Take it from William Nickerson, author of How I Turned $1,000 into Three Million in Real Estate – In My Spare Time, who said,
“It is never too late to start, although fortune favors early starters. Each day of delay loads the dice against maximum success. But I know of many successful owners who bought their first income property after retirement at sixty-five. You can always start later in life.”
Age is Relative
To put things into perspective:
Thomas Edison invented the telephone at age 84;
Benjamin Franklin helped in the writing of the United States Constitution when he was 81;
Frank Lloyd Wright designed the Marin County Civic Center in California at age 88, and;
I started buying rental properties as a mere child at age 47.
Too Much Work?
I have a friend who retired when he was 65, but he had to take a job at an Arby’s fast food restaurant to help make ends meet. I asked him, “Why didn’t you just buy a few rental properties before you retired?”
He replied, “It’s too much work.”
Too much work?
Which is more work, being trapped in a restaurant 8 hours a day doing menial labor, or having free time all day, and cashing rental checks once a month? Sure, there is some repair work every once in awhile, but you can hire a handyman to take care of that.
It’s Never Too Early Either
I’ve had young people ask me, “Is it too early to get started?” If you have the motivation and don’t mind learning as you go, there is no better time to build wealth and security than when you are in your 20’s. You don’t have to know everything to start.
I have a friend who got started at age 25. He bought a 4-plex apartment complex. He lived in one unit and rented out the others. He had a sharp learning curve in the beginning, starting off at an Elmer Fudd skill level, but after he had done it a year or so, he had his business operating like a Swiss watch.
Are you too young or too old?
It’s not about age. It’s about just getting started.
Calvin Coolidge said, “We cannot do everything at once, but we can do something at once. “
Opening up the old mailbag again, I am printing my response to a recent fixer upper email question that I received.
Hello Terry,
I’m writing you with a somewhat specific question.
I am looking at a house at xxxx Star St. in Duluth, MN. It’s a vacant house (so many are nowdays) and the listing price 39k. Repairs look to be 10.9k plus a fee of 1,100 for re-registering it as occupied.
I walked through the house, visually it’s fine. I like the house, don’t get me wrong. New windows, carpets, paint, etc. But the repairs are mostly plumbing etc. Should I put in my bid for 39k EVEN or throw it down for 29k?
It’s in a fairly low crime area, but across the street is a halfway house for prisoners just getting out into the world…Prior values in the 200k for this area before the Great Collapse….
Thank you for your time,
Malcom
Dear Malcom,
What I see is a red flag that should influence your decision.
The location of the house across the street from a halfway house is going to considerably limit what you can do with the house. Regardless of whether you are going to turn it into a rental or flip it, you have a very limited pool of potential tenants or purchasers. In my opinion, most people would not want to live there.
Consider, if you had a tenant who had a choice to rent your property, or one in another neighborhood nearby that did not have a half-way house across the street. Which would they choose?
Granted, the purchase price is low. However, in my opinion, it’s better to spend a little more money for a house that doesn’t have a glaring defect.
There are a lot of properties on the market right now, and many at bargain basement prices. If I were you, I would consider looking around for another one.
Donald Trump said, “Sometimes your best investments are the ones you don’t make.”
In these 5 Steps you will master my secrets of how to drive tenants to your rental property. Learn which signs work best, where to advertise, and how to word ads and flyers so as to reduce unnecessary calls for information.
Remember your tenants during the holidays with a gift card. This shows them that you are in it for more than the money.
When I was a Peace Corps Volunteer in Honduras, the people I worked with went out of their way to make me feel I welcome and cared for. I try to do the same with my tenants.
Be kind to your tenants and treat them the way you would like to be treated and they will return the favor by taking care of your property, and by providing you with financial security for years to come.
I also recommend four of my favorite repair books for your real estate library to guide you through the process of repairing appliances, sinks, electrical outlets, and almost any other repair issue that you may encounter.
When looking for investment properties, don’t just find houses that meet your financial criteria. Rather, find the house that meets your criteria in locations where people are extraordinarily inclined to rent.
There are nice areas in my town and there are not- so-nice areas in my town. However, neither of those two areas is where most people like to rent properties. The largest majority of people like to rent in what I call “opportunity zones” (also known as “transition zones”).
A good question came up today during my radio interview with Dave Kebler of WRNJ Radio in Hackettstown, New Jersey.
I was asked if it was now impossible to get a loan, either to refinance a house or to purchase a fixer upper rental house.
The answer is no, it is not impossible to get a loan. Granted, it requires more paperwork and squeaky clean credit, but loan money is still available and at great 4.5% rates for 30 year loans. I have taken out 3 loans in the last 12 months.
Is it worth it to take out loans for investment properties?
The economy is still as flat as Rush Limbaugh’s trampoline, but there has never been a better time to invest. From the perspective of mortgage interest rates and low real estate prices, this is a time of great opportunity.
When I was a Peace Corps Volunteer in Central America, people would ask me if the streets of American were paved with gold. I said, they’re not paved with gold, but they are paved with opportunity. And they still are.
Upcoming radio interviews
Aug. 11, 8:10 am, Mark Wayne show, WICH 1310 am, Norwich, Connecticut.
August 17, 6:50 am, Jason Mansmith show, WRPN 1600 am, Ripon, Wisconsin.
August 20, 8:30 am, I will be on David Sutton’s show, KSRN 1490 am, Los Alamos, New Mexico.
August 25 at 8:08 am, I will be on Jeff Anderson’s show, KSDR 1480 am, Watertown, South Dakota.
Owning rental houses far exceeds the benefit of the pension that you may receive from your job. I worked for the state of Arizona for 13 years, and I will one day receive a pension of around $1,000 a month.
But, does that really provide security?
Each year the value of my pension will go down because it is not tied to inflation. So, after 10 years I’ll still receive $1,000 a month but because of inflation, it may be actually only worth $100 dollars a month because the cost of my groceries, my clothes, health care, and other costs have all gone up each year.
Rental houses provide a better pension. If I get $1,000 a month in rent profits, it not only keeps up with inflation, but it exceeds inflation.
Which pension program would your rather have? One that increases in value with the passing years, or one that decreases in value?
From: Janet Sent: Friday, June 18, 2010 12:12 PM To: ‘Terry Sprouse Subject: Re:7-Week Fixer-Upper/Rental House Course: Lesson 7
How does the refinancing work in this underwater market? i just bought a house in Jan, do i have to wait 10 years to do this? i am 50 now, should i wait till i am 60 to start doing this? sincerely, Janet
Hi Janet,
That’s a good question.
Everything depends on how long it takes to generate some equity in your house. And, of course, that depends on the situation that the market is in. Right now, as I’m sure you know, housing values are not going up very quickly. In fact, in many areas of the country, housing prices are going down.
So, in your case, all you can do is wait and see what happens. If the housing market improves again, you may be able to refinance sooner rather than later. But, until the equity in your house increases, you would not be able to refinance and buy an investment house.
Best regards,
Terry
———
Usually you need to live in a house several years before you have enough equity to refinance and purchase another house. I lived in my house ten years before I took out the equity to buy my first fixer-upper rental house.
Another possibility it to find a partner with more equity in their house, or who has some cash, and to jointly buy an investment property.
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If you are new to investing, make sure you have a good inspection done of your investment property, and follow the safe steps for investing, as I discuss in my new, easy-to-follow guide for beginning investors, “Never Sell Your Home! How to Turn Your Home into a Rental House.”
Buying an investment rental house with the equity from your home is one of the safest and easiest ways to start a reliable new income stream. But, timing and planning are everything.
I wish I had remembered that before I spilled spot remover on my dog, and he disappeared.
But in real estate investing, one of the most basic principals, like the law of gravity, is that you must have some equity in your house before you can take it out and use it.
You can’t rush things, or you’ll wind up with your dreams broken faster than a movie star wannabe, just off the bus from Kansas.
1. Place several small For Rent signs on all nearby streets, especially the major intersections. If you get a sign with an arrow on it, you can point the arrow in the direction of your house. I buy the signs at Home Depot or Lowe’s.
2. Hold an “open house” on Saturday and Sunday. People driving by can come in and look around.
3. Contact companies that help people find rental properties. Some will list your property for free. These companies usually contact me.
4. Run an ad on craigslist.org. You can upload photos and describe the qualities of your rental property. The ads are free & I usually get a great response.
I hope you find a tenant soon.
Let me know if you come up with a good technique that I haven’t thought of.
Good luck!
Best regards,
Terry Sprouse
Location, Location, …
One thing I didn’t mention in the letter, but which is perhaps the most important consideration of all in attracting good tenants, is the location of your property. Properties located where people really like to rent are called “opportunity zones” (or “transition zones”). Just as Baskin-Robbins must offer the flavors of ice cream that the public likes, so you must offer rental properties in the areas of town where people want to live.
If your property is located in an area where people don’t like to rent, you will always have trouble finding tenants. For more information about my philosophy on where to invest, check out my EzineArticles.com article The Secret to Increasing Cash Flow – Invest in Opportunity Zones .
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