In yesterdays blog, I highlighted a great deal we are presently wrapping up that personifies all of the tenets of low risk real estate investing. I promised that I would highlight a development project that we are presently working on that will simply blow your socks off....
however I don't want to take you too fast as developing is for those who are accredited and/or educated investors who have the assets and capital to employ so before shooting for the stars, I think it is important that we cover the proper mindset and insure you understand.

Having this solid educational foundation will allow you to understand completely and be able to follow the train of thought as we discuss and highlight the virtues of low risk real estate investing.

In the present real estate environment we live in, it is common in many breakrooms, cafeterias golf courses (or other venues where people gather) across America to hear co-workers,friends, bosses, neighbors and your local little league coach extolling the virtues of real estate investing! Many will openly tell you they are beginning or new investors and they are mostly interested in finding a "quick flip" property that they can buy cheap, rehab inexpensively and sell for the "ever-popular" quick profit of $25k to $35k or more! Most then go on to say that after doing a few of these they will then look to buy some rental property to build up there passive income and/or other goals!

Like nearly everything in life, this is much easier said than done...just ask any real investor (one who tells the truth...) and they will tell you how difficult this can be. The reality tv-shows on the Bravo channel give you a glimpse into what happens however none of the shows I have seen show when the investor loses money.....or lot's of money.....

OH... You didn't that know real estate investors in some cases lose MONEY! That is a foreign concept to many however the reality as that it can happen to any of us and it does happen so a smart investor is one who looks to lower the risks such that the investment becomes a No-Brainer!

I personally recommend that a beginning investor do (2) things when getting started in real estate investing:

#1 - Consult with and PAY for an experienced Mentor - Most reading this will not follow this simple truth and ultimately it will probably be the largest mistake one can make before even getting their investing career started! The average common person simply does not comprehend easily why they should pay for a mentor, although in my opinion they are actually paying a much higher price by not being educated!

#2 - Read and study your craft - I see it all the time a person just getting into real estate investing thinking they will make $100k in the next year however they know little to nothing about the business and they have spent no real time studying the business by reading books, attending FREE & paid seminars and networking. You will have to study and spend time on this if you expect success and it is a real business that requires skill and dexterity.

After doing the above (2) tasks, a couple things will become clear or apparent; for starters a good mentor will be able to identify the next big area or niche that you should be considering and they will also be able to supply with the names of several books and/or courses that should be of interest to you. One of the benefits of a mentor is they will save you time because in conversation they can explain or tell you something that saves you countless hours on the internet or in the bookstore researching, they can literally give you the directions straight to the well(s) of knowledge that you will need.

If the mentor is worth their salt and have been in the game for a while, they will give you tips as to where you can begin looking for opportunity. Personally I have been consulting with my clients and partners who are starting out to keep their eyes out for (2) distinct trends that pose tremendous opportunity for investors:

#1 - the Pre-foreclosure market - the rate of foreclosures continues to increase every month and there is no end in sight. It has gotten so bad because the market is being inundated with existing homes at an alarming rate while builders are opening new communities like crazy so it makes it harder for the desperate sellers to sell these homes before being foreclosed on! That spell O-P-P-O-R-T-U-N-I-T-Y because we are in the home-buying business.

#2 - Small multi family properties - i have purchased numerous houses over the last 8 years however one of my favorite & most profitable deals was a nice little 2 unit duplex. I love duplex, triplex & 4 plex properties because you have anywhere from (2) to several people all getting together every single month to pay your mortgage and because there is more than (1) person paying it is hard for you to ever have to worry about having to pay the mortgage if you have a vacancy because you should never have all units vacant unless you have done something drastically wrong! In areas like Houston where the rental market is strong, there is plenty of money to be made owning these types of properties!

With tomorrow being Thanksgiving I am not sure if I will be able to get the laptop over my belly to do an entry tomorrow however I will be back in the saddle on Friday to complete Part 2 of this Low Risk Real Estate Investing blog! Until then, have a great Thanksgiving and be sure to let the people who mean the most to you know that you care about them and are thankful for having them in your life, talk with you soon!

SEE YOU AT THE TOP!

Tyron C. McDaniel

With real estate being so popular there is an ever-growing amount of books, study courses and really expensive seminars that one can purchase to learn about this tremendous business we call real estate! In this blog, I hope to shed light and educate you on a low-risk alternative to a lot of the hype and smoke & mirrors schemes and strategies that you may hear!

In the photo above, you will find my latest gem of a discovery; this 4 unit multi family rental property is located on a corner lot right by the 2 major highways and is less than 3 minutes from downtown Houston and it is located on the busline. We conservatively estimate the 2-bedroom units will rent for $450 per month unfurnished and $550 for the furnished unit! With all 4 units rented at an average say $500 per unit, that is $2000 per month gross rents and our negotiated price is about $108k.

As part of the financing arrangement and negotiations, I will add about $9k for repairs to bring the property up to the best of class status that we seek on all of our investment properties as this assists in our getting the best qualified tenants available and allows us to command the best rental rates! Even after adding the repairs and upgrades allowance, the estimated mortgage payment with insurance and taxes will be $1200 per month, with gross rents of $2000 per month, that will leave $800 or so in free cash-flow per month! $9600 per year, in addition to that since we will most likely do a 10% down payment (12,000) we will probably have an unrealized cash on cash gain of 200% the day we fully rent the property!

In other words, the 10% down payment we will be paying at the closing table, we will more than double that amount in equity that we gain once the property has been renovated and completely rented out and this will all occur within 75 days after closing! So that is about $800 per month in cash flow and somewhere in the range of $40-45k equity the day we get all of the units rented out! Now here lies the whole essence of this blog, Low Risk Real Estate Investing & Development opportunities.....

Let me explain why this is considered a Low Risk Investment! For starters, the return or instant security of the monies invested is paramount, hence that is why we always buy one of two things when purchasing rental property: equity or cash-flow. Let me explain, you see on this property we are buying equity because it is presently undervalued and we have an instant equity position. Now if the property were already rented out producing a monthly cash flow of say $650 a month, then in that case we would be buying cash-flow!

Now even after re-couping our initial investment, we will still have a positive monthly cashflow after paying all expenses and because of the location of this unit our equity position will be enhanced every day that we own it as there is plenty of New Construction development in the area and within the next 6 months at least 14 units of high end townhomes will begin construction, all of these things will further enhance the value of the land this property sits on! In fact, this property has great re-development potential as a mixed used office building so again, there is another level of protection that further mitigates our risk and makes this deal a NO BRAINER!

There is last aspect of this deal that enhances our investment potential as well; because the free cashflow estimates look so promising, I anticipate renting this property completely out and then listing it for sell for somewhere in the range of $165k, which will produce a gross profit somewhere in the range of $45k or so! Not bad for a Low Risk Real Estate Investment! In the next post I will discuss a recent property that we are presently developing that you will simply not believe the profit potential it has, somewhere in the range of 500% profit!

Talk to you soon!