Jim’s Secret to real estate investing success. 10 rules that will help you retire in 20-25 years.

Jim had a secret.

The funny thing was that he didn’t keep it a secret. If you were willing to ask him and really listen to his answers, he was happy to share it with you. But you had to be paying attention. Because if you weren’t, you wouldn’t even know that he HAD a secret.

We worked together in a non-profit/volunteer organization. He was an adviser, a counselor if you will. I was a rookie volunteer. And over a few years of working on projects together, I came to realize that he always had time to work on things with us. He always had enough money to help out when needed. He wasn’t flashy about it. And he was certainly frugal. But when there was a good reason, he was willing to take care of things for others. Quietly. In the background. No limelight, no publicity.

He lived in a modest home in a nice, quiet, suburban neighborhood. Nothing fancy or pretentious. A typical California style 3 or 4 bedroom rambler with 2 bathrooms and an attached 2 car garage. Maybe 1200-1400 square foot. Probably built in the 1960’s. He drove an older car. Again, nothing fancy, just a good quality car that was well maintained.

And in his early 50’s he was preparing to retire. I wanted to know how.

One day I started asking him questions and he opened up and told me about himself. What he told me has provided the basics of what I’ve shared with  people who wanted to invest in Real Estate ever since.

Jim worked as an engineer. He made good money, not a ton, just a little more than the average for the area at the time. He had a steady paycheck, with good benefits. He had a good education from a good school. While in school, his father had strong armed him into buying a duplex rather than renting a room or living in the dorms.  This was a key in Jim’s future success. He became a landlord rather than a tenant. And paid for much of his schooling in the process.

At the time we talked (in the early 1980’s), Jim owned 23 rental properties and was worth over $3,000,000!

I wanted to know his secret. And he was happy to share.

Jim’s secret was really quite simple, but a stroke of genius nevertheless. Simply put, Jim bought an average of two homes per year. Some years he bought more and some years he bought less depending on the market and his own circumstances at the time. But on average it worked out to two homes per year.

Some of the homes he re-sold. Some of them he kept as rentals. Once in a great while he refinanced one. But most of the time he just paid them off as quickly as he could. And his secret, or system if you will, will work for almost anyone who is serious about having a comfortable retirement. It’s not easy. It’s NOT a get rich quick scheme! It takes a lot of hard work and some risk over the years. But it works. And almost anyone can retire in 20 to 25 years a multi-millionare by using Jim’s secret.

1. Have a good job that provides enough to take care of your family and has decent benefits.

2. Do your investing activities on the side. Richard Paul Evans calls this “Winning in the Margins.”

3. Plan on buying two properties per year. One you’ll keep as a long term rental. The other you re-sell.

4. Buy them right. You make most of your profit when you buy, and lose most of it when you sell.

5. Use the profits from those you sell to fund your purchases and repairs. Don’t try to live on it.

6. Every property must cash flow. If it can’t pay for itself, sell it.

7. Only refinance a property if the interest rate is 2% or more less than what you are currently paying.

8. Put excess cash flow into paying off the oldest mortgage first. When you’ve paid it off, roll that money into paying off the next oldest. And so on. DON’T increase your standard of living to eat up the extra income.

9. Manage the properties yourself. Do as much of the repairs yourself as possible.

10. Make sure that your rentals are better maintained than other rentals in the area. Better properties equals better tenants.

May you find peace and happiness in your life and eternal life in the hereafter.

Cleve

ps: Check out Richard Paul Evans book “The Five Lessons a Millionaire Taught Me”. It’s an easy book to read and has some good insights in it. His website is http://richardpaulevans.com/

Tish Washington, the Honest Mortgage Pro, can be reached at 877-897-4831. Now lending in AZ, CA, CO, CT, FL, HI, ME, NM, NV, OR, and WA.ANNOUNCING !!! $97 Do It Yourself Loan Modification Kit www.97DIYLoanModKit.com

Rates are rising daily consider refinancing now.

Newsletter-Chrisman, Rob (excerpt)

“Deja Moo” is defined as “the feeling that you’ve heard this bull before”. Rates have gone up because the “economy is doing well”, yet there are numerous signs that the economy is a) either not doing well, or b) about to sink even farther. Unfortunately for mortgage bankers, ALL rates have gone up, including Treasury rates, and thus we find ourselves with rates back in the high 5% range. Certainly the “end of the world” feeling from the banking sector is gone, at least for the time being, which is a good thing. There are certainly signs out, however, there that things are doing better with regard to the demand for mortgages. Yes, the Fed has been in buying $5-6 billion in mortgages per day, rain or shine, and this will continue for quite a while.

Brokers and agents have written to me saying some positive things. For example, in Florida, “home sales have risen dramatically in recent months. The number of units currently under contract is the highest in over 2 years…resulted in a dramatic decrease in inventory as we currently have 7.5 months of inventory on the market as opposed to 20 months in May ‘08….the median sales price has leveled off and actually increased slightly over the last 3 months. These figures certainly point to the start of a recovery or at the very least a signal that the market has stopped declining.”

Another wrote, “Business is going well, especially looking back the past 60-90 days, although the purchase market in my area is very slow. Those months definitely helped make up a little for the last 18 months of instability. These last 2 weeks have seen a big slowdown in volume and I am sure has everyone scratching their heads in terms of forecasting volume, human capital needed to process volume, etc.”

And this from the Washington Post: “Foreclosure filings fell in May compared with the previous month, but remain at elevated levels, according to data from RealtyTrac released today. The firm counted 321,480 filings nationally, which can range from default notices to bank repossessions. That was down 6 percent from April, but an increase of nearly 18 percent from May 2008. RealtyTrac, a private firm, says its data include more than 90 percent of U.S. households.”
Tuesday’s $35 billion 3-yr auction went well (as was called “ham-on-rye” by one trader), but the $19 billion 10-yr yesterday was not so smooth. Today we have $11 billion in 30-yr’s to sell. With the yield on the 10-yr near 4%, one could argue that we should see good demand for the bonds being sold – let’s hope so. The 30-yr mortgage rate is now in the high 5’s versus in the 4’s in April and May. Certainly if anyone believes that the economy is doing poorly, now would be a good time to buy!

I love surveys. The latest one shows that higher unemployment (like 10%) would cause a decline in consumer spending. Hopefully someone paid pollsters lots of money to come up with that finding! Many economists feel that the jobless rate will climb to 10 percent by the end of 2009, 1.6 percentage points higher than projected at the start of the year, according to the median forecast of 62 economists surveyed from June 1 to June 8. Household purchases will drop this year more than previously estimated. They predict that fewer jobs, lower home values, limited credit and shrinking retirement funds will prompt Americans to save, blunting the Obama administration’s stimulus efforts. Still, government infrastructure projects, smaller stockpiles and stabilization in residential construction will help the economy start growing in the second half of this year.

For economic news today we had the usual Thursday Jobless Claims, which fell more than expected last week “pointing to an easing of labor market weakness”. They were down 24,000 to a seasonally adjusted 601,000 in the week ended June 6, which is the fourth straight week the number of claims declined or was unchanged. The 4-week moving average for new claims fell to its lowest level since mid-February. We also had Retail Sales come out as expected, +.5%. This is the first increase in five months, and was helped by gasoline and building material increases. Ex-autos the number was also +.5%, compared to -.2% last month. After the news we find the 10-yr at 3.96% and mortgage prices (you guessed it) worse by about .125.
Jim died.
His will provided $40,000 for an elaborate funeral.
As the last guests departed the affair, his wife Sharon turned to her oldest and dearest friend. “Well, I’m sure Jim would be pleased,” she said.
“I’m sure you’re right,” replied Brenda, who lowered her voice and leaned in close.
“How much did this really cost?”
“All of it: $40k,” said Sharon.
“No!” Brenda exclaimed. “I mean, it was very nice, but $40,000?”
Sharon answered, “The funeral was $6,500. I donated $500 to church. The whiskey, wine and snacks were another $500. The rest went for the Memorial Stone.”
Brenda computed quickly. “$32,500 for a Memorial Stone? How big is it?”
“5 carats.”