How to Build Wealth Through Smart Real Estate Investing

Pay Off High-Interest Debt Before Investing

You got extra money and you’re itching to where to spend them. I know you might have this question: Should I pay off debt or invest this extra cash?

As someone who's been investing in real estate and been in credit repair for over 15 years, the number one piece of advice I can give you is to pay off any high- interest debt. This is before you even think about investing in property. Why? Because high-interest debt can eat away at your potential returns faster than you can say "investment portfolio."

I met people althoughout who made this mistake early on, and believe me it cost them a lot of money. The money that we could have put toward real estate all went to interest charges. If you have credit cards charging 8-10% interest, pay those off first. Every dollar you invest elsewhere is essentially working against you. It's like trying to fill a leaky bucket—your hard-earned cash keeps draining away, leaving you with little to show for your efforts.

Remember, when it comes to debt repayment, start with the highest interest rates and work your way down. Every dollar you put towards eliminating debt brings you one step closer to financial freedom and opens up a world of possibilities for future investments. So, before you start building your investment empire, make sure your financial foundation is rock solid.

Use "Subject-To" Investing to Acquire Properties With Little Money Down

Once your high-interest debt is gone, you can look at "subject-to" investing. This is where you take over someone else's mortgage, so you can buy property with little or no money down. You do have to make the mortgage payments, but if you find a good deal, the property can cash flow and provide a good return. The key is finding a property where the mortgage payment is less than the market rent. Do your due diligence to evaluate all costs to make sure the numbers work.

The key is finding motivated sellers who want out of their mortgage payments and property taxes. Here’s what you need to know with subject to investing:

Find Sellers in Distress

Look for people going through a divorce, job loss, illness, or relocation. When sellers are motivated, they're often willing to transfer the deed to their property over to you, as long as you start making the payments. You get control of the asset, without having to qualify for a new mortgage.

Evaluate the Numbers Carefully

While this strategy allows you to acquire real estate with limited capital, you still need to make sure the numbers work. Run the calculations to determine if the rental income will cover expenses like taxes, insurance, maintenance, and the mortgage payment. Your goal should be for the property to cash flow, providing a return of at least 10% each year. If the numbers don't add up, keep looking.

Learn Through Experts

Subject-to investing can be risky, especially when you're first starting out. I highly recommend finding a mentor in your local real estate investing club or association. Work with someone who has experience taking over seller-financed properties. They can help you evaluate deals, negotiate with sellers, and avoid costly mistakes.

Real estate investing is a proven path to building wealth, but you need to go in with realistic expectations. Do your homework, find the right mentor, and start with a solid strategy like subject-to investing. If you're willing to put in the effort, you'll be well on your way to acquiring your first cash-flowing rental property!

Subject-To Investing Insider Tips

“Hey Joe, I am interested with this, but I am still confused." This is totally acceptable since not many really know this strategy. Let me paint a picture of how this strategy works with a real-life example from my own portfolio.

Imagine you stumble upon a distressed property in a desirable neighborhood. The current owner, let's call them Sarah, is struggling to keep up with mortgage payments and is on the brink of foreclosure. However, Sarah's mortgage terms are favorable—a low-interest rate and manageable monthly payments.

Here's where subject-to investing comes into play: instead of purchasing the property outright with cash or obtaining a new mortgage, you negotiate a deal with Sarah to take over her existing mortgage payments. Essentially, you're stepping into Sarah's shoes and assuming responsibility for the loan, while she transfers ownership of the property to you.

Now, you might be wondering, what's in it for Sarah? Well, by transferring the property to you, she avoids foreclosure and preserves her credit score. Meanwhile, you gain control of a valuable asset with minimal upfront costs.

But wait, there's more! Since you're not taking out a new mortgage, you can bypass hefty down payments and closing costs typically associated with traditional property purchases. This means you can acquire the property with little to no money down—talk about a sweet deal!

Now, here's the kicker: if you've done your homework and found a property where the market rent exceeds the mortgage payment, you're in business. The rental income from the property covers the mortgage, allowing you to pocket the difference as passive income. Plus, as property values appreciate over time, you stand to profit even more when it comes time to sell.

Of course, subject-to investing isn't without its risks. You'll need to conduct thorough due diligence to ensure the numbers stack up and assess any potential pitfalls. But for savvy investors willing to roll up their sleeves and do their homework, subject-to investing can be a lucrative strategy for building wealth in real estate.

Evaluate Costs and Cash Flow to Ensure Profitability

As a new real estate investor, evaluating the costs and cash flow of a potential property is crucial. I can't stress this enough. Many eager newbies jump into deals without really understanding the numbers, only to end up with properties that don't generate income. I've made this mistake myself when I first got started, but thanks to the guidance of an experienced mentor, I quickly learned my lesson.

Do Your Due Diligence

The most important thing is to thoroughly evaluate all costs associated with a property before purchasing it. Make sure you understand not just the down payment and mortgage payment, but also utilities, insurance, property taxes, maintenance, and repairs. These ongoing costs can really eat into your profits if you're not carefully accounting for them.

Calculate Your Cash Flow

Once you understand the costs, you need to determine if the property will generate enough cash flow. Calculate your projected rental income and make sure it exceeds all costs by at least 10% each month. This provides a buffer in case you run into unexpected expenses. If the numbers don't work, walk away. There are always more deals to be found.

Find a Mentor to Avoid Costly Mistakes as a Beginner

Out of all the strategies and tips I've shared, mentorship stands out as my personal favorite. Having someone who has been there, done that, and can offer tailored guidance is truly invaluable. Mentorship goes beyond mere instruction; it provides encouragement, accountability, and a sense of camaraderie.

When I first started investing in real estate, I made a lot of mistakes that cost me time and money. The biggest piece of advice I can give new investors is to find a mentor. Having a mentor, someone who has experience and success in real estate investing, can help guide you and avoid those costly errors.

As for my experience, my mentor showed me the ropes when I was getting started. He taught me how to evaluate properties to determine if they would cash flow, how to negotiate the best deal, and how to manage the properties once I had tenants. Without his guidance, I likely would have struggled for years trying to figure it out on my own.

In fact, one of the first strategies he taught me was subject-to investing. The one we discussed earlier where where you take over someone else's mortgage, allowing you to acquire a property with little or no money down. My mentor walked me through evaluating several subject-to deals to find one that would provide a good return.

Real estate investing can be very rewarding, but you need to go in with realistic expectations. My mentor always emphasized that the goal is for properties to provide at least a 10% return through cash flow and equity. However, if you don't properly evaluate all costs, like repairs, vacancies, and management fees, you may end up with properties that don't generate income.

Having an experienced mentor look over the numbers with you can help avoid this scenario. Overall, I can't recommend finding a mentor enough, especially when you're first getting started with real estate investing. A good mentor can teach you proven strategies, help you avoid costly mistakes, and guide you to profitable deals.

Aim for 10%+ Returns by Ensuring Positive Cash Flow

There’s money and a bright future in real estate if done correctly. As I mentioned, the key is making sure any high-interest debt is paid off first. Once you've done that, subject-to investing is a great way to get started without much capital. This is where you take over someone else's mortgage, so you can acquire the property with little or no money down.

My wife and I have found a lot of success with this strategy. However, you have to make sure the numbers work. Run the calculations to determine the cash flow - meaning the income the property generates after paying all expenses like the mortgage, taxes, insurance, maintenance, and management fees. If the cash flow is positive, that's a good sign the investment will be profitable. Our goal is always at least a 10% return, if not higher.

The biggest mistake new investors make is failing to properly evaluate the costs and cash flow. They get excited about the potential returns but don't do enough due diligence. This often leads to properties that end up costing more than they generate. My advice is to find a mentor, someone who has experience with real estate investing. Work with them to evaluate potential deals and learn how to accurately assess if a property will be a profitable investment or not.

Sure, there’s no easy money but once you get the hang of it, building wealth through real estate becomes easier. You can use the equity and cash flow from your initial investments to acquire more properties. Over time, your real estate portfolio expands, and so do your returns. The key is starting small, learning the ropes, and always making sure the numbers work in your favor before moving forward with a deal. If you do that, you'll be well on your way to becoming a successful real estate investor!

Amazing Wealth Building Strategy: Real Estate Investing

Well, there you have it, folks! Real estate investing can be an amazing wealth-building strategy, but you've gotta be smart. Do your homework, find a mentor, and focus on cash flow - not appreciation.

Sure, it takes some work, but with the right property and financing strategy, your rental income and equity can help you achieve financial freedom. I'm living proof this works, but you've gotta lay the foundation first by crushing high-interest debt and educating yourself. Real estate's not for everyone, but if you plan it right, it can help you build serious wealth and even replace your day job income. Hope this gave you some solid tips to dive in - just make sure you've got your personal finances in order first and find an experienced investor to show you the ropes. Trust me, it'll be worth it! Now go make it happen.