First, he became interested in investment property when I was a futures broker commodity on the east coast of Florida two decades ago. I did what I everyone did. I went to a seminar. The sponsor of the seminar soon went to prison and joined the crowd of people who knew he could not invest in real estate. I was lucky to have a disaster in my dealing with conventional real estate show me the big picture.

Maryan and I had bought a house in Boca Raton, and when he decided Back to Pinellas County (Tampa Bay area) we learned that the house they bought was a mile away from where an incinerator for burning trash was to be built. The person who sold us the house may have known about the plans, but we did not. When we were ready to sell everyone knew and we can not sell the house.

We left the house with a realtor and moved to Palm Harbor to start a new business. No estate agent. Months later, the realtor called to say that a "good young couple" wanted to buy our house and wanted to be funded. We were terrified because I had learned the conventional wisdom that banks make mortgage loans and the loan people. However, it is sold that way or not sold for long, so we funding.

Eventually worked out, people really were a nice young couple, refinanced a couple of years later and I was fascinated creative with real estate. We bought a couple of foreclosures, which were quite large in the 80's as they are now, which needs very little work and sold with owner financing, since she learned that funding went home quickly and eventually bought a house too ugly to make our first real rehabilitation.

The house cost about $ 17,000 and we paid about $ 12,000 to set up and quickly leased with purchase option at $ 50,000. The buyer tenant was paying $ 550 per month. I thought this was terrible. I had never seen anything like this in the stock market or commodities market.

We thought this was pretty good until a mortgage broker we know, let's call her "Mary", mainly because that's his real name, came to us and said.

"Forget the taxes, repairs and insurance for simplicity and tell me what your rate of return is?"

And you would be interested if I could show you how to do much more, and if I do it that's fine if I make a profit too? "

"Sure, he said. "If it actually rented all year (and can not be), have $ 6,600 in rent and since we have about $ 30,000 of our own money in it, the return is 22 percent per year and will do a little more out of the back-end when the tenants of refinancing and cash us out. "

"So if I were to loan the $ 30,000 it takes 8%, I was going to pay $ 2,400 a year, far beyond what you can do outside of CDs, it would an income of $ 4,200 and you would have all the money back so you could buy and renovate another house and $ 4,200 return on investment of zero would be better than 22 percent.

We think that was very convincing logic. We took the loan and everything went well until the refinancing of the tenants and collect us. We had to make another check for just under $ 20,000, so now is a zero investment. But we decided to get used to it.

Mary suggested that we "walk by the mortgage." This means that changed the mortgage to another property so Mary could still receive the8 percent interest and we had to reach $ 30,000 to pay her off. So the check we received was really closer to $ 50,000 to $ 20,000.

I always think of this early experience, when people tell me that real estate is risky. That is thousands and thousands of people who considered themselves investors property have gone through terrible stress, foreclosure and bankruptcy. But as we said at the beginning of the first article of this series. "There are investments in real estate and then there are the investments in real estate.

Many of the recently departed investors bought at full price when the market was high and expected to market would go up so it could re-sell and profit. That only worked when the market is rising. When stopped, they lost substantial amounts of money.

Being a partner of a person rehabilitate a property bought below market may have less risk than outright speculation, but still has risks. There is always a variety of things that can go wrong.

Even the strategy that Mary has shown us their risk, but I think that is less than most available investment vehicles of any kind. IBM can not buy below market price because the share certificates are broken and they get paid to write together again. Have a very good chance to get paid for fixing the houses that need repair and are selling below market, because most people think it will cost more to fix what we have found to be the case.

George K. Beardsley has been buying, renovating, and renting homes in the Tampa Bay area for two decades. Like most real estate investors, he never started out to be in real estate. He has a bachelor’s and master of arts in Journalism, was awarded the Bronze Star Medal for service as a combat intelligence officer in Viet Nam and was a reporter for the Chicago Tribune before becoming a stock and commodity broker and commodity trader in Chicago. Now out of the securities industry for two decades, he works to resolve customer complaints by chairing arbitration panels for investors who have disputes with their stock brokers under the auspices of the Financial Industry Regulatory Authority (FINRA). He has written two Mini Books on the use of options in securities markets and was an editor for the book publishing firm of Dow Jones Irwin and has contributed articles for securities and commodity industry magazines. He holds a Florida Real Estate Broker’s License and is the broker of Advanced Realty Team, Inc., Dunedin, Fl. He has recently written the eBook “911forLandlords.com,” showing landlords how to rent houses faster for more money. Visit the Advanced Web site at http://www.1Gr8Deal.com.

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