A friend of mine who is a part-time residential real estate investor lent me this book recently. Don’t let the title of Mike Summey and Roger Dawson’s book fool you. This is not a get rich quick scheme. It’s a get rich slowly plan to grow your net worth through real estate investing by holding the rental property for passive income throughout your lifetime.
I really like this book, and I would recommend it to anyone thinking about buying a rental property and trying their hand at becoming a landlord. The premise of the book is to buy and hold mainly single family dwellings and build a real estate portfolio of homes that will pay you passive income through the rent that they produce. A passive income is a cash flow stream such as investment income through interest payments or dividends, real estate rental income, royalties, alimony income, etc. in which the individual does not have to actively participate in running the business.
“The Weekend Millionaire’s Secrets to Real Estate Investing” is based on the idea that you can invest in real estate in your spare times hence the weekend part of the title. The book shows you a step by step guide to finding and purchasing properties without having to quit your day job.
Some of the book’s key tenets:
Don’t pay retail prices for homes. In most cities and towns in America, it is cheaper to rent a home than to buy one. That’s why so many people continue to rent instead of taking the plunge into home ownership. You can hardly earn a positive cash flow on a rental property if you pay retail prices. You will price your future rent out of what the market can bear. Summey and Dawson’s book focuses on how to find a potential rental homes at wholesale prices. The authors go as far as to say that most rental real estate deals are very difficult to make profitable without buying at wholesale prices or receiving unconventional loan financing.
Focus on your property’s cash flow. Instead of looking at the seller’s asking price for the home, we should look at the net income that you can expect to receive from the rent the home will generate after all your expenses such as mortgage payment, insurance, taxes, etc. are deducted. According to Summey and Dawson’s plan, your rental properties must have a positive cash flow from the very first day. Your rent must be larger than all your expenses including a vacancy factor, maintenance, and property management fees. If the property does not provide a positive forecasted income stream, then you should look for a better deal elsewhere.
Yearly incremental rent increases. By increasing your rent a little each year, your cash flow and net worth will continue to increase and keep up with inflation. If the rent you charge during the first year covers all your expenses, all rent increases year after year will be pure profit. Tenants can usually stomach a small 5% rent increase or about $50 extra if you continually raise your rents year after year by a small amount. Renters tend to balk at large, infrequent rent hikes every other year or every third year.
You can be a real estate investor if you want to be one. The first step in becoming a part time real estate investor on the weekends is just convincing yourself and your family that you are one. As soon as you decide to start looking at rental properties, you are an investor. The more people who know that you invest in real estate, the more people will think of you when potential deals and wholesale price steals present themselves. Summey and Dawson even go as far as to recommend that you get business cards printed stating that you are an investor who buys real estate. Like most new things, the hardest part is just starting.
The threshold theory. The more thresholds you cross, then the more likely you will find a good deal. It takes time, patience, and energy to find a house that makes you a positive cash flow from the first day. You have to view a lot of rental properties to find your diamond in the rough at wholesale prices. You might look at one hundred homes before you find the right one at the right price, but you are an investor as soon as you set out on your first research gathering trip into a neighborhood.
These are just a few of the excellent tips that this book provides both the beginner and experienced real estate investor. The book also covers a large section on negotiation techniques that are well worth the price of the book alone. Roger Dawson is a negotiating expert and provides a wealth of knowledge in the book for negotiating real estate and other contracts. The ideas that he presents such as being prepared to walk away from a deal and putting your advisory in a vise just by saying that the offer isn’t good enough (“You’ll have to do better.”) can also be used in many other situations like buying a new car, buying ad space for your business, or something as simple as giving your children money for the movies. The book also goes in depth in finding rental locations, learning your real estate market, structuring offers, unconventional financing, and even larger multi-unit projects.
No related posts.