I ran into a CTREIA real estate investor at the gym the other day. He has been investing for 9 years and has 25 rental units. "John" told me that he is getting frustrated because he is hardly making any money with his real estate. He is getting "killed" with major increases with property taxes and water/sewer bills.
If you are an experienced real estate investor who has been in the market for a while, John’s situation may ring true for you. How can you add some "spice" to your real estate business?
First, I asked him some questions. Here are his concerns. He wants to:
- Increase his cash flow
- Buy more real estate but in his target area – good areas
- Quit his J.O.B.
- Spend more time with his 2 1/2 year old daughter
I asked him a few more questions. And this is what we came up with this challenge:
- He really likes being a real estate investor and has made quite a bit of money in it – So he wants to get back into it.
- But he does not have much cash – And banks won’t lend to him because he has more than 4 mortgages.
So what would you do in his situation?
Upon further questioning, I discovered that he has some opportunities:
- He owns a rental single family house free and clear. And… it was appraised for $570,000 earlier this year.
- He is actually cash flowing a "little" bit to the tune of 2 to 3000 per month – that is an average of $30,000 per year! That is about half of the median income in Connecticut – and he does not work 40 hours a week to earn that.
- Plus he is getting incredible tax benefits from the depreciation of his buildings. In fact, he does not have any federal taxes taken out of his paycheck each week. He gets the full benefit of his salary.
Here’s the plan
Change your mindset: John discovered that he wasn’t doing so badly after all!
Determine your geographical area: Given current market prices, he can invest in "better" areas and still have a positive cash flow.
Market to the right people: who would be willing to hold the mortgage. Did you know that 30% of properties are owned free-and-clear? And many more have enough equity to make owner-financing workable?
Put a line of credit on the free-and-clear rental property and reinvest that money in real estate.
Get back into the real estate game by attending his real estate investor association meetings. There he can meet potential partners, get re-motivated, and get coaching in the current market strategies.
Find a mentor or coach who can hold him accountable for his progress as well as hold a candle to the opportunities that are right in front of him.
How about you? What is your current situation?
Even if you have negative equity or negative cash flow, you have opportunities in front of you. How can you turn around your situation to increase cash flow, equity, and long term wealth? Please comment and send in your questions to: Membership@ctreia.flywheelstaging.com .
To your success!
The CTREIA Team Coaching Staff.