Newbie Question About How Much RE I Can Leverage
Newbie question...so please don't flame me too hard.
Of all of the RE reading I've done, what sticks out to me is this: To maximize long term appreciation, I must control as much RE as possible. To do this effectively, I must use Other People's Money.
My question applies to rental properties (duplexes, four-plexes).
How much can I control? As long as I have a positive cash flow for each property, would my income level limit me from acquiring more?
I have some cash reserves that I would like to use to cover closing costs and other miscellaneous fees, but I would prefer to use OPM to cover 100% of any purchases (I've seen other posts mentioning 80%/20% No PMI NOO loans).
I'm sure I can't just go out and buy 100 4-plexes and become the 4-plex king (though getting to wear the crown would be pretty cool!)...but I would like to think that I could acquire more than 1 or 2. I know that I need to start somewhere, but I don't want to tie up all of my capital if I could be more efficient with it.
Dear Newbie,
The nice thing about leverage is that it has no limits. Given the proper length of lever we can move the earth. The only real problem is finding that little platform on which the lever must rest.
So is it in Real Estate Investings. Lets see, to review John Kennedy, father of one of our presidents. Did it in one large transaction he leveraged $50,000 into over $4,000,000.on one transaction.
Chicago Board of Trade Building.
Big Bill Zekendorf bought the Empire State Building on a non money transaction, ended up with three mortgages, a master lease, four sandwich leases. At the time he had finaly moved up from Real Estate Salesman to Broker.
How about the Donald, Mr. Trump da Frump. Ever chart his early deals? Yip they were how shall I say it, unbalanced, no just highly leveraged.
Lucky Baldwin had $5 and lots of guts. On to glory.
We must not forget that sainted person Bob Muir, was a salesman for that unothodorx broker Lucius Foster. Came in one day and said, I am leaving and I would like to settle up all of our open escrows etc. Supose I give you this check for $5,000 and you call it even." Done" I said," we will miss you Bob" Good luck with your new Brokers License." Right we are all even up. I trust his handshake why should I not.
It was exactly three weeks to the day, into the office comes Big Bob, "Hi Lucius," he says,"I just dropped by because I forgot a small little matter." He hands me a check for $50,000, "Would you endorse that over to me." "What the hell is this?" I asked "Oh just a little deal I had in escrow it just closed and as you know we squared up last time so its mine, all mine." I am a little taken back, I have just been had and I don't remember any kiss. But a deal is a deal. So I signed it and shook his hand and sent him on his way to glory. He did make millions and millions and did build some of the biggest shopping centers in the world. I suppose I should say it was all done on that $50,000 he swindled me out of. But no that would not be correct. He did have a problem with that check, you see , I don't spell too well and I endorsed the check. George Washington.
Learning Lucius