I'll apologize right now for the "salesy' nature of this post, especially towards the end. It's a newsletter addendum that we sent out to our subscribers from the radio show, and well, a big part of the radio show is hooking up investors to investment opportunities, because, a) we are paid referral fees for doing so, b) we get to participate in the investments ourselves, and c) often times, to raise the cash for an investment property, the investor needs a refi. BINGO! So anyways, this went out, and I thought that parts of it were worthy of the scrutiny and scorn of the ActiveRain Community. :)

The Three Rules of Plumbing, Marriage, and Real Estate Investing

Everybody knows about the First Rule of Plumbing. But not everybody knows that there are actually Three Rules of Plumbing. Now plumbing is a very complicated field, with multiple acronymed building codes, UBC, ICBO, IAPMO, etc., to name just a few, and a high degree of training and education are required to be qualified to practice the trade at the journeyman level or higher. So you might think that the Three Rules of Plumbing would be highly technical in nature, but they're simpler than you might think. And, having spent five years in the plumbing industry in my younger days, I have it on the highest authority, from Master Plumbers, no less, that the Three Rules of Plumbing are:

• S#!t flows downhill
• Friday is payday
• Never chew your fingernails

If you can master those, you have a shot, certainly no guaranty of success, but a shot at success in the field of plumbing. Then there's this guy. I'm guessing nobody taught him the Three Rules.

Now, over the years, my lovely wife and daughter have developed my job description for me. Wasn't that nice of them? Anyways, it comes down, again, to Three Rules. More specifically the Three Rules to Being a Husband and Daddy. I know that if I just keep to these three rules, I will always have a place to lay my head, and somebody to laugh at my corny jokes. I pass on these three rules to every young newlywed man as my sage advice after nearly eighteen years of marriage. I tell them that the earlier they master the Three Rules, the happier will be their married life.

Again, they are not as complicated as you might think. In fact, virtually every situation a husband and father faces in his daily life is covered by one or another of these rules (if you smush them hard enough). What are they? Glad you asked...The Three Rules For Husbands and Daddies:

• Bring Home Your Paycheck
• Lift Heavy Objects
• Kill Spiders

That about sums it up. Guys, do those three things (and their myriad sub-categories), and you're golden.

So now we get to the most complicated area of all. Real Estate Investing. There are seminars, books, tapes, gurus, and enough strategies to keep your head spinning from now on, trying to make heads or tails of it all. On our radio show, The Home Ownership RoundTable, we have always tried to make smart selections in terms of the investment opportunities that we discuss with our listeners. These people know where to find us every Saturday, so we really, really want them to have a positive experience with us. So we turn away more opportunities than we will offer to our listeners, regardless of how much extra referral fee or bonus or whatever the developer or syndicator is offering to the four of us personally.  We've got to make a living, true, but we've also got to live with ourselves. So we do our best to balance those interests.

The thing is, of the opportunities we have gone ahead and offered to our listeners, well, they're just all very different types of opportunities. There are pre-construction properties with built-in equity, there are high appreciation flow properties, high cash flow duplexes and 4-plexes, highly appreciating vacation properties in the Great Smoky Mountains, and zero down pre-development waterfront properties in the Carolinas. Additionally, there are rehab properties where the deal is structured so that all of the initial investment is returned within 60-90 days PLUS approximately $10,000 TAX FREE cash, and there are other rehab deals that only return about $5,000 tax free cash, but only take $1,000 up front to get into.

While we can't say that we have not had any bumps in the road with the various opportunities we have offered, and developers that we have partnered with, all in all, we have been very satisfied with the results, as well as the outstanding integrity of our partners. The few problems that have popped up here and there have been owned up to and dealt with, rather than run from. All of which has led to repeat business with many of our investors across several of our offerings.

With all this variety in properties and opportunities, the commonalities are not that obvious. One is about cash flow, another about cash back, another about appreciation, and yet another is about instant equity. All of these are aspects in varying degrees, to each of the opportunities. But what will strike the really observant among our listeners; those who have heard us bark at some wingnut caller who wonders if it's a good idea to buy a certain condo in an area where prices are depreciating, and rents don't come close to covering the mortgage and wait for however many years for the market to turn around; what will strike them is that there ARE in fact some commonalities to all of the opportunities that we offer. Any guesses as to how many?...

• Make Money When You Buy
• Break Even or Better While You Hold
• Make Money When You Sell

Seems simple, doesn't it? It can actually be summed up in three words. DON'T LOSE MONEY.

Make Money When You Buy

Especially in this market, it is imperative (and more importantly, readily possible) to buy below the market price.

In the case of rehab properties, it is possible to buy in certain parts of the country at such a low price that once the property is fixed up, you're still at 60-65 cents on the dollar, all-in. At that point, it is possible to refinance of 80% of the after rehabbed value, which, if the deal was done as an all cash deal, can result in the return of ALL your invested dollars, PLUS another $10,000 in tax free funds, while still being able to break even or better once rented at out slightly below market rents. If hard money was utilized, only two things change; the payout is lower; roughly $4,000 to $6,000, and importantly, the total out of pocket to initiate the transaction is only $1,000 (which of course is returned as part of the $4,000-$6,000 payout).

In the case of pre-construction properties, the money is made differently. Because as an early investor in a new development, you become a risk partner with the builder, you participate in the builder's profits as the development moves forward and finished properties begin to sell at full retail price. These properties generally break even on rents, but care is needed here and the buyer should do his homework.

The Carolina waterfront pre-development lots are ALL about making money on the buy. The developer has packaged these North Carolina Intra-Coastal Waterway properties in such a way that the buyer is walking into twenty percent equity, and no payments for two years, without ONE THIN DIME out of Pocket. In fact, at close of escrow, a bank account is set up with around $50,000 to $60,000 in it to make the payments for those two years. Let me repeat that. ZERO Down, no payment for two years, and approximately $50,000 CASH back at close (to be used for covering the payments for two years). All in an area (Wilmington, NC) that is just exploding with growth.

Some of the other properties sacrifice a little on the buy side, because they are so strong on cash flow or on appreciation, but we'll cover that below...

Break Even or Better While You Hold

The duplexes and 4-plexes we feature in Killeen Texas are all about Cash Flow. Sure they appreciate reasonably well, 5%-10% a year, and that's nice, but when a $250,000 4-plex generates $2700 a month in rents and $600-$700 after all expenses and the mortgage are paid, that's a GREAT thing. Can you say Positive Cash Flow? And with Fort Hood (the largest Army base in the world) nearby, the suplly of renters is fairly endless. The Tennessee Resort properties we featured just a few short weeks ago have an available guarantee that the mortgage will be paid by rents for two years from the resort rental property manager. That's strong. Even stronger is that there is such an imbalance in housing demand and supply due to the growth of Dollywood, the Great Smoky Mountain National Park, and other nearby attractions, that values have increased at 10% or better for over a decade. The Rehab properties? The refinance is always structured with the goal in mind of being able to break even or better. The Carolina Shores properties? No payment for two years gives you time to decide whether to flip or build and flip.

So, bottom line, remember that thing about Don't Lose Money? Don't lose money. It's OK to bleed a little if a) you can afford it AND b) you'll get it back in April with depreciation and interest deductions, but NOT if you're bleeding heavy when you can't afford it or have bet the farm on the property value skyrocketing. Buy a lottery ticket. It's cheaper.

Make Money When You Sell

Each one of our pre-screened investment opportunities has a story to tell here, but suffice it to say, each deal is structured with the end game in mind. When it's time to sell, you want leave with more than you came in with. With most all of these deals, it's pretty difficult not to.

So, what it all comes down to is this (REPEAT AFTER ME):

• Make Money When You Buy
• Break Even or Better While You Hold
• Make Money When You Sell

Don't lose money. Hard to argue with that... And, uh, don't forget about the fingernails. Or the spiders.

Best,

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