There seems to be a misconception among certain segments of our society as to the role real estate investors play in an economy. They believe that people who invest in real estate are nothing more than sharks preying on the less fortunate. And while that may happen in corporate, hedge fund and other investors like Armando Montelongo and Than Merrill who typically are not personally involved in the investment, nothing could be further from the truth as far as the individual investor who is personally involved.
My name is Bill Vaughn. I have been personally involved in real estate investing since 1969, and I wrote the free ebook, "Success - by Design" which has been downloaded over 4.2 million times, and in 1989 developed "The Simple Man's Guide to Real Estate" investing program through which I have personally taught thousands of people throughout North America how to grow wealth by doing what I do. I know real estate investing.
Individual investors avoid preying upon anyone. On the contrary, they tend to benefit everyone involved in a transaction - not only themselves, but also the seller, the financing institution, the Realtor, appraiser and even the neighborhood in general. Let's look at an example:
Joe homeowner has run into difficult times and is unemployed. His home is valued at $180,000 and he has $40,000 equity, leaving a $140,000 mortgage. First he defaults on his $10,000 credit card debt so his credit is already trashed. Nowhere to turn, he begins missing his mortgage payments. The bank has issued the foreclosure notice - Joe's family is losing their home. Upon foreclosure, they will have no home, lose their equity, have no money to rent a place and no credit. The future for Joe's family is bleak.
A wise investor inserts himself and offers Joe a different future. He offers to pay off the $140,000 mortgage AND the $10,000 credit card debt and will give him an additional $5,000 to get a fresh start. In return, the investor gets the remaining $20,000 equity. Joe now has some jingle to get an apartment for his family with some cash left over for expenses, and his credit is beginning to mend since his debt has been paid in full. This is a far better outcome than Joe was looking at before the investor came along.
The investor takes out his own 80% LTV mortgage ($144,000) on the place to pay off the old mortgage. He pays the $10,000 to pay off Joe's credit card debt and the $5,000 "walking" money for Joe out of pocket (in lieu of the down payment). This leaves the investor with a $180,000 property at a total out-of-pocket cost of $15,000. He markets the property at its $180,000 value. Upon closing, he pays off his $144,000 mortgage, gets his $15,000 back from paying off Joe's credit card debt and walking cash, leaving him a quick profit of $21,000 less expenses.
Everyone wins. Not only was the investor not a predator, he was actually a saviour. For those who say "But poor Joe still lost his home" I would remind them that Joe was going to lose his home in any case. The investor did not cause the loss of his home, but did make it much, much easier for Joe. In fact, the investor could simply allow Joe's family to stay in the home with a lease with option to buy, giving Joe time to get back on his feet and buy his home back. The investor would profit more from the appreciation when Joe finally buys it back.
This is only one of 24 different types of transactions - 8 of which do not require cash or credit - featured in "The Simple Man's Guide to Real Estate."
The point is: an investor, regardless of the type of transaction, would typically create a win-win deal because that is the only way to insure a lasting career. If he preys on people, it won't be long before his reputation nudges him out of deals. If you help everyone to win, they will help you to win because they want your good deals to keep benefiting them.
I know. I have survived 53 years in this business!
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