Originally posted by backbreaker
yeah star8up, clean out your box, I tried to mail you 2 days ago...
Box is clean, sorry guys.
IN my opinion, and this is just my personal opinion, I'm not a real estate agent, although I did use some of my PERSONAL MONEY TO BUY SOME REAL ESTATE ONCE I SOLD MY COMPANY... Buying a House on credit and reselling it is probably the stupiest thing you could do..
I have the utmost respect for you because I can clearly see that you know your sh!t. I'm as leery about someone's claims as the next person but the stuff you write about can't be made up by just anyone.
That said, your opinion that buying a house on credit is stupid is way off base and I'll tell you why.
You seem to have done very well for yourself and I'm not taking anything away from what you have done, but you have to put it into perspective. You built a company that became worth a lot of money because (and I don't know the specifics here) it either generated a lot of profit, or someone saw the potential for it to generate a lot of profit and they paid you handsomely for it.
For most people the world of business isn't so simple as it looks on the surface as with your situation. Fact of the matter is that very few people have what it takes to do what you did. I think that you were in a situation that it would be difficult for most people to replicate. Being a good businessman is a VERY specialized talent that can be learned to an extent, but the best of the best have more of a natural talent for it.
So here's my take from my limited info I know about you:
1) You are naturally talented with business
2) Because you are talented you won your first race right out of the starting gate and as such you missed many of the intricacies of business (when it comes to the asset value of it) and the challenges most people with less talent are faced with
3) You aren't fully aware of some of the underlying fundamentals that create wealth, since you have only seen it from the perspective of being a talented businessperson
Basically what I am saying is that what worked for you might not work quite so well for most other people. That would include myself because although I believe I have a natural talent for money in general, business doesn't come so easily for me.
Now, assuming that I am at least somewhat correct here, I think you are good at building a valuable business that not everyone is capable of. This has caused you to miss out on becoming educated as to how leverage (debt) is absolutely the most powerful tool for building wealth, hands down. This is where the credit issue comes into play.
For the average Joe who doesn't have your level of business savvy the best way to create wealth is to learn how to borrow tons of money and use it effectively. For someone in your shoes it can turn you from a millionaire into a BILLIONAIRE, if that's the direction you wish to go.
Building businesses = great for someone who has a knack for it
Learning to buy assets with leverage = great for someone who isn't great with business
Learning how to use leverage AND business together = the key to unimaginable wealth
So I believe you are missing a big piece of the puzzle. There, I said it.
I'm sure you grew up just like the rest of us having been taught that debt is BAD, end of story. It took me years to realize that all debt is not created equal and to truly discover how powerful of a tool it is for building wealth. Even today I catch my old conditioning trying to influence my decisions. It's VERY, VERY difficult to train yourself to think otherwise when pretty much everyone around you is telling you the opposite.
To further illustrate my point let me answer a few of the points you made in your post-
Doens't make much sense whatsoever...
Unless you can get an unreal Low Interest Rate on your loan..
Remember... Housing Interest Rate loans are Compunded interest... a $100,000 loan paid off in 30 years is really a wopping $270,000... So why not just pay the $100,000?
Okay, this is where it gets good. Before I go into it, let me ask you something. What exactly IS an unreal low interest rate? 2%? .5%?
ANY interest rate is low if you MAKE more than you pay out.
If I let you borrow $10 today with the understanding that you would pay me back $20 next month, you might tell me to get lost because that would equate to you paying me HUNDREDS of percent in interest. You would be absolutely justified in telling me to get lost if you were to use that money to buy clothes or food or anything else that has no value (even if you were to put it in the bank earning a small amount of interest) but.....BUT....what if instead you took that money and bought a rare coin from person A for $10 then turned around and sold it to person B two weeks later for $30. You could pay ME the $10 principal and the $10 interest, and YOU keep the difference. Ten bucks in your pocket for knowing that interest is only a cost of doing business.
It works the same with buying assets such as real estate, only on a larger scale. Of course you wouldn't likely be paying such high interest rates, BUT EVEN IF YOU DID IT'S FINE AS LONG AS YOU MAKE MORE THAN YOU SPEND, I CAN'T STRESS THIS ENOUGH! You have to get that "debt is evil" mentality out of your head.
You said, "why not just pay the $100,000?"
Now HOW MANY people do you know that have an extra $10,000 laying around LET ALONE $100,000? You are taking for granted that others have the same resources you do. Even if we DID, the way to make money grow is through leverage, not by paying cash for assets.
Put it this way. There are times when I sell a property and I might have an extra $100k sitting in the bank. I could easily say, "I want zero risk, I will pay cash for ONE property". Instead I know that risk isn't as dangerous as it's made out to be if you have experience, so I say to myself, "I want to make this money grow, what is the best way to go about it?" Then I take the $100k and buy FIVE or more properties with it instead of one.
Let me clarify something. Right now I am using the cash from the sale of my old properties to speculate (yes, I said speculate, not invest) in a condo market which through research I have made a reasonable guess that this market will do well over the next few years...better than outlying areas. This is a unique opportunity for me and I wouldn't recommend anyone else do it without enough backing, the proper connections, and lots of experience.
As soon as the market that I am in cools down though, I am going to sell these properties and invest (this time I will be investing) in commercial peoperties that provide me with a passive cash flow that I should be able to use to live comfortably for the rest of my life. I will be buying based upon getting the best rate of return possible on the money I have to put down to acquire each property.
When all is said and done and I sell these units there should be between $1million - $2million dollars left over to buy commercial property. I could easily use this money to pay cash for one property, but instead I want to make it grow. In order to do that I will take my time searching for SEVERAL prime properties that give me a good return on the amount of money I have to use for a down payment in each one.
If I only bought ONE property the value of the money I have invested might double in ten or so years, but since I am investing in multiple properties it will likely increase by 4 or 5 times. Make sense?
Keep in mind here that there are many different strategies for investing in real estate and business. You can buy and hold, letting the tenant pay your bills, you can buy and flip, you can do all kinds of stuff by CONTROLLING the property instead of actually owning it (options, etc.). I don't know why SOME people on here are stuck on the fact that I mentioned that ONE of the methods I used over the years was to buy property with credit cards, but the fact of the matter is that the two I did buy that way I just sold for a LOT more than I paid for them. I could have thrown my hands up and said "I can't get financed so I can't buy these properties" and I wouldn't be where I am at today, that's for sure.
