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LIVING THE DREAM
ii
Opinions and recommendations given in this book are based on the author’s actual experiences
and on research believed to be reliable. It should be noted that investments described in this
book have been chosen to demonstrate a given point.
This book is sold with the understanding that the publisher and author are not engaged in
providing legal, accounting or other professional services. If legal advice or other expert
assistance is required, the reader should seek competent professionals in those fields. If you do
not wish to be bound by this statement, you may return this book to the publisher in good
condition for a full refund.
Published and Distributed by:
KJAY Publishing Co.
P.O. Box 491779
Redding, CA 96049-1779
www.fixerjay.com
1-800-722-2550
COPYRIGHT by KJAY Publishing Co.
First Publishing 2013
All rights reserved. No part of this book may be reproduced in any form, by any means, without
written permission from the author, except when used in advertisements for this book or other
written material by this author. Manufactured and printed in the United States of America.
Library of Congress Catalog Card Number
ISBN 0-9621023- 4-2
LIVING THE DREAM
iii
PRODUCT 8210
CONTENTS
-WHO IS FIXER JAY
-WARNING TO READERS
CHAPTER PAGE NO.
1 Become the First Millionaire on
Your Block 1
2 Seller Financing – Investor 11
3 The Power of Leverage
And Compounding 17
4 The Best Stay At Home
Business Opportunity 21
5 Your First Gold Mine Opportunity 28
6 Financing and Control 37
7 Rent to Value Ratio 42
8 Dreams Can Come True At Any Age 50
9 The Right Vehicle – 5 Units or More 53
10 Investing With a Different Twist 61
11 Answers to Most Common
Questions 69
12 Dream a Little Playing What-If 73
The Ball’s In Your Court – It’s
Up To You 79
LIVING THE DREAM
iv
WHO IS FIXER JAY?
Jay P. DeCima (“Fixer Jay”) is a seasoned investor/landlord and a national best-
selling real estate author. Over the past 30 years, Jay’s popular books and
“Investor Training Seminars” have helped thousands of small-time investors
create second incomes and launch “full-time” investment careers.
Jay’s unique investment strategies are ideally suited for small-time, “Mom and
Pop” investors who most often have very little money to start with! By developing
their personal skills and learning the right kind of income-producing properties
to acquire, Jay’s students are soon competing with their wealthier competition!
Today, Jay spends his time managing and overseeing his investment properties and
teaching others who wish to learn more about building their personal real estate
wealth! Jay’s current hobbies are visiting Civil War battlefields, cruising on the
high seas and writing more books about his life-long passion, building real estate
wealth starting from scratch!
LIVING THE DREAM
v
WARNING TO READERS
If you happen to be an “eager beaver” or wanta-bee investor searching for the best
way to invest in real estate – and you also have a very limited start-out budget,
which includes almost all regular working folks – this book might read like a
miracle from heaven – or, your constant reminder how close you came to the gold
mine – but walked away!
First, I’d like to show you how one small six unit investment property can literally
make you a millionaire landlord! Then I will tell you about my personal
investment plan that can help you become totally financially independent within a
very reasonable period of time. I intend to let you in on a variety of money-
making opportunities that can ultimately put you and your family on “Easy
Street”.
I call my plan “INVESTING WITH A DIFFERENT TWIST”, and although it’s
not really new or original – I often describe it as a revised version of an older
model with a brand new “hi tech” carburetor. Best of all, my plan works extremely
well for both part-time investors and career changers alike! I’ll show you how to
maximize your monthly income in the shortest amount of time, build yourself a
million dollar investment portfolio and retire like a king!
LIVING THE DREAM
vi
There is however an unfortunate downside for looky-loo’s and dreamers. It comes
from learning about this lucrative profit-making opportunity I’ll be sharing –
and then doing absolutely nothing about it! Failure to take action can have a
devastating effect on your financial aspirations for many years to come, therefore;
please be advised – reading any further shall be at your own risk!
FIXER JAY
LIVING THE DREAM
- 1 -
Chapter 1 BECOME THE
FIRST MILLIONAIRE
ON YOUR BLOCK
Folks who’ve read my books, newsletters or attended my Investor Training
Seminars already know something about my background and experiences as an
investor. I’m pretty much a two career guy who worked more than 20 years for the
phone company, then spent the rest of my life up till now as a full-time investor. I
began investing in real estate while still in my 20’s – and basically “moonlighted”,
fixing up junky houses nights and weekends while splicing telephone wires during
my day job.
After 50 years investing, a good number of successful “money-making strategies”
have rubbed off – and without trying to toot my own horn too loudly, they’ve made
me financially independent. That said, there’s one strategy in particular I want you
to know about! Pay close attention here because what I’m about to show you is the
best one I’ve ever found for regular everyday investors without a suitcase full of
money to start with. I will promise you this much – if you’ll take what I tell you
seriously and learn the ropes, financial independence can be yours as well!
It took me 20 long years of my investing life to make the switch over to properties
like Cherry Street, and during most of that period, my bank hovered around
LIVING THE DREAM
- 2 -
“almost empty”! All the while, I desperately tried to make my single family houses
cash flow! Suddenly one day I finally figured out that highly leveraged houses
with big mortgage payments take way too many years before there’s hardly a whiff
of cash flow! Friends, Cherry Street is 100 times better, and I’m about to show
ya why!
MY MILLION DOLLAR VEHICLE
Cherry Street (not real name) was not any different than hundreds of other small
multi-unit rental properties you’ll find in almost every decent size town or city in
my state (California). In fact, you can find Cherry Street properties in just about
every state in towns or communities with populations of 4500 or more. Many
newbie’s, or start-out investors claim they have great difficulty finding these small
multi-unit properties – however; I’ve found the main reason is because their sights
are generally set on finding single family bargains rather than small multiple unit
properties like Cherry Street. If your goals as an investors are anything like mine –
that is, you’d like to “speed up” your cash flow earnings and start making profits
in a much shorter period of time – pay very close attention to what I’m about to tell
you next. It’s what I call my millionaire strategy for Mom & Pop investors!
CHERRY STREET – MILLIONAIRE MAKER
My first real up close look at six older houses all snuggled together on an oversized
city lot with a skinny dirt driveway running down through the middle sorta
reminded me of an old Norman Rockwell painting with the paint all smeared
together! About sixty years old I’m guessing – each house had two small
bedrooms and a single bath! They were pretty much typical of the smaller homes
LIVING THE DREAM
- 3 -
built during the late ‘50’s and early ‘60’s. Small “cottage style” houses like Cherry
Street, are an excellent find for investors like myself because they are extremely
easy to rent – and they’re affordable for most of my customers (tenants).
Purchased at the right price, I can easily afford to spend a few bucks to spiffy ‘em
up, making them very attractive for my rental customers! Best of all, I can still
make a decent profit for myself.
Before moving on, I want you to underline those last two sentences and never-ever
forget them! They contain 38 words that are the essence of making a million
dollars in the income property business. Let me say this one more time so it’s
perfectly clear! Investors who are willing to step outside the box - learn a few new
investment skills, can acquire these properties – rent them at affordable rates and
earn very respectable profits while the tenants are paying off the mortgages and all
the expenses along the way.
When you compare my results to investing in single family homes or flipping
properties, you’ll be absolutely amazed at my huge profit advantage. Naturally,
you must keep the properties and manage them, but in the end they’ll make you a
wealthy investor. If becoming a financially self-made millionaire is your goal –
stay tuned! I’ll show you exactly how it’s done. Take a close look at my Cherry
Street property showing the actual dollar numbers my six little houses produced! I
think you’ll be thoroughly convinced that my multiple unit strategy is the best
game in town! Before I show you Cherry Street, let me make something clear – I
love all income-producing real estate, including single rental houses. However,
it’s the order of buying where I’m different than most other teachers.
LIVING THE DREAM
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I believe small-time beginners need to develop dependable cash flow or monthly
income first! Cash flow is what keeps the doors open! Once you have money
coming in every month that you can count on - then buying good solid break-even
houses is just fine! To accomplish this goal – buy Cherry Street properties first
LIVING THE DREAM
- 5 -
Purchased Many Years Ago
With The
Following Terms:
Purchase Price: $145,000
Down Payment 20,000
Seller Carryback 125,000
Terms: 15 Years – Seller Financing
LIVING THE DREAM
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CHERRY STREET HOUSES
I operated the property for 26 years, then –
I sold with the following terms:
Selling Price $650,000
Down Payment Received 50,000
I Carried Back A Note 600,000
For 20 Years with the
Following Terms:
Payments to Jay $3250 per Month
Interest Only 6.5% with Principal
of $600,000 – All Due In 20 Years.
LIVING THE DREAM
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TOTAL OF ALL MONIES RECEIVED
BY JAY
Total Rents Received $999,010
Down Payment from Sale 50,000
Interest Income Seller Financing 780,000
Jay’s Note Principal Payment 600,000
(End of 20 Years)
TOTALS – START TO FINISH $2,429,010
LIVING THE DREAM
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FINANCIAL RESULTS – BENEFITS
Jay Earned Back His Initial Investment
Down Payment of $20,000 --- 121 Times
For Every Year Jay Owned – And Financed
The Property – Cherry Street Provided
An Average Annual Income of $53,000
Average Rents During Jay’s Ownership
Less Than $550 per Month per House
LIVING THE DREAM
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Pretty impressive earnings – wouldn’t ya say? Some may argue that $2,429,010 is
indeed a lot of money, but its gross earnings! Fair enough - it is gross, and I paid
mortgage payments as well as normal expenses along the way while I operated the
property. Still, $2,429,010 far exceeds all the money I ever spent on Cherry Street.
You also need to understand this – before I reached my seventh year of operation, I
had all my fix-up expenses, plus my down payment money back in my pocket! In
other words; I had none of my own money left in the deal – and here’s the
beauty. From the seventh year until I sold Cherry Street, my tenants paid for
everything! They paid all my expenses – plus every single mortgage payment till
they were all gone!
LIVING THE DREAM
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REASONS TO CONSIDER INVESTING IN
MULTI-UNIT PROPERTIES
1. Investment not affected by an up & down economy – or recession.
2. Not dependent on bank financing.
3. Much easier to create your own employment.
4. Monthly income indexed to inflation.
5. Keep your money – no FUTA, FICA, state withholding.
6. Ideal family business – generous write-offs.
7. Easy to expand in any economy.
8. Many “high Profit” related benefits.
9. Rapid wealth builder for net worth.
10. Guaranteed retirement income.
LIVING THE DREAM
- 11 -
Chapter 2
SELLER FINANCING
INVESTORS MUST
LEARN HOW
During my book tours, almost everyone who saw my Cherry Street slides were
absolutely “blown away” by the impressive dollar numbers generated
by the property! Remember, the numbers are gross earnings – not net, and of
course, I did have mortgage payments and expenses. Still, as you probably have
already guessed, there was plenty left over for me!
McGraw Hill, my giant New York publisher called me several times during their
review of my manuscript! At first, they told me their real estate staff didn’t believe
I could negotiate seller financing in an age when real estate mortgages were at their
lowest rate in 60 years. One expert (so he calls himself), told me that seller
financing only happens when banks charge high interest rates for mortgages or
when they stop lending altogether like during the Jimmy Carter years.
I invited my personal editor to fly out to California and review my closing files
since I’ve kept them all from day one. After I told the crew at McGraw Hill that
not only was Cherry Street financed by the seller, but also more than 80% of all my
deals are financed by sellers – plus, I can prove it! That really snookered ‘em!
LIVING THE DREAM
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Apparently they didn’t know what else to say, so they just quit calling. Needless to
say, they didn’t bother flying out to visit me either. In all fairness, I did convince
them that properties like Cherry Street with more than five rental units on a single
lot are considered commercial mortgages at the bank – and for older properties like
Cherry Street; new mortgages are pretty much out of the question!
YOU MUST HELP YOUR AGENT
HELP YOU
Negotiating seller financing and convincing reluctant real estate agents to help you
is something all successful investors must learn how to do! Buyers need to
personally talk with sellers, look them straight in the eye and negotiate seller
financing. This idea pretty much flies in the face of real estate agent training 101!
Agents are taught that principals should always be kept separated – much like bulls
from the heifers! No seller, including me; is likely to ever carry long-term
financing for a buyer unless they can meet him or her personally and judge for
themselves whether they seem like a reasonable risk! Underline this next sentence,
its important! Real estate is always about people and their needs! You need to
meet ‘em to find out what those needs are!
Because seller financing is one of the most valuable benefits to my investing
strategy – my home study course, “EARN $100,000 ANNUALLY WITH SMALL
INCOME PROPERTIES”, dedicates several chapters and CD lessons to the
subject. Seller financing is a big money-maker when you’re the buyer – and
again, when it’s time to sell as you’ve already observed with Cherry Street. Since
wrap-around financing is also very important, and is always recommended, when
you are selling a property with existing mortgage debt, my study course will teach
LIVING THE DREAM
- 13 -
you how to write up or draft the mortgage contract. I’ll also tell you how to avoid
a huge tax bill when you decide to sell a property with existing mortgage debt.
This one lesson is worth the price of my entire course many times over!
MORE INCOME IS ALWAYS BEST
Properties like Cherry Street are not the best real estate investment because I say
so! They’re best because they have more benefits that can make you richer – and,
they can do it a whole lot faster than most other investments can!
A bit later, I intend to show how six (6) small properties like Cherry Street can
provide you lifetime security, financial independence and a worry-free retirement
far superior than Social Security. If you happen to be a two career person like me
– take ‘em both! If you’re fairly young, Cherry Street might just be all that’s left –
don’t worry, earning $100,000 a year should keep you outta the poor house –
more about this later.
LIVING THE DREAM
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In my slide presentations, I show an example of a medium priced single family
house in my town that rents for $1100 per month. As an investor – or non-
occupying owner, it will cost me 20% for the down payment. The balance (80%)
can be financed with a traditional investor mortgage. In this particular case, the
asking price was $149,000 for the 3 bedroom house, so I felt pretty good when my
offer of $125,000 was accepted! Here are the purchase numbers:
Purchase Price $125,000
Down Payment 25,000
Bank Mortgage 100,000
Terms: 6.25% amortized
30 years - payments: $ 615.72
Estimated operating expenses
(35%) of income: 385.00
CASH FLOW: $ 99.28
LIVING THE DREAM
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MORE INCOME IS ALWAYS BETTER
A small six unit property that looks trashy and rundown with deferred
maintenance, as they call it, would likely sell in my town for around $300,000.
Depending on the seller’s motivation, a $25,000 cash down payment would
probably be enough to purchase the property I’ve just described. Over the years,
my average down payments to acquire these small multiple unit properties has
been about 10%, depending on how the property looks.
CASTING A WIDER INCOME NET
Let’s assume my out of pocket cost or the down payment is $25,000 (same as the
house purchase), but for six units instead! Obviously, there’s no difference there!
However, there’s a huge difference in the income these properties produce! The
house earns $1100 per month or $13,200 annually, while each of the six multiple
units bring in $625 per month or $45,000 annually. That’s almost 3 ½ times more
income for the six units with exactly the same amount invested. My return on the
investment (ROI) jumps from 53% for the house to 180% for the multi-unit
property! Leveraging down payment dollars is truly like leaping tall buildings in a
single bound! Remember Superman?
LIVING THE DREAM
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Important Reasons to Invest In
Income-Producing Real Estate
1. Investing the way I teach is guaranteed employment for your family if they
wish. And most important of all – you become your new boss – and kiss your old
boss goodbye.
2. Investing the way I teach works the same in a good economy – or bad! It
don’t run hot and cold because shelter is needed by all of us. When you acquire
affordable rental houses as I suggest – you’ll be setting up a guaranteed income for
life.
3. One of the best features of becoming a house provider is you can earn while
you learn. Investing is about learning new skills. Beginners are wise to learn a
few basics before buying their first investment property. Be extra careful about
who you select as a teacher. My advice – check ‘em good.
4. You do not need to be a genius or have a college degree! High school drop-outs
can succeed same as anyone else who has discipline, determination and willingness
to learn.
5. This business can set you up for life! It can provide a sizable monthly income
of your choosing – build a large net worth for you and your family – and a very
comfortable retirement you can depend on. Financial freedom will be the
reward for your efforts.
LIVING THE DREAM
- 17 -
Chapter 3
THE POWER OF
LEVERAGE AND
COMPOUNDING
Leverage and its twin sister compounding are two of the most powerful tools in
your investor’s financial kit. You must learn to use them safely! Please underline
safely because leverage can destroy your dreams of riches and security almost as
quickly as it can create them! Just be aware, it’s a double edge sword that can cut
both ways! Safe leverage will make you richer and a whole lot faster – let me
explain how!
Referring back to the example of six rental units purchased for $300,000 with a
$25,000 cash down payment – I want you to understand why leverage is such a
powerful wealth builder. Since the entire property cost $300,000, that means the
price for each rental unit would be $50,000 ($300,000 divided by 6 units =
$50,000). But because we are paying only $25,000 down, we are actually
investing just $4167 for each of the six units. That’s only about 08% of the total
cost – but here’s what’s really exciting! We get to collect and keep 100% of all the
rent money each unit generates because we were smart enough to be the owner.
From an earnings standpoint, our $4167 investment will generate $7500 in income
during our first year of ownership! Think about that for a moment! How much do
you think you might have earned if your $4167 was in some bank account! If you
LIVING THE DREAM
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earned 10%, that would only be $417! This is how super leverage can speed up
your wealth plans if you’ll invest your limited funds wisely.
THE MAGIC OF COMPOUNDING
Albert Einstein is reported to have said: “Compounding is the most powerful force
in the universe”! Let me explain my version of what Einstein is talking about.
Say for example; you decided to invest $1000 per month into real estate trust deeds
that will pay you 12% annual compounding interest. It might be your personal
savings account or retirement plan, but you must promise me you’ll leave the
money alone for 20 years. In other words, you can’t withdraw or borrow any
money from the account until after you’ve been investing for 20 full years. That’s
my only rule! Now fast forward to 20 years from now!
Can you make a guess how much money you’ll have in your account after
investing $1000 a month for 20 years? Would you ever guess you’d be a
millionaire? If you did, you’d be pretty close – you’d have $989,255 in your bank
account!
WOW – that’s a lot of money. I’m churning the numbers around in my head, but
I’m coming up way-way short! When I multiply $1000 per month times 240
month (20 years), it only comes to $240,000! That’s absolutely correct, but what
you forgot to plug in is the 12% compound interest earnings over 20 years. That
number, my friend, is $749,255! Altogether you’ll have $989,255.
LIVING THE DREAM
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Okay, I can hear ya thinkin’ out loud --- All this sounds like peaches and cream,
but where does Jay think we’re supposed to find a $1000 every month to invest?
Well – no one said this was easy. Still, lots of folks spend that much money on car
payments, TV’s and new iPhones! Eventually if you follow my investment
strategy, buying small multiple unit properties, you’ll create the extra income outta
thin air – keep reading, I’ll show you how!
SELF-HELP AND SWEAT EQUITY
Earlier I told you why I was able to purchase a six unit income property in my
town for $300,000 with only $25,000 down! Do you recall what I said about the
property when I described its condition or how it looked? Almost all of us judge
value based on the looks. Bad looks will greatly reduce the competition for these
properties. Bad looks and ugliness also tend to lower the seller’s expectations - or
his asking price. When you’re the buyer – this is exactly what you want. This is
the situation where you make your biggest profits! Here’s what I told you earlier!
A small six unit property that looks trashy and rundown with deferred maintenance
would likely sell for $300,000 in my town. Of course, that’s why the rents were
only $625, even though comparable units in the neighborhood were renting for
$795. Why the difference in the rents, you ask? Tenants won’t pay top rents for
trashy and rundown units! Paint ‘em, clean ‘em up and plant nice green lawns
with flowers and in a couple years or so, you’ll be able to get $795, just like the
nicer units. By the way, this is where you’ll find that extra $1000 a month you
need for investing in trust deeds. The difference between $625 rents and $795
equals $170 per unit. Multiply that times six rents and presto - you’ll have your
thousand bucks.
LIVING THE DREAM
- 20 -
THE BEST I CAN OFFER YOU
Earlier I told you I love all kinds of residential real estate investing from one room
shanties to larger apartment buildings, but they all have their positive advantages,
as well as their negatives. Since I’ve done ‘em all; I feel more than qualified to
present you with what I consider the very best of the best for ordinary working
folks who’ve been bitten by the investment bug! People I often refer to as “Mom
and Pop” investors, much like myself when I first started. As a group, we’re very
energetic working folks with a common desire to improve our financial lot! It’s
also quite likely that we don’t have a great deal of money to start with!
If my description fits you like it did me 50 years ago – you need to keep right on
reading because I intend to let you in on a very special investment plan with more
than enough income and profits to change your life forever – even the lives of
your family if you choose. The beauty of my plan is that it works for part-time
investors and full-timers alike! It’s also perfect for career changers, family
business ventures and small informal partnerships. The nuts and bolts of my plan
are covered from A to Z in comprehensive detail in my home study course:
“EARN $100,000 ANNUALLY WITH SMALL INCOME PROPERTIES”.
However, allow me to share some of the major benefits to show you exactly what I
mean! Perhaps best of all, you won’t need a Master’s degree to be successful! Of
course you will need some education – but that’s where my study course will come
to your rescue!
LIVING THE DREAM
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Chapter 4
THE BEST STAY
AT HOME BUSINESS
OPPORTUNITY I KNOW
Before I let you in on my wealth builder plan, which can greatly improve your
financial security – I first want you to think long and hard about your future. If
you’re young – what are your future job prospects? If you’re older, what about
your retirement or your standard of living later on? If you’re somewhere in
between – do you need more income now? Do you need a financial backup plan?
Almost everyone fits in here somewhere, I’m sure! Assuming you do – then here’s
the deal? If you are truly sold on the idea of owning income-producing real estate
– and you wish to take full advantage of the extremely lucrative benefits it can
provide for you – just keep reading! I’m about to show you how you can
accomplish the task. Also, I want you to know you can do this a lot quicker than
you might think if you’ll attend my INVESTOR TRAINING SEMINAR or
educate yourself using my home study course to help you get started.
Many real estate book writers claim you need a special team of experts in order to
be a successful investor! That’s pure horse pucky! These so-called experts won’t
ever show up until after you’re already successful because you can’t afford to pay
‘em! There’s an old saying about banks and their lending policies – they’re willing
to loan you money when you don’t need it. The same thing is true about the
LIVING THE DREAM
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experts. What you really need instead, is a good workable plan that you can adopt
and make it work all by yourself. That’s exactly the kind of plan I’ll be telling
you about.
CHERRY STREET REVISITED
Back on Page 7, I showed you the financial rewards associated with my long-term
ownership of six little houses on Cherry Street. Over the course of my ownership
and the seller financing profits when I sold the property – my average gross
earnings were approximately $53,000 per year – or about 121 times my initial
investment of $20,000. This happened because I employed the two most powerful
investor tools – leveraging and compounding! You’ve read how the magic of
compounding works on Page 17! Well, guess what – it works the same way for all
properties like Cherry Street! Talk about “hamburger helper”, you can’t leverage
anything and get better results. This is exactly what broke investors need to get
off the launching pad!
A little later on I’ll introduce you to my lifetime investment model. It consists of
six (6) separate properties containing 40 rental units. In my town, even with very
modest rents of $695 per month, you’ll gross $333,600 annually and keep more
than $100,000 for yourself. Right now however, allow me explain how you can
accomplish this task without a ton of money to start with!
YOU MUST SELECT THE RIGHT VEHICLE
You can’t drive up the side of a mountain in a regular passenger car, but it’s easy
as pie with a rugged four-wheel drive “off road” vehicle! Passenger cars are just
fine for highway driving, but they’re almost useless on the mountain side because
LIVING THE DREAM
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they don’t have the right stuff! Investing is much the same way! You need the
right vehicle with the right stuff to earn the biggest paydays!
To begin with, let’s assume your plan – or goals are to earn $100,000 annually
and develop a cash flow stream quick as possible. I’ll assume, you’d like to
accomplish these things before you’re as old as the instructor. To make this
happen, you must first choose the right vehicle that can get you there! Buying
single family houses with 80% mortgages simply won’t cut the mustard! Why not
– you ask? It’s because mortgaged houses take too long! Remember, it took me
20 years to figure that out! (See Page 1)
Whether your plan is part-time investing or you’re hoping to make real estate
your new career – the vehicle should be the same! Why? Because I’ve yet to find
an investor who told me cash flow doesn’t matter! It always matters to me, so I’ll
just assume it matters to most other investors as well!
QUICKER CASH FLOW REDUCES RISK
The opportunity to acquire the type of property (right vehicle) that allows you to
quickly increase the income – as well as the property value, is very important to
any investor, both newbies and ol’ salts alike! The reason is --- Because it reduces
risk and eliminates the fear of going broke! This is particularly appealing to family
investment teams where everyone can feel much safer.
My example of a single family house with an 80% mortgage payment (Page 14)
clearly shows why you need a better vehicle if your goal is to earn any serious
money while you’re still a resident of this planet! You’ll note that my example
LIVING THE DREAM
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shows cash flow less than $100 in the best case scenario! With a two month
vacancy, I’d be completely under water! I’ve been there, done that and believe me
– it sucks! It’s far better to pin your hopes and dreams on a plan that can produce a
lot more money – and much faster too! AGREED!
FINDING A DIAMOND IN THE ROUGH
Under-performing properties, they’re called! It means the property is trashy,
rundown and probably butt-ugly. The owner is likely to be a “milker”! Every
month he sucks all the money (rents) from the property and never spends one thin
dime to fix anything or even perform routine maintenance. As a result, the
property is caught in a downhill spiral, looking shabbier every month, and
attracting only marginal tenants who can’t pay regular market rents.
Finding the property I just described is like discovering gold in your backyard!
Obviously, you’ll need to beef up your skills to take advantage here, but assuming
you have my home study course; “Earn $100,000 Annually With Small Income
Properties”, you’ll have the proper guidance to keep you in the moving forward
mode!
HOW VALUE IS DETERMINED
Your first big profit opportunity could come rather quickly when you learn and
understand how property values are determined! With single family houses, it’s
pretty much cut ‘n dried! A licensed appraiser is summoned with his measuring
tape and “boiler plate” forms! He draws a few sketches and then searches through
the current records to find out what the same size houses in the neighborhood are
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selling for. He then basically copies those prices, jiggles the numbers a little – and
BINGO, there’s your appraised value! When the houses all look about the same,
with roughly the same measurements, it’s hard to get much of a price break when
you’re a house buyer. This is called comparable value or “comp’ing”.
MULTIPLE UNITS ARE MUCH DIFFERENT
During my 50 years investing, I’ve yet to see two income properties (the kind I
buy) that look very much alike! The kinds of properties I buy are actually called
income properties. Houses are not called income properties! This is a very
important distinction – and here’s why! Income property values are mostly
determined by the income they generate along with two other factors – the
condition of the property and its location!
I want you to underline what I’m about to tell you next! Under-market rents can
artificially lower an income property’s true value, but more importantly – it’s
selling price! This can create a super opportunity to buy properties at a substantial
discount for investors who have learned a few basic detective skills. Skilled
investors buy income properties for income! When the income is not up to par –
or it’s less than it could be; buyers will pay accordingly. Sellers (owners) who let
their properties run down and become ugly will always suffer at the sales table!
To repeat; multi-unit property values are primarily based on the following three
(3) items:
AMOUNT OF INCOME
LOCATION OF PROPERTY
CONDITION OF PROPERTY
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The two most commonly used methods to determine the value of income
properties are CAPITALIZATION and GROSS RENT MULTIPLIER.
Capitalization is the most precise or accurate measurement because it’s based on
net income, however; the gross rent multiplier is more widely used because it’s
an easier calculation, and it’s close enough to establish a reasonable “ballpark”
estimate of value. In my 50 year career, it’s about the only method I’ve ever used.
HOW TO HELP YOURSELF LEARN VALUES
You’ll find using the GROSS RENT MULTIPLIER method is easy as pie, but you
must first learn the rental rates (prices) in your buying area! You can do this by
studying the classified “For Rent” ads – then driving out to the various properties
to see what your rent dollar will buy you! Basically, you’ll be pretending to be a
rental customer until you’ve developed a pretty fair knowledge about what
different properties will rent for. Be sure to check out the various sizes (1BR, 2BR
& 3BR), the condition of the property and of course; pay close attention to
location! Don’t forget to take good notes for your future reference!
Local real estate agents can help you learn what investors are willing to pay for
income properties in your local investment area! Obviously, if you’ll promise to
do business with an agent, this learning process might just happen much faster.
It’s called the “back scratch’n” formula – I’ll scratch yours if you’ll do mine! As I
told you earlier, income property values are almost entirely based on INCOME,
CONDITION and LOCATION. Once you learn the rents and property values,
you’ll be able to develop your own GROSS RENT MULTIPLIER CHART for
your area like mine on Page 27.
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GRM CHART
(Gross Rent Multiplier)
JAY’S INVESTMENT AREA
6 UNITS – HOUSES OR APARTMENTS
GRM DESCRIPTION RENT ANNUAL VALUE
13X Snob Hill $1,000 $72,000 $936,000
12X Primo 950 68,400 820,800
11X Deluxe 895 64,440 708,840
10X Desirable 845 60,840 608,400
9X Average 795 57,240 515,160
8X Deferred Maint. 715 51,480 411,840
7X Trashy-Rundown 625 45,000 315,000
6X Butt-Ugly 510 36,720 220,320
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Chapter 5
YOUR FIRST GOLD
MINE PROPERTIES
You won’t find multi-unit income properties for sale sittin’ on every street corner
like bank repo houses! The reason is because multi-unit properties generally make
money for their owners – houses don’t! Therefore, one of the most important
lessons you’ll need to learn is how to find them, or dig ‘em out! Like gold, they’re
often hidden in the older established neighborhoods or tucked in out of sight
behind the main house on an older residential street! Often you’ll find ‘em mixed
in with small commercial properties where you would least expect to look.
Don’t fret, there’s plenty enough to go around – and once you begin looking in the
right places, they’ll start pop’n up like targets on a rifle range! Several chapters in
my home study course, “EARN $100,000 ANNUALLY WITH SMALL INCOME
PROPERTIES”, are dedicated to helping students find these properties – and how
to contact owners with “cold-call” letters. When you can deal “one on one” with
property owners, you’ll be in the driver’s seat! The reason is because it’s the
owners who can make the kind of deals that will help you the most! This is one of
the keys to negotiating seller financing with the kind of terms that can help you get
cash flow! Besides, when dealing with an owner, there’s no commission to pay.
Every little bit helps when you’re running on empty – agreed!
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SCOUTIN’ THE NEIGHBORHOOD
Suppose I learn about six (6) small houses in a desirable rental area that have
suddenly become available for sale! I’m told the elderly couple that owns the
property can no longer physically do the upkeep and they’ve decided to move to
Florida! During the 30 plus years they’ve owned the property – their church
friends have also become their tenants! This has worked out quite well because
managing has been a breeze! Their only problem however – they’ve failed to keep
their rents at current market rates because the tenants are their friends – plus they
rarely call for repairs!
As I’ve already told you – income properties are pretty much bought and sold
based on the income they generate. As a rule, the higher the income, the more
valuable the property. Obviously, lower income means less value! Most real
estate salesmen or brokers will generally express an income property’s value in
terms of gross earnings! For example; in my town, a six unit property in good
condition, located in a desirable rental area would likely sell for about 10 times
gross rents (see Page 27). For 2 bedroom units, each house would rent for $845
per month – therefore, 6 units renting for $845 each = $5070 per month or $60,840
annually. 10 times the gross rents would equal a sale price of $608,400.
The GROSS RENT MULTIPLIER CHART on page 27 shows you how values
increase or decrease as the income goes up or down! Understand, these values are
based on what investors are willing to pay for a specific amount of income. They
can vary somewhat with inflation, scarcity and the interest (returns) what other
investments are paying. Investors must study their particular market area before
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they can develop their own chart like mine. A knowledgeable real estate agent can
help you a great deal, particularly in the beginning!
Now back to my example about the elderly couple wanting to sell! I told you they
have a problem and I immediately realized there was great opportunity for me if I
could strike a deal! Their average rents were only $695 per month in a desirable
area where neighboring units similar to theirs, were renting for $150.00 more per
month. This situation often occurs when landlords rent to their friends at below
market rents – or when the owners no longer have mortgage payments to make
(meaning they have more cash flow). Obviously, the most common reason for
lower than market rents is when owners allow their properties to run down and
they simply cannot charge market rents because of the condition. Each of these
situations are “gold mines” in disguise for educated investors.
Referring to my gross rent multiplier chart on page 27, you can see that $695 rents
would translate to slightly under an 8 x (times) gross rent multiplier (GRM). Yet,
as I’ve already told you, the elderly couple’s property was located in a desirable
rental area! Once again, referring to the chart, you will note that rents in a
desirable area are $845 per month. This is what investors refer to as an under-
performing property. Notice that six (6) units renting for $695 per month – or
$50,040 annually would likely have a value between $375,000 to $400,000 (see
chart Page 27, far right column).
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STRIKING A DEAL
Lots of money can be made by finding under-performing assets; both real estate
and small businesses alike – then turning them around. Corporate raiders become
rich and famous when they possess the ability to do this! But they are not alone
however! Small-time real estate operators can become very wealthy tycoons doing
the same thing. A good start would be acquiring the elderly couple’s six (6) small
rental houses using my example on the previous pages.
In my town, a fair offer for six small 2 bedroom rentals (detached houses) earning
$50,000 annually would be somewhere around 8 times the gross annual income.
8 x $50,000 equals $400,000 back when I went to school – I assume it still does!
When I say around 8 x gross; the word around always means a bit less to me.
Thus, my offer will be $360,000, which translates to $60,000 per unit. The rent-to-
value ratio is still over one percent (.011), which I consider good. ($695 rent per
month divided by $60,000 unit price) If the seller agrees to carry the financing
giving me what I consider good terms; who knows – I might even show my
generous side and pay up to $450,000.
Good terms to me means – ten percent (10%) down payment and a monthly
mortgage payment of around 50% of the total monthly income. In this example;
the total monthly income is $4170, therefore; a mortgage payment of $2100 per
month is about what I’m shooting for.
Although my first offer will likely be $360,000, let’s assume I’m countered (or got
pushed up) to $400,000! Here’s how my offer might look:
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JAY’S GENEROUS OFFER
Total Selling Price $400,000
Cash Down Payment 40,000
Seller Carry-Back Financing 360,000
TERMS: Payments to Be
$2158.40 per Month
Including 06% Interest
Amortized 30 Years
Although my monthly mortgage payment is $58 higher than my target mortgage
payment of $2100, it’s still within the acceptable range for me.
Remember, this stuff is not set in concrete. There are ways to be flexible! The
variables are selling price, down payment amount, and of course, the mortgage
interest rate.
IT’S NOT THE ECONOMY –
IT’S YOUR KNOWLEDGE AND SKILLS
Let’s assume we close the deal with the elderly couple like my example above –
“Jay’s Generous Offer”! Can you visualize your earnings and profits? In case you
can’t – let me tell you that finding an under-performing property is like hitting
the super jackpot. If you’re a “do-it-yourself” investor like me; you’ll enjoy cash
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flow starting on day one of your ownership! When you manage the property – and
do your own maintenance and repairs, you’ll save yourself about 25% of the
operating costs, which in this example will put about $500 per month extra in
your pocket.
The real payday comes from your buying skills because almost immediately you
can begin raising rents to match the neighborhood units, which we’ve already
determined are $845 per month. As a rule, I do these rent increases gradually as
new tenants move in. It’s also my policy to make a few improvements – paint the
units, build some new fences and upgrade the yards so new tenants – and even the
existing residents see they’re getting some real value along with their increased
rent payments. My time limit for bringing rents up to the current market value is
generally about 18 to 24 months. I raise the rents in modest amounts during this
period and try to reach full market rates by 24 months or so. Gradual rent
increases while making visible property improvements along the way won’t stir up
the tenants like big rent increases for no obvious reason!
FORCED APPRECIATION ALWAYS WORKS
The beauty of what I’m about to tell ya is that you can have absolute total control
when you acquire the kind of income properties I suggest! It don’t matter a “hill o
beans” whether there’s inflation or mortgage funds available! Neither does it
matter if the economy is completely in the dumper or if your credit score is less
than the days in a year! Why – because everything I’ve told you so far is 100%
within your control. Personal control is one of the key factors to becoming
financially independent and rich by the time you’re old like me!
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Let’s fast forward about two years from now and take a quick peak at our six little
houses example! If you did what I’ve suggested, you should have the rents up to
the market rate by now ($845 per month)! Like I’ve already told you, the value for
rental units is primarily based on the income they generate. In this case $845 x 6
units equal $60,840 annually. We know the property is located in a desirable area
– thus the value is $608,400 as shown on my GRM chart on Page 27.
As the owner, you would now enjoy rents of $900 more than when you acquired
the property – plus equity of nearly $250,000 – life is good. Best of all – you did it
all by yourself because you were serious about the value of educating yourself
before you struck out on your own and made some stupid mistakes.
Congratulations!
If for some reason you believe my only purpose in telling you my million dollar
secrets is to sell you my training course – give yourself some credit – but you’re
only half right! The other half is because I have 50 long years experience doing
this stuff and you really need my help! If your goal is to speed up your success,
and make money a whole lot quicker than you can by yourself – I’m your
shortcut! Remember, I spent 20 years buying houses with hardly any cash flow
and without any help! Believe me when I tell ya – that’s like a slow boat to China
– you and I together can beat the pants off of that - GUARANTEED!
LEVERAGING PROPERTIES AND
THE TENANTS WHO PAY
You don’t need 20 or 30 houses scattered hither and yawn like I once owned.
You’ll be light years ahead acquiring just six multiple unit properties with 40
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rents coming in every month. That will make you a millionaire several times
over; with a whole lot less effort. My home study course; “EARN $100,000
ANNUALLY WITH SMALL INCOME PROPERTIES” is an inexpensive way to
get you started down the right path today! Believe me, right now is the investor’s
perfect storm!
Here’s what several of my “die hard” students have said about my training over the
years. And no – I didn’t pay ‘em either!
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WHAT OTHERS HAVE TO SAY
Jay: I love your courses. I’ve been an investor since 1978. I now own 20 units. I
have applied your knowledge to my recent rehab and I’m very satisfied. I’ve
listened to your tapes over and over and they’ve really helped me. I’m your best
customer for any new courses you write – especially about landlording.
Thanks much - Brian Felch, Columbia, MD
Hi Jay: I’m probably your biggest fan. Being a single mother with two small
children, I’m especially grateful for your help. I was able to acquire 5 rundown
houses in 2 years, which I sold so I could be a stay at home mom with a good
income. You were a life saver to me.
Beth Rosander, San Francisco Area, CA
First Jay: Thank you so much for all your help. Your counseling has been
extremely valuable to me. After attending your 3 day seminar in Las Vegas, I
returned home (Sacramento, CA) and purchased 24 houses in one location using the
seller financing you taught me. Thank you
Dan Shea, Kentfield, CA
I just wanted to thank you for a wonderful course this weekend. Your course was
extremely practical and useful – and thankfully lacking the puffery of so many real
estate gurus. I was very impressed by the breadth of your knowledge and by your
generosity of sharing it with us. Thanks for a great seminar. Cheers!
Richard Kelly – San Francisco, CA
Jay’s Fixer Camp is the absolute “Gold Standard” when it comes to learning all
about adding value to multi-unit properties. Jay’s cash flow techniques are nothing
short of amazing. I highly recommend Jay’s seminar.
John Schaub, Investor, Author,
Educator – Sarasota, FL
Great seminar Jay! Boy did you ever open my eyes to a whole new way of thinking.
A job well done! I really enjoyed the whole experience and plan to send others to
see the light.
Mike Cantu – Alta Loma, CA
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Chapter 6
FINANCING
AND CONTROL
How you finance your real estate holdings makes all the difference in the world.
One of the major reasons I invest the way I do and in the kind of properties (multi-
units) I’m writing about –properties I often call “the right vehicle”, is not because
I’m in love with these properties. It’s because they create the biggest
opportunities for the biggest paydays in the quickest amount of time!
When banks loan money for mortgages, after you’ve paid 10 or 20% down –
would you care to make a guess about who might have the most control or say-so
about your property! If you guessed the bank – give yourself an A+, you’re
catchin’ on! Bank mortgages control what happens to the property with fancy
clauses like “Due on Sale”, meaning no one else can assume or take over the
mortgage without their permission. Also, unless the mortgage is for your personal
residence (owner-occupied), you are generally personally liable for any monies
less than a full payback should the property ever be sold for less than the mortgage
balance; such as foreclosure auctions or a short sale. That just plain sucks, in my
opinion!
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When you purchase five or more units; the bank calls this a commercial loan or
mortgage! These are very difficult to get unless you’re building a shopping center
or new commercial development! So if you follow my advice about buying older
multiple unit properties (over 5 units) and they look a bit shabby and rundown –
you can forget about your prissy little loan officer at the downtown branch. Don’t
even bother bringing the pictures either! He’ll throw up!
Banks don’t do commercial mortgages for older junky lookin’ rental properties.
Besides, they understand that Mom and Pop investors are generally highly
leveraged. Many are investing on a shoe string – and some don’t even have a W-2
from a regular job! Banks really hate that!
SELLER FINANCING IS THE
ONLY GAME IN TOWN
Since the banks won’t come out and play, small-time investors like myself must
look for long-term financing elsewhere. In short, we must ask the sellers to
participate! Most sellers who own the kind of properties I’m looking for already
know that banks won’t provide mortgages, therefore; these owners are fully aware
that financing will be up to them! You could say that buying the older multiple
unit properties (5 or more units) like I’m suggesting, actually forces seller
financing if the owner wishes to sell his property!
When sellers agree to “carry paper” or finance your deals, it’s far different than a
bank mortgage! To start with, bank mortgages are actually a loan – meaning real
money was used! When the bank provided a mortgage so you could buy the
property, they actually used depositor funds to pay off the seller! In turn, you
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signed a promise to the bank that you’ll pay the money back along with interest
over a period of 20 to 30 years. The bank earns a profit on the money in the form
of interest income until they are paid back all the original loan (mortgage) amount.
Seller financing is not a loan – real money is not being used! The seller is simply
allowing you terms; say like 10 years, to pay for his property. He’s not loaning
you one stinkin’ dime. He’s extending credit to you because you cannot pay for
his property all at once! Instead, after an agreeable down payment – say 10%, he
allows you to make payments over a certain period of time until he receives the
total “Agreed-To” price for his property! Just remember; bank mortgages mean
real dollars have been loaned – with seller financing, that’s not so! Seller
financing is only about terms! I need you to understand this distinction because
one will make you rich – the other a whole lot poorer!
BUYING BACK YOUR OWN DEBT
If you have a bank mortgage, you can keep reading, but you’ll hate yourself in the
morning! Why is that, you ask? Because I’m about to tell you about a big profit
opportunity that won’t work with bank financing – yet, it’s quite common with
seller financing (terms).
Sellers who own properties (multi-units), the kind I buy, will generally accept 10%
cash down payments when they sell to me. Would they like more cash if they
could get it? The answer is yes; but with older properties, especially if they’re
rundown looking and not kept up too well, most investors are simply not willing to
pay much more than 10% down! As a general rule, the kinds of investors who are
interested don’t have much more than 10% to give! Also you mustn’t forget, the
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competition to purchase six junky looking rentals on a single lot is only a small
percentage of all the wanta-bee investors roaming around looking for properties to
buy! Roughly 95% are looking at single family houses!
When you negotiate seller financing on your property – as opposed to a bank
mortgage, you’ve set yourself up to earn bonus profits in the future buying back
your own debt – or financing! I’ve found the type of sellers who allow their
income properties to run down (often called milkers) are always needing more
money! They seem to manage money about the same way they manage their
properties!
MAKING $85,000 THE EASY WAY
Years ago I purchased a six (6) unit rental property for $200,000 with 10% down
($20,000). My payments on the balance ($180,000) were $1200 per month. Just
thirteen months later the seller needed cash to open a new restaurant. He was more
than happy to take my $95,000 cash as the full payment for his 20 year, $180,000
promissory note. I borrowed the $95,000 to pay him, cutting my monthly
payments to $765 per month. These large discounts for cash are not the least bit
uncommon when you acquire properties financed by the seller.
Think about this for a moment! Only thirteen months after I purchased my
property for $200,000, I get $85,000 back in the form of a discount! This means
I’ve actually acquired my six (6) rental units for only $115,000. This is only
possible when you buy properties from sellers who provide the financing (terms).
Dealing with people, rather than banks is one of the most profitable benefits when
you invest the way I teach. Buying back debt at super discounted prices works
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equally well when you purchase my kind of properties and assume or “take over”
the existing private financing that comes with the deal! Learn more about this in
my home study course, “EARN $100,000 ANNUALLY WITH SMALL
INCOME PROPERTIES”.
The more you can learn about creating your own financing – which sometimes
includes paying no interest at all, the more money you’ll start making – and
keeping for yourself. Once again, I’ll remind you what I’ve told you several times
already. You must select the right vehicle to enjoy the kind of benefits we’re
talkin’ about.
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Chapter 7
RENT TO
VALUE RATIO
Investing is about $ numbers and investment returns and you don’t need to make
it too complicated or difficult to figure out. My RENT-TO-VALUE measurement
works just fine for me because it’s easy to use and gives me a good feel about how
much money each one of my rental units is earning in relationship to its worth or
value!
For example; suppose I purchase a six unit property for $300,000 – and further,
each of the six units is valued at $50,000 ($300,000 divided by 6 units = $50,000),
lets also agree that each unit will rent for $750 per month after a few repairs and a
spiffy new paint job! My rent-to-value formula is calculated as follows! $750 rent
divided by $50,000 value = .015 or as I call it, a 1.5 ratio. This 1.5 ratio means my
$50,000 asset, the rental unit, is earning or bringing in an 18% annual rent return!
To verify the math; multiply 0.18 x $50,000, which equals $9000. Obviously,
$750 per month for 12 months = $9000.
By comparison, a single family house in my town with a value of $150,000 only
rents for $1100 per month! Therefore, $1100 rent divided by $150,000 value =
.007 or as I call it, a 0.7 ratio! This means the house brings in or earns less than
half the annual rent return compared to my multi-unit property above! A 1.0 ratio
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equals 12% annual rent return or the equivalent of 01% per month. As you can
see, my vehicle of choice (multi-units) blows away the competition when it comes
to the return on my investment!
QUALIFICATIONS FOR
REAL ESTATE INVESTING
The real beauty of real estate investing is that it’s wide open to everyone regardless
of education, age, background, male, female or the size of one’s savings account.
Much like any other business venture; having a few bucks saved up can make
getting started a bit more comfortable! However, far more important than a
savings account is one’s commitment to learning what to do (education), then
quickly following through with a plan of action.
Basically, it means learning enough about rents and values so you can go out and
acquire your first property if you’re just a beginner – or you can make a quick
switch if you feel your current plan is not up to snuff! More than anything else
however; you must follow your dream and stay totally focused until you achieve
the goal. Along the way you must constantly “muster up” the discipline to stay on
course!
Professional golfers will tell you, the toughest tournament they’ve ever won was
always the first one and it often took many years! Fortunately, real estate
investing can produce far better results – and a whole lot faster; if you stay
motivated and keep your plan moving forward. This is where the personal
discipline comes in. In football jargon, you mustn’t stop until you’ve clearly
reached the end zone!
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HILLCREST COTTAGES WAS
MY EARLY DREAM
Had you driven by my Hillcrest property when I finally mustered up enough
courage to buy it, a dream would have been the furthest thing from your mind. “A
nightmare” would have been a much better description! Looking back now, I
should have won a medal for bravery on the day I closed escrow. After all, not
another soul even made an offer so far as I know! Still, I’ve never lacked
confidence in my own ability to clean up a stink’n mess no matter how many
“looky-loo’s” around me thought I was nuts! I did prove to myself that if you’re
willing to roll up your sleeves and take on the challenge, you can make yourself a
ton of money if you’ll stay the course!
Hillcrest was an old outdated motor lodge (the forerunner to modern day motels)
with 23 small cottages all snuggled together on a two acre parcel (city lot). It was
my plan to switch the cottages over to individual senior apartments and rent them
on a monthly basis. The sellers were still trying to compete with modern day
motels when they finally decided it was time to give up.
Fortunately for me, they were quickly going broke so their motivation level was a
near perfect 10, and rising! As it turned out, they agreed to my no cash offer,
accepting instead, a single family house I owned as a trade. I learned early on, the
toughest jobs – often the dirty jobs will produce the biggest rewards! Properties
like Hillcrest present broke buyers like I was back then, a great deal of flexibility
when it comes to the down payment and extra special creative terms! Trading my
house for the down payment was a good example.
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MAKING $69,000 OUT OF THIN AIR
I had just purchased a commercially zoned property (my house) a short time before
finding Hillcrest! I had paid $80,000 with a $20,000 cash down payment. The
owners had agreed to sell me Hillcrest for $234,000. I agreed to assume (take
over) three (3) existing mortgages, which added up to $143,000. That meant I
would still need $91,000 to close escrow! By now my house mortgage balance
was paid down to $58,000, so I simply added $91,000 to $58,000 – and presto,
my new house value, appraised by me, was now adjusted to $149,000. I could
now trade equities straight across for Hillcrest Cottages – no cash would be
needed.
Many folks have asked me – how can you purchase a house for $80,000 and sell it
a few months later for $149,000? That’s an 85% markup. Is that legal? It’s not
only legal, but the sellers were pushing me hard to make the deal happen – can’t
we close any faster, they asked?
There’s a valuable “profit-making” lesson clearly demonstrated in my Hillcrest
transaction! When sellers are determined to dump what they own – when they’re
highly motivated to sell! There are many ways to close a deal. It often takes very
little cash, sometimes none and most motivated sellers don’t pay a whole lot of
attention to trade values like my “puffed up” house value! They’re main concern
is getting out from under the property they’re trying to sell – or dump! Finding
these sellers is worth big bucks to investors who wish to “speed up” their wealth
building plans. This may be a great opportunity to join the “one percenters”.
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CHANGE THE USE –
INCREASE THE PROFITS
I’ve written a lot about Hillcrest Cottages because it’s the kind of deal that can
move “small-time” players (investors) to the big leagues rather quickly. Almost
two years to the day, and after spending nearly $50,000 (borrowed funds) for fix-
up, clean-up, rewiring and hooking up the units to city water; I sold Hillcrest along
with a couple other rentals for almost $600,000 to a local physician looking for a
tax shelter.
Naturally, I was more than happy to carry the financing when I sold! My interest
income alone was nearly a million dollars, well, $939,077 if you wanta be picky!
Later on when I tell you about “selling out” at the end of your investment career,
like when it’s time to smell the roses – I want you to remember the term wrap-
around financing and make it your primary selling tool – we’ll call it, funding
your retirement!
Selling Hillcrest along with a couple other rental units earned me $260,945 in sales
profits – but when you add on the $939,077 I earned from interest income during
the 27 years I carried the seller financing – it adds up to some serious money!
Wouldn’t you agree? You’re gonna want to learn all the details how wrap-around
financing works ‘cause it can easily earn you a million bucks on every multiple
unit property you sell – the same way it’s done for me!
Think about wrap-around financing as your old age retirement plan. You can’t
find a better plan anywhere! You’ll also need to understand the six (6) important
reasons for using “wraps” when you sell your properties so you don’t miss out on
the extra profits. In my home study course; “EARN $100,000 ANNUALLY
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WITH SMALL INCOME PROPERTIES”; you’ll not only learn these six (6)
important reasons – but how and when to use them! My home study course
devotes nearly a full chapter showing you examples about how to draft up your
wrap-around notes, plus I’ll show you where the extra profits come from. Wrap-
around financing will also eliminate most of the seller carryback risks the way I
teach you! That’s especially important at my age – but still, you’re gonna want to
know for yourself!
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WHEN YOU HAVE NO MONEY –
THEN USE WHAT YOU HAVE
People often ask me --- How do you find these special deals like Hillcrest? Many
investors tell me they’re willing to tackle almost any kind of problems in order to
save money on the down payment - or acquire properties at a substantial
discount! It’s no big secret, if you’re willing to do some work yourself and crappy
lookin’ rentals don’t frighten you away, you can earn yourself some serious
profits! As a general rule; you’ll be able to negotiate far better terms – meaning
longer terms, with easy pay seller financing. Always remember – terms control the
cash flow.
Obviously, there are some investors who want no part of hauling away trash and
facing goofy lookin’ tenants. Some may not have the skills to fix anything! Still,
you can make a ton of money without having any hands-on skills, but you must
promise me you’ll make a double effort to learn what things cost. In the long run,
the biggest profits will come from your negotiating skills and your ability to obtain
seller financing with the kind of terms that allow you to operate with cash flow.
The following chart gives you some idea, based on my experiences, about on the
range of discounts you might expect if you’re willing to tackle the clean-up
problems and people issues. Remember, ugliness and people problems always
cause sellers the most grief! Most buyers shy away from rundown ugly properties,
which means; if you can jump in and fix these problems, you’ll have automatically
eliminated most of your buying competition. Being one-on-one with the seller,
with no other buyers in sight is the ultimate dealmaker’s goal!
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Range of Discounts for Various Conditions
Condition of Property Discount Range
1. Ugliness – Pigsty lookin’ 30-50%
with tons of junk on property.
Major clean-up.
2. People problems – dirty 30-40%
unruly deadbeats, often
non-paying tenants.
3. Old junky houses/apts. 25-35%
Lots of deferred maintenance
and repairs.
4. Rundown properties 20-30%
Out-of-town owners,
often a tenant manager.
5. Cosmetic fixer 10-15%
Mostly needs clean-up
and paint – general “tune-up”
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Chapter 8
DREAMS CAN COME
TRUE AT ANY AGE
At seminars I’m often asked about age. Students ask --- Can you still become
successful after 50, 60 and so forth? My answer; without the slightest hesitation is
yes – you most certainly can! You can do almost anything you set your mind to,
I’ve found, if you will stay focused, maintain discipline, avoid negative friends and
all the “nay-sayers” who will always tell you why you can’t!
An excellent role model in my opinion was the late Harland Sanders - an Indiana
born, grammar school dropout, who wouldn’t give up! Harland’s working career
began at age fifteen doing back-breaking, labor intensive jobs – but Harland had a
very special dream! He loved to cook! As a young boy he’d learned how to pan
fry chicken and make scrumptious homemade biscuits from his mother. Harland
decided to open his own restaurant in a 12’ x 15’ storage room in the back of a
local service station. By the time he was 42 years old, his fried chicken dinners
had gained a wide reputation in the county allowing Harland to open up a full size
restaurant, which he named – Sander’s Café! Business was good, but pan frying
was way too slow, so Harland developed a pressure cooking system that worked
much faster. At the same time, he kept improving his special blend of spices!
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A DREAM - PLUS ACTION WAS
HARLAND’S MAGIC INGREDIENTS
Harland was not your ordinary day dreamer. He had a clear vision he’d soon
become successful! When he was 59 years old, he was presented with a
prestigious Kentucky Colonel’s commission from the governor’s office. He even
had his picture taken dining with the governor!
In 1959, Harland was offered $164,000 to sell his popular roadside restaurant, but
he turned it down! He dreamed of much bigger opportunities, perhaps expanding
his building size or opening up a second location! However, fate was about to play
a dirty trick on Harland and his popular highway café.
Expecting a brand new freeway interchange that would literally dump hundreds of
new customers on his doorstep, it wasn’t to be! Instead, the U.S. highway that ran
directly past the front of his restaurant was re-routed several miles away. Harland
was forced to sell out for just enough money to pay his bills.
With his restaurant gone, the Colonel now faced the prospect of living on his paltry
Social Security check of $105 per month. He was now 66 years old. Down but
never out, Harland wouldn’t even think about giving up! With an overabundance
of lifetime experiences, he was “dead-bang” certain there was one thing he could
always do better than anyone else – fry chicken with homemade biscuits!
Loading up his herbs and spices in the trunk of his aging white Cadillac, Harland
took to the road! He convinced himself, he could still be a success. More
importantly, he never gave up on his dream, even though he was now almost 68
years old! He would stop at every restaurant and offer to cook for free, just to
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prove that diners would fall in love with his special southern style chicken formula.
Harland would then convince the owners to pay him four cents for every chicken
they cooked using his now famous herbs and spices.
A bit slow at first, but by 1960, there were more than 200 Kentucky Fried Chicken
outlets in the United States and Canada. The Colonel could now afford to stop his
traveling! While his wife Claudia kept the books – Harland would mix and mail
out his herbs and spices working from home. The Colonel had now reached 70
years of age, but he wasn’t done by a long shot! Successful folks never are!
By 1963, the popularity of Kentucky Fried Chicken had expanded to more than
600 outlets. By now, the Colonel and his wife employed 167 employees to keep
the operation running – but it soon became too much! The Colonel sold his
business to a Nashville millionaire for two million dollars cash and a $75,000
annual lifetime salary to travel around the country in his white linen suit,
promoting his famous chicken. With his bleached white hair, neatly trimmed
goatee and a black string tie, the Colonel would soon become one of the most
recognized marketing personalities in America.
By 1971, just seven years after the sale, the number of Kentucky Fried Chicken
stores grew to 3500 – and before it was bought out by the giant Heublein
Corporation in 1995, there were 9400 KFC outlets worldwide with reported annual
sales of seven billion dollars. When members of the U.S. congress asked Harland
Sanders what one should do to prepare for retirement, the Colonel replied --- “Give
him the opportunity to do for himself! A person should never stop dreaming or
stop working to achieve his dream – a man will rust out long before he wears out!”
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PROOF THE AMERICAN DREAM
IS STILL ALIVE
Colonel Sander’s life is an inspiration for entrepreneurs everywhere! Harland’s
story should be a constant reminder that no matter how old you are, the best is yet
to come. To be a successful real estate investor, you must never recognize defeat.
To keep trying is not the mark of a loser. As the Colonel no doubt would tell you –
it’s the mark of a millionaire in the making!
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Chapter 9
THE RIGHT VEHICLE
5 UNITS OR MORE
I’m sure you’ll agree – it’s much better to collect six (6) rents instead of just one
like I already told you back on Page 15. $45,000 annually trumps $13,200 per
year any day of the week! It’s only fourth grade math, but yet, I know PhD’s who
can’t figure out how to make a profit!
I also told you the down payment cost to purchase six units instead of buying just
one would be the same amount, $25,000! How can that possibly be, you’re
probably wondering! WELL – here’s the reason! All real estate investing don’t
follow the same set of rules. Take financing for example! It’s customary for
most houses (homes) to be financed by banks and mortgage companies using
traditional 30 year amortized mortgage or at least some form of institutional
financing. Yet, when you inform your banker the house will be occupied by
renters – they charge more interest because banks consider renters to be higher risk
compared to owner occupants. Banks also have tons of restrictions written into
their mortgage documents telling borrowers what they cannot do.
One such restriction (clause) says that if you sell, lease or encumber the property –
they want all their money back right now! This restriction is known as the DUE-
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ON-SALE CLAUSE, and you’ll find one written in every bank mortgage you sign!
Banks also require that house buyers sign mortgages which say – they agree to be
personally liable if the property gets foreclosed and is sold at auction for less than
the mortgage balance when the property is being used for business – like a rental.
FINANCIAL SUCCESS CREATES FREEDOMS
After being both a W-2 wage earner and full-time investor; I can honestly tell you
– there’s no way I’d ever switch back. From a financial standpoint; they’d have to
pay me more than the President. Still, it’s not just the money – it’s the lifestyle!
As a general rule; investors like myself start out with a goal of FINANCIAL
FREEDOM. Once we learn the business well – work hard and achieve success, we
soon realize there’s another equally important goal we need to conquer! It’s called
PERSONAL FREEDOM! It’s having enough free time to do all the personal
things we’d like to do. With enough money jingling in our pockets, we can now
set our sights on doing all the things that regular wage earners with a boss, can’t
ever do!
For example; in the past 20 years or so, I’ve become quite fond of annual cruises –
sometime I’ll even sail twice! Another personal freedom, which of course,
financial freedom has given me are my trips to visit Civil War battlefields. There’s
simply no way I could have ever dropped everything – jumped on a jet plane,
headed for Miami and a two week cruise while working for the phone company.
Back then, I found myself in a rather peculiar situation! After twenty years of
service, I had earned my full four weeks vacation, but I only had enough money
saved up to pay for one week’s worth! Working for the other guys has severe
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limitations! Seems like in the beginning, I couldn’t get enough time off, then
finally, when I could – I was broke! Jumping on a plane to visit Civil War
battlefields without advance permission - and having some extra money in my
pocket, was only a distant dream before my real estate success!
WHEN THE LIVIN’ IS EASY
I don’t wish to suggest that real estate is ever easy, but like most opportunities in
this life – with the proper education and a strong desire to succeed, it does become
much easier! It also becomes a lot more fun because your deals will keep getting
better, which generally means more cash flow! Now that’s real fun - agreed!
I’ve concluded that investor benefits come in two different flavors! We tend to
think first about the money benefits – as in getting rich – and obviously, that’s a
very important part! But I also believe almost equally important are the lifestyle
benefits! It’s all the personal freedoms I have which are far superior than working
for someone else.
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LISTED BELOW ARE 13 INVESTOR BENEFITS THAT I TREASURE
VERY MUCH!
1. I can earn a very good income; the amount is up to me. The sky’s the only
limit!
2. I can work whenever I choose – no specific hours or days. When I’m not
working – I’m free.
3. I can take time off my job anytime I need to because I’m the boss. I’ve got
permission!
4. I’m both the boss and CEO. I hold my strategy meetings every morning in
the shower. Needless to say – I’m in total agreement.
5. My earnings are never frozen or voted on by others. My rents are indexed
to normal inflation. Rents go up just like pork-n-beans at the supermarket.
6. I enjoy the best home business opportunity in America. My assets are
income real estate, which continually increase in value, unlike personal
property assets, which wear out and generally decrease.
7. I get to keep most of my income because Uncle Sugar allows me very
generous business write-offs, therefore; less taxes to pay.
8. I’m layoff proof – no pink slips or downsizings – plus, my earnings don’t
stop when I’m sick. Rents keep coming in around the clock.
9. I’m like a walking tax deduction. A large majority of my expenses are
what accountants call “above the line” tax deductions. They’re legally
paid by my business – not me!
10. Driving and auto expenses – most are management expenses - driving back
and forth to my rental properties or other business related trips.
11. Invisible earnings without any taxes due – when I acquire a $250,000
property for $150,000, I’ve earned $100,000 without a tax bill. Try this if
you earn an extra $100,000 on your job!
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12. My business assets, my properties, are being fully paid off by my
customers (renters). I get the deeds, they get rent receipts. Which do you
like the best?
13. Best retirement plan in the world – “Pajama Money” I call it! Payments
from my carryback notes – comes from the financing I provide to the
buyers when I sell my properties! It’s now time to smell the roses, but my
income never stops!
If your dream is to enjoy the same benefits like me, this could be your lucky day!
You can start right now with my home study course; “EARN $100,000
ANNUALLY WITH SMALL INCOME PROPERTIES”. You’ll be glad you did!
ONLY FOOLS RUSH IN
There’s not one single reason to race out quickly “halfcocked” to purchase income
properties! You need to understand a few basics first! I’m familiar with
investors who set strict goals for themselves to acquire at least one house every
month – sometimes even more! That’s kinda what I did when I started nearly 50
years ago and it don’t work any better today than it did back then!
When you’re a brand new investor just starting out – you’re bound to make
beginner-type mistakes. If you keep repeating these same mistakes twelve times in
a year; you might very well be going backwards with each new purchase! Take
my advice here – slow down, there’s really no hurry. Ya got it!
Preparation and quality rather than speed and quantity will bring you far better
results no matter which kind of properties you acquire. But as you shall learn, it’s a
lot more profitable when buying multiple units or colony properties, as I call them.
Once again, let me repeat myself – take your time – there’s absolutely no hurry!
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Buying just one multiple unit property each year will make you a millionaire if
you follow my strategies! Just imagine where you’ll be financially if you decide to
own six!
WORKS FOR NEWBIES & OLD SALTS ALIKE
The genius of my multi-unit strategy is that it works for newbies and ol’ timers
alike! It’s also an excellent investment strategy for part-time investors like I was
starting out – yet, it’s perfect for “full-timers” and “career changers” as well. I’ve
already told you – I began investing nights and weekends while working my day
job at the phone company.
One of the biggest benefits that comes from investing in multi-units – or colonies,
is much quicker cash flow – and more of it! On Pages 19 & 20, you may recall
my example showing how rents were increased more than $1000 during the first
two years of ownership. That was no misprint or Disneyland fairytale! The fact is,
it’s really quite common when you choose the right vehicle – multi-units, like
we’ve been talking about!
Also, I want you to consider the huge returns on your initial investment dollars! In
our example; the down payment was only $25,000 needed to acquire a $300,000
property. Just two years later, with increased rents, the property was earning or
taking in $12,240 more annually. With the added rents, you’ll soon be able to
recoup your total down payment back - roughly 2 years. For Mom and Pop
investors hoping to expand rapidly – there’s no better game in town!
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The beauty of multi-unit investing is versatility! You can make some serious
money even if you decide to acquire just one property and keep it for monthly cash
flow until you sell out and retire! See my Cherry Street property on Pages 2 thru 8.
On the other hand – you can go for the gusto! Keep right on buying and become
the first millionaire in your family. Don’t forget, this is America; every family
deserves at least one!
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Chapter 10
INVESTING WITH
A DIFFERENT TWIST
I call it my lifetime investment model! Six (6) multi-unit properties or colonies –
six separate locations with 40 rental units! It’s more than enough to make you a
millionaire several times over and will guarantee financial freedom for you and
your family for as long as you stay invested. This model is my personal
investment plan of choice.
I call it lifetime because if you follow through and accumulate six separate
properties with 40 rental units combined – you’ll be able to create a six figure
annual income, total financial independence and a worry-free retirement
without ever reducing your active investment income. SOUND INTERESTING?
Take a look at the next page, I’ll show you what they look like!
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Multi-Unit Rentals
The Colony Concept
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Referring to the sketch – six properties or colonies with 5 to 8 rental units at each
location. In the center is the owner or investor! I often describe this configuration
as my investment wheel! The hub or the center represents the owner. Those
straight lines running out to each colony location are the spokes of the wheel! The
properties themselves make up the wheel, although they’ll likely be scattered
around your town or buying area!
These colonies are small multi-unit properties, generally groups of houses or
apartments all together on an oversized city lot. They are mostly older property 45
to 70 years old, and most were built or established back when zoning laws and
building codes were far more lenient. There’s no need to fret over codes and
zoning because in most cities, towns, rural areas and just about anywhere else, so
long as they’re still standing and being used as rentals – they’ll be grandfathered in
if you keep ‘em that way.
The units themselves can be detached houses (my favorite), duplexes, small
apartments, individual mobile units and even an old motor lodge might be
converted to monthly rentals (like my Hillcrest units). Also, any combination of
these types will work just fine!
Often I’m asked --- Is it okay to have larger or smaller size properties? The answer
is yes, but my investment model (sketch) is based on sizes that I believe most
investors (even beginners) can handle – or manage!
Multi-units or colony investing can make you rich for a number or reasons, but to
start with, the competition is at least a thousand times less! I can’t begin to tell you
how important this is! Most small-time, Mom and Pop investors are chasin’ after
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single family homes, especially in the foreclosure – short sale markets. The
competition is fierce and the rewards are mediocre at best! Mediocre rewards
might well be good enough for the other guys, but it’s never been good enough for
me!
As I told you earlier – my goal has always been to become rich, at least rich by my
definition, during my lifetime and enjoy a financially secure ride during my
sunset years. Even though I began investing many years ago, it took me a little
time before I eventually discovered that “highly leveraged”, single family houses
weren’t keeping pace with my dreams - or my version of financial freedom! My
version means never again having to worry about money problems – plus, having
enough personal freedom to pretty much do as I please!
For these reasons, I switched to multi-units or colonies as I like to call them!
Colonies have not only met my expectations, but they’ve exceeded most of them
when it comes to producing income and profits. Additionally, multiple unit
properties are much easier to manage, which allows me the time to enjoy my
personal activities! To me, colonies are simply the greatest investment strategy
and the fastest wealth building vehicle available to everyday, start from scratch,
investors like me.
SO YOU WANTA BE A MILLIONAIRE
If I got you all worked up and excited when I told you about my Cherry Street
houses (pages 2 thru 8), just hang on – ‘cause I promise you’re gonna fall in love
with my lifetime investment model – six separate properties just like Cherry Street
and I guarantee, they’ll make you a wealthy tycoon! I say lifetime model because
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six multi-unit properties with 40 individual rents coming in every month will make
you financially independent – and eventually give you all the personal freedom
you deserve with the money to enjoy it!
SIX (6) COLONY MONEY SHEET
GROSS ANNUAL INCOME $333,600
40 RENTAL UNITS @ $695
PER MONTH = $27,800
OWNER/OPERATOR’S
SHARE (30%) $100,000
TAX SHELTER FROM
PROPERTIES --- $80,000
DEPRECIATION
(REAL & PERSONAL PROPERTY)
Sheltered income earnings mean little or no personal income taxes for
owner/operator.
Rental income is pretty much indexed to inflation. When “pork-n-beans” go up at
the supermarket – so do rents! This means if you can make it on $100,000 today,
chances are; you’ll be just fine in future years.
How long will it take you ask? The answer my friend, it’s up to you! Obviously,
you will need to educate yourself, but I will help you shorten the time it takes by
teaching you the fundamentals. You can start immediately by ordering my
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home study course; “EARN $100,000 ANNUALLY WITH SMALL INCOME
PROPERTIES”. My course is designed to help you achieve the following three (3)
primary goals:
BUILD $100,000 ANNUAL INCOME
BECOME FINANCIALLY
INDEPENDENT & SECURE
DEVELOP A WORRY-FREE
RETIREMENT
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6 Multi-Unit Properties (Colonies)
Location Description # Of
Units Monthly Rents Annual Rents
#1 Duplex + 5 Houses 7 5,130 61,560
#2 6 Houses, 2 mobiles 8 5,400 54,800
#3 6 Unit Apt. Building 6 3,675 44,100
#4 6 Houses , 1 Mobile 7 5,275 63,300
#5 4 Unit + 3 Unit Apt. 7 4,475 53,700
#6 5 Detached Houses 5 3,845 46,140
TOTALS Small Apt & Houses 40 $27,800 $333,600
Above Properties = 40 Individual Rents / Month Locations Loc. #1 Loc. #2 Loc. #3 Loc. #4 Loc. #5 Loc. #6
Unit #1 775 685 600 775 650 800
Unit #2 695 695 600 675 650 750
Unit #3 795 625 600 750 650 795
Unit #4 695 675 625 725 650 775
Unit #5 695 650 625 750 625 725
Unit #6 725 675 625 750 625
Unit #7 750 700
850 625
Unit #8 ___ 695 ___ ___ ___ ___
TOTALS $5,130 $5,400 $3,675 $5,275 $4,475 $3,845
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SPECIALIZATION QUICKLY MOVES YOU TO HEAD OF THE CLASS
Doctors, teachers and corporate CEO’s all understand the power specialization!
Learning to be the best there is at something – meaning your specialty! Should
something go haywire with your ticker, wouldn’t you want the best heart specialist
you could find? Just say yes!
For real estate investors, specializing works exactly the same way by making you
the best! If you start out tomorrow morning and make it your goal to concentrate
on multi-unit properties like I suggest – it won’t be very long before you’ll
become the best multi-unit investor in your area. You’ll no longer be wasting your
time looking at every property for sale like the other investors do. Your
concentration on just one type of property will soon make you the expert or
specialist! When you talk to most rich folks, you’ll find they understand the
power of specialization – that’s why they’re rich!
Master sales trainer, the late Zig Ziggler, used to say: “If you don’t zero in on a
specific target or goal, and continually strive to become the very best you can –
you’re pretty much destined to wind up a wandering generality with very little
direction – or results.”
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Chapter 11
ANSWERS TO THE
MOST COMMON
QUESTIONS
1. How would you suggest I start?
Whether you’re a beginner, intermediate or seasoned investor, colony
house investing begins with one, your first one. Congratulations, now
you only have 5 more to go. Acquiring one property (colony) per year is
a very reasonable plan.
2. What’s in the future for these kinds of properties?
It’s very bright – multi-unit colonies are basic affordable rental stock.
Nearly 50% of the population in my state (California) are renters. Of
those who rent, 60% have lower paying service-type employment. For
this group, housing is scarce as “hen’s teeth” and no one is building
anymore. Preserving what we have now will only become a higher
demand product. Besides that, investing in one of people’s basic
necessities (housing) can’t be anything put positive.
3. How quick might a new investor expect monthly cash flow from a
multi-unit property?
Faster than any type of real estate I know of. I explained how this can
happen on pages 19 thru 20. Naturally, much will depend on financing!
Financing controls cash flow! That’s why seller financing is so very
important. My home study course; “EARN $100,000 ANNUALLY
WITH SMALL INCOME PROPERTIES”, covers many lessons on
financing and negotiating with sellers. My course will help you
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determine how much to pay – and when to walk away. A complete
financial analysis with samples are provided in the course materials.
4. How can I keep buying when my funds are limited?
Obviously, negotiating will determine your down payment or how much
cash you may need to close. My average down payments have been
around 10% of the purchase price, but sometimes trades of personal items
can be substituted! Cash savers – I call them! More about this in my
home study course. If you improve properties like I do (adding value),
it’s quite likely you’ll never again need out-of-pocket cash for another
down payment. Your first property will grow in value enough to pay the
down payment on the next purchase. Refer to Jay’ generous offer, page
29 thru 34 (adding value).
5. Will managing overwhelm me?
The colony concept – having all your units in one location – or six
locations later on will greatly help your management task. Scattered
units hither and yawn are much more difficult to manage when you
consider travel time and service calls. Having multiple units at a single
location allows for killing several birds with one stone. Combined
service calls; reduce trips to the hardware store and save both time and
gas – much greater efficiencies.
6. Is family investing a good idea?
Multi-unit investing as a family partnership is as good as it gets if you
can pull it off. In many ways, it can strengthen families by creating
common goals. Each member works at the property and earns his share.
An excellent way to help junior buy his first truck by managing family
properties. In this day and age, having a reliable family income,
employment for the kids and assets to pass along makes a whole lotta
sense!
7. What’s the hardest part starting out?
Finding and acquiring your first multi-unit! This breaks down into two
major challenges! First; finding the right properties to begin with. New
investors will struggle with this for a while! Then suddenly, like when
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the fog lifts, they begin popin’ up everywhere. Hope this helps you, but
it’s the same for every new investor!
Acquiring the right property and passing over the ones that won’t work –
here again, it’s a matter of education and developing your skills. If
you’ll furnish the time and effort, I’ll contribute the “how to” part! Don’t
miss my next INVESTOR TRAINING SEMINAR. It makes this much
faster. If you can’t attend, then order my home study course; “EARN
$100,000 ANNUALLY WITH SMALL INCOME PROPERTIES”.
Let’s get started!
8. Does multi-unit investing work for women?
Very well indeed – years ago at my seminars, 2 or 3 women showed up.
Today, most classes are nearly 50/50! Gender has very little to do with
making money with real estate. My most famous female student, Beth.
R.; fixed up properties in the San Francisco bay area with her two small
children by her side. She’s famous because she was interviewed by the
local TV channel, which publicized her success.
9. Are bank mortgages available for colonies?
Mostly not! When you acquire multi-unit properties with more than four
(4) units (which I recommend), bank loans (mortgages) would be
classified commercial lending. For Mom and Pop investors acquiring
older, often non-conforming properties, most banks are not interested!
The good news is; sellers of small multi-unit properties know this too.
This is the main reason that nearly 85% of all my deals are seller
financing! Believe me, you want seller financing.
10. How does income property ownership compare with owning any
other kind of business?
Very well indeed! For starters, income property owners are providing
one of the basic necessities (food, clothing, shelter), therefore; in terms of
stability, rental units are here to stay! Secondly, the ability to acquire
properties using high leverage (small down payment) and yet become the
100% owner and collect 100% of the income – that’s a tremendous
advantage for average folks without much money to start.
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Perhaps the biggest advantage in the investment business is the assets
themselves. Not only do the properties provide monthly income, but the
real estate (assets) are growing in value. When it’s time to quit;
properties quite often sell for two or three times what they cost, creating a
guaranteed retirement plan!
Contrast this with operating a restaurant – not nearly as stable. It’s
possible to earn decent wages working your tail off – but when it’s time
to quit or retire – no more wages and the worn out fixtures – worth
maybe - ten cents on the dollar, if you’re lucky! Not very much to
compare, I’d say!
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Chapter 12
DREAM A LITTLE
PLAYIN’ “WHAT IF”
WITH YOURSELF
Suppose I take Jay’s advice and acquire my first multi-unit property – then for
whatever reason I don’t buy anymore! Would that be worth my effort?
For heaven’s sake yes – just one property like Jay’s Cherry Street houses would
earn you more money than many employees make during their entire working
lives. As you might recall; Jay’s annual earnings for the time he operated the
property and financed the sale, averaged more than $53,000. Granted, we’re
talkin’ gross income, but do the math! Even if you only got to keep half of $4400
per month for a very long time, would that work? Would that be a good return on
your $20,000 down payment? Think about that!
Lots of folks don’t earn that much money from Social Security, so in terms of
planning for your future, just one Cherry Street property could well become your
personal retirement plan! Don’t forget, after Jay sold out and no longer had
anything to do with managing the property or tenants – the income from his
carryback financing was $3250 every single month for 20 years. I can’t speak for
other property owners, but receiving $780,000 for financing fees works for me!
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Besides, all I have to do is boogie down to my mailbox every month in my pajamas
to pick up the check!
DREAMING BIGGER
Now close your eyes and just pretend. Say you fall in love with Jay’s lifetime
model and you begin to wonder --- How far can I go? How much money can I
make?
First of all – the sky’s the limit! Even though Jay’s six (6) property model with 40
rental units has a beginning and end. Yet the truth is; there is no limit! Jay has
owned and operated lots more than 40 units at his “high water” mark! Still, 40
units will make you a millionaire several times over! 40 units is a very reasonable
goal or target to shoot for!
Since we’re only dreaming here – what if you owned and operated Jay’s six (6)
property model with 40 rental units for the next few years? How would you fare
financially?
To begin with, you’d have a great income! Even using Jay’s hometown rents of
$695 per unit – your gross income would be nearly $28,000 per month! Roughly
one-third or $9300 would be yours to keep. By the way, very few people in my
town earn that much, so you’d be on all the local charities mailing lists.
Obviously, you’d have created yourself “full-time” employment along the way!
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WHY LONG-TERM INVESTING PAYS OFF
Rents go up like peanut butter and pork-n-beans! Let’s assume that down the road
aways they’ve increased to $825 per month! Now, what happens to the extra
money? The answer, my friend – it’s yours to keep! You’ll immediately become
more popular with all your long lost relatives. They’ll begin showing up outta
nowhere! It’s hard to keep success under wraps!
Finally the time comes to cash in your chips. What happens now? If you follow
my teachings, you’ll carefully begin selling off properties to the next generation of
investors! Hopefully, you will have learned the right way to do this! But since I
don’t want you guessing – I’ll teach you at my Investor Training Seminar or you
can learn from my home study course: “EARN $100,000 ANNUALLY WITH
SMALL INCOME PROPERTIES”. Either way, selecting the right buyers and
setting up your carryback financing to provide you maximum safety, are the keys
to a quality retirement.
I HAD A DREAM – I’M RICH
If you’re like me – you’ll be a lot richer, than you ever dreamed – you’ve got my
word on that! Let’s say I sold six colony properties, providing selling financing;
just like Jay’s plan! Is there anyway to know how rich I might be?
Not exactly, but we can look back to Cherry Street for some guidance. I owned the
property for 26 years and the value increased nearly four and a half times. That’s
just a smidgen over $19,000 per year. When I bought the property, I could have
never guessed; but an up and down economy always favors real estate. It’s hard to
look forward and imagine prices going up – yet, they always do!
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For the sake of comparing, I’ll use my Cherry Street to calculate how rich you
might end up. Today, Cherry Street properties will cost a skilled buyer in my town
between $350,000 and $400,000. Even if we estimate values three (3) times higher
when you decide to sell out and retire – that would be 6 to 7 million dollars!
I’ll assume you follow my advice and sell for about 10% down and carry back
$6,000,000 or so. Financing at 6.0% interest only on the unpaid mortgage debt
would allow you to live quite happily with a monthly income of $30,000. Unlike
rents, your mortgage payments won’t go up! But by now I’m assuming, you’ll be
old like me and you’ve adjusted to $30,000 per month! Regarding the principal!
Let the kids have it when it comes due; they’ll know how to spend it – agreed!
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THE BUSINESS OF
MULTI-UNIT INVESTING
Learn this business – there are basically three (3) stages of development – and
there are no shortcuts.
LEARNING
STAGE ONE is learning how to buy the right kind of properties that produce
cash flow the quickest. This will be your most challenging – and exciting learning
period. You should expect to read lots of books, purchase home study courses and
attend training seminars in order to develop your investment skills. You’ll begin
acquiring properties and you’ll make the usual beginner mistakes. Money will
always be tight. This is the stage you’ll work most of the bugs out as you “fine
tune” your investment skills.
OPERATING
STAGE TWO will find you a much more sophisticated “deal maker”. You will
now have the knowledge and skills to “flush out” properties with the highest
potential for quick cash flow and long-term profits. By now your abilities are
good enough to attract equity investors should you choose. With money available
from “deep pocket” investors, the sky’s the limit. But with or without financial
assistance, your cash flow should allow you to pick-n-choose new investments
more carefully. You must continue your education and training to broaden your
knowledge. By now, your investments are taking good care of you – life is good!
SMELL THE ROSES
STAGE THREE is about reaping the harvest. By now you’re living well – and
“cashing out” will put you on Easy Street. You’ll begin selling off your
properties selectively – taking back wrap-around notes for monthly payments.
You may even consider hard money lending to support your twice a year cruises.
At this point, you can pretty much do as you please, so long as you manage your
business well. The time has come to pull over in the slow lane. Your biggest
chore now will be making those daily jaunts down to the mailbox in your pajamas
to pick up your wrap-around note payment checks! Ain’t life grand – or what!
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THE BALL’S IN YOUR COURT
IT’S NOW UP TO YOU
Well my friends, there you have it! I’ve given you a good look at what my kind of
investing can do for you. I even warned you at the beginning about reading this
book and doing nothing! You’re now at the crossroads. It’s your chance to
become wealthy – or simply do nothing! That you must decide for yourself.
If you like what you’ve read and you choose financial independence; here’s the
next step.
Order my training course; “EARN $100,000 ANNUALLY WITH SMALL
INCOME PROPERTIES”, and let’s get started today. See the description on the
next page.
–Click www.fixerjay.com/info/7050-2
– or call 1-800-722-2550, ask for Kathy
– or fax the order form to 1-530-223-2834.
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Much like leveraged real estate will increase your yield – this home study course
will do the same for you. This course is specifically designed to “speed up” the
time it takes between your education and ownership of your first multi-unit
property. Each chapter moves you closer to your goal of financial freedom, more
income and the security you get with income-producing real estate. Starting with
Chapter One, you’ll learn Jay’s insider secrets to finding the kind of properties
that produce income quickly. How to acquire properties not listed for sale is
covered in Chapter 3. Jay’s special “Cold-Calling” technique using letters is in
Chapter 4, along with how much to pay.
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The four methods to acquire properties, as well as instructions for writing “Cold-
Call” letters, are covered in Chapter 4. You’ll also find examples – how much
you should pay. Leverage & Compounding are explained in Chapter 5 with
examples – how it works.
Understanding jay’s isolation factor is important before you buy. Chapter 6 tells
you how to use it! Also avoiding most risks when buying multi-unit properties is
explained clearly to help you avoid early mistakes. You find 10 things you
shouldn’t be doing in this chapter.
Six studio recorded CD’s help you understand each chapter fully explained by
Fixer Jay and Dan S., Jay’s millionaire student. Chapter 7 is about building your
own “money machine” – adding value and learning how to spot opportunity.
Chapter 8 shows you how to develop a wider vision and the principals of
operating your own business compatible with managing your real estate. The
benefits will totally eliminate paying income taxes.
Chapter 9 shows you how to select the right real estate agent, what you should
expect and where to find “Mr. Right”. Planning is covered in Chapter 10 – how
much to spend for fix-up. Chapter 11 is extremely important – all about creative
financing, explained so you understand it. In Chapter 12 creative techniques
continue and Chapter 13 fully explains how wrap-around can make you rich.
Shows you examples – how it works and teaches you the benefits and how to avoid
any risk.
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Online: www.fixerjay.com/info/7050-2 Phone: 1-800-722-2550 TOLL FREE
FAX: 1-530-223-2834 – 24 HOURS
Mail: KJAY Publishing
PO Box 491779, Redding, CA 96099-1779