In this week's episode of Real Estate Investor Stories, we meet Samuel.
Sam is a salesman for a local mobile phone company. Sam considers one of his greatest assets his ability to build rapport, establish trust and look for win-win solutions through his sales skills.
While he makes OK money in his sales position, he doesn't believe he earns enough to achieve financial independence. He hasn't really sat down to do any serious math about it, doesn't keep to or even have a written budget. He just knows that he spends most of what he makes and he, correctly, realizes that probably won't lead to financial independence.
Sam believes his sales skills and the great low interest rates buyers have been getting on their loans over the last few years is a golden opportunity of him to do a little networking and marketing in his spare-time to help homeowners facing distress get out from under properties they no longer desire.
Sam's not one to really make detailed plans, create processes or systems. He definitely did NOT take advantage of my Marketing Modeling Spreadsheet we've taught in classes like Motivated Sellers 101.
His plan was simple but required some manual labor: networking and calling on for sale by owners to find sellers that would be willing to sell their properties creatively. He doesn't have any significant down payment saved up and not even sure he could get a traditional loan with a mortgage broker (because he never called one to find out).
He would be looking to buy houses using creative real estate financing strategies like buying houses “subject to” the existing financing, using lease-options/lease-purchases, or with owner-financing. He was smart enough to meet with a real estate attorney that is familiar with creative financing strategies to get the proper paperwork and some guidance on how to buy a property “subject to” and that's his primarily plan. He'd also consider the other strategies as well on a case-by-case basis.
Eventually, he figures he might be willing to spend a little bit of money on marketing to find sellers and go from Poor Marketing strategies where you invest your time instead of money to Lazy Marketing strategies where you invest money instead of time.
He figures instead of just renting the properties, he will offer the properties for lease and give the tenants an option to buy it from him in the next 1, 2 or 3 years. These special tenants that also have an option to buy the property are typically called Tenant-Buyers. For our modeling, Sam will sell each property he buys “subject to” after renting it to the Tenant-Buyer for 3 years.
At first, he is limited to only being able to buy properties where he has enough money to cover the cash needed to give the seller, cover closing costs and any repairs the property might need. Fortunately, the real estate investing strategy he has opted to pursue typically has him buying “pretty houses” that don't require much if any work. And, for properties that do need a little work, he would be willing to advertise the property as a “fixer upper” and allow a handy tenant-buyer do the work as a partial trade of the option fee he requires for them be able to lease-option the property from him. The tenant-buyer can capture a little sweat-equity and he would need less cash.
As Tenant-Buyers decide to exercise their option to buy the property and purchase the properties from Sam, his bank account balance grows. This gives him additional capital to buy a wider selection of creatively financed properties that he comes across. It will also, eventually, allow him to buy 20% down rental properties with long-term financing in his own name.
- Will Sam be able to achieve financial independence starting with just a few thousand dollars in savings and some mad sales skills?
- How long will he need to continue working at the local mobile phone company before he can stop working there?
- How long will he continue to buy properties using creative financing before he opts to acquire long-term rentals with 20% down and hire a property manager?
- How much cash flow (in today's dollars) will his rentals bring in?
- If the creative financing thing is working so well, why doesn't he keep doing it?
- What do his reserves look like and why does it even matter?
Find out more by watching the video, copying the
Sam Sells His Way To Financial Independence with 2 Accounts, 2 Properties, 8 Rules,
Or, read the detailed, computer-generated, narrated