| The All-Money-Down Technique | | | | technique. At the time maybe I had $60,000 in available |
| So how does the all-money-down technique work by | | | | funds to use to buy homes off of my HELOC, so I |
| purchasing a home with cash? First of all, let me | | | | would buy a home and then replenish the money. It |
| repeat that I really didn't have any cash, but I had a | | | | was a terrific technique that was legal, and I could see |
| significant amount of equity from Terry's home and | | | | my dream of being a real estate investor full-time |
| several homes that I owned put together to give me a | | | | coming to an eventual reality even though I wasn't |
| substantial cash down payment. Banks and mortgage | | | | there yet. |
| companies alike will accept money from a | | | | During the years from 1995 to 2002, the real estate |
| home-equity line of credit as cash to purchase a | | | | market in Philadelphia made gradual increases of |
| home. At least they did in 1997 under the financial | | | | maybe 6 percent as each year went on. I began to |
| guidelines of the day. What you must remember about | | | | track my net worth that was 100 percent equity, |
| mortgages and lending is that the guidelines change | | | | meaning I had no other forms of investments to look |
| constantly, so this technique I used in 1997 may or may | | | | at when calculating my net worth. Generally speaking, |
| not be able to be used in the future. Whether it is or | | | | the first five years of my real estate career did not go |
| isn't able to be used again doesn't really matter to me | | | | well because of the bad decisions I made purchasing |
| as I believe that there will always be a way to buy real | | | | buildings and the decline in the market. Furthermore, my |
| estate with limited money down sooner or later. There | | | | lack of knowledge and experience in repairs made it a |
| will always be a technique to acquire real estate but | | | | rough. The second five years of my real estate |
| exactly how that will be done in the future I'm not | | | | career that I just finished explaining didn't make much |
| completely sure. | | | | money either. I supported myself primarily through my |
| I began purchasing homes in the Mayfair section of | | | | career as a salesman, but I could definitely see the |
| Philadelphia with the prices in the $30,000 to $40,000 | | | | writing on the wall that down the road real estate was |
| per home price range. I would purchase a home with | | | | going to be my full-time gig. |
| three bedrooms and one bathroom on the second | | | | Realty Professionals of America |
| floor with a kitchen, dining room, and living room on the | | | | I own an office building that has a real estate company |
| first floor and a basement. What we call a row home | | | | as a tenant called Realty Professionals of America. |
| in Philadelphia would consist of a porch out front and a | | | | The company has a terrific plan where a new agent |
| backyard the width of the home. Most row homes in | | | | receives 75 percent of the commission and the broker |
| Philadelphia are less than twenty-two feet wide. For | | | | gets only 25 percent. If you don't know it, this is a |
| those of you who are not from Philadelphia and can't | | | | pretty good deal, especially for a new real estate |
| picture what a Philadelphia row home looks like, I | | | | agent. The company also offers a 5 percent |
| suggest you watch the movie Rocky. Twenty-two | | | | sponsorship fee to the agent who sponsors them on |
| homes on each side of every block will really test your | | | | every deal they do. If you bring an individual who is a |
| ability to be a neighbor. Things that will usually cause an | | | | realtor in to the company that you have sponsored, |
| argument with your Philadelphia neighbors often stem | | | | the broker will pay you a 5 percent sponsorship out of |
| from parking, noise your children make, where you | | | | the broker's end so that the new realtor you |
| leave your trash cans, parties, and the appearance of | | | | sponsored can still earn 75 percent commissions. In |
| your home. | | | | addition to the above, Realty Professionals of America |
| In 1998 my girlfriend and I moved in together and to the | | | | offers to increase the realtor's commission by 5 |
| suburbs of Philadelphia called Warminster. After living | | | | percent after achieving cumulative commission |
| on a street in Tacony, much like Rocky did, I really | | | | benchmarks, up to a maximum of 90 percent. Once a |
| looked forward to having space between my home | | | | commission benchmark is reached, an agent's |
| and my next-door neighbor. I told Terry not to even | | | | commission rate is only decreased if commissions in |
| think about talking with the people who lived next door | | | | the following year do not reach a lower baseline |
| to us. I told her if one of them comes over with a | | | | amount. I currently keep 85 percent of all my deals' |
| fruitcake I am going to take it and punt it like a football | | | | commissions; plus I receive sponsorship checks of 5 |
| right into their backyard. I believe I was suffering from | | | | percent from the commissions that the agents I |
| Philadelphia row home syndrome. My new neighbors in | | | | sponsored earn. If you'd like to learn more about being |
| Warminster turned out to be wonderful people, but it | | | | sponsored into Realty Professionals of America's |
| took me eighteen months before I was willing to learn | | | | wonderful plan, please call me directly at |
| that. | | | | 267-988-2000. |
| So you just bought your row home for $35,000 in | | | | Getting My Real Estate License |
| Mayfair, and after $2000 in closing costs and $5000 in | | | | One of the things that I did in the summer of 2005 |
| repair costs, you find yourself a good tenant who | | | | after leaving my full-time job was to make plans to get |
| wants to rent the home. After renting the home with a | | | | my real estate license. Getting my real estate license |
| positive cash flow of $200 a month, you now have an | | | | was something I always wanted to do but never |
| outstanding debt of $42,000 on your home equity line | | | | seemed to have the time to do it. I'm sure you've |
| of credit that will have to be paid off. When purchasing | | | | heard that excuse a thousand times. People always |
| the home, I did not get a mortgage as I just purchased | | | | say that they're going to do something soon as they |
| a home for cash as it is said in the business. All monies | | | | find the time to do it, but they never seem to find the |
| I spent on this house were spent from the | | | | time, do they? I try not to let myself make excuses for |
| home-equity line of credit. | | | | anything. So I've made up my mind before I ever left |
| The move now is to pay off your home-equity line of | | | | my full-time job that one of the first things I would do |
| credit so you can go do it again. We now go to a | | | | was to get my real estate license. I enrolled in a school |
| bank with your fixed-up property and tell the mortgage | | | | called the American Real Estate Institute for a |
| department that you want to do a cash-out refinancing | | | | two-week full-time program to obtain my license to sell |
| of your real estate investment. It helps to explain that | | | | real estate in the state of Pennsylvania. Two terrific |
| the neighborhood you purchase your property in should | | | | guys with a world of experience taught the class, and I |
| have a wider range of pricing as the neighborhood of | | | | enjoyed the time I spent there. Immediately after |
| Mayfair did in the mid-90s. The pricing of homes in | | | | completing the course at the American Real Estate |
| Mayfair is quite unusual as you would see a $3000 | | | | Institute, I booked the next available day offered by the |
| difference in home values from one block to the next. | | | | state to take the state exam. My teachers' advice to |
| This was important when doing a cash-out refinancing | | | | take the exam immediately after the class turned out |
| because it's pretty easy for the bank to see that I just | | | | to be an excellent suggestion. I passed the exam with |
| bought my property for $35,000 regardless of the fact | | | | flying colors and have used my license many times |
| that I did many repairs. I could justify the fact that I've | | | | since to buy real estate and reduce the expenses. If |
| spent more money on my home to fix it up, and by | | | | you are going to be a full-time real estate investor or a |
| putting a tenant in, it was now a profitable piece of real | | | | commercial real estate investor, then you almost have |
| estate from an investment standpoint. | | | | to get a license. While I know a few people who don't |
| If I was lucky like I was many times over doing this | | | | believe this, I'm convinced it's the only way. |
| system of purchasing homes in Mayfair and the | | | | I worked on one deal at $3 million where the |
| appraiser would use homes a block or two away and | | | | commission to the buyer's real estate agent was |
| come back with an appraisal of $45,000. Back then | | | | $75,000. By the time my broker took a share, I walked |
| there were programs allowing an investor to purchase | | | | with $63,000 commission on that deal alone. With the |
| a home for 10 percent down or left in as equity doing | | | | average cost per year of being a realtor running about |
| a 90 percent cash out refinance giving me back | | | | $1200 per year, this one deal alone would've paid for |
| roughly $40,500. Utilizing this technique allowed me to | | | | my real estate license for fifty-three years. Not to |
| get back most of the money I put down on the | | | | mention all the other fringe benefits like having access |
| property. I basically paid just $1,500 down for this new | | | | to the multiple listing service offered too many realtors |
| home. Why did the mortgage companies and the | | | | in this country. While there are other ways to get |
| appraisers keep giving me the numbers I wanted? I | | | | access to the multiple listing services or another |
| assume because they wanted the business. I would | | | | program similar to it, a real estate license is a great |
| only tell the bank I need this to come in at $45,000 or I | | | | way to go. |
| am just keeping it financed as is. They always | | | | Some of the negatives I hear over and over again |
| seemed to give me what I wanted within reason. | | | | about having your real estate license is the fact that |
| This whole process took three to four months during | | | | you have to disclose that you are realtor when buying |
| which time I may have saved a few thousand dollars. | | | | a home if you're representing yourself. Maybe I'm |
| Between the money I saved from my job and my | | | | missing something, but I don't see this as a negative at |
| investments and cash out refinancing, I had replenished | | | | all. If you're skilled in the art of negotiation, it's just |
| most or all of my funds from my home-equity line of | | | | another hurdle that you have to deal with. I suppose |
| credit that was now almost back to zero to begin the | | | | you could end up in a lawsuit where a court of law |
| process again. And that is exactly what I intended to | | | | could assume because you are realtor you should |
| do. I used this system to purchase four to six homes a | | | | know all these things. I don't spend my life worrying |
| year utilizing the same money to purchase home after | | | | about the million ways I can be sued any more than I |
| home after home over and over again. In reality, the | | | | worry about getting hit by a car every time I cross the |
| technique is a no-money down or little money down | | | | street. |