I am going to buy a house this month, here's how

[Mdhaas]

Nice hijacking of a thread, Trace.   

[d_sbrown]

I am a fan of Robert Kiyosaki, who believes that you should be earning at least a 200% to 1000% (or more) return on your money. It took me a while to get thru the noise of the promotional stuff he pitches, but if you listen well, you'll see that he does make sense.

For some a 10%, 20% or even a 50% return on your money may be a great deal, but to me it's not worth the risk, especially when property values are in free fall in many areas of the country. There are too many things that can go wrong if one expects that level of return, which to me is just like the exposure that you get in investing in stocks or mutual funds.

Returns of 200% to 1,000% are very much possible in real estate investing if you do it right. Those levels of returns give you the ability to take your time and invest thoughtfully, not emotionally or speculatively. To get such a return, you should never use your own cash or credit, nor should you accept a deal where you are hoping for capital appreciation (values to rise). You have to use other people's money (not banks) with you in complete control of the deal.

Returns of this kind are not accurate, they ARE the sales pitch that you say you see through.

To get that kind of return, you say you have to not use your own money.  Then your own money is actually earning 2% in a bank, and the rate of return is irrelevant, because if you make 1 dollar, you have an astronomical rate of return on the investment. 

If you can make 200% to 1000% on your money, you pass Gates in a hurry, even if you only start with $100 dollars.

Take this example of 500% return.

Period         Dollars
1                  100
2                  500
3                  2500
4                  12500
5                  62500
6                  312500
7                   1562500
8                  7,812,500
9                  39,062,500
10                 195,312,500
11                 ...

As you can see it is ridiculous to claim these kinds of returns except on very small amounts of money and in very limited circumstances.

I would much rather take a 15% return on every dollar I have instead of 1000% return on 0 and 2 % on the rest.

DB

[christopher w]

I am guessing that he using using those large return numbers because he is not using any of his own money so he can make up his own rate of return.

In actuality if you go back to the start of this thread on 01/05 till today the OP has made $5080 based on the fact that the wholesale deal he was working on actually closed. So in the 12 week span of the life of this thread that breaks down to $423 per week. While the return may be higher because he used none of his own money the return on time is terrible. The OP has done an incredible amount of research into breaking down the numbers for us and I give him credit for that, but all of that work has resulted in what amounts to about an $11.00 per hour job. People can say what they want about how risky it is to have some of your own skin in the game but in todays market HML's and even private lenders want you to have something in the deal. Maybe after you have done a couple they will let you slide a deal through now and then without much of your money or credit. But not on the first, or the second, or maybe even the third. There are several lessons to be learned from this thread. The first is that you have to do a lot of research on several different properties because you will most likely have to submit offers on several properties to get one accepted. Investors are now competing with the spring market owner-occupied borrowers. I am working on an FHA OO purchase of a REO property right now.  Tax value is $147K, and the Zillow value is $197K (which should be taken with a grain of salt). Based on the way this thread has been written I will use the tax value for true value and offer 65% which would be 95.5K. It was listed at 116K. There have been so many bids on the property that now the asking price has gone up to 133K. So there will be more work involved because of the competition. The next lesson is to have your money lined up before you start making bids because if one drops in your lap priced the way that the OP has submitted them you will need to be able to close very quickly.

[msq7163]

Any updates Hassan?