My brain hurts
 

Chris:

I get "brain ache" trying to keep up with some of the creative financing guys. They bandy numbers about as if we should all just know them off the top of our heads. And never explain WHERE the numbers came from.

I find, if I know WHERE a number comes from and HOW that number is figured out, I can understand it and my brain does not begin to shut down in protest.

In the original post - the one with the fifteen year "table" - the value of the property is increasing at 5% per year. I just added 5% to each year's value to come up with the new value. The equity was that new value minus the $90,000 loan.

Simple "bush math" as I call it.

If I cannot do it on a normal calculator and need a financial calculator, I don't want to know. It's too complex. And complex things have a tendency to lack control.

I find, sitting down with a calculator and working through the numbers in presented stuff, lets me "own" the calculation method. Just reading it and trying to figure it creates brain strain.

A little while back we had a thread based on a real estate method that went like this:

Lease a property for six months. Pay the six months lease up front. And for doing so, only pay five months and get the sixth month for free. Then sub-lease it to a tenant for six months at a slight discount - the discount is so they will stay on.

The original lease payment (all five month's worth) was to be funded by investors at 12% - you owe them the money back plus 12%).

Your money came from the difference between what you owed the investor and what you took in in rent.

After all was said and done, you did a lot of work for little average payback. You got all your money up front - first and last month's rent - and after one year, you were basically managing the property for free.

The guy who presented the idea used numbers I could not figure out. I didn't know where he got his numbers from. And after asking for clarification - and getting it - I still don't have a clue.

I understand the concept. But not the numbers as they were presented. And what I don't understand I drop.

If you want to know WHERE a number came from in anything presented here and you can't figure it out yourself, ask. Once you know, you own it.

By the way... loan recalculations are figured by me using a free loan calculator I downloaded :o) I remember learning a loan formula at school, but it's easier to use software to figure it out.

Michael Ross

Great Post, Michael! (DNO) (DNO)
 

Re: My brain hurts
 

Now what I do if find someone in preforeclosure or relocating or going through a divorce. They need to move, and NOW!

I will step into their shoes and start to make their payments on THEIR existing loans. Usually this consists of making up the missed payments.

A few minor repairs and I have it out on the market. I am usually able to buy at 85-90% of current market value.

On houses with major repairs I have been able to do the same thing, but I am able to buy at about 60-70% of market value. This is my after repair percentage.

Based upon the need to keep money flowing I use other peoples money to do the repairs or making up the back payments. They get it from their IRA's.

Now, we do sell our houses, after a year, and keep a few as well. It just depends on if we have a better house to buy at that time. Also, you can't eat equity.

I agree, DO NOT BUY IN WAY ZONES. Now, with that said, I know of some guys here who are buying over 100 houses a year and making great money by doing just that. They have about 100 houses that they have kept free and clear by selling off the others.

I use a great deal of marketing to generate leads and to do follow ups with people looking to sell their houses.

Thanks Michael

Terry

Re: How To Become A Millionaire In 10 Years (or less)
 

Some other facets of the Australian Dream

Michael,
It is really good to see someone from down under able to show the worlds best practice capitalists a thing or two. I am always amazed that more people in the US are not doing what is now almost folk law in Oz. With their rental markets (over 10% return in alternative areas of SF apparently) together with 15 years at 7% (Yikes am I dreaming!!!) this should be a breeze. I also know of one bloke here in Queensland that is branching out into the states with the same idea. With the US's much more flexible financing and acceptance of novelty I think it would go over really well. But I digress....

Two other points to think about. Always get each house financed by a different source (bank etc.)this stops banks amalgamating your colateral in case of problems. And put each property in a different trust structure, this will only cost a few $hundred each and if all trusts have the same corporate trustee the taxes are still relatively simple. This combined with keeping up the level of good debt through borrowing for "wages" will act as a pretty good asset protection system. US citizens can make it even simpler by use of New Mexico LLC's as silent owners and other such ideas that are too far off the wall for us simple souls from down under.

Thanks for the constant education and entertainment (edutainment?)

regards, Scott
> In the latest issue of The Entrepreneur's
> Hotsheet we linked to a post which
> contained a story about a woman who became a
> millionaire in 7 years. See the story here:
> http://www.creonline.com/wwwboard/messages/49935.html