Do you see those signs about I buy houses or sell your house all over your neighborhood? I know I have.
How is it that those people buy all those houses? Are they sitting on tons and tons of money that they can just buy every house that they see? What do they do with all these houses they buy?
My name is Eric Wargo, and I’m going to teach you what those signs are all about and why you should have your own sign advertising the same thing.
The goal is Financial Freedom
What is Financial Freedom? Financial Freedom is the ability to live off of the money your investments produce.
How do you get to Financial Freedom? You get to Financial Freedom by learning how to get paid on your willingness to risk and not by how many hours you can work.
If you have ever had to sell your house quickly because it was about to get foreclosed on, the idea of Financial Freedom might sound unachievable, really really is.
Even if, after a couple of years of work, you still haven’t reached Financial Freedom, that’s fine, you will be in such a better place than you were before.
It all starts with the mindset
Years ago, I lived in the Dominican Republic, and I saw poverty in a whole new light. I also spent time in Haiti, and I saw the exact same thing there. The people are incredible. I can’t speak more highly of both countries. I would consider moving back. The hard part was that I found poverty not necessarily to be a financial situation but a mentality. Not that anyone chose this but that society as a whole influences us all, and society pushed the idea that people can’t ever get ahead.
Through my time of living in developing nations, I watched people struggle just for the basic necessities of life. I would talk with them and noticed there was no real hope for a better future. The people were not disgruntled or hated life, or despairing, but that you work till you die. The goal is just to enjoy life in the here and now. To be fully alive. This is why many cultures are so relational. In my opinion, relationships trump’s productivity because productivity is not the ultimate goal.
But what does that have to do with real estate investing?
Honestly, everything. If your mentality says, “I can never get ahead, and I’m stuck with the cards I have been dealt”, chances are you are stuck. But if you have a living Hope inside you that says I can do things differently, I can change the way I think. I can move towards Financial Freedom, and I believe you can get there.
It’s not an easy thing to do, it is scary, contains risk, and it can be stressful, but it’s so worth it. No one that I know who climbed to the top of any mountain ever looks back and says, “I wish I wouldn’t have climbed that.”.
Real estate investing is no different. You can start out in real estate investing today. Here are some ideas on how to make this happen.
There are a few main things you can do with real estate. This isn’t everything, but these are the main ones.
1. Flip a house
- This consists of buying a house at a really good deal.
- Fixing up that house so somebody would want to buy it.
- And then selling that house (and keeping the profit :).
2. Rent out a house
- Buy a house at a really good deal.
- Fixing up that house so somebody would want to buy it.
- Option based on the load: Refinance it into a long-term mortgage.
- Rent it out and enjoy the monthly profit.
Here is the breakdown:
Buy a house at a really good deal
In my opinion, this is the absolute hardest part. This is why you see the signs all over that say “I Buy House.” These are investors trying to get people to call and sell their house at a low price. You might say, “but even if I found a great deal, how do I pay for it?” The answer is hard money loans.
Hard money loans are super easy to come by, super easy. The interest is the highest of all loans but plans for it, and it doesn’t matter.
It works like any other loan-they pay for the house, and then you make monthly payments. You can even add in the money to fix up the house. If you Google “hard money lender” you’ll find plenty of them. There is so much money available for real estate; it’s incredible. Most hard money lenders don’t care about your credit or your job or anything else like that because as long as you’re getting a good deal. They know that if you can’t pay, they will take back the house and sell it to another investor. You can borrow $100k for a home and $40k to rehab the house from the same hard money lender.
Fixing up that house so somebody would want to buy it
If you go to Lowe’s or Home Depot, you can take out a credit card with them and not pay interest for 6 months or maybe not even have to pay the first payment for a certain amount of months, so use this to buy your material.
You might say, “I don’t know what in the world I would need to buy?” Not a problem, Google the term, turn-key house rehab, and you will find companies that work specifically with investors to rehab a house. They will give you a quote for absolutely all the work needed. That quote includes all costs, labor, and materials. You don’t even have to be there to monitor the progress since they have people whose job it is just to make sure their workers are doing exactly what was agreed upon.
If you want to rehab it yourself, go for it! You can always do that to save money!
If you’re planning on renting out the house, you might need to refinance a long-term loan. This happens all the time, so hard money lenders expect this is a possibility. They might even be capable of taking your loan and converting it to a long-term loan, and you don’t have to do a ton more paperwork.
At this point now, you have a finished house ready for someone to live in it.
Rent or Sell it
If you want to rent the house out, put up a “For Rent by Owner” sign and make sure it has your phone number on it. Chances are you’ll get a call pretty quickly if you have a house in an area that people will want to rent in. The best houses to rent out are 3 bedrooms, 2 bathrooms, 1800 square feet, and one story. That’s pretty much the magic sauce that will rent. If you don’t know how much to charge, I can give you an idea.
It needs to make money, so figure out how much money you need to cover your mortgage. After the mortgage, set aside an amount to cover repairs. After the mortgage and repairs, set aside some of the rent to cover vacancies, as in if you have to hold it for a month or 2 without someone living in it. If you are going to have it managed, then you need to take out for that, but if you manage it yourself, then you don’t need to set aside anything for management fees. Once you add up all those, you know what you need to break even. So if you rent out a house for $1600, but all your items add up to $1300, you will have a positive cash flow of $300 a month. These are exactly what my numbers were on my first rental.
Alternatively, you can sell the house
Find a realtor in your area. Chances are you know one, or you know somebody who’s related to one. Tell them what you want to make on the house and see what they think about it. Have them list this house on the MLS. Get all the info from the realtor that you need so you feel like you understand what’s going on. When I first started, I called a realtor friend of mine, and he told him if he listed my house and sold it, I would pay him a 1% fee versus the 3%, which he said was fine with him. I recommend never paying over 1% to a realtor to have them list your house. To sell a house is not that much work inside for a realtor. They just have access to certain things to list houses that you don’t, and you need a license to do that, so it’s worth something to them, but it’s not worth 3% of your profit. However, if a realtor is helping you BUY a house, then let them earn the 3% (I can say from experience that helping people buy a house is a lot of work).
Once the house is rented or sold now, you’re an investor. You invested some money. You took a risk. Hopefully, that risk had a good payoff, and you also learned how to do it all. I’ll be honest, though, on your first house if you don’t make anything, it’s still a huge win for you because you just entered into something that most people in the world would never do and you saw it through to the end.
Help me get this going
The company 77 Realty Solutions is there for any help. They had someone to hold your hand through every step of this process, from finding a deal to bringing in contractors, and the advice was priceless to me, and I even made about $8,000 on my first one.
You can do this! Invest in real estate!