Download (direct link):
Date: June 7, 2--------
Address of Property: 123 Main Street Seller’s Name, Address, Telephone No.: John Doe,
678 Glenn Av, 654-9876 Asking Price: $65,000 Down Payment Asked: $6,500 Annual Expenses:
Real estate taxes: $1,800 Maintenance: $900 Insurance: $1,068 Total Annual Expenses: $3,768
Condition of Property: Needs some interior painting; exterior needs minor repairs; total estimated cost of both = $1,800. Favorable Aspects of Property: Good location; near schools, shops, transportation; easily rented since it has 3 bedrooms, 2 baths, 3 parking spaces and nice backyard with room for children’s play equipment.
Unfavorable Aspects of Property: Needs some cosmetic repairs.
Rental Potential: $1,125 per month; $13,500 per year. Negotiable Price: $62,000 vs. $65,000 asking price.
Down Payment Deal Negotiable: $6,200 vs. $6,500 asking. Seller Attitude Towards Sale: Very, very anxious!
My Rating of This Property: 9, with almost a 10, if I can get it for $62,000 with $6,200 down payment.
Personal Thoughts Re This Property: I like it and think it will fit in well with my future plans for real estate wealth.
Figure 5.1 Real Estate Riches Success Book
Use Single-Family Homes for Your Quick Real Estate Start-Up 101
7. Make an offer on the detached single-family home if it measures up to your requirements in terms of rental potential, down payment requirement, and profit you can earn from the home once you own it. YOU MUST HAVE A POSITIVE CASH FLOW FROM EVERY SINGLE-FAMILY HOME YOU INVEST IN! Enter the full details of your offer in your Real Estate Riches Success Book.
8. Acquire the property and rent it to a suitable tenant. Wait at least three months to get some experience with the property (real estate lenders call this “seasoning") Then go on to your next single-family home to expand your wealth building.
Work the Numbers for Each Property You Acquire
Once you own your first rental property, you’re in business for yourself. And when you’re in business, you must “work the numbers"—that is, figure your expenses and your profit.
If you had trouble with numbers in school or on your job, don’t worry! When you work the numbers for your income and profit, you’ll find them easy. Why? Because when your livelihood is involved, the numbers suddenly have real meaning and they “just seem to add up,” as many BWBs tell me.
To work the numbers for any single-family home of any type, take these eight easy steps:
1. Get the price of the house from your notebook.
2. List the down payment you’ll make.
3. Figure your monthly mortgage payment using Table 10.1 (on page 210).
4. Calculate your monthly payment on your down payment loan using Table 10.2 (on page 211).
5. List the monthly cost of your real estate tax, maintenance, insurance, and any other expenses.
6. Estimate the monthly rental income you expect to get.
7. Figure your monthly Positive Cash Flow.
8. Compute your annual Positive Cash Flow.
Now you can perform these steps, quickly and easily. Here’s how to figure your Annual Positive Cash Flow (APCF) for a house at 123 Main Street that we’re assuming you’ve decided to buy, after having carefully looked it over, as detailed above.
1. The Price and Down Payment come from your Success Book.
2. Figure your monthly mortgage payment by using Table 1 in Chapter 10, and following the steps shown in the example accompanying the table. This is easy to do. If you have any questions, just call me and I’ll do it for you on the telephone once you give me the numbers. Use an interest rate based on the going charge in your area. Just call any bank and ask what their current mortgage fixed interest rate is. Or you can find this in mortgage ads in your local paper.
3. Figure your monthly down payment loan payment the same way, getting the current interest rate on your credit card—if you used a credit card line of credit for your down payment. Or use the interest rate for a personal loan you got from a bank, credit union, or finance company.
4. Enter your info from these steps in your Success Book on a form like that in Figure 5.2, for the home at 123 Main Street.
5. Next, list the other monthly expenses associated with 123 Main Street in Figure 5.2. These expenses are: Real estate tax = $150; Maintenance = $75. You get these monthly expenses from the seller or you estimate them, based on data you obtain from the tax authorities. Enter them in your Success Book. This gives you a complete picture of your costs.
6. Compute your monthly positive cash flow by subtracting the total of your expenses, $805, from your monthly rental income, $1,125, to get your monthly positive cash flow, $320. Your Annual Positive Cash Flow is then = 12 x $320 = $3,840.
Put Your Numbers to Work
“The Annual Income from 123 Main Street really isn’t much,” you say to me. “I’m a corporate executive and that annual income wouldn’t
Use Single-Family Homes for Your Quick Real Estate Start-Up 103