Monday, September 15, 2008

Building a fortune, one house at a time.

(All these folks have to live somewhere!)

Myself and others have preached a path to wealth through owning single family homes. For indocrination into our cult check out the books "Buy and Hold" or "Building Wealth One House at a Time." The formula couldn't be easier: buy single family homes and rent them out. Out of all real estate investments homes are easiest to finance, easiest to rent, tenants pay all utilities, move much less, homes appreciate the most, there’s no rent control, and....drumroll...the return is unmatched by ANY investment.

Simple analysis on a house for sale in Los Feliz 90027, just listed for $1.6m:

“This house was purchased for $400k in 1987. Twenty years later, it has appreciated 7% on average - we now have a list price of $1.6m. But the buyer only put 20% down when she bought it. In other words, she turned $80K (20% down) in 1987 to $1.55m after commissions. And if it was never refinanced, the $320K mortgage should be way less than $100K (thanks to the tenant for paying it down).

“Basically, the owner turned an $80K down payment into $1.45m, in 20 years. That’s an annual return of 85% (how’s that 401K doing?).”

The power of leverage – homes appreciate 7% a year and we make 85% a year. With Mr. Lender and Mr. Tenant on your side, why aren’t you buying a new rental house every two years and retiring in twenty? Now with the mortgage turmoil it is becoming more difficult to finance homes. Guess what, that means more renters pushing up rental prices!

Don’t wait too long: rates just dropped almost a whole % point on some loans. Things are getting busy – in Silver Lake/Echo Park/Los Feliz alone homes are selling a rate of 2 per DAY.

Call me to set up an appt to look at rental houses and talk about long term planning. Please do not email me for a “list of homes.” They are all on the internet. Property investing = buns in carseat driving around.

1 comment:

Unknown said...

Yo Cielo.
Bess sent me the link to the Sarah Silverman slepping video. Quite cute. I read your blogs - lot of heavy stuff here even tho I don't understand some of the abbreviations. Too bad I'm not in LA or I'd look you up to find me a rental pad. Hope to see you in Colorado in January or March. Until then happy riding.