Is not it great that there are so many ways to get funding for projects, real estate investment today? This is important because the type of vendors who want to get paid for their homes when they sell ... right ?? Now, just because there is what seems like an endless number of sources of funds, does not mean that money is easy to get them ... or when you can get them ... they're easy to afford. Asks the borrower, in many cases, "jump through hoops" in order to end up with the money you need. Credit approval, assessments, LT / antiretroviral ... and even then you usually do not get it. All they need is the "skin in the game."
versus debt Goodness Bad Religion
Most real estate investors are familiar with the "debt of expression vs. Good Bad Religion. " The problem is most do not fully understand the difference. My daughter knew the difference when she was 8 years old. I remember when we went to lunch and I went from asking me to do, "the shortcomings and cons" to do the problems of the story. Therefore, in the interest of "train her early in life," she gave her story problems involving business. She learned by mistake in everything from expenses , the profits ... including the differences between good and bad debt. It had a thorough understanding so you can read this definition, and most importantly, explain it when asked.
Unfortunately, we are not considering any of this in school today. We learned how to be spenders / savers rather than how to be investors / businessmen. In other words, we are not taught how to "working capital", but we are taught how to "work for money" for sure. Know the difference between good and bad debt is not brain surgery, but the negative effects of ignorance can be huge. The difference is very simple. Bad debt costs you money, religion makes good money. Yes, it's just that simple.
What do you know about banks and we do not
, banks are well aware of the difference. Just look at the difference between what "pay you" (and I use the word "push" very loosely) to deposit your own, and "charge" when you "sell you credit." Understand the business of the bank credit for the sale. They also know and understand the adage, "nothing special, but to control everything." They live it. What is the fun, with the use of religion is a privilege, and able, and can be a real estate investor to do the same. And it can become almost their own bank.
bad debt costs you money since the net result of this is that you end up with less than what you started with. Good debt makes you money because the end result is that you end up with more than what you started with. In business, you're compared to a profit versus expenses. In our personal lives, we compare the income, and also "alternative income" ... sometimes referred to as credit cards.
clear examples of good debt will be things like rents SF, and rental multi-family, commercial real estate, and other assets and cash flowing concrete. Examples of bad debt have previously mentioned credit cards, boat, RV, etc. ... and justice in our country is not an investment, and makes us no money, it costs us money to build it. Now, if we are to benefit from them in the form of a loan, religion becomes ... what kind of debt depends on what it is used for Notice I did not say we should all go out and refinance our homes, cash out of stocks, investment, and if you decide to do it, you do not have my blessing. You put your home at risk. Not smart. Especially since there are many ways most other safer to get the necessary funds to invest with
power of compounding ... duplication on steroids
banks understand all of this. As your assets / deposits benefited to the credit / debt. This, and credit them, and the debt for you. They have nothing, and in fact can take advantage of the credit, in fact, the sale of "virtual money" to you in many "nominal value" times of your assets on deposit with them. This topic is for another time. For this discussion, understanding that the bank exploits the power of duplication. In fact, they are taking advantage of what Albert Einstein referred to as "the greatest invention of the 20th century" ... compound interest. He went so far as to say that such a concept (banks) are living on those that do not (the rest of us).
Do you want a very powerful example? start with a penny ... just 1 per cent . Then, for the next 30 days, twice that. So, one day to be 2 cents, the day will come three to be 4 cents, Day 4 will be 8 cents, and so on. Do it on paper. It will have a much greater effect on you. What is the answer? Try it. You will be amazed. What you will be see an example of compounding at its best.
So, how can we, as real estate investors, do the same? We can do the same thing? The answer to the second question is yes! The answer to the first question is, you guessed it, with mortgage debt is to use, and capable.
strength is Lian-capable religion ... and which increases on steroids
How do you ask? simple. First, remember that the traditional funding used in the real estate investment is the religion Lian capable. There are a privilege of some kind ... the assets and property from which they purchase. When we use the non-mortgage debt, is able, there is no lien on the property. In fact, there is no link whatsoever to the property. This is crucial. This is what makes this work. This is what makes us our own bank. How?
what has been the signing of the first of what is happening in the conclusion, after Mount securities? And, the original lender to the seller, and pays off the answer. In other words, [1945005lienispaidoffThesellerdoesnotevenseethemoneyYoudonotwanttotouchitatleastwhensellingevenforoneminute?Whataboutdoingmore? reuse what about the ability to , it again and again? Yes you can. This answer was for all those reading this and saying, "I know you can not afford it." Here's why ... and how.
Let's look at a typical property financing. First, get a loan, we buy and rehab the property. We stand the house, and when they sell do two things: 1) We pay the original funding (franchise); 2) We make a profit (hopefully). Now, to move forward, we need to get new financing and dealing again with the "Triplets applications." As you know, a new application evaluation and approval. Each is expensive, time consuming and without any guarantees.
Now, if this form of debt is mortgage forms, and is capable of, and we will not need to repay the money they borrowed ... at least not immediately. It also means that, instead of just walking away with all our profits to use, we walk away with all of the proceeds of the sale. Selling a house with $ 75,000 for the privilege of religion capable of $ 50,000 and we walk away with only $ 25,000. .. Profit. Selling the same house with non-mortgage debt, and is capable of, and we walk away with the entire $ 75,000 ... minus closing costs. You prefer to do?
touched "bad debt" to "good religion"
OK, before you go any further, I need to respond to all the readers who saying: "I still have to pay off the debt." In fact, I have a future monthly payments that are usually very high due to the nature of the conditions most of the National League for Democracy. So, what I do, is I cash reserve funding as part of the National League for Democracy. cash reserve is your silent partner only role is to make the monthly payments so you can develop the system to become self-sufficient, self-contained. Combining the profits from the first couple of flips and purchase / rehab and 2 ND "House paper", which will also re-use that money again and again, since there would be no religion at all in that house 2ND ... I bought if for all the cash. The idea is to never use the principle of the thing, but the cost of the house next paper. You're working with a couple of "flip houses" Now that the face 2ND
face these two chambers, and the two combined profits and buy / rehab third Facial House . Again, you will be reusing the costs of all three houses for the purchase / rehab in three homes in the face next in line. You now have three lines to homes Flip. does not matter how many times I tried spend a principle ... it keeps you in the replay. Now, this is where the real fun begins.
while you've been developing your system, your cash reserve is dwindling to nothing. So, it is time you reply, do not you think, and "buy yourself a" more time. Keep in mind that you are making such payments from cash reserves actually pay off the debt ... or it does not work, so when you calculate how much to put in the cash reserve, keep that in mind. Now the real fun.
As I said, the cash reserve is "no more", so I will reply to you ... with one of the profits from a three flip houses. What do you do with a couple of other profits? Buy / restore "the house holding the" rehabilitation of the cash flow ... with all the criticism. Then, still just flip homes Flip three, again and again, using "all profits" to buy more houses, "cash flow", with all the cash, and sometimes replayed cash reserve until the payment of the debt ... and you are completely debt-free.
Tale of the tape ... Einstein was pretty smart guy
Question No. 1: How many times we pay for these funds?
Answer: once ... We just did not pay it back all at once, as we would have if the religion par excellence capable.
Question No. 2: How many houses we are able to use these funds for (remember, we're only going to pay for it once)?
The answer is: I do not know. I'll let you know when I stop for re-use.
just became our bank. We now take advantage of our money for ourselves, without any additional cost. Every time we re-use of these funds, at no extra charge, we can make the cost of the debt in a house down. This means, we are also just made the initial cost for this type of financing reckoned with.
wasEinstein right. Compounding is a beautiful thing. When combined with the non-mortgage debt, and is capable of, it can be a "gold mine" for real estate investors.
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