By Mr. Land Trust, Randy Hughes
This is my 50th year of investing in real estate. It seems impossible, but it is true. I have invested in almost every type of real estate, but I have concentrated primarily on the Single-Family Home as a long-term store of value. I bought my first rental house in 1969. It was a two-bedroom, one-bath ranch with a one-car detached garage. I was in college and rented the house to other college students. Four of them lived in an 800 square foot box.
It took my life’s savings, $800 as the down payment. I assumed a Veteran’s fixed-rate, 30-year loan with 26 years left on the amortization. Back in that day, anyone could assume a VA loan for a $35 fee.
By the time I graduated from college, I owned three rental houses. Upon graduation, I went to work for an insurance company that needed a small office to rent. I used the equity in the rental houses to fund the down payment for a small office building and rented it to the insurance company for which I worked.
My wife and I married right out of college. We both had jobs to pay for our living expenses. This freed up the positive cash flow from the rental houses to accumulate another down payment to buy another rental house.
We did this for 20 years before ever taking a dime out of our investments. Every dollar of positive cash flow was reinvested in more houses. Was that easy to do? NO! There were many temptations along the way. A new car would have been nice, maybe a motorcycle, or how about an expensive vacation?
We lived well and enjoyed those 20 years, raising two daughters. But we did not live beyond our means. We lived BELOW OUR MEANS.
Who does this in America today? Not many. It is a foreign concept to most Americans, but it really is true that if you live below your means and invest for the long term, your future will be bright. You do not have to be brilliant, cunning, dishonest, or a trust fund baby to be successful. All you must do is work hard, uphold your commitments, build an honest reputation, and keep your “nose to the grindstone.”
Think about it this way, when you are born you have three to four twenty-five-year amortizations ahead of you in your life. In a perfect world, you could borrow one million dollars on the day you are born and buy 5 to 10 rental houses (depending on where you live). When you turn 25 years old, you will be a millionaire! Your tenants paid the loans off for you!
You could then borrow another one million dollars and do it again by age 50. And, upon retiring at 75, you would have another million dollars. So, set your goals! How many millions of dollars do you want in your future?
Yes, I have seen booms and busts along the way, but I never ran scared and sold everything because of fear of “losing it all.” I reasoned that even if the houses did not appreciate, people would always need a place to live and many would pay rent to have a roof over their heads. Cash flow was my ultimate goal. After all, who wants to EVER sell a cash-cow?
So, does it matter what the cash-cow is worth? Not really, if the cow is producing. That is all that you should be concerned about. And, from a tax standpoint, you don’t EVER want to sell. The capital gains tax will kill you and deplete your earning power. The best tax plan is to die! Yes, you read that correctly . . . die! Your heirs will get a “step-up-in-basis” when they inherit your properties, and they will get to depreciate them all over again!! OMG, life doesn’t get any better!!!
I could go on and on about the wonderful world of real estate, but this article is supposed to be short and to-the-point. (You have better things to do than read too much and not be out looking for “Killer Deals.”)
Therefore, I shall end this article with a few of my golden nuggets:
1. Always use a trust when buying ANY kind of real estate.
2. Do not own anything in your name personally.
3. Learn how to use options on real estate, they are almost risk-free.
4. Concentrate on getting Cash Flow FREE, not rich.
5. If it is not against the law, it must be legal.
6. Live a corporate “lifestyle.”
7. Avoid government employees at all costs.
8. Build a team with which to work (Lawyer, Title Co., Accountant, Insurance Agent, Banker)
9. Always use a P.O. Box address. (Or the street address of your Post Office.)
10. Best asset protection plan? Don’t get divorced!
Randy Hughes, Mr. Land Trust
I encourage you to learn more by going to my FREE online training at www.landtrustwebinar.com/411 and text “reasons” to 206-203-2005 for my free booklet, Reasons to Use a Land Trust. You can also reach me the old-fashioned way by calling me at 217-355-1281. (I actually answer my own phone unlike most other businesses in America today!)