As I wrote about my story, I came to a realization that I want to share with you because–it is my failure story. People learn from their successes AND their failures. I am guilty of having made some successful real estate investments and then stopping. Just plain stopping!
I think that somewhere along the way I lost my confidence in my ability to buy real estate with no money down principles. Until just recently, I had not bought a single property for myself since 1989! I have just been managing my two remaining properties since that time.
So my story is about wasted potential. I have read all of Robert Allen’s books, listened to his tapes (and others), tried some of his techniques (sometimes successfully), and not used them for my own real estate investment program. Instead, I have worked as a Realtor helping novice investors to buy real estate and teaching them the ABCs of property management. But I have NOT bought for myself!
By buying Carleton Sheet’s course recently, I was hoping to rekindle my confidence in real estate investing for myself. I wanted to put a bur in my saddle and get going again. Finding Creative Real Estate Online has helped me greatly, as I am reading real-world Success Stories about people who are out there and doing it.
Tonight I followed up on an offer that I had made for a townhouse yesterday. Here are the nuts and bolts: I am paying current market value: $95,000. The owners will get a new first mortgage of $ 76,000, pay out their existing first mortgage of $20,000, and carry the difference as a 2nd mortgage at 6.5% for 4 years.
I will lease option it for $995 with a positive cash flow of $250/month. After 4 years, assuming the tenants exercise their option to buy, I will receive a lump sum of $16,000. It looks like they will be accepting it as they will be talking with their lawyer on Monday. I advertised it in today’s newspaper as a “Rent to Own” and had several calls by people wanting to see it immediately and rent it for July 1.
Oh yes, on July 1 I will be receiving $995 rent plus $995 security deposit. About one week later, I will also receive a selling commission of $3,325. My expenses that first month will be legal fees of about $500 plus property taxes of about $1,000.
Our very first real estate investment was when my wife and I borrowed $10,000 from a bank at 15% and loaned it to a home buyer at 21% plus 1/2 interest in his appreciation. He bought the house for $67,000 and repaid us on time every month.
After about 24 payments, we discounted the 2nd mortgage by $400 and sold it to my parents, so they would get a 25% return on their cash investment. We kept the clause regarding the shared appreciation. Now, 12 years later, we still own 1/2 of the appreciation of the house (minus renovations and maintenance costs). Its current value is about $140,000.
In 1987 I bought a condominium in Calgary for $41,800. I assumed (took over the payments) the existing 1st mortgage balance of $37,000 and the seller agreed to carry back a 2nd mortgage of $3,000 so I ended up paying $1,800 as my down payment.
In the “terms” section of my offer, I had asked for access to show the property to potential renters “upon acceptance of this offer.” As the condo was vacant at the time, this term was easily accepted and, on possession day, my new tenants moved in paying me their first month’s rent plus an equal amount as their security deposit.
That totaled $1,000 and my first mortgage payment wasn’t due for another 30 days so I paid my condo fees and put the rest back into my bank account. Although my “positive” cash flow was only $12.70 per month, I sold the condo four years later for $65,900 and deposited a cheque for $30,000 into my bank account.
I had endured some battle wounds as I learned to be “fair but firm” instead of “nice and soft.” My education cost $1,500 in repairs from bad tenants BUT I learned. The education was worth it.