20

MAKING IT BIG ON LITTLE DEALS

In my classes I have taught thousands how to buy houses for investment. Many students have made it in a very big way. Some own hundreds of houses. Others have bought a few houses to supplement or replace the income from their jobs.

To make money as an investor, you have to take risks. If the risk is small—if it is a little deal—you are more likely to take it. A modestly priced house in a good neighborhood can be an almost risk-free investment if you learn how to buy, finance, and manage it well. You can buy it with a relatively small down payment and rent it to a tenant who will pay you enough to repay your loan.

It takes a modest amount of work to find, buy, and rent a house, but the reward is more than worth the work and risk. Those who fail to take this chance, who will not make the effort to buy even a safe investment, run a far greater risk—the risk of never building any wealth. The great majority of people, even in our free and wealthy country, do not build any significant wealth. They must rely on the government, a company pension, or relatives for support.

Reduce your risk by learning before you write a check to buy your first investment. Hopefully, this book has answered some of your questions and given you the direction that you need to write that first check and buy that first house.

WRITING DOWN YOUR PLAN FOR BUILDING WEALTH

Commit today to buying at least one house in the coming year. Don’t worry about what the market is doing, look for a house that you can buy using my 10/10/10 rule, and you will own a house that should rent for at least the amount of your payments. You will learn a lot and build some self-confidence in the process.

Now hold on to that house until it doubles in value. If you don’t refinance it along the way, your cash flow from that house will increase every year.

All you need to do to become wealthy is to repeat the process; to buy one house a year for ten years and to hold them until they double in value (see Table 20.1).

Table 20.1    My Net Worth in Ten Years If I Buy Just One House

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If houses in your town double in value every ten years, Table 20.2 shows what your houses will look like in ten years if the first house you bought was worth $150,000. (If they don’t double in ten years, hold them until they do.) Your first house will double in value from $150,000 to $300,000, and since you will continue to buy the same type of house in the same neighborhood, all your houses will be worth about $300,000 in ten years, or however long they take to double.

Table 20.2    My Net Worth If I Buy One House a Year for Ten Years

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There is nothing complicated about this plan. It simply requires you to stick with it and buy one house a year and then hold on to those houses until they double in value. These numbers are conservative. As you improve your buying and borrowing skills, you will make deals better than 10/10/10.

SECRETS OF SUCCESS

Warren Buffett has made billions of dollars as an investor during my lifetime. He and I agree on most everything, and here I have restated and embellished some of his thoughts for real estate investors.

1.   Buy value. Buy investments that have real value, and buy them at a bargain price. Buy a house you know the value of and that will produce income, and buy it when you can make a good deal.

2.   Hold on to your good investments—forever. Don’t sell a house that rents well and appreciates. It is making you a lot of money.

3.   Sell losers as soon as possible. When you make a mistake admit it, recognize why it happened, get rid of it, and learn from the experience.

4.   Treat others as you would like to be treated. You can make a lot of money buying, renting, and selling houses without ever making any-one angry. When you treat people well, they will send their friends your way.

5.   There is unlimited opportunity to build wealth. Buying houses, one at a time, and holding them until they at least double in value can build you more wealth than 98 percent of your friends and neighbors, and it can do it faster than you’d believe.

Get outside your comfort zone. Take a small risk on a little deal—and you can MAKE IT BIG!

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