is learning to crawl. She begins by pushing herself backward around the house. Backing herself around, she gets lodged beneath the furniture. There she thrashes about -- crying and banging her little head against the sides and undersides of the pieces. She is stuck and hates it. So she does the only thing she can think of to get herself out -- she pushes even harder, which only worsens her problem. She's more stuck than ever.
"If this infant could talk, she would blame the furniture for her troubles. She, after all, is doing everything she can think of. The problem couldn't be hers, But of course, the problem is hers, even though she can't see it. While it's true she's doing everything she can think of, the problem is precisely that she can't see how she's the problem. Having the problem she has, nothing she can think of will be a solution."
Each of us falls into this category at some level or another. We are getting ourselves into problems, trying harder to get ourselves out and don't realize that we are the problem. Nothing we do will get us out of the problem we have created for ourselves. This books goes into the root of this problem and shows how this self-deception affects our lives and why we can't see the problem we're creating until we know what the problem is. I would recommend the book to everyone.

Fortune Favors the Brave...It's Time to Act!

I heard Mike Watson say something that I remember as, "try to find reasons to make the deal work, not reasons why it won't work." There are so many tools in real estate that can be used to put and keep deals together. The more I work in investment real estate the more I realize that it's easy to get out of contracts and out of deals but that isn't what makes an investor wealthy. Our job is to get into contracts and into deals that make sense and then to do what it takes to make the outcome as profitable as possible (while still maintaining a win-win transaction).

Brian Tracy had a similar thought...
"Boldness is a necessary part of courage but it must be a boldness based on an intelligent assessment of the potential risks and rewards. The wonderful nature of boldness is that, properly directed, it builds the habit of courage in the person who practices it.
"Perhaps the most obvious important part of courage is the courage to step out in the face of uncertainty. Every great venture in the history of man has begun with faith and a giant leap into the unknown.
"General Douglas MacArthur said, 'There is no security in life, only opportunity.' The creed of Frederick the Great, one of history's most successful leaders was, 'Audacity, audacity-always audacity."
He continues with 2 ways to build boldness...
"First, just do it! Step out in faith! If you think some action you can take to improve your life, give it a try. You may be surprised.
"Second, when in doubt, act with audacity. Audacity may get you into trouble but even more audacity will get you out. Go for it!"

The greatest obstacle to a real estate investor is to do something. There are no guarantees in investing. But when you take an active role in creating and enhancing equity your chances for success are greatly improved. When you work with someone who has a plan for adding value, who strives for win-win transactions and opportunities, who has vision and who is willing to act with boldness (and audacity) you have a winning combination. So if the numbers work, so should you. It's time to move forward and make it happen!

Flag Lot Creates Instant Equity

We found this house while doing a simple MLS search for homes on big lots. This house has 2,100 square feet and sits on a lot with over 16,000 square feet. As it turns out, the neighborhood sits in a zone that allows 6,000 square foot lots (R1-6); it also allows a flag lot if the body of the lot is at least 8,000 square feet (not including the access/stem). A flag lot gets its name from the shape of the lot, the body looks like the flag and the access/stem looks like the flag pole.
The subdivision was a simple process. We hired a surveyor to create the plat map, completed the city application and paid the city fees. Our survey showed that the existing lot lines overlapped in places and had gaps in other places. We didn't worry about correcting the overlap (the fence was encroaching onto our property) because that gave us some needed square footage to meet the city criteria for the flag lot. We needed a little more room on the other side of the property. After a short discussion with the neighbor we discovered that they believed the property line to be in our favor. So we prepared a lot line adjustment document and had the neighbors sign (and notarized) that we could record giving us permanent possession of the area in question. Now we had more than enough frontage and area to meet all the city requirements. Because the lot fit the city criteria for the subdivision we didn't meet any resistance and proceeded through all city meetings. Once the new lots were approved we were able to record them.
Financing this project was the trickiest part of the whole deal. The simplest way would have been to pay cash for the original parcel, record the lot split and then sell or refinance the property seperately. We tried to do a conventional purchase and ran into many challenges...
Equity Partner...new lending guidelines limit a traditional borrower to 4 financed properties! It doesn't matter how the properties are financed (which includes property that is seller financed). In order to be able to continuing doing these residential deals we found several clients who wanted to participate in investing. A partner has to have several things to qualify as an equity partner: 1) documentable income, 2) low debt (income to debt ratios), 3) good credit (over 700 is preferable), 4) cash reserves (liquid assets in savings, available home equity, retirement account monies, etc).
Simultaneous closing...buying a property and then selling the same property using the proceeds of the second sale to fund the first. Our lender thought of this brillant plan to sell the lot and use the proceeds to cover the down payment on the house (since we had 2 seperate properties after the lot split). In this way we could own the house with no money out of our pockets. However, the title insurance companies have decided that this kind of transaction is not insurable. The reason is that we cannot sell something that we don't own and we cannot use the proceeds of the sale of the property to finance our purchase (we have to show that our money stands seperate from the money of the second transaction). So we used different (short-term) funds for the property purchase and the sale of the lot proceeds to pay off the short-term funds.
Seasoned Funds...funds that can be documented and shown to exist for a period of time (usually about 2 months or more). The down payment for the original purchase needed to be seasoned, or at least documented to show that they were not a loan or borrowed funds that would need to be reported on the loan application. The overcome the seasoning issue we were going to use the proceeds of the lot sale as our down payment. Obviously that was not an option due to the simultaneous closing issue. What we finally realized is that we could borrow the funds for the down payment as long as there was no monthly payment (interest could accrue but would be paid at the end of the term of the note) and the money was secured by a trust deed and note to a completely different piece of real estate. With no monthly payment there is no debt service and those income to debt ratios are not affected. And with the note secured to a different piece of property it is no different that a home equity line of credit and is considered seasoned funds.
Tax IDs...tax identification numbers are used to identify each parcel of land (much like a social security number for a person) and is used for a government municipality for taxing purposes. Originally our lender wanted to use the lot proceeds to help finance the property purchase and so he had us record the lot subdivision. Since the bank loan was only going to encumber the lot with the house we had to use its specific tax id and not the old tax id representing the entire original parcel. It took 4 weeks for the county to show the newly assigned tax id numbers for each lot and we couldn't proceed with the loan until the new numbers could be shown. In addition, traditional residential lending cannot encumber parcels with multiple tax ids. Because we were purchasing 2 parcels instead of one (due to our lot split) we had to create a second REPC (Real Estate Purchase Contract) for the flag lot.
Extended Closing...the deadline for settlement of the purchase contract is extended beyond a traditional timeframe and may be tied to a specific event in the deal process. Our original REPC was a full price offer with an extended closing (the closing date was set to 14 days after we had city approval of our flag lot subdivision). We managed to expedite the city process by meeting all the submittal deadlines (and our surveyor was very helpful in getting the necessary changes made). Just before our first closing deadline our first investor backed out of the deal. We had to find a new investor for the project; with a new investor came new funding processes and we needed more time. We increased our earnest money and released it to the seller to "buy" more time and extended our closing 30 days. The next deadline came but we had to wait for the tax id numbers to be assigned because of our lot split so we increased our earnest money and released it to the seller and gave ourselves a new extended closing deadline (a few days from receipt of new tax id numbers). The extended closing ultimately save this project and all our work into the deal.
Instant Equity through the Foundation to Success! When we found this house it was already a decent deal at $165,000. After the lot split we had a house worth $158,000 and a lot worth $60,000 for a total of $218,000. That represents $53,000 of instant equity! The deal would have had an even greater equity position had we completed the transaction in 2 months instead of 12 months (this property went under contract the first time in September of 2007 and finally closed in August of 2008) due to our current market factors.
While this process was lengthy and filled with problems, loopholes, and conditions, it has proven to be a valuable learning experience. I would hope that future investors won't make the same mistakes that I made on this project!

Personal Opportunity

I have talked to quite a few people who are scared of this market. But there is opportunity everywhere. The majority of the people I talk to have are living in one of the greatest opportunities available, there own home! The home that you live in is one of the greatest assets you'll ever own and no matter how much the neighbor's house sold for you always know that your house is worth more! So what are you going to do about that value that your home possesses?
If there is equity in your home why don't you use it for good investments, especially if they are backed by real estate? Your home is a piece of real estate so you obviously believe that owning real estate is a good idea. But in our current market the investment that you made is currently lossing money, your equity. What would happen if you used that equity to invest in a real estate project that was guaranteed to make money in this market? What if you used that equity to buy an income producing property that would not only pay for itself but would pay off a new mortgage so that over time your net worth was consistantly increasing? How would your life change?
Obviously, increasing your net worth and cash flow do make sense so why don't more people invest their home equity in our real estate projects? The reason is that most people are scared and the fear of the unknown has a crippling effect on the decision making process. And these same people will rationalize that owning their home free and clear means that they will always have a place to live even if all their other investments don't work out. Unfortuneatly those people are only partly correct. Picture this: a person invests $500,000-$600,000 to own an investment that has a value of about $200,000; then this person has the opportunity to pay an additional $2,000 a year (in taxes) and $200 a month (in utilities) plus additional monies in maintenance for the privilege of keeping this asset. OR Picture this: a person borrows some money from their home and buys an income property; this property pays them monthly to own the property, over time the property pays its self off so that it is owned free and clear, and the income from the property pays all expenses and pays you for your faithful service and foresight; you now own a $200,000 property that pays you $2,000 a month and pays the expenses.
I hope that I can help more people see the value of investing using their home equity. Home equity, just left in the property, is subject to the ups and downs and whims of our market. But home equity that is used for investment is guaranteed to pay forever. Those who understand this simple idea will still own their homes, will still get any market appreciation but will also gain the value of the cash flow and increased net worth from investing their home equity.

Opportunities Abound

Right now we are facing a very difficult real estate market. In general terms we are facing a market correction. Very simply put, that means that prices for real estate are going down (correcting). This has caused many people to become scared of real estate in general.
As far as I can tell the reason property prices are going down is that the value being assigned to any given property is not being supported by the property itself. When people invest in real estate it seems that they buy a property with the hope that someone else will come along and think it is worth more. No work is done, few improvements made...so why would someone else think that a propety is automatically worth more?
One of the great things about our style of investing is that we actual do something to the property. This isn't just about adding carpet and paint to a bad house ("lipstick on a pig"); that just gives you a bad house with new carpet and paint. As you look at property there is a hidden value called its "highest and best use" that most people never see. The reason is that most people are not willing to take the time to learn and train themselves to see the opportunity (and it takes a lot of work and effort). Sometimes the hidden value involves carpet and paint but many times it does not.
I hope that as I work with my clients I will be able to help them understand and realize the hidden value that a property possesses and the abundant opportunity that is available in our marketplace.