Download (direct link):
5. Work the numbers with the seller to get the property at the price you know can give you a Positive Cash Flow and at the same time put some money into your bank. Then manage your property carefully to give you the best return possible!
If You Have Time and Experience, Mortgage Out in Development
The way mortgaging out works in construction is based on the completed value of a project. Thus, if you:
Bootstrap Your Way to Your Real Estate Cash
• Buy land to build on,
• Have a building designed by an architect,
• Develop the land—that is, put in roads, sidewalks, sewers,
• Construct the building on the land, and
• Ready the structure for occupancy,
the finished building will be worth 25 to 33 percent more than the cost of the land, its development, and the construction cost of the building. Your mortgaging out comes from the difference between your land and construction cost, and the finished value of the building.
So, to mortgage out in development and construction takes time. The average land development and building construction time will run one year or longer.
Youthful Example of Mortgaging Out in Construction
Kemmons Wilson, the highly respected founder and chief executive of the famous Holiday Inn chain with some 1,700 inns in the United States and many in more than 50 other countries, started in business at the age of 17 with a popcorn selling machine. He then went into the pinball machine business. The profits he earned from that business were used to build a home for his mother. Building the house himself, he saved $1,700; the total cost of the finished house was $2,700. Once he finished construction, he mortgaged the house for $6,500. In essence, he mortgaged out. With the money from the mortgage he purchased a jukebox business—eventually going on to found the popular Holiday Inn chain.
For most people, development and construction require previous experience. So I suggest to you, my good friend, that you start with single-or multi-family residences to mortgage out. Once you have a few years experience you can turn to development and construction.
When that day arrives you can call me and I will gladly help you, as a mentor or advisor, every step of the way. You’ll earn enough and be busy enough for several years, just with your single- and multi-family residences.
Your Keys to Real Estate Riches
? Mortgaging out can give you cash in hand when you close on an income property that you buy for zero cash down.
? You can start mortgaging out in a small way and build to greater amounts as you gain experience.
? Mortgaging out also has other names—including windfall and overcapitalization. But all give the same happy results—cash in your pocket on closing.
? There are many real estate windfalls you can enjoy when you mortgage out. It’s good to get to know all of them.
? Three good rules to use are:
• Gross Rent Multiplier.
• Price Per Square Foot.
• Price per Apartment Unit.
? Quick mortgaging out can bring profits to you sooner than you think but you must work at building value.
? Use every proven method you can to mortgage out and you’ll find success faster than you might imagine.
? Know the perks for you in mortgaging out—they can build a great life for you and for your family.
? Get to know the where and how of mortgaging out. This knowhow could make you rich.
? Start mortgaging out with single-family homes. Then go on to multi-family homes. Try development and construction later in your career.
Use Single-Family Homes for Your Quick Real Estate Start-Up
People call me—again and again—saying:“I j ust found this beautiful 40-unit apartment building that has an income of $230,000 a year with a cash flow of $150,000. And they’re asking only $1,800,000 for it. How can i buy it, even though i have bad credit and i went bankrupt last year? And, by the way, I have only $150 cash at this moment. Please help me, Ty!”
You think I’m exaggerating? No way! Such calls come in at least once a week—sometimes much more often. Gently, I try to tell these ambitious but misinformed BWBs the facts of real estate life. Here are these facts.
Start with the Possible and Grow Bigger
Your future in real estate is better today than ever before. But you must start with the possible and grow bigger with the passage of time. To start with the possible:
• Look for properties that can give you a steady and stable income while not requiring a large down payment.
• Look for properties having government, state, and city programs that will help you with locating, financing and rehabbing (if needed).
• Look for properties having sources of tenants with rents paid by a government organization—national, state, county, or city.
When you look for income properties having the characteristics listed above, you’ll find that almost all of them will be single-family homes. Why is this? Because many government programs: