Beginners guide to becoming WEALTHY

[STR8UP]

Originally posted by Page
I'm still confused.


so I would not use the $1k for anything, then? Then what do I pay the final loan off with? (assuming i have this right: I secure loan #1 from bank#1 with collateral $$$. I then take the money from loan #1 and dump it into an account in bank #2. I take out a loan from bank #2 and use it to pay back loan #1. I take out another loan from bank #1 (a little bit more this time) and use it to pay back loan#2. I then reciprocate.) Where does it end? The way I see it, I'm stuck with the original $1K I put up and the ammount of the final loan, whatever that may be. How do I get rid of the loan in the end? How do I pay it off? Do I use the original $1k for that and consider the collateral money to be forfeit?

the book also said I should borrow a little bit more with each new loan that I swap around this way. About how much (percentage-wise) would you recommend? I was thinking about 10% additional with each loan. I don't want to get into trouble here, but i'm not going to let unfamiliarity stop me. However, once I start this, I won't be able to walk away anymore without any loss, so I have to be ready for all angles. There won't be any going back, the way I see it. (the moment I secure that loan is the time where I choose to take the red pill instead of the blue pill-- and I'm stuck with the choice I made.) I just need more info and to understand it completely before i'm ready to do this. I want to do my homework and have a plan, rather than run into this blind and relying on instinct and blind confidence. I've learned that confidence in something will go a long ways, but baseless overconfidence can kill you. I just want to know everything I can.

You always have the initial $1,000 in hand. You don't buy anything with it. It will go right back into paying off the principal.

BTW...by you using your credit card to get the ball rolling you need to pay attention to an important lesson. You are beginning to use your resources to bulid MORE resources (using your unsecured credit to build more credit). This is what will eventually lead you to be able to borrow large sums of money that will allow you to control valuable assets.

The idea isn't to borrow $1,000 to buy something. The idea is to use the initial $1,000 as collateral to secure a loan, which eventually will lead to you being able to borrow WITHOUT collateral. All you are doing is making the bank familiar and comfortable doing business with you. How long before you pay off the loan? Make a few monthly payments (more than minimum pmnt.) then walk in and pay it off in full. This is what banks love to see. Someone who is responsible with money.

As for how much MORE you should attempt to borrow, I would recommend raising it as much as possible. The only downside is the interest or fees that you incur during the time you have a loan that is outstanding. Since you never spend the principal your only costs are interest and fees. Make sense?

How do I get rid of the loan in the end? How do I pay it off? Do I use the original $1k for that and consider the collateral money to be forfeit?

Assume you have a bank account with $1,000 in it. You borrow against this money and deposit it in another bank. You NEVER actually spend the money so regardless how many banks you deposit then borrow from, you will ALWAYS have the initial $1,000 in your pocket. If as in your case you borrow against a credit card to get strarted, you still do not spend the money you borrow so all it ever costs you is interest and fees. You always have the principal $1,000 and at any time you can pay off your balances. Hopefully this makes sense...

(the moment I secure that loan is the time where I choose to take the red pill instead of the blue pill-- and I'm stuck with the choice I made.)

Sounds like you are willing to commit for life, which is good. This stuff is so ingrained in me that pretty much every decision I make is based upon how it will affect my financial situation.

When you get deeper into this you will realize that every action has a consequence. If you neglect to take into account the effect a decision such as buying a car will have on your financial situation, it is VERY easy to slide FAR off track. On the other hand, if you are acutely aware and are able to analyze decisions based upon a future outcome it will enable you to reach your goals in record time.

 

[STR8UP]

Originally posted by Page
Str8up: I'm also thinking of jumping into the stock market to help build some investment capital to help me get started. My current plan revolves around IPOs. I plan to hold them until they begin falling signifigantly, and then sell them as quickly as possible once that happens. What are your thoughts on this strategy, and what advice do you have re: stocks in general?

I have dabbled in stocks but am not qualified to give advice.

Be careful because for most people the stock market is little more than gambling. What you are talking might fall into this category. Unless you are willing to dig deep and learn how things really work I would recommend sticking to the real estate plan.

 

[Page]

Originally posted by STR8UP
Make a few monthly payments (more than minimum pmnt.) then walk in and pay it off in full. This is what banks love to see. Someone who is responsible with money.

Ok, that makes a little bit more sense. One last question: suppose I have $1k collateral, and borrow $1k with it and pay it off. I then go back and borrow $1500. How am I supposed to get the money to pay back the extra $500 when the loan comes due? I still have the $1k, but how do I pay off the extra money if I continue to up the ante each time? Do I pay it off with part of my paycheck? I'm a full time student right now, so I don't have much disposable income at the present, but I know that if I do this all that will change soon. My only problem is to find a way to pull it off in the meantime.

After thinking about it, I suppose my biggest question is, Where do I get the money to pay off the final loan if I have to pay back the collateral money too? The CC company sure as hell isn't going to give it to me as a gift. by my logic, i would need at least $2k to pay off both people. I've never done this before, so this is unfamiliar territory.

So, I should forget about stocks right now? I looked at some IPOs today, and I see you are right in retrospect. I can't control if a stock goes down or up, so yes, it is a bit like gambling. I'm a risk taker, but not a gambler.

 

[STR8UP]

Originally posted by Page
Ok, that makes a little bit more sense. One last question: suppose I have $1k collateral, and borrow $1k with it and pay it off. I then go back and borrow $1500. How am I supposed to get the money to pay back the extra $500 when the loan comes due? I still have the $1k, but how do I pay off the extra money if I continue to up the ante each time? Do I pay it off with part of my paycheck? I'm a full time student right now, so I don't have much disposable income at the present, but I know that if I do this all that will change soon. My only problem is to find a way to pull it off in the meantime.

After thinking about it, I suppose my biggest question is, Where do I get the money to pay off the final loan if I have to pay back the collateral money too? The CC company sure as hell isn't going to give it to me as a gift. by my logic, i would need at least $2k to pay off both people. I've never done this before, so this is unfamiliar territory.

So, I should forget about stocks right now? I looked at some IPOs today, and I see you are right in retrospect. I can't control if a stock goes down or up, so yes, it is a bit like gambling. I'm a risk taker, but not a gambler.

Step 1- Borrow $1,000 on your credit card. You have $1,000in your hand.
Step 2- Deposit this $1,000 in a bank account. Go back a week later and borrow AGAINST your bank account. You OWE $1,000, but you have $1,000 on deposit. You walk out of the bank with $1,000 again.
Step 3- Repeat step 2 at a different bank. Again you walk away with $1,000
Step 4- Make a few payments on both loans (you made sure you can afford to cover these payments before you signed the papers!)
Step 5- You still have the $1,000 you borrowed from the last bank. Take this to bank #1 and pay off the first loan. Remember, you still have a $1,000 account at this bank!
Step 6- Use the money in the account at bank #1 to pay off the loan at bank #2. You still have an account at bank #2 that contains $1,000.
Step 7- Use the $1,000 that is in bank #2 account to pay off your credit card. Everything is paid!

Everything is settled up to zero. Your only costs are interest and any fees incurred.

I don't see where you are getting lost here.

When you have $1,000 in an account and also OWE $1,000 in a way it washes itself out. The $1,000 you borrow from your credit card to get started is washed out by the $1,000 you have in your hand. See?

Your loan terms probably will not require that you pay them off in a short time. They might be amortized over a year or more so it isn't as if the bank is going to come knocking on your door a few days later looking for payment in full. Just make sure you read the note you are signing so you know your obligations.

I don't want to tell you to stay away from stocks. What if you have a knack for it? You might hate real estate and business. I would be doing you an injustice by giving you specific advice in this case. You have to find your fit.

The only way to do that is to read up on all three (and eventually try them) and decide what interests you. Maybe you will fortunate enough to take a liking to all three! BIG money is made when you understand how to make all three work together.

 

[h2o]

Originally posted by STR8UP
Step 1- Borrow $1,000 on your credit card. You have $1,000in your hand.
Step 2- Deposit this $1,000 in a bank account. Go back a week later and borrow AGAINST your bank account. You OWE $1,000, but you have $1,000 on deposit. You walk out of the bank with $1,000 again.
Step 3- Repeat step 2 at a different bank. Again you walk away with $1,000
Step 4- Make a few payments on both loans (you made sure you can afford to cover these payments before you signed the papers!)
Step 5- You still have the $1,000 you borrowed from the last bank. Take this to bank #1 and pay off the first loan. Remember, you still have a $1,000 account at this bank!
Step 6- Use the money in the account at bank #1 to pay off the loan at bank #2. You still have an account at bank #2 that contains $1,000.
Step 7- Use the $1,000 that is in bank #2 account to pay off your credit card. Everything is paid!

Everything is settled up to zero. Your only costs are interest and any fees incurred.

I don't see where you are getting lost here.

When you have $1,000 in an account and also OWE $1,000 in a way it washes itself out. The $1,000 you borrow from your credit card to get started is washed out by the $1,000 you have in your hand. See?

Actually, I was a bit confused too when I read this, but not because I didn't understand it. The reason I was confused was because if you use the actual account money from bank#1 to pay off the loan to bank#2 and then use bank#2's account money to pay off your card, aren't you cutting off your accounts with these banks? You can't still have an account when your balance is $0.

So...the thing that I was confused about is...can you go to a bank where you don't have an account (or atleast an account with a balance higher than $0) and get a loan? Whitney says you can get a loan...this is what I was confused about...?

Thanks again for your help STR8UP. With regards to my own investing, I've actually decided against the condo I was looking at. I've decided on buying a single-family home or two ...I've been reading and according to the news / word-of-mouth, one of the highways in the area is expanding, which should make for big gains down the road if I buy the properties now.

 

[Page]

Originally posted by STR8UP

Step 4- Make a few payments on both loans (you made sure you can afford to cover these payments before you signed the papers!)

I understand the initial process completely now. So, to keep this going for each cycle where I borrow a little more, I just need to borrow more collateral from my credit card (say, $1500) and then borrow an ammount equal to it and repeat the whole process, right? When should I stop?
Whitney makes it sound like the more I do this, the more they would be willing to give me on a signature loan.


thanks for clearing it up. i'm just unfamiliar with loans (understandable, since i've never done one before now) so I had trouble seeing the cashflow.

Now, you say I have to have income to do this so I could make the payments, correct? Do you think I could do this while earning little over $8.50 an hour? (Which is all i could do right now. I am a full time student for about 2 more weeks, after which I will be free for a few months, so i'll start working full time if my boss will let me. In the fall, I'll go back to part time, so i'm curious is I could still do this and cover my other expenses. I've never worked full time, so I'm not sure how much more I would make there than under Part time. (I currently net about $250 a week, paid biweekly... not bad, but not too good, either) I have car insurance and my other bills on top of this.

How much do you think the payments would be on a $1,000 loan? I know you probably don't have an exact figure, but please give me a rough estimate.

 

[STR8UP]

Originally posted by h2o
The reason I was confused was because if you use the actual account money from bank#1 to pay off the loan to bank#2 and then use bank#2's account money to pay off your card, aren't you cutting off your accounts with these banks? You can't still have an account when your balance is $0.

Good point. You might want to leave the minimum amount in the account to keep your foot in the door.

Keep in mind that this is simply one suggestion that might help you build credit. I started with jewelry store credit cards and a car loan my incle co-signed for me. Be creative!

So...the thing that I was confused about is...can you go to a bank where you don't have an account (or atleast an account with a balance higher than $0) and get a loan? Whitney says you can get a loan...this is what I was confused about...?

If your credit is good enough (might need to show income as well) you can obtain a loan with no collateral. I have unsecured business lines of credit in the $70,000 range. Just takes time to build them, that's all.

You need to research what types of collateral a bank will accept for a personal loan. That will tell you what you have to come up with.

Thanks again for your help STR8UP. With regards to my own investing, I've actually decided against the condo I was looking at. I've decided on buying a single-family home or two ...I've been reading and according to the news / word-of-mouth, one of the highways in the area is expanding, which should make for big gains down the road if I buy the properties now.

That's EXACTLY what you need to be doing to become a successful investor!

My partner and I recently bought 11 condos for an average price of about $150,000. The residents of these condos were offered first dibs and in many cases would have been able to actually buy them for thousands less than I did.

I have talked to many of these people (some of them are now renting from me!) and although some of them felt they weren't in a position to buy at the time, many thought they were a ripoff even at their discounted price! We knew better and bought up as many as we could. Today, just a few months later, these condos are reselling for as much as $215,000.

The point is, we knew (guessed correctly) the true market value of these properties. On top of that we are buying in an area that is undergoing an urban renaissance, which should catapult values for years to come.

If you are first to buy up property in a developing area, you will be the one to benefit. You're on the right track.

I understand the initial process completely now. So, to keep this going for each cycle where I borrow a little more, I just need to borrow more collateral from my credit card (say, $1500) and then borrow an ammount equal to it and repeat the whole process, right? When should I stop?
Whitney makes it sound like the more I do this, the more they would be willing to give me on a signature loan.

You're catching on.

Only you can determine when you need to stop. Don't get too agressive. Banks might not like that. Just up the ante until you can secure a signature loan that will help you in your dealings.

Keep in mind- if you have a credit card you ALREADY have a signature loan at your fingertips! Don't let anyone scare you into thinking that credit cards are evil and should never be used to invest. That's POOR talk. It's no different than any other kind of loan. As long as you make a profit, take full advantage of ANY available credit source!

In the fall, I'll go back to part time, so i'm curious is I could still do this and cover my other expenses.

You need to work out your own budget. Find out the terms on your loans and work the payments in. It all depends on what you and the bank work out.

How much do you think the payments would be on a $1,000 loan? I know you probably don't have an exact figure, but please give me a rough estimate.

$.01- $1,000 or anything in between!

It completely depends upon the rate and term. Go online and find a loan calculator and run a few scenarios. that should give you a better idea than I could.

 

[Page]

thanks again. I'm going to wait 3 weeks before moving on this so I can get my job again first to make the payments on the loans.

I'm about halfway through Building Wealth. Some of it is amazingly simple, other parts seem quite complicated and require further study. I found I get more out of it when I treat the book like a school textbook and actually sit down and study it (complete with notes) instead of simply reading it.

 

[STR8UP]

Originally posted by Page
I'm about halfway through Building Wealth. Some of it is amazingly simple, other parts seem quite complicated and require further study.

Keep in mind that the "go to school, get a good job, avoid debt, buy a house, and invest in mutual funds" mentality is ingrained pretty deeply in pretty much all of us, whether you realize it or not. Thinking in this way might help you keep your head above water when you EVENTUALLY are able to retire (probably when you are in your 60's) but if you are like me you would rather position yourself to be able to enjoy life when you are in your 30's instead of having to answer to someone else for the better part of your life.

Make sure you keep a VERY open mind about the concepts you are studying. I had to struggle with it myself when I first discovered this stuff. The "avoid debt and save money" mentality still rears it's ugly head sometimes with me. It's hard to get rid of, but it can be done.

 

[Page]

Originally posted by STR8UP


Make sure you keep a VERY open mind about the concepts you are studying. I had to struggle with it myself when I first discovered this stuff. The "avoid debt and save money" mentality still rears it's ugly head sometimes with me. It's hard to get rid of, but it can be done.

I know what you are talking about. I too get that whining voice sometimes that screams at me to avoid debt and play it safe. I always succeed into willing it into submission, though.

Tommorrow, I'm going to a new bank, different than the one I normally use, (Whitney recommends a small bank, and I know one that fits his profile nicely) and I'm going to open an account, even though I don't have the collateral money yet. I think it would be a great opportunity to find out about short-term loans and the payments they would want me to make on a $1000 loan. (I'm not ready to get an advance and sign loan papers yet, its merely a fact-finding mission.) I'll let you know how it goes and what I find out.

 

[STR8UP]

Originally posted by Page
Tommorrow, I'm going to a new bank, different than the one I normally use, (Whitney recommends a small bank, and I know one that fits his profile nicely) and I'm going to open an account, even though I don't have the collateral money yet. I think it would be a great opportunity to find out about short-term loans and the payments they would want me to make on a $1000 loan. (I'm not ready to get an advance and sign loan papers yet, its merely a fact-finding mission.) I'll let you know how it goes and what I find out.

Now you're talking! It doesn't cost you a penny to talk to a banker and most of them would be more than happy to help you out. Go in and open an account like you said. While you are setting up the account ask some questions. They will probably refer you to the person who handles the product you are looking for. By that time the ball is rolling and you are on your way.

Keep in mind that it is better not to take Whitney's or anyone elses advice as the gospel. I have found that my best ideas have originated from studying other people's ideas and tweaking them to formulate something that works even better.

Be sure and post about your meeting with the bank.

 

[Page]

Ok, here's what I found out at that bank I told you about:


------------------
a Passbook loan= their secured savings loan.

Minimum rate: 7.5%
Minimum ammount: $2,000
Loan fee: $50
3% over rate paid on collateral account

---------------------------------

Is this the average that I should expect or do you think I could do better someplace else?



The person that I talked to said that the bank doesn't normally make a lot of these types of secured loans so I'm going to have to talk to the bank manager, which I was planning to do anyway. (I asked for the president, but a manager will suffice, right?) I have the manager's business card and phone number to call to set up a meeting when I am ready.

however, one solution creates another problem.

No one in my family is up for loaning me the collateral money, so it looks like I have to use my Credit Card. The problem is, I already checked with my credit card and the maximum I could get an advance on with a card this new is $500. That leaves me 1/4 of the way there, but 3/4 still to go. I have to wait about 3 months(3 payments) before being eligible for an advance, so what do you recommend I do in the meantime? Can I open the doors for a bigger advance by sitting tight for now, paying off my credit bills every month in full, and generally by doing all the other things necessary to building good credit?

I couldn't even open a savings account today b/c I didn't even have the $100 minimum deposit required to open it. The interest I would get on it is so low it isn't even worth thinking about. (0.20 % or something like that... i.e. shytty) Being poor sucks, that's why I resolve to change.


I'm going to have to find out a way to come up with the collateral $$$ so I can get the ball rolling. So far, the only thing keeping me from what I want is time, then I can get my advance.


I'm going to get moving on my patent in the meantime.

 

[STR8UP]

Originally posted by Page
Ok, here's what I found out at that bank I told you about:


------------------
a Passbook loan= their secured savings loan.

Minimum rate: 7.5%
Minimum ammount: $2,000
Loan fee: $50
3% over rate paid on collateral account

---------------------------------

Is this the average that I should expect or do you think I could do better someplace else?

You found someone who will make this type of loan, that's a good start. I would check a few more banks to see what is out there. One might meet your criteria better than the other.

The person that I talked to said that the bank doesn't normally make a lot of these types of secured loans so I'm going to have to talk to the bank manager, which I was planning to do anyway. (I asked for the president, but a manager will suffice, right?) I have the manager's business card and phone number to call to set up a meeting when I am ready.

You should always make friends with the highest person possible in the food chain. You might have to deal with lower level employees when you are only dealing with a few thousand $$$.

No one in my family is up for loaning me the collateral money, so it looks like I have to use my Credit Card. The problem is, I already checked with my credit card and the maximum I could get an advance on with a card this new is $500. That leaves me 1/4 of the way there, but 3/4 still to go. I have to wait about 3 months(3 payments) before being eligible for an advance, so what do you recommend I do in the meantime? Can I open the doors for a bigger advance by sitting tight for now, paying off my credit bills every month in full, and generally by doing all the other things necessary to building good credit?

Just keep building your resources until you are able to get started.

I'm going to have to find out a way to come up with the collateral $$$ so I can get the ball rolling. So far, the only thing keeping me from what I want is time, then I can get my advance.

One thing I have noticed so far is that you are making things happen. It may not seem that way right now, but rest assured that if you keeo it up it will pay off sooner or later.

I hesitate to answer your questions with much more than a generalized answer for a reason. The reason is, I want you to start to get creative. You are running into stumbling blocks, and the way you respond to them will determine how far and how fast you will go. If you throw up your hands and say "impossible!" you aren't going to get very far. If you resolve and learn from each obstacle you will gain the knowledge and confidence you need to keep moving you forward.

 

[djnewb]

I just ran into something that relates to this long thread somewhat.

I work as a cashier at a local retail chain and while I was ringing up this woman today, we started talking about her credit card and how she accumulated massive amounts of free points / rewards on her card. I was like "how'd you get so many points, your credit limit on the credit card shouldn't be that high", she replied back that her credit limit on that card was $10,000 and that she recently built a whole new house and charged a lot of the expensives on that card. She explained that she maxed out the limit, then paid it off somehow, and then remaxed out the limit, and then kept doing this "several" times a month. She always paid it off before interest accumulated though by the end of the month somehow *didn't ask how / why because didn't want to be nosey*. Through this she not only used her credit efficiently but also got plenty of the rewards that credit cards company offer for using their card.

Just thought i'd share this with everyone

 

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Originally posted by STR8UP


I hesitate to answer your questions with much more than a generalized answer for a reason. The reason is, I want you to start to get creative. You are running into stumbling blocks, and the way you respond to them will determine how far and how fast you will go. If you throw up your hands and say "impossible!" you aren't going to get very far. If you resolve and learn from each obstacle you will gain the knowledge and confidence you need to keep moving you forward.

Okay.. I see where you are going with this. I'm already visualizing myself in these situations, and I'm getting in the habit of planning various strategies I would do for each obstacle. At this point, I've already given myself over to this, so It's only a matter of time.

also, how's this for creative: If you were in the same room as me, right here, right now, I would not hesitate to ask to borrow the collateral $$$ from YOU. My logic being that you already know what I would do with it, and you already know how you would get the money back. The fact that we are both of a similar mind to varying degrees already cinches the deal.

 

[h2o]

Hey STR8UP,

I had a quick question. I am currently browsing some apartments that are in the pre-construction phase...the building has not been built yet. Since the building will go up in about a year, and the actual apartments in around 1.5-2yrs, they are asking for a 5% deposit. These range from $200K-$400K, so that's about a $10K-$20K deposit, and they are asking for 40% of it up front and the other 60% at financing time.

A similar building was built in the area about half a year ago, and since then the units have appreciated around $20K-$30K. My question is, can I put a deposit now, and when come construction time (in two years), sell it, since it will probably appreciate quite a bit by then? In fact, why not put deposits down on as many units as I can? I was thinking that it seems way too easy / too good to be true. Have you done anything like this, and does it work?

Do I have to be able to finance the entire price of the unit? I am currently using that loaning trick to build some credit and several banks, so I could possibly have enough credit to finance one of these units (but not several), two years down the road.

Thanks again for your help. It's very helpful to have someone who can answer specific questions like this.

By the way, if you are looking for some good real estate investments, the area around Research Triangle Park in North Carolina (where I am), is supposedly the second fastest growing real estate market in the nation. There's also an Interstate Highway being extended by 2006, making land in Apex and Mebin very great potential investments.

 

[Page]

Str8up: I have another question.

I was talking about this on another board, and the subject of cap rates came up. The poster claimed that it is a basic concept in REI, but neither Whitney or Kiyosaki mentions it IIRC. What is a cap rate and how is it important? (I googled cap rate, but i had a hard time understanding what came up, maybe you can clarify.)

 

[STR8UP]

Originally posted by Page
Str8up: I have another question.

I was talking about this on another board, and the subject of cap rates came up. The poster claimed that it is a basic concept in REI, but neither Whitney or Kiyosaki mentions it IIRC. What is a cap rate and how is it important? (I googled cap rate, but i had a hard time understanding what came up, maybe you can clarify.)

http://www.rogueinvestor.com/definitions/capitalization_rate.html

Check out this definition, it might be easier to understand.

You usually see cap rate referred to on commercial property listings. It's one way to help establish a value for a property. I haven't seen it often used in residential real estate.

It's basically a reflection of how good the rental income is in relation to what you are paying, but it's only one of many factors that determine the value of an investment.

 

[Oxide]

StR8UP, straight to the point:


When buying real estate, what is it we should be looking at to evaluate the condition? Someone told me kitchens are very important..

here are some things i've been told:


Look at the roof, what kind it is, if it has shingles look at the CORNERS of the shingles to see if they are bent , this means it will have to be replaced sooner.

Windows, look at the isolation and look at the cracks. Windows are expensive as fukk to replace (apparently).

In order to make a room a legal bedroom you need to have a window in it.


Add more


p.s. i got only $280 on my credit card to pay off, about freaking time my limit is 4k and i checked my credit report, it said i got 4 "good" relationships and none bad.

 

[STR8UP]

Originally posted by h2o
Hey STR8UP,

I had a quick question. I am currently browsing some apartments that are in the pre-construction phase...the building has not been built yet. Since the building will go up in about a year, and the actual apartments in around 1.5-2yrs, they are asking for a 5% deposit. These range from $200K-$400K, so that's about a $10K-$20K deposit, and they are asking for 40% of it up front and the other 60% at financing time.

A similar building was built in the area about half a year ago, and since then the units have appreciated around $20K-$30K. My question is, can I put a deposit now, and when come construction time (in two years), sell it, since it will probably appreciate quite a bit by then? In fact, why not put deposits down on as many units as I can? I was thinking that it seems way too easy / too good to be true. Have you done anything like this, and does it work?

Do I have to be able to finance the entire price of the unit? I am currently using that loaning trick to build some credit and several banks, so I could possibly have enough credit to finance one of these units (but not several), two years down the road.

Thanks again for your help. It's very helpful to have someone who can answer specific questions like this.

By the way, if you are looking for some good real estate investments, the area around Research Triangle Park in North Carolina (where I am), is supposedly the second fastest growing real estate market in the nation. There's also an Interstate Highway being extended by 2006, making land in Apex and Mebin very great potential investments.

All i can say is that pre-construction is great if the market continues to trend up. It's only too good to b true if you make a profit, and noone has a crystal ball to see two years ahead! If appreciation continues you will make some cash with little effort. If not, well, you are going to be out some money depending upon the contract you sign.

We have a few pre-construction contracts pending as we speak. We try to stick with lower dollar units and the only area we are working in right now is undergoing an urban renaissance. I would be hesitant to put a whole lot of money into some of the projects that are going up in outlying areas because I don't feel that they have the potential to hold up as well when real estate cools down.

This is a specualtive investment. I wouldn't rely on past appreciation to judge the value. It's just like anything else though...if you have done your research and feel that the demand will continue to grow in a certain area you have the potential to make some money. Just make sure you do your homework!