Many people would like to get involved in investing in Real Estate. However, most are limited with funds with which to buy properties. The myth that most people believe is that if you want to make money in Real Estate you have to have substantial cash to begin with. As I said, this is a myth because it is UNTRUE. There are MANY ways you can buy, sell, hold , or control income producing properties with little or NO CASH. I know and have known several people who have built substantial Real Estate portfolios who started with no cash.
I’m going to tell you the story of Bob and his wife, Greta. I first met Bob when I was a Broker in Arizona. Bob had just moved to Arizona from Florida. He owned a good amount of Mortgages secured by properties he had sold in Florida. He wanted to use these Mortgages to acquire income properties in Arizona. I worked with Bob to help him accomplish his objective. We became close friends and eventually partners in several Real Estate ventures.
But, back to the story - When Bob was in his 50′s he lived in Florida and owned three shrimp boats, with which he made a good living. Then there was a storm which destroyed all the shrimp boats. Bob had NO insurance on the boats. Very shortly Bob and Greta were broke. Bob was definitely an “Entrepreneural” kind of guy. The next part of the story proves it. So to make ends meet, (You may not believe this), Bob and Greta went into the wig business. Most of you won’t remember this but wigs became very popular back around the 1950′s or 1960′s, especially among the ladies.
So, Bob and Greta established a weekly wig route. They would buy these wigs in bulk wholesale for, say $2.00 a piece. On the routes they established they would sell the wigs for, say $20.00 with $5.00 down, then the balance payable at $1.00 per week. Greta would style the wigs for their customers. OK, back to the Real Estate part.
Bob happened to run across a duplex consisting of 2 bedroom units for sale. Both units were vacant, and they needed minor fix-up to make them presentable. The owner was sick and tired of tenants and was a real “Don’t Wanter”. Bob was confident that he and Greta could do the work needed to make the units presentable to tenants. The owner was asking $30,000 for the units (remember this was back in the 1960′s). Bob made the following proposal which was accepted so fast Bob knew he had offered too much.
Here’s the deal:
Bob & Greta bought the units for $25,000 with their work to make the units ready to rent as their down payment (That’s called “Sweat Equity” folks). Then the balance was payable at $150.00 per month to include 6% interest. The first payment was not due until they had rented the first unit. They soon had both units rented at $300 per month each. So – after Note payments, Insurance, and Tax escrows, Bob and Greta’s Net monthly income was $350 a month, not bad for a little “Sweat Equity”.
Well, needless to say Bob knew that he had struck gold. He began looking for properties that someone didn’t want anymore. There are always those around. you just have to look. Over the next 10 years or so, Bob & Greta acquired several properties. When they decided to move to Arizona they sold and financed these properties themselves. When I met Bob he and Greta owned several hundred thousand dollars in Notes and Mortgages. We then used these notes to acquire for them income producing properties in Arizona.
The moral of this story is that there is always plenty of good Real Estate deals out there that can be done without cash; however, you have to look for them. They will seldom come looking for you, EXCEPT when the word gets out that you are looking; then they will even come to you.
These posts are the opinion of the author who is not engaged in rendering legal, accounting, or investment advice. If such advice is required or desired, the services of competent professional persons should be sought.
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