Wednesday, December 31, 2008

Property Virgins

Well I have made a clear decision of when and where I will be purchasing my first property (not my first home, first property) this week through some very careful calculations. I plan on waiting until Jan 19, 2010 (my 25th bday) to purchase a 6+ unit building in the Bronzeville neighborhood in Chicago. I plan to spend around $400,000-450,000 for the building with a 20% down payment which will be between $80,000-90,000, however my goal is to actually gross a minimum of $100,000 through some investments. I plan to start my investing on January 31st 2009 so that I give myself almost a full calendar to make the $100,000, which will require me to make $410 a day 5 days a week for 49 weeks. Seems crazy right? Well of course it does because many people don't even make 100,000 a year working in their daily jobs and I am planning to make it by doing nothing but investing. However the reality is that you could actually make a lot more than that if you have the money to invest and have a good grasp of where to invest your money. It goes back to the clear understanding that you need money to make money.

As for my building I plan on converting the two top rooms into on unit for my personal I know a few of you are thinking that may be a waste of money and I am losing out on the profits of that 5th unit by taking two for myself. I totally agree with you but here's my philosophy about business and life in general, if money is your sole motivator your life will be an empty and unfulfillable hunger forever. You need to enjoy life and for me to do this I need a big ass condo in my building lol. Plus here's the good thing about real estate...once I get to the point of my life when I want to buy house then I will just either rent that unit out as a bigger unit for more money or just convert it back to the 6 unit, viola lol! I will always have a good relationship with my tenants if they know that I am just a stones throw away from them, hell even when I get my house it won't be farther than a 10 minute drive since it will be in either the Bronzeville, Kenwood, or Oakland neighborhood. Landlords forget that these people are your "customers" and you need to have good "customer service" because you don't think these people will be telling other people how much of a great guy or dick head you are? Of course they will. So why not benefit from this word-of-mouth marketing and use it as your advantage to get your current "customers" to bring you new "customers" for future properties.

My plan will be to find a building that will either have the amenities that I am looking for (stone, hardwood, steel, and glass) and if it doesn't the price reflects that its a major renovation. For example if they building is $200,000 then I will invest $200,000-250,000 into renovations so that the building gets to the level that I am looking for. I want my first building to be perfect, so that I won't have to worry about having assing the job from the start. If I do it right the first time I won't have to go back and do patch work or bring it to the level that it should have started at. Reality is that your buildings condition will go down every year so if you start at 80% then by next year you are already at why not start at 100% (or even 120% if you have the funding) so that you are still in good shape by the end of the year or even 2-3 years? You will capitalize on your profit faster if you focus on the people rather than your numbers. You put in more now to make more later...its just that simple. Oh the other good thing about having a building besides the positive cash flow you are getting from rents is that you own the building so as long as the area is going up and gentrification is on track the value of your building is either staying the same or increasing. This means more money for you, there are really no lenders despite the market who wouldn't give you a reverse mortgage on your property, which means you can use your property to buy you more! The real estate game is so much fun aint it?

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