First – Happy New Year! We made it through a tough one.
I read a lot and most active, successful investors do also. Recently I read several articles that impressed me: (you can let me know, on this Blog, if you’ve read something that impresses YOU)
Rich Dad (his book, along with many others, your choice, is available when you join MassRealEstate.net as a Bonus Book for only $99/year Membership or $119/couple) wrote the difference in why some people are Richer than others: They think Rationally vs thinking Emotionally. I’ve spoken many times on the ability of successful RE Investors who use their Rational thinking and become “Contrarians” Buying when the “herd” is Selling and the inverse Selling when that same herd is Buying. Often it requires nerves of steel to do something different from everyone around you. You know you’re right but what if your timing is off a little. Mr. Kiosaki calls it “Fear of Ostracism from your Peers”. At one time I thought we were on the famous “seven year cycle” which gurus espouse. So 1985 was a peak then 1991 was a recession trough. We were supposed to go up for 7 years before another peak. However in 1998 I looked around, we in Real Estate were heading for the sky and the market did not peak until 2005. Fortunately my signals did keep me in beyond ’98. Now, how long will our current recession take to trough? Some say it’s here now and we’ll turn round in mid 2010? Personally I don’t think it matters when you buy. As long as you purchase WELL below market and sell JUST below market, leaving something for the next person.
So how do you buy? I read how Larry never pays more than 70% of after repaired value invested which includes purchase, repairs and closing costs. So a Single family in my area is worth $350,000. Let’s back it out with $35k in repairs and 5% closing costs and the most I can pay for this is $210,000.
Doug had a Seminar where he told Investors his formula, using an example: Purchase price $115,000. Rehab $25,000 Total maximum acquisition cost is $140,000 Only if he can sell it for 50% more $210,000.
I’ve got a different approach based on continuous research. I’m at 10-12 Open Houses every Sunday in my “farm” area. I see what’s on the Market then I follow up to see what they’ve sold for. I also stay up on my Construction costs, Labor and Materials. This is the basis of our training in my course “How to Become a Real Estate Investor in 12 Easy (formerly Tough) Lessons” by Mike Hurney for only $599 (members of MassRealEstate.net only $499. Membership is only $99/yr). I spend a good deal of focus on what the house would sell for in “perfect” condition then back out my Upgrade costs, Holding costs, Commission and Profit of a minimum of $40,000.
Want a Real life example or have a potential deal to run by me? It’ll be a quick, fruitful call if you’ve got some of those costs in advance 781-405-1845 cell, Mike Hurney
PS So how do YOU buy?