Profiles Of Successful Young People: The Rising Real Estate Star
A few days ago I asked readers to send in their stories of young people achieving significant success and financial gain while still young. Here is the first in this series. Send in your stories if you have them.
Here is Arthur’s story in a nutshell:
To give you context, I have been working in sales for the past 8 years. My first two years I made $50k; then after about two years, I leveraged my experience in a small company (9 employees) to pursue a worthwhile opportunity with a fortune 500 company – Pearson Education. During my time there I’ve generated a yearly income of ~$100K annually.
When I first started in sales, I was making a base salary of roughly $50K, and I adjusted to living on that income. I didn’t buy into liabilities like new cars or expensive TVs, nor did I get into credit card debt. Up until 2 years ago, I sacrificed the lap of luxury in order to grow my savings account and to contribute to my 401K.
Moving my money into Real Estate
One thing I noticed is that while many of my co-workers were high-income earners, they didn’t spend their bonus money wisely. Many of them bought new cars, expensive upgrades on their primary homes, lavish vacations, etc. This all produced the same end result: flashy ornaments, but no true wealth.
One day (about two years ago) I had a long conversation with a buddy from college who came from a wealthy background. We started talking about money and investments. During this conversation, he said that I should consider buying a few rental properties. I didn’t know ANYTHING about real estate except that most wealthy people dabbled in it.
Fast forward 3 months, I devoured every book I could get my hands on regarding the topic of real estate investing (literally 33 books). After all the info in hand, I took a risk and bought my first property (roughly 2 years ago).
* Single-family home in a suburb outside of LA price $315K
* Current value – 345K ($37K in “built in” equity – I purchased below market value).
* $545 per month in cash flow.
Property #2 (6 months later):
* Single family home Price 75K (short sale)
* Current value – 120K. ($45K built in Equity)
* $500 in cash flow, per month.
Property #3 (3 months later):
* Duplex in central California Price $110K.
* Value -150K. (40K of built in equity)
* cash flows $985 a month.
Property #4 (2 months later):
* Single family home in central CA price 70K
* Market value is roughly 90K (20K of built in equity)
* cash flows $525 per month.
* Single family home Central CA. Price 90K
* Market value is110K (20K built in equity)
* the cash flow is projected to come in about $500-600 a month.
Tenants & Financing:
The key to rental property is understanding how to qualify tenants. Someone may look good on paper, but be incredibly difficult to service (constant phone calls and requests), so I usually try to find people who have decent finances and who will take care of the property (as much as a tenant is willing to anyway). Also, since I have been extremely strategic with the locations I purchase in I usually get “b” quality tenants (I’m not a slum lord).
Things have been going quite well so far. I do have to stay in communication with the renters and occasionally I have to call a “handyman” or take care of a problem myself, but over all I enjoy the whole process. This completely different than the stock market, but I understand what I am doing and I love having 95% control of what is going on with my investment.
Regarding financing, I think it comes down to understanding how to correctly manage risk. Too many people see loans as a bad thing, when in fact, they are the biggest key to unlocking true wealth. Leverage allows me to realize incredible returns that can not be matched anywhere else – 35-40% ROI. Another thing to consider is that apart from the getting a good “deal” on the property, a locked in 5% interest rate for 30 years is unbeatable. Plus if you think about it, the bank is the one really taking the risk, they have to put up 80% of the money. Need fast cash? Instant Payday Loans Online from MyPaydayLoanCash.com can help out within 1 hour.
The problem is that a few years ago people didn’t understand the market or how to properly analyze an investment opportunity and they lost everything. I keep 8 months of cash reserves per property, roughly 25K, on hand at all times. So if I have to carry the mortgage I am not up a creek. Secondly, since I only purchase properties with healthy cash flow (most of my mortgages are around $500 a month) the excess is put in a savings account which pays for any repairs or vacancies.
I’ve put together a highlight real of the past 9 years, but SO much has happened to me internally. The biggest thing I learned was to change my thinking (consumer to investor). Your email to me was correct, one can not save their way into true wealth – taxes and inflation will win over time. I’d be happy to talk about the set backs and the struggles (cleaning toilets, re-piping a whole house, dealing with tenants) if you’d like to talk further.
I recognize not everyone can accomplish what I have done in the same time line, however, I am not doing anything overly complicated. This type of portfolio can easily be attained – especially between two working partners.