Business & Economics

90 Days to Your First Real Estate Investment Purchase

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Synopsis

The Essential Daily Action Guide to Profiting in Residential Real Estate Like A Pro Even If You’ve Never Purchased a Property and Are on a Shoestring Budget

Master the Art of Real Estate Investment in Just 90 Days - Even If You Have ZERO Experience & A Limited Budget!

In 90 Days to Your First Real Estate Investment, you will discover:
• How you can achieve financial freedom regardless of income
• An intelligent guide to begin wealth building and build monthly passive income
• It explains easy-to-use profit-proven investment strategies to challenge yourself
• 10 cash flow essentials you need to master to evaluate property opportunities
• 5 Oldie but Goldie rules to navigate potential risk and avoid the beginner mistakes
• How to cash in on your first money-making deal within 90 days
• And much more.

Let’s Start


“Now, one thing I tell everyone is learn about real estate. Repeat after me: real estate provides the highest returns, the greatest values and the least risk.”

—Armstrong Williams, entrepreneur


The fear of starting something new is an evolutionary trait. We all experience it. It may be a human weakness, yet it is the most common feeling we internalize when beginning something unfamiliar. Often, that great weakness can be trained to be your greatest strength. A story worth repeating is of a caring father of a young boy who decided to enroll his son in a martial arts class to rebuild his confidence after the boy lost his left arm in a freak camping accident.

The father hired an experienced Japanese martial arts master to teach the boy. With his wise instruction, the boy became skillful after several months. The boy could not understand why, during all this time, he was taught only one move.

“Master,” the frustrated boy asked, “Shouldn’t you be teaching me more moves?”

“My young student, this move may be the only one you know, but it is the only one you will ever need to know,” answered the master.

The young boy strongly believed in his master, and so he continued his martial arts practice.

Some months later, his teacher announced the boy was ready to compete. The boy easily won the first two fights, much to his delight. But the third match was challenging. Then, as the competition wore on, his opponent gave him an opening, which the boy used to win his third match. Shocked, the boy realized he was now in the finals.

This time it would not be an easy win. It appeared the boy was mismatched in that his opponent outweighed him and was stronger and far more experienced. As the match got underway, the referee was so concerned about the safety of the young boy that he stopped the match.

“No, no,” the master intervened, “Let the match continue.”

Shortly after the match resumed, the boy’s opponent dropped his guard. At once, the boy pounced using the practiced move to win the match. He received the competition trophy for his class.

On the drive home, the boy asked, “Master, how is it that I won the tournament with just a single move?”

The master replied, “You won because you have mastered one of the most difficult moves in all the martial arts. The only defense for that move is for your opponent to grip your left arm.”

The lesson here is that with the right training and practice, almost any weakness can be overcome, and impossible feats are performed. I know from my experience that I could not move forward in real estate investing until I overcame my weakness, which was my fear of investing in real estate. How does one move forward under those circumstances? I think you will agree the answer is simple: our motivation must overcome our defeatist feelings. If we can learn to develop motivation, we can succeed in great accomplishments in life.


Setting Up Goals to Succeed

Goals are what give us motivation in life. They show a sense of direction to allow our minds to focus on a target. When we have a specific endpoint in mind, we automatically avoid certain distractions and stay focused on the goal. Goals are the tools to focus our energy. Setting goals for us is a way to fuel ambition. A goal is like having a map to give us a destination.

Many of us have giant dreams that seem impossible to carry out. It is easy to feel discouraged when you are staring at a massive, seemingly insurmountable mountain. Research has proven that achieving smaller milestones provides real motivation and greater contentment.

This book sets up a big goal—ninety days to your first real estate investment. Achieving such a laudable goal will provide you with benefits way beyond a real estate asset. It will melt away fears, provide you with extraordinary self-confidence and self-worth, and put you on a path of independence.

It is a big goal, we agree. But this book takes you step-by-step and teaches you what to do. We have set your goal to purchase within three months after you finish the book. The deadline is tight, so you will miss the target if you slack off. It is well worth the work that you put into it. So here we start down the investment road. As you take on the challenge, you will be distracted with obstacles and disappointments along the way. The road is not a smooth one. As they say, if it were so easy, everyone would be doing it. It is not easy, but it is incredibly worthwhile.

Each chapter takes you through the steps of helping you find your first investment property. Why would that motivate you?

To answer that question accurately needs you to think long-term, as real estate investing is a get-rich-slow proposition. With this well-thought-out ninety-day investment plan, you will soon be able to leave the nine-to-five grind and retire at a young age. Because the critical part of real estate investment is that you can use what income you have available now, including your salary, to buy your property investments using debt. This method, called leverage, allows you to invest more significant amounts without using your own money.

Investing is perhaps the most essential piece of your financial future—but often, it takes a while before we understand this truth. Some of you get that now, but you still have not put it into action. Examine why that may be and what you can do about it.


Lack of Investment

Unfortunately, in our day and age, even minor investing is avoided. As an example, fifty-two percent of Americans are avoiding the stock market—either by not buying stocks or mutual funds or investing in retirement accounts such as a 401(k) or an IRA. Among the non-investors surveyed, fifty-three percent said they do not have the money to invest, and twenty-one percent said they do not trust stockbrokers or financial advisers.1

Leading to the conclusion that so many of us are not financially prepared for retirement. Then we learn of those making promises, promises, promises. A study by the financial services firm Edward Jones found that ninety percent of respondents ages 18 to 35 say they either have started saving for retirement or plan to start before turning thirty. Just seven percent of that group plan to start saving for retirement in their 40s. Meanwhile, when looking at respondents ages 35 to 44, only sixty-four percent began saving in their 30s or earlier.2


(INTERESTING CHART SHOWING THAT AMERICANS BELIEVE IN REAL ESTATE AS A LONG-TERM INVESTMENT)


Figure 1. According to a May 2019 Gallup poll, Americans still regard real estate as a better bet for long-term investment. Gallup found that Americans who own both stocks and a home are also divided as to which is the best investment, with 40% choosing real estate.


With those results in mind, according to a 2018 survey by GO Banking Rates, nearly half of Americans are at risk of retiring broke. It found that forty-two percent have less than $10,000 saved for retirement. Another report from the Economic Policy Institute (EPI), using 2013 data, found that many Americans are unprepared for retirement.3

That is just the bad news on retirement. But what about saving for college? Out of ten families surveyed, nine said they knew their student would attend college as early as his or her enrollment in preschool. Despite that knowledge, far fewer families—less than 4 in 10—had created a plan to pay for all years of college before their child enrolled.4

According to Sallie Mae, forty-two percent of families went into debt in 2017 to cover some college expenses. The thinking of families who borrow to pay for college is different from that of those who do not borrow in several ways. Those who borrowed were not likely to have a plan to pay for college, and they were not confident they made the right financial decisions about how they are paying for college.5

Princeton Survey Research Associates found that twenty-one percent of working Americans in 2017 is not saving any part of their income, which remains unchanged from the answer consumers gave the survey in 2016. Just 25 percent are saving more than 10 percent of their incomes, down from 28 percent in 2016.6

What are the primary reasons Americans are not saving more money? The No. 1 answer: Thirty-eight percent said their expenses were excessive. Expenses may not be under their control, given that wages have remained stagnant in recent years. Some 16.4 percent of those surveyed replied that they “hadn’t gotten around to it.” The third and fourth reasons? Just over 16 percent said they did not have a good enough job, and 13 percent said they were struggling under debt.


Fear of Investment

Sixty-five percent of adults say they find stock investing to be frightening or intimidating, according to October 23, 2018, Ally Financial survey.7

Such lack of action credited to fear of loss. Behavioral economists have a name for this normal psychological dislike. They call it loss aversion. “People naturally have this fear of losing money, and its effects what would otherwise be rational judgment,” says Robert Koppel, author of Investing and the Irrational Mind.8

Investing can be a bit scary. You will have to learn to cope with this psychological issue if you want to learn to invest. Mastering one’s emotions while investing is a healthy challenge, but all successful investors have done this.

This fear is misplaced, and it is. We should be more worried about reaching retirement age and not having enough.

Those that fear investing need to reorient the way they look at it. Instead of thinking about investing, think about protecting. Look at investing in the way it is designed—not as a get-rich scheme, but to protect what you have earned and to increase those assets over time. Investing equates to keeping your savings safe and growing so you can pay for college and vacations and retire in comfort.

Most of us think of the stock market when the term investment comes up. Under the right circumstances, real estate offers an alternative that can be lower risk, yield better returns, and provide the most significant opportunity for diversification. More people invest in the stock market, perhaps because it does not take as much time or money to buy stock.

However, when you buy a real estate investment, you gain a piece of land or property. It takes more time to research compared to an investment in stock. But unlike stocks, you make money several ways. First, money comes to you from the monthly rent. You gain through property appreciation. Your mortgage loan is paid down every month out of the rent collections, giving you added net worth even as you sleep. Your real estate can be leveraged to make it possible to expand your holdings even if you cannot afford to pay cash outright. Investors can also take advantage of large tax benefits.

Buying investment real estate often needs more capital than investing in stocks and mutual funds. When buying property, investors have more leverage over their money, enabling them to buy a more valuable investment.

That is why millionaires say that real estate is still the best investment you can make today. The question is, how to begin? Admittedly, getting started as a real estate investor can be challenging, especially if you have little money to start. I think that it might surprise you how far you can go with as little as $10,000.

I have bought and sold all types of investment properties: single-family, multi-family, garden apartments, strip malls, and office buildings as well as land. We have made these buys from sellers using real estate brokers, through foreclosures, and through tax-free 1031 exchanges where we traded a garden apartment for two office buildings. At their height, our real estate assets totaled over twenty-million dollars, with twelve million in equity.

Benefits of Investing

There are so many benefits to investing that it is something everyone should take part in. Getting started is easy, and it makes little sense not to. The purpose of investing should appeal to everyone, as it builds wealth and provides long-term financial stability.

Investing is not savings. Investing is for growth. With saving, there has been almost no return these past few years and, as a result, this it offers little growth. You might remember, years ago when the average CD yields exceeded ten percent. Those days are over and long gone. You will not find returns anywhere close to that now. The average one-year CD returned just 0.45 percent APY in 2020, according to a Bankrate survey. Between 2019 and 2020, the inflation rate was 2.05 percent, meaning your CD would be losing 1.6 percent of its value in the bank each year (2.05 – 0.45). It is the opposite of growth – it is a loss.

You can probably see from this real-life example that if you do not invest and grow your money, thanks to inflation, you will lose money over time.

Inflation is the general increase in prices that happens throughout the year. It reduces the buying power of your money. The rate of inflation can vary; though today it is 2.05 percent, historically, inflation has averaged around three percent.

If, instead, you invest your money, say, in the stock market, you can expect a much higher return. Historically, the stock market has returned an average of ten percent yearly before inflation. Of course, stock market returns vary significantly from year to year. There are no guarantees in the market, but this ten percent average has held remarkably steady for a long time. If you make such a decision, you will grow your investment and stay ahead of inflation.

Investing is how wealth builds. There are many ways to invest and grow your money. If you want to build your wealth, you need to create an investment plan based on your goals.

Investing allows your money to work for you so you can make your retirement goals and live comfortably. Investing enables compound interest. This is what happens when your interest starts earning on interest.

Another extraordinary benefit of investing is saving on taxes. If you set up a retirement account such as a 401(k), IRA, or SEP, you avoid paying taxes on the amounts you deposit each year. You pay taxes when you withdraw the funds, at which point you should be in a lower tax bracket.

Warren Buffet has this advice: “Never depend on a single income; invest in creating a second source.”9

You can summarize this into a simple premise, namely, that if you don’t invest now and continue not to, you will be rudely awakened sometime in the future, realizing that retirement is not a choice for you.

Celebrity Investors

Perhaps you cannot act, but you can invest and reap the same rewards that many Hollywood celebrities have been seeing. Hollywood types have set aside their fears of investing in real estate and have learned that it is easy to make their money work for them.

Ellen DeGeneres is the Hollywood investment queen. She has closed $150 million in real estate deals in just two years. DeGeneres has bought and sold at least eight homes in Carpinteria, Beverly Hills, Montecito, Carpinteria, and elsewhere.

In Home, her book about her real estate and decorating adventures, DeGeneres wrote that she had bought and renovated nearly a dozen homes over the past twenty-five years. When she was 13, she thought she would be an interior designer.

We do not want to leave out singer and songwriter Taylor Swift, with her $81 million of mansions and penthouses. She has yet to do as well as DeGeneres but is catching up. She has benefited extraordinarily by buying high-end rental properties that are gaining value, and that provides her added cash flow while she continues to tour, write, and record. “For others, such as former Baywatch and Melrose Place actor David Charvet, they were astute enough to realize that a beau-hunky TV actor often has a specific shelf life and looked to real estate investment as a second act.”10

Other Hollywood, real estate investors, are also well-known celebrities: Jeremy Renner, Jennifer Aniston, Diane Keaton, Arnold Schwarzenegger, Vanilla Ice, Brad Blumenthal, and Ashton Kutcher, to name a few more.

What do these actor types know that you may not? Real estate investing pays, and it pays big time.

Overcoming the Fear of Investment

Overcoming the fear of investment begins through reading and educating yourself about the types of investments available to you and how they might respond to your long-term goals. Then you must take the plunge and invest. The best place to start is with a 401K retirement fund. You might also wish to put a little money in a mutual fund to get the feel of the market’s ups and downs. Your first-time investing should only be with little capital. Seek out advice from someone you trust who has the experience, or a knowledgeable family member.

Ignore the ups and downs that are the regular part of the stock market. Base successful investing in sticking with a long view of the market. Investopedia reports that in the past 90 years, the average annual return of the S&P 500 has been around ten percent.10

Overcoming the Fear of Real Estate Investing

Real estate investing is alive and thriving in every state of the union. You hear about it in the office, on television, and maybe at your club. You may even own a house, and indeed, your parents may. What about that cousin of yours who brags about his rental properties? In other words, real estate investing is all around you. You are missing out.

What is holding you back? We covered it before. Your reluctance, about this real estate investing, is held up by an undefined fear that we should explore.

Overcoming any problem begins with understanding the cause. What are the fears preventing you from making financial decisions you have to make?

What are Those Fears?

Fear can immobilize us. They can prevent us from realizing our goals and dreams and explain our lack of investment progress. These fears can cause us to lose hope and think less of ourselves. They are a great life negative.

Realize that investing is not a matter of life-and-death. The primary fear in investing is the fear of failing. In life, we fall off the horse sometimes. We get back up, dust ourselves off, and ride on. That is the story of life. Nothing is perfect. The real failure is not getting back on the horse. Fearing the horse will immobilize you, but you are stronger and smarter than that.

What is the answer? It is to reveal the facts and actions to take in an investment plan. You write down your goals and, in bullet points, the measures you will take to get you there. A written plan reduces your chances of failure while increasing your success.

Of course, you will not be putting a million dollars in the bank with your first investment. Because it is your first deal and you are still learning, you may not create as much cash flow as you calculated. This is the deal to cut your teeth on and to walk away with a significant amount of experience. You will have broken through the fear barrier and gained immeasurable confidence you can use to find the next deal.

Overcome Investment Fear with Knowledge

If one of your fears of investing is the lack of funds, then there is great news for you. You do not need much money. You can start with a budget of as little as $10,000. If you do not have that amount, now that you are focused and have the want, saving up should not take too long. Say you put away $500 a month. If you started from zero, in twenty months, you would hit your goal. Meanwhile, you will not waste your time if you begin following the advice in this book and start looking for and analyzing deals for practice.

Let us, for a moment, move away from the topic of fear of real estate investing. Instead, we can lessen the entire subject to a fear of decision making. After all, it amounts to a yes or no action plan to make your first investment. That is the decision that you must make. It does not need to be fearful. Instead, what it needs is education. It wants to research the benefits to see that they outweigh any disadvantages. All successful business decisions go through the same process, known as a cost-benefit analysis.

Business uses a decision making method known as a cost-benefit analysis to analyze decisions. This is a method to discover the merits of a business idea. In this case, the choice is whether to invest in real estate or not. In practice, the analyst lists all the benefits of taking a specific action, then subtracts all the costs associated with making such a move. It can be more sophisticated, as some analysts build models to assign a dollar value to intangible items such as the benefits and costs associated with living in a town. But we do not need to go that far.

Proper decision-making is about developing a list of wants. Then you look for opportunities meeting most or all those needs. For example, if you are thinking about buying a new car, you will consider several features—mileage, horsepower, and similar factors. If you are deciding to invest in a CD, you will compare banks and interest rates.

As an example, when a CD of ours came due recently, instead of automatically renewing it, we shopped around and found in these times of minuscule interest rates a local bank providing three times the interest rate as the old CD in a new savings account. So, we opened an account at the new bank and made the deposit there. This cost-benefit analysis we made was a simple one and cannot be compared to that of a real estate investment. But the process is the same.

Let us work through a theoretical cost-benefit analysis of a potential real estate rental investment. Most people cannot answer the question of comparing real estate to the stock market. If they try to, it is often with a skewed apples-to-oranges comparison such as a 3-percent real estate appreciation versus a 6-percent average stock return over time. If you hear this, rest assured, the person has no idea about real estate investment returns. Let us look at two examples:

Long-term buy and hold stock investment:

Assume you invest $10,000 into an S&P index fund and leave it untouched for 30 years. With an average annual return, your account would be valued at $76,122.11. If you decide to cash in, you will be obligated to pay a 15-percent capital gains tax, so you will receive $64,704.17.

Long-term buy and hold rental investment:

With that same $10,000, you buy a $40,000 rental property. You borrow $30,000 at a 4-percent interest rate for a thirty-year term. True to form, as with most real estate, your property appreciates at an average of 4 ¼ per- cent a year. Your monthly rents are $200, which nets you $40.00 a month in cash flow.

Appreciation. By growing four and a quarter percent yearly, after 30 years the property is worth $139,425. That is more than the original purchase price of $40,000, the property has appreciated by $99,425 ($139,425 minus $40,000).

Equity Growth. You began your investment with a $40,000 property pur- chase using $10,000 of equity to buy it. Over 30 years, the income from your rents paid off the entire loan. You have increased your equity by $30,000 ($40,000 – $10,000).

Rental Income. After maintenance and capital costs, vacancies, and property management costs, your net before-tax cash flow is $480 yearly. However, because of depreciation write-off, the cash flow is not taxed. If we can assume an average rent increase of two percent a year, net rental income will total $22,523.00 over 30 years.

Appreciation   $99,425

Equity Growth  $30,000

Rental Income  $22,523

Total Earnings $151,948

Earnings, before you pay any tax on a sale, are $151,948, more than double the $76,122 that would have been earned on the stock investment.

Choices for the Future

When the property mortgage is paid off you have several future choices:

You can pay the capital gains and depreciation recapture tax and sell.

You can delay paying any taxes through a 1031 real estate exchange.

You can simply decide to hold on to the property and continue collecting a larger amount of rental income.

You can get a reverse mortgage to supplement your retirement.

You can borrow against the property, buy that yacht you have always dreamed about, and have your tenants pay it off as they did the mortgage.

It is impossible to make an equal comparison between a securities investment and a real estate investment. Real estate offers different kinds of benefits beyond straight appreciation. Both types of investing have advantages, with real estate offering several benefits unavailable in stock investing.

Now that you have compared the two choices of putting your money in stock and putting your money into investment real estate, note that these are not limiting choices. They are not limited to either-or, as you can invest in both simultaneously. However, if you could only choose one, which would it be? We have prepared five excellent reasons the real estate rental investment is the better choice:

A wide number of real estate investment choices. As you will see in later chapters, there are many real estate investment choices available to you. These choices include raw land, house, duplexes, commercial properties, wholesaling, and flipping to name a few. Moving up, you can choose to invest in commercial properties such as strip malls, office buildings, and warehouse-type properties. You also have many investment choices to invest in alone or in partnership with another investor.

Real estate is a physical asset. While securities are represented on paper documents you will rarely see, real estate can be visited and inspected as it is a hard asset. Unlike stocks with risks that allow their value to fall to zero, real estate increases in value over time because of a demand for housing, office, and retail space.

Less volatility owning real estate. It is given that stock tends to be highly volatile. Its value rises and falls up and down after it is purchased. Stocks are also dependent on market, news, and demand.

Real estate does not reveal itself in this way. Its value remains stable increasing by inflation. Thus, it is considered a safer investment.

Real estate provides more control. Real estate gives you control over how it is managed. You can manage it yourself or use a management company. You can find the tenant, set the rent rate, and keep the property to your standards.

Great tax advantages. Real estate investment comes with excellent tax advantages. You can take off all your expenses, including interest on your mortgage. You can also shelter your real estate income using the depreciation the tax code allows.

So far, you have learned about all the benefits available to a real estate investor. Here we want to address the fears of investing a second time to summarize what we have presented here.

Actions to Take to Overcome Real Estate Investment Fears

Educate yourself: Read books on real estate investment. Watch YouTube videos. Listen to real estate vlogs

Perform financial analysis on real estate investment properties until you become comfortable doing it

Join a local real estate investment club

Put limits on your capital investment

Use other people’s money by controlling instead of owning.

Wait to launch

There are two primary reasons those who believe in real estate investing have not taken part. They are a lack of money and various apprehensions leading to a fear of investing. Both resolved through action.

To Remove Fear, You Must First Embrace It

Noam Shpancer Ph.D. writes in Psychology Today, “… avoiding anxiety maintains and magnifies it. To get rid of your anxiety, you should capitalize on the principle of habituation using ‘exposure.’ Exposure is by far the most potent medicine known to psychology. It is responsible, or indirectly responsible, for most improvement in therapy—any therapy, but particularly the treatment of anxiety. Exposure entails facing your fears, which makes it aversive in the short-term. But many worthy long-term goals involve short-term discomfort.”11

In other words, recognize the anxiety for what it is, embrace it, then “pull the trigger,” go out, and as uncomfortable as it might seem at first, just do it—invest.

Action Reinforces Doing, Doing

Reinforces Habituation

A common form of learning is through habituation. Habituation is something that happens regularly in your everyday life, yet you are largely unaware of it. The most significant reason in your future financial well-being is simply getting started in investing. The act of doing so will reinforce the habit, lessen anxiety, and reinforce getting rich slowly. The way forward is through building your knowledge and developing a savings discipline.

Knowledge. The more you study a subject, the more you learn it. The more you master it, the more you will understand and be comfortable with it. This applies to learning to drive, skiing, playing an instrument, and of course, investing. The more you learn about a subject, the less intimidating it becomes. It will lessen the inclination for making rookie mistakes and build your confidence to stay with it in the long run.

Set investment money aside. Success begins with making lifestyle changes such as simplifying our lives and lessening extraneous expenses. It can be as simple an act as packing lunch instead of buying lunch. Put the daily savings in a jar and bank it once a month. Focus on what you can save. That simple act will return dividends as you build investment capital and make rental property purchases in the coming years. Decide to build the future for you and your family by saving.

Summary

If you remember our story at the beginning of this chapter, you should remember the missing arm. The young man overcame that weakness through training by doing. He wanted to know more, but his teacher had him focus on only one move, one objective, and then he studied it until he mastered it. Perhaps you will give me a license to equate that weakness to that of beginning investors filled with apprehension and concern that they may lack the capital to begin an investment program. This book is all the training you need to overcome those weaknesses and, in ninety days or less, enter the com- petition—which is to put into action all you learned and earn that winning trophy—your first investment property. Let us do this together.

Next Steps

In the next chapter, we look at the variety of real estate investments that are designed for a beginner. We examine the pros and cons of each. By the end of the chapter, you should have a firm idea of the specific property type best suited to you. It should be an exciting chapter as we explore the benefits of a variety of investment types. Even if you know in advance what class of property you want to specialize in, you will learn a great deal about alternatives. The next step is to read the chapter and decide on the property you want to embrace.







About the author

Robert Gill, Jr. has spent over five decades investing in commercial and residential properties. His vast investment experience includes single-family houses, units, garden apartments, strip centers, and office buildings. He is also a writer of books and magazines and publisher of ArtMolds Journal. view profile

Published on September 07, 2020

Published by Teaching Press

60000 words

Genre: Business & Economics

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