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Getting Rich Kiyosaki Style
After spending the past 10 years of my early adulthood avoiding financial responsibility I've begun to take an interest in investments and making money. My boss told me about a book by Robert T. Kiyosaki called Rich Dad Poor Dad. Rather than rewrite it I'm just going to cut and paste an email I sent to my friend where I tell him about the 1031 Exchange that Kiyosaki mentions.
I think I told you on Saturday that i was reading this book called Rich Dad Poor Dad. He mentioned the 1031 in an example scenario where he made a bunch of money. Apparently, back in the mid 90s the housing market in Phoenix was doing poorly. He found a house that normally went for $100,000 but now was appraised at $75,000. He bought it at an auction (or maybe he found it at some Bankruptcy attorney's office) for $40,000. Because all his money was tied up in stocks and Apartment buildings, he borrowed $2,000 from a friend of his for the down payment. He listed it in the paper for $60,000 and he said there was a "feeding frenzy" considering he was selling the house for considerably cheaper than it was worth. Once he had ownership, he sold it. Charged the buyer with fees for finding the house, paid back his buddy, and put the $20,000 he made toward another property...on and on down the line till he had made $190,000.
He said he'd rather not have the bank pay the him the principal, because he'd be taxed heavily. But now, at 10% interest (I don't know where he comes up with this interest rate...I don't think the 1031 allows him to put this money toward an investment that is not of "like-kind") he's making 19,000 a year for doing nothing. Speed up to 2007 and that's probably between 30 and 40 thousand.
Look for me down at the courthouse auction next month bidding on foreclosed homes...as soon as the bank qualifies me for a loan.
5 comments:
When and where is this infamous "courthouse auction"? When you find out, let me know and I'll go with you...maybe we can hang out on the courthouse steps and reel in a bunch of prime properties for pennies on the dollar that all the professional real estate investors have passed on.
P.S. - Finding the buddy willing to part with $2000 is harder than getting the loan.
In all seriousness, my boss and I were discussing how this probably works: a.) you go get qualified at the bank for a loan, b.)You figure how much you can spend and how much you want to make and how much you think you can make c.) There's probably a city gov page that has forclosed homes and bankruptcy stuff that needs be auctioned off, c.)You find the house(s) you want to buy and go check them out and make sure there's no major problems that would prevent you from selling it quickly and then you've just made some money that you can put into something else.
Sarge, with your home building experience this sounds like an ideal money-making scenario for you.
When you've removed the "probablys" from you're description, I'm in.
Since when do homebuilding and get rich quick real estate plans go together?
The plan works for opportunists willing to ferret out, and then pounce on a deal. If you have cash, or at least immediate access to cash, and can make immediate decisions regarding real property, then you have a chance at making money. If the deal has already hit a website or a government list, it's probably too late. The better way is to be constantly on the look out for someone almost in foreclosure, or going through a divorce, or some other experience that causes them to HAVE to make a deal in order to keep their situation from worsening. That's when the opportunists sweeps in, offers to immediately throw a fistful of cash at the situation, and then walk away with the deed. Another great bet is to get in good with bankers that hold the notes, get tips from them on properties they're getting close to foreclosing on, then offering them a lump sum payment to get it off their books. Banks deal in money, not property, and would typically rather get rid of property quickly before it ever goes to auction. They realize that time is money.
There's a local company called the Land Source that deal's in raw land. Recently they had an auction of several properties around town. Most owner's put reserves on their properties, but some did not. Overall, this auction wasn't a huge success for buyers or sellers, but it was the first of it's kind (at least for here). Anyways, one particular 14 acre parcel sold for around $9000. This is around maybe 5% of the going rate for ground. There's not much that can done with the particular parcel today, but who know what can be done with it later, or if it could be attached to adjacent parcels, etc. The point is - the the man who bought it saw an opportunity, knew enough about real estate to make a snap decision, then literally whipped out his American Express, and said "SOLD" before anyone else knew what happened. He won't make his return anytime soon, but I guarantee he will make a killing on it eventually.
Sarge,
That's some sound advice and reasoning. See? Home builders do know something about real estate. Know any friendly bankers who could tip us off?
On the way to work it just occured to me that my ex's father is a banker...but I think I'd need to reconcile things with her and put a ring on her finger before any tips come my way.
Regardless, I think we should just incorporate, and then we won't have to take as big a risk. What do you say? I've got a small amount I'm itchin' to take some risk with...a least to kind of learn the ropes with.
Maybe Bronco's LLC dreams could be realized here.
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