A very wealthy friend of mine once said to me 'nobody ever got rich by being comfortable. If you would like a shot at a life of comfort without changing yourself, buy a lottery ticket at the gas station. If you want to be wealthy in life you need to take chances.' My friend wasn't saying be stupid, but rather 'life is risky.' What I have learned in my life since then is the more I risk, the more life rewards me.
If you have purchased property in the last few years, chances are you are sitting on a decent amount of equity in your home. There's nothing risky about sitting on the equity in your home. If you haven't pulled the equity out to buy a new Escalade or home theater system, you might want to consider using your equity to buy investment property.
Long term investors know that historically one of the safest places to park your money is in real estate. I'm not saying that investing in real estate is risk free. Like I already mentioned, life is inherently risky, so is investing in real estate. But, if you are smart about what you are buying the rewards can pay you a lot of money.
I have invested in real estate myself and it seemed pretty risky to me at the time. I can honestly say that purchasing my first investment property was a stressful experience. I knew that it would take expanding myself to see my dreams fulfilled and I was going to have to be uncomfortable with risk.
Here's my story about my first investment property purchase. The property was my neighbor's home. It had been sitting on the market for months vacant with no offers. For some reason I looked out the window one day and had a thought 'maybe I should buy it.' I laughed to myself for a bit and then I had another thought, 'why not?' I knew that I had the equity in my home to use for down payment and remodeling expenses. So, I walked across the street and pulled out a flyer from the box on the real estate sign. Usually the box was empty, but that day it actually had a flyer in it.
I read the flyer over and decided to make an offer. I made what I thought was a lowball offer that was way below what property was selling for in the area. I figured that there was no way that they would take my sales offer. I was expecting a counter offer or rejection completely. However, much to my surprise they accepted my first offer.
My excitement lasted about 10 seconds when I realized what I had done. I had just put myself and my home on the line by getting my offer accepted. I took a deep breath and started thinking about all the remodeling I would have to do to fix this property up so I could rent it out. The property was nearly 25 years old and had never been remodeled. It also had roof leaks and it really smelled bad inside from mold. What I didn't know when I put in the offer was that there were termites and a lot more mold in the property than I planned on. I found this out during the home inspection period. I kept going with the purchase anyway since I wanted an investment property.
Along with getting my offer accepted and finding out there were more repairs needed on the property than I had originally planned on, my mom fell and injured her neck, which left her paralyzed from the neck down. I thought to myself, maybe I can back out of the real estate deal so I can take care of my mom. As I was thinking about what to do, I remembered something that a mentor taught me once, 'life is always going to throw you a curve; you will get through it if you have the desire and vision.' I knew that the only thing I could do was keep going.
The next 45 days were spent picking out paint, carpet, fixtures and waiting for the contractors to show up. I learned a lesson about remodeling: it takes patience and tenacity. I was also working my full time job as a mortgage broker, and spending a lot of time in the hospital. I kept telling myself, 'you're committed to having an investment property; you gotta do what it takes.' In the back of my mind I kept thinking of all the people that I know who are wealthy have rental property. I was on my way to joining them.
Once the property remodel was complete, there was one thing left to do: get it leased! I knew two mortgage payments would get old fast. Finding tenants was an interesting experience. I wasn't prepared for people who were looking for a place to live to not make appointments to see the place and not calling me to say they weren't coming. I was patient though and finally the right tenant came along and I have had it rented ever since.
Years later now, I look back at that purchase experience and can say that I had really lived and experienced life. I faced my fears and all the circumstances and won. The thing that kept me going was my commitment. I knew that I wanted a different future - one that was filled with action instead of just wishing. I'm glad I walked across the street that day as I have made nearly $40,000 in cash from that one house.
I heard this quote once and it has stuck with me: 'there is no better measure of a man than results, often harsh but always fair.' I got the job done and I proud to be able to say that I'm a real estate investor.
Happy investment property hunting and by the way, my mom is fine now!
Written by: Dave Mason, Real Estate Investor, Mortgage Broker
