By: Jay Long
Q : Dear Jay, I’m brand new to the real estate business and I want to get started right a way. I just started going to my local investment group and meeting other investors, but I’m confused. Everyone I talk to has a different strategy and I don’t know who’s right. To compound matters, I really don’t have any money to invest with. What do I do? Penniless in Pittsburgh A: Dear Penniless, You are not alone. Most folks see an infomercial on TV that says you can do this and that with none of your own money or credit and you’ll be rich by the end of the month. Although the TV techniques to investing do work, they’re the exception to the rule. The best thing about TV infomercials is they bring more people to our local real estate investor groups where they can get more practical advice. Be on the lookout for the biggest trap for the new investor. It’s called borrow every penny you can from several different places just to do your first “no money down” deal. Anybody can buy a house with no money down, even if you’re broke with bad credit. All you have to do is pay too much for the property and sign your financial life away. Yes, there are very compelling arguments to buy a property with none of your own money, rent it out for a breakeven or better cash flow and sometime within the next ten years it will double in value and you’ll be rich. Let me be the very first to say that it is true. You and anyone else who wants to could do that deal all day long. The problem is you’ll be paying too much for the property and you’ll go bankrupt with the very first costly maintenance problem. That’s because you don’t have any money saved up. Here’s the dirty little secret that most investors don’t want to talk about. Most properties that were purchased with large amounts of borrowed money don’t make a profit. The more debt against the building the less the monthly cash flow. Most buildings with 70% debt or more are actually negative each month. Instead of going down the road of feeding the debt monster, learn how to find great bargains on property that you can sell for an immediate profit. Older rich investors will usually be willing to help you do this, if you agree to sell them the good deals you find. As a matter of fact, the more deals you find for them, the more money you and they make, the more they’ll help you build your own business. I have a simple suggestion for all the broke people out there. Go make some money! Go make a big ol’ honkin pile of money and then write a check for a rental house that you can buy for half price because you can pay all cash. Once you’ve learned how to find the bargains and stockpiled some money, you’ll be in the driver’s seat to building your rental empire. Buy, sell and make a chunk of cash. Buy, sell and make a chunk of cash. Buy, sell and make a chunk of cash. Buy a good rental house for all cash, don’t borrow a penny and always have a true positive cash flow that you can spend every month. Jay Long is an expert real estate investor and national speaker. He’s also a licensed real estate broker, author of several real estate courses, seminars and a monthly newsletter, and former vice-president of KREIA (Kentuckiana Real Estate Investors Association). If you would like more information about Jay’s courses, monthly newsletter subscriptions, or if you would like to have Jay speak to you group… contact him at: JAY LONG PO BOX 20025 LOUISVILLE, KY 40250 PHONE (502-893-3313) FAX (502-893-3384) EMAIL Jaylong7@aol.com or www.JayLongInnerCircle.com
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