Hit the Jackpot, Strike it Rich in Real Estate, and Quit Your Job

Are you ready to begin investing? Or, are you already investing some, and want to expand your holdings? Or, are you investing a lot, but want to streamline your operation?

Let’s really hit the jackpot, strike it rich, and quit that day job!!!

As one of my professors use to say, “Let’s commence, to begin, to start, to get ready, to GO.”

Do you bet on the lottery?

I am amazed at how many people throw their money away buying lottery tickets with such slim chances at winning!

At the start of 2004, Tennessee cranked up its new state lottery. The news media fanfare went on for months. Tennessee hired the lottery director from Louisiana to set up the state’s system, and this aired every night on the news. Finally, the kickoff. Within just weeks, the announcements aired that Tennessee had taken in $50 million in lottery sales, and then $100 million in lottery sales. Newscasters quietly mentioned that a whopping $50,000 had been paid out already in winnings. Wow! $50,000 in winnings compared to $50 million in ticket sales. What a windfall. (For the lottery, that is) Then came the subdued mention of some store owners shutting down their recently-opened outlets out of conscience at seeing their regular customers buy so many tickets who did not even have enough money to buy groceries. And all this ballyhoo was presented under the guise of lottery money to subsidize college scholarships.

Isn’t it great for kids to get a good education, and isn’t it greater that I can buy a lottery ticket – not to pay for my own kids’ education – but to help other folks’ kids get their education!

And in the meantime, I might strike it rich!!!

Come on. (Where is common sense logic?)

Fishing tales

I had some fishermen friends several years ago that liked to boast about how much money they spent every year on lottery tickets in another state. When I pinned them down to their actual winnings, they admitted they spent over $10,000 a year buying tickets, and they claimed they always made more in winnings than they spent for tickets. Funny thing, however, they couldn’t show me a tally of their win-loss record!

If you are a gambler who wants to make it big in some game of chance, you need to visit Vegas instead of reading this article.

But if you really want to win the big stakes without taking the big risks, real estate is a great game of chance!

Oh yeah, I’m a gambler, too, but I like REAL chances at winning. I want the stats on my side.

Twenty-five years ago I made one of the biggest gambles of my life by starting out with nothing and trying to hit the jackpot in real estate. It was a gigantic gamble because I had no cash and no credit. I was able to scrape together a $10 bill and a real estate contract, and I started shooting craps.

No, people didn’t like my offers. Most threw the contracts back in my face. Success did not come easily. I was often very discouraged and frustrated. I actually did not know at that time of anyone ever who had started investing with a $10 bill, and I have never heard of anyone since (except those who use my investing package that explains how I did it). But I never threw in the towel. And within a year, I had somehow bought almost one million dollars in rental properties!

That’s a gamble that paid off.

I like that kind of gamble.

Gamble when the odds are in your favor

But I could have lost everything if I had not managed it right.

That’s why I really believe in getting an education in real estate before getting started. If you make a wrong move in buying, managing or selling your property, you can lose everything, and your efforts are flushed down the toilet. On the other hand, if you have what I call know-how savvy, you can weather almost any of the financial storms which will inevitably brew around your venture.

You’ve Gotta Know the terminology

When you start investing in real estate, some terminology is necessary. Developing a professional vocabulary builds a solid foundation for your career and gives you a “head start.”

Don’t stop learning. This information is just a beginning. If you are an intermediate, or expert, vow to keep learning.

Even those already in the business can learn from others. I do.

I started investing in 1988. I knew very little about the real estate industry at large. For my first exposure to investing, I went to the library and got as many books as I could on real estate. And I remember reading them and all I read made very little sense to me. I didn’t even understand the terminology.

When they said “a second note,” I didn’t understand what a second was. So…I am going to cover some terminology.

I am going to go on the assumption that the reader doesn’t have a real estate background.

So I am going to try to start from the beginning – I’m not going to go into complete detail on the number of ways to invest. They are too numerous to cover here – and there are way more than I know.

My focus is going to be primarily on fixer uppers, wholesale buying, lease options, and pre foreclosures.

There is so much more to real estate investing than I knew when I first started. At first I thought of real estate investing as – you know – find a broken down house, fix it up, and sell it.

Which is good – that is one way to earn money, in fact it can be very lucrative. But there is so much more – much more that I was missing out on. There are other basics, like options, wholesale (also called quick flips), and pre foreclosures.

I can remember one of my earlier deals. It was a very good deal – it was a house – actually, it was two duplexes- 4 units total. It was an estate sale. The children basically wanted to get rid of the property – they didn’t want tenants. It was owned free and clear.

They wanted, I think, a hundred and twenty thousand dollars for the property, which was an absolute steal. You know – four units. If I recall right it was renting below market at $450 and was worth at the time $600 per unit. The rental rate today would be about $900 or so.

So this was a very good deal. I actually offered them $105,000 and inserted all sorts of requests, like asking for a new roof. And it didn’t need any repairs at all – it’s just that I was new and the thought of putting on a new roof kind of scared me. So I kind of threw it in there just because I didn’t know what I should do.

I was surprised when they accepted my offer! Additionally, it also had a lot next to it which could accommodate 4 more units.

So, the deal was very good – but I had no money. No money whatsoever. I even had to borrow $1000 from my mother to put down as earnest money.

What eventually happened on this deal was, I wasn’t able to close.

I was very young and didn’t have a great job as a government employee. I didn’t have a lot of income, so the banks really didn’t want to even look at me.

I think the banks wanted me to put down something like twenty percent. Which, of course, I didn’t have.

And I didn’t have bad credit. It’s just that I didn’t have much credit at all. Maybe a Sears card and that was about it.

So no bank would loan to me. And that was my initial problem. Borrowing from a bank was the only way I knew to get a loan.

I learned later that there are many other ways to pay for a real estate purchase. I was unable to fulfill my offer on this first deal, but I didn’t lose my Mother’s thousand dollars. I got that back. If I knew what I know today, I would have been able to close that deal.

I knew nothing at the time about partnering. I didn’t know I could bring in a partner to put up the down payment or float the loan.

On this particular deal, I probably could have gotten a hard money loan since the value was already there. Usually on hard money loans is about 60 to 65% loan to value.

And what that means is, if a person wants a hundred thousand dollars on a purchase, the hard money sources are willing to lend sixty thousand or sixty-five thousand dollars.

So I didn’t get this particular deal. There were numerous things I could have done in retrospect. So losing that first deal made me aware that I needed more education.

Education starts with learning some basic terminology.

I am going to review several terms essential for understanding the real estate investing profession. My definitions are not legal definitions nor are they complete definitions, but just my own understanding of them. I am going to start with Assignment.

Assignment means conveying the rights you have in a contract to someone else. Transfer is made to some other person by way of a document. So if you want to convey a contract to someone, an assignment allows someone else to step in as you.

You might use an assignment to convey a house purchase to someone else. An assignment can be handy when you want to put a house under contract and then flip your deal to someone else instead of doing the rehab work yourself. An assignment is also called wholesaling.

Balloon payment is a large final payment due on a loan. For example, you might have a loan amortized over thirty years, but the purchase agreement requires that you you cash out in five years. This is referred to as a five-year balloon.

Earnest money is a deposit of money to bind a purchase. It is usually given to a real estate agent or escrow company directly. Never give money directly to a seller.

If the seller has no agent, you can give the money to the escrow company or lawyer who will be closing the transaction.

Equity of Real Estate is the value of interest a person has in a property. For instance, a house worth one hundred thousand dollar houses without a mortgage (or, free and clear) has an equity of $100,000. If an underlying mortgage was on the same house, the equity would be twenty thousand dollars.

An Escape Clause in a purchase contract is an exit right for you in the purchase. For example, you can (and should) write in one or more escape clauses in your contracts. It might read, “subject to financing,” which means you do not have to fulfill the contract if you cannot obtain financing on the purchase. You can use any sort of escape clause you choose, such as “subject to my partner’s approval” or “subject to inspection.” This clause allows you to exit the contract.

Flipping is a terminology used for turning over a house quickly. You’ll hear it referred to as “quick flipping”. You’ll also hear it called “wholesaling,” although wholesaling is a specific type of flipping.

First deed of Trust is a deed, recorded first, terminology used in some states. For example, if you purchased a house for $100,000 by taking out an $80,000 loan with the house as collateral, and the seller agreed that you would owe him or her twenty thousand dollars for the balance, then the first recorded loan amount owed would be called the first deed of trust [in a deed of trust state] and the second recorded loan would be called the second deed of trust. So the amount you owe to the seller is called the second – or the second note. And the eighty thousand dollar amount owed is called the first note.

Hard money loans where you don’t use a bank are companies or individuals who use the property as the collateral. These loans usually don’t go over 65% loan to value. They tend to not have as much red tape as banks, so you can usually close quicker than with a bank. The draw back to hard money is that interest rates are higher than bank rates.

If you were getting a hard money loan on this hundred thousand dollar house, the hard money loan source would not loan you more than sixty-five thousand dollars max.

You can usually find these hard money sources in the newspaper, or by word of mouth. Or sometimes by attending the real estate investment club in your vicinity.

The best hard money sources to find are individuals you encounter on a personal basis during your career in real estate investing. They are often someone with money sitting idle in a bank. You might find them among neighbors, family, and friends – associates who have confidence in you who want a greater return on their idle money and who want the security of a collateralized loan.

Junior lien is just a terminology for a lien that holds second position to the first mortgage. isn’t in first place on a house. The second mortgage in our earlier example of a $100,000 house with a $20,000 second loan is referred to as a junior lien because it is not in first place. Sometimes it is called a subordinate lien.

Lease option is the right to rent a house for a period of time, and then hold an option to purchase the house. The renter does not have the obligation to buy the house, but only the right to buy at a set price by a set time. All of the particulars of the lease option are contained in a legal document.

An Option is a right (usually a paid right) to purchase a property, but without any reference to renting. If you found a house to buy but did not want to rent it out to anyone, you might ask the seller for an option to buy. This kind of transaction might be desirable when your delay in buying for any reason (such as finding partners, raising funds, etc.) might lose the purchase to someone else if you do not place it under option.

Sometimes you find a property which can be placed on an option for the simple purpose of finding another buyer who will pay you for your option or will pay a higher price for the property than your optioned price.

As with all of your variations in purchasing property, check with a knowledgeable attorney who specializes in real estate.

Real Estate Investing russ whitney

Russ Whitney is known for his TV infomercials and his real estate investing seminars.

I met Russ Whitney years ago when he spoke at Real Estate Investors of Nashville at my invitation. At that time, many real estate investors were requesting to present their real estate investing programs at local real estate investment clubs across the country.

Since that event, Russ Whitney has gone into various cities across the country and presented his seminar. Russ Whitney usually airs his seminar invitation on TV infomercials.

You will have to evaluate Russ Whitney and his real estate investing seminar for yourself.

John T.Reed has investigated Russ Whitney’s career, and has posted extensive information on Russ Whitney at http://www. http://www.johntreed.com/ReedonWhitney.html. Russ Whitney sued John T.Reed in a case that was later dismissed by Russ Whitney. Russ Whitney’s Florida attorneys have threatened to sue me on the just basis of my reference to him as an acquaintance, a fact his attorneys did not know. I am not a psychologist, even though my Ph.D. work was in Communication and Psychology and though I have spent most of my life in counseling and consulting. However, a psychologist is unnecessary because everyone universally recognizes a person’s deep-seated fear when threatened with exposure.

I have long held the belief that I can learn something from anyone who has experience in a particular endeavor. Knowledge is power, and the more anyone knows about people and their philosophies, the better anyone is equipped to confront the challenges of life.

Real Estate Investing carlton sheets

Carlton Sheets has been around a long time.

You will have to evaluate for yourself whether Carlton Sheet’s real estate investing philosophy is current for the marketplace.

I took Carlton for a visit to the gorgeous Cascades display at Opryland Hotel in Nashville years ago after he had completed his presentation at Real Estate Investors of Nashville where I had invited him to speak. He had begun investing a few years earlier and was just getting started “on the real estate investing club circuit” at that time, and later transitioned to TV infomercials.

Carlton Sheets is still teaching the same concepts now as then. I don’t know how much actual investing Carlton does now, but his thrust of becoming a landlord with rental houses is an approach you should examine. Owning and managing rental properties is not what it used to be. In the ’80s, a real estate investor could buy a rental house, and inflation would increase its value significantly and immediately. With today’s flat inflation rate, some income producing properties are appraising for less than their prior appraisal 3 years earlier. The real estate investor who expects retirement income from years of appreciation might be in for a startling surprise.

The nature of TV infomercials demands that products be moderately-priced to have sales appeal. Carlton Sheets sells what appears as an inexpensive home-study course. However, the sales pitch does not end at that point. Success on TV infomercials depends on expensive up-sales on the back end. While everyone should be able to learn something from any experienced real estate investor, be aware that TV infomercials that appear to be low-priced may not be the end of the story.

Real Estate Investing robert allen

Robert G.Allen came to prominence among real estate investing circles in 1980 with the publication of his best-seller, “Nothing Down,” for which he reportedly received $1 million advance royalties. Robert Allen promoted his book with a challenge he stated on live TV: “Put me in any city of the U.S., and in 24 hours I will make $24,000.” Robert Allen’s promotional techniques launched what is known historically as the “Nothing Down Real Estate” or “Zero Down Real Estate” movement. In conjunction with this movement of the ’80s, Robert Allen began touring the major U.S. cities with “conventions,” where different real estate investors of varying degrees of success presented their wares and sold their programs to the tune of reportedly millions of dollars per convention.

Robert Allen was preceded in real estate investing circles by Nic Nickerson, Al Lowry and Mark Haroldsen. Each of these authors had developed a following, and offered the first real estate investing seminars and conventions in America. Mark Haroldsen was the first Mormon to capitalize on turning publicity from writing a book into profitable convention rallies, followed by Robert Allen and numerous other Mormons. I had been inspired to start my own investment career by Robert Allen’s forerunners, and attended many of these conventions across the country. My experience dictates the need to acquire as much knowledge as possible from every available resource for ultimate success.

Robert Allen reportedly converted many of the commercial real estate investing ideas he had learned from his previous employment into the 50 principles in his book, “Nothing Down.” Some of these principles are still valid today, even though Robert Allen himself has had financial difficulties, such as Chapter 7 bankruptcy in 1996. The purpose of this article is not to demean Robert Allen, for I have learned what I know about real estate investing from him and many, many others, but if you want to examine John T.Reed’s expose of Robert Allen, visit http://www.johntreed.com/Reedgururating.html#anchor496881.

Robert Allen has dabbled in various enterprises, such as USANA health supplements, and has written several books. He has recently reignited his efforts to teach real estate investing. Upon meeting him dressed for public speaking at his engagements, you might wonder if he has ever worked at renovating properties, filthy in work clothes and dripping in sweat from hard labor.

Robert G.Allen is a marketer and promotional wizard. Robert Allen’s real estate investing programs are expensive.

Real Estate Investing books & courses

Real estate investing books and courses are extremely popular. The book stores and libraries are full of them. Anyone can write any of these books (even without credentials), and anyone can offer a course in real estate investing. All it takes is a pencil and paper, or a computer. If a writer has a “way with words,” the book might get published. If an instructor can write a course or promote a course, someone might go for it. In fact, real estate investing is so popular that the authors of books and courses make a ton of money from the use of their words, even if they have never actually made any money in real estate investing.

But all books and courses are not equal.

Want to take the “real estate investing challenge?” Find out how many writers of books and courses on real estate investing ever made any significant profits from real estate investing!

If you want to learn real estate investing, don’t buy books and courses. Find someone who has actually made a lot of money in real estate investing. Then hope that your discovery captures the techniques of their success in a format that you can acquire and emulate. Locate someone who has actually been down in the trenches of the war zone. See if that someone will actually expose his own failures and weaknesses, like showing you his battle scars. Will he openly admit what he did right AND wrong in the trek toward success in real estate investing?