I really need to study this angle a lot more.

So while the Bawldguy is talking… I am listening.

I can assure you it isn’t rocket science. The proof is – I’m doing it.

>In most areas, if you don’t put down a substantial amount of money when you purchase rental property… your rents (minus management fees) will not cover the mortgage. And if you DO put down a substantial amount of money… you won’t have the capital to purchase multiple properties.

I honestly don’t know about most areas. However, I’ve done it in San Diego, Phoenix, and now Boise without the need for substantial down payments. In Boise clients are acquiring four properties with $100k. They’re in a positive after tax cash flow position. An Arizona real estate firm’s CEO is now doing what he saw me do for almost two years there – in Utah. Today.

I’m putting out a white paper in the next week or two which will shed at least some light on what I do.

I think the bottom line is Doug, (and my business manager is pushing me to do this) I have to write a book. I don’t want to.

I’d sure like to talk at length with you about this. I have a lot of respect for you. If you’re available this weekend, maybe we could talk.

Thanks for the kind words.

I don’t doubt your ability to guide these folks to this wonderful increase in wealth and income… but I guess most of us out here don’t understand how you can get there from here.

In most areas, if you don’t put down a substantial amount of money when you purchase rental property… your rents (minus management fees) will not cover the mortgage. And if you DO put down a substantial amount of money… you won’t have the capital to purchase multiple properties.

I think this example is the kind of story that needs one post to lay out the concept… but will need several posts to cover it in a meaningful way.

And I’m hanging on every word…

We’ve shown a consistent ability in all markets to continue to grow equity, even in this market. I’m sure you do too.

I never intended to implly they’d be selling of 1-2 props yearly into eternity. I thought that’d be obvious to almost anyone, but I’ll take the blame for that one. We’ll be able to easily do this for through 2008 or ’09.

Again, it was done because Missie, then her husband wished to be stay at home parents. It’s not a long term modification. But it works incredibly well.

In about 4-5 years their portfolio will have been transitioned into totally different vehicles which will be geared more towards pure cash flow than growth. Also, we’re acquiring income with current dollars which will kick in in 5-10 years, tax free.

No need to worry Robert, they’ll be fine.

Thanks so much for your thoughtful comment.

Huh? Eventually (shortly) they’ll have used all the depreciation from all the properties to offset the sale of a few properties right? There on it’s all Federal 31.5% plus 9.3% California income. Ouch.

$1.8m equity across 40 AZ properties. Average equity of $45,000. All of them high LTVs so let’s say an average of 90% LTV to be safe. Nice as long as there are no downturns in home prices. Of course with the strategy outlined these purchases are entirely end loaded so probably half are under 2 years since purchase. That’s $18 million in debt service to realize a temporary $150,000 income. One year in any of the next 4 years of flat prices and zero income. One year in any of the next 4 years of declining income and 2 years of negative income. And Starting in about 5 years under the best circumstances of continued appreciation no more deductions right? Selling off 3-4 properties per year in 4 years leaves them with $14 million in debt to service and little or no equity.

The rest is in AZ! They have roughly $1.8Mil in equity divided among just under 40 investment properties. They have homes, duplexes, and 4-plexes.

As far as matching what the Millers did, it helps tremendously to begin your investments around the first quarter of 2001 – and in San Diego. One of the keys to their success has been their ability to ‘pull the trigger’ on trades when the market said to. By constantly keeping their LTV relatively high, their capital growth was consistently turbo charged. That’s what most investors fail to do because they’re locked into the thinking that growth is good – let’s keep watching it grow.

The appreciation of the property isn’t as important as the appreciation of the capital. That one principle is lost on most investors. Instead of falling in love with the fact their $200K duplex is now worth $300k, (and standing on the sidelines to excitedlly watch it hit $400k) they should have traded the increased equity into 3-4 more properties. That’s what the Miller’s did, and that’s why they have so many options today.

I smell a post coming on.

I know SoCal has a great deal better equity position than say Kingman Arizona has so I can’t really compare to two situations (as in I have multiple rental properties right now and can’t see how I could match what the Millers have done).

What kind of numbers are we talking about??

Thanks

I’ll keep reading.