False Evidence Appearing Real - That is what I was told the acronym F.E.A.R. stands for. I think fear drives people to do, or not to do, a lot more than the desire to achieve success. Let's look at a few examples;
I invest primarily in California. To the outside observer, one would think I either -
A) have tons of liquid cash or
B) I don't know what I'm doing and missing much better opportunities out of state.
I disagree on both points.
The median home price in the county in California where I invest, at the time of this blog post, stands at $225,000. My average rental in this market comes in at about $1,200. On the numbers, at face value, I couldn't possibly get a decent return paying $225,000 for a $1,200 income stream.
As an investor, it is my job to seek out opportunity and what I am looking for is an undervalued property in a solid rental market. It takes time and energy, and I rarely 'find' a great deal. What I do find is a property owner who has both equity and motivation that I can work with to create a good deal.
I also don't look at property priced around the median value. My typical rental property has a market value in the $125K~$200K range and if I have to pay all cash, I'm buying that property for $70K~$120K. I finance them through a local hard money lender using their long term rental program. Those loans have a 9.9% interest rate, but the APR comes in at closer to 18%. And they still cash flow. Right here in California.
Many of my associates are taking packages of those financed houses and refinancing them through local lenders using their LLC or C corp. They get 30 year amortization, due in 15, with interest rates around 5%.