Rich Dad’s Success Stories: Real Life Success Stories from Real Life People Who Followed the Rich Dad Lessons by Robert T. Kiyosaki & Sharon L. Lechter

Author:Robert T. Kiyosaki & Sharon L. Lechter [KIYOSAKI, ROBERT T.]
Language: eng
Format: epub
Tags: BUS050030
ISBN: 9780759508149
Publisher: Grand Central Publishing
Published: 2003-09-30T16:00:00+00:00

What We’re Doing Now

Our current strategy is to flip lower-end houses and to buy and hold mid-end houses like the one mentioned above. We have figured out that in our particular market, we are able to buy lower-end houses at a discount, fix them and sell them at premium. Plus, the smaller houses we can now buy for cash, so all the financing costs that would be taking money off of our bottom line are eliminated. We then proceed to sell the lower-end houses in the less-affluent part of town to people who can’t find decent affordable housing.

Because the lower-end houses do not spin off as much positive cashflow as mid-end houses do, we take each one on a case-by-case basis. We run financials on each property—the prices vary from $50,000 to $150,000—and based on the numbers we decide whether to sell or to hold. At this point we have purchased nine single-family homes, sold five, and kept four.

We get more money out of our properties than the rent market value because we market them very well. Plus we make sure that the homes really look good so we end up renting to tenants who are willing to pay more—we average about 10 percent more than the going rate. Factor in that we buy our investments below market value and you can see that we win on either side of the ownership equation.

We also screen our tenants, checking their credit rating, references, and employment history thoroughly.

Here are the numbers for a duplex (2,500 total square feet with six bedrooms and three bathrooms) we just acquired:

Purchase price: $70,000

Cash put into property

Down payment: $7,000

Closing costs paid by us (seller paid): $0

Repairs paid by us: $35,000

$42,000

Monthly cashflow analysis

Rental income: $1,825

–Vacancy loss (5%): $91.25

Total income: $1,733.75

Monthly expenses:

–Taxes (property) and insurance: $208.30

–Repairs/maintenance (6% of rental income): $109.50

–Reserve: $50

–Yard work: $20

–Management fee (10% of rents): $182.50

–Loan payment (30 years at 7%): $419.14

$989.44

Net monthly cashflow: $744.31

Cash-on-cash return

Annual cashflow ($744.31 × 12) $8,931.72

÷

Amount of cash put into property $42,000

Cash-on-cash return 21.27%

Today the property is appraised at $164,500.

We are in the process of refinancing this property so we can get the cash back that we put in for repairs and the down payment. By refinancing and increasing our loan amount, our monthly mortgage payment will go up to $698.57, which will make our net cashflow decrease by almost $280. However, we will still have a positive cashflow of $650 per month and have $42,000 to put toward our next investment property.

Here’s the breakdown on another duplex (2,300 total square feet with five bedrooms and two baths):

Purchase price: $97,000

Cash put into property

Down payment: $9,700

Closing costs paid by us: $2,910

Repairs paid by us: $18,000

$30,610

Monthly cashflow analysis

Rental income: $1,600

–Vacancy loss (5%): $80

Total income: $1,520

Monthly expenses:

–Taxes (property) and insurance: 192

–Repairs/maintenance: $96

–Reserve: $50

–Yard work: $25

–Management fee (10% of rents): $160

–Loan payment (30 years at 7%): $580.81

$1,103.81

Net monthly cashflow: $416.19

Cash-on-cash return

Annual cashflow ($416.19 ×12) $4,994.28

÷

Amount of cash put into property $30,610

Cash-on-cash return: 16.32%

Today this house is appraised at $159,000.

As far as the houses we flip go, we buy them for all cash at 50 percent to 60 percent of market value.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.