Getting Started in Creative Real Estate
Getting Started in Creative Real Estate
November 12, 2008
As I talk with people every day about Creative Real Estate, I frequently get asked this question: "How did you get started in Creative Real Estate?"
People are curious to know how or why someone like me found themselves buying property creatively. The simple answer is that at the time I bought my first property, I was broke and needed a place to live. Of course, people want the details, so I give them the long explanation.
In July of 1979, 1 took the California Bar Exam. As soon as I had finished the exam, I flew to Hawaii to join my wife who had left earlier. We had decided to live there a while after taking the exam. While we were living there, my wife's uncle made a trip to the mainland. When he returned he came back with many things, one item being a book about creative real estate (No, it was not A Fortune at Your Feet).
This book was pretty basic compared to A Fortune at Your Feet. It did cover such topics as leveraging and how compounding works. I began to realize why my parents had purchased a few rentals over time. You see up until this time my view of rental property was something I had to work on. In my family I was the eldest son. Whatever help my father needed, I was there to provide. Most of the time I was not enthusiastic about my role as an indentured servant!
He had purchased properties with no money out of his pocket. After reading this book, as basic and self-serving as it was, it opened my eyes to the possibilities of owning not only my own home, but a number of properties. The author kept referring to his use of a "wraparound mortgage" to buy him several properties and how by using this technique he had purchased properties with little or no money out of his pocket.
In December of 1979, we moved back to California. We arrived broke. The costs of airline tickets for ourselves and our household goods tapped our cash and credit resources. I may have been broke, but I had a plan! We moved into my sister-in-law's home. However, before we came back, I asked my sister-in-law to find us a Realtor. As soon as we arrived I met with the Realtor and told her what I wanted. I wanted to buy a house using a wraparound mortgage. Lucky for me she had just gotten her license and was eager to put together a transaction!
There is something to be said for working with a young dynamic person who has a lot of energy and enthusiasm. She didn't know what a wraparound mortgage was and neither did I. You see, the author never gave an explanation of how it worked. Therefore, I could not explain it to my Realtor except to say that you use it to buy real estate without having to go to the bank.
While she was looking for a property for me, I was out interviewing for a job. I realized that if I were to purchase a property for "no money down" I still had to make the monthly payments. Within two weeks we were both successful. She had found us a house and I had found a good job. The home was a four-bedroom in a suburb of Los Angeles. The owner was a contractor who happened to live right across the street from the property.
The owner was tired of having renters as his neighbors. He also was tired of maintaining the property. However, he still wanted the monthly income from this property. After inspecting the property and meeting with the owner to discuss the needs of the owner and explaining the situation, "no money, great prospects", we made an offer. We gave him his asking price because we had reviewed some comps and his price was reasonable.
We asked that he carryback the financing using a wraparound mortgage. Lucky for me he knew what that was and how it worked. He had sold other properties using this technique. I wrote the Realtor an IOU for $500 on the back of an envelope for deposit.
The bottom line is that I had to come up with $500 at closing with further principal payments over time. Part of the offer was that we could live rent free in the house during the escrow period. The owner agreed with one stipulation, that I provide verification of employment. I was able to comply with this one stipulation and moved into the house.
So there you have it. How a dummy got an idea from a real estate book and just did something!
Frederick Tingley
November 12, 2008
As I talk with people every day about Creative Real Estate, I frequently get asked this question: "How did you get started in Creative Real Estate?"
People are curious to know how or why someone like me found themselves buying property creatively. The simple answer is that at the time I bought my first property, I was broke and needed a place to live. Of course, people want the details, so I give them the long explanation.
In July of 1979, 1 took the California Bar Exam. As soon as I had finished the exam, I flew to Hawaii to join my wife who had left earlier. We had decided to live there a while after taking the exam. While we were living there, my wife's uncle made a trip to the mainland. When he returned he came back with many things, one item being a book about creative real estate (No, it was not A Fortune at Your Feet).
This book was pretty basic compared to A Fortune at Your Feet. It did cover such topics as leveraging and how compounding works. I began to realize why my parents had purchased a few rentals over time. You see up until this time my view of rental property was something I had to work on. In my family I was the eldest son. Whatever help my father needed, I was there to provide. Most of the time I was not enthusiastic about my role as an indentured servant!
He had purchased properties with no money out of his pocket. After reading this book, as basic and self-serving as it was, it opened my eyes to the possibilities of owning not only my own home, but a number of properties. The author kept referring to his use of a "wraparound mortgage" to buy him several properties and how by using this technique he had purchased properties with little or no money out of his pocket.
In December of 1979, we moved back to California. We arrived broke. The costs of airline tickets for ourselves and our household goods tapped our cash and credit resources. I may have been broke, but I had a plan! We moved into my sister-in-law's home. However, before we came back, I asked my sister-in-law to find us a Realtor. As soon as we arrived I met with the Realtor and told her what I wanted. I wanted to buy a house using a wraparound mortgage. Lucky for me she had just gotten her license and was eager to put together a transaction!
There is something to be said for working with a young dynamic person who has a lot of energy and enthusiasm. She didn't know what a wraparound mortgage was and neither did I. You see, the author never gave an explanation of how it worked. Therefore, I could not explain it to my Realtor except to say that you use it to buy real estate without having to go to the bank.
While she was looking for a property for me, I was out interviewing for a job. I realized that if I were to purchase a property for "no money down" I still had to make the monthly payments. Within two weeks we were both successful. She had found us a house and I had found a good job. The home was a four-bedroom in a suburb of Los Angeles. The owner was a contractor who happened to live right across the street from the property.
The owner was tired of having renters as his neighbors. He also was tired of maintaining the property. However, he still wanted the monthly income from this property. After inspecting the property and meeting with the owner to discuss the needs of the owner and explaining the situation, "no money, great prospects", we made an offer. We gave him his asking price because we had reviewed some comps and his price was reasonable.
We asked that he carryback the financing using a wraparound mortgage. Lucky for me he knew what that was and how it worked. He had sold other properties using this technique. I wrote the Realtor an IOU for $500 on the back of an envelope for deposit.
The bottom line is that I had to come up with $500 at closing with further principal payments over time. Part of the offer was that we could live rent free in the house during the escrow period. The owner agreed with one stipulation, that I provide verification of employment. I was able to comply with this one stipulation and moved into the house.
So there you have it. How a dummy got an idea from a real estate book and just did something!
Frederick Tingley