Positive vs Negative Cashflow - 2 of 10

Cashflow is a term that is used repeatedly in discussing real estate investing. Cashflow is also used to described streams of income from other sources, but primarily the term is used in real estate. Cashflow is simply the amount of gross revenue that the property or asset is producing for you. If you own a rental property and the renters pay $800 a month then that properties cashflow is....yep you guessed it $800 a month.

To break it down a bit more cashflow, again, while discussing real estate investing, is either termed as positive cashflow or negative cashflow. You can probably figure out what these two terms mean also. They are referring to the net income of a property or asset. So using the same example if you are receiving $800 a month in rent but your total mortgage plus taxes plus insurance plus maintenance payment is $1,000, then this property provides negative cashflow. Negative cashflow 99% of the time is a negative thing if your strategy is to buy and hold. On the other hand if your total payment is $600 a month then you have positive cashflow. Positive cashflow is the key to having a successful real estate investment.

I recently over heard a conversation about real estate investing. One man said to the other, "I don't know why but when it comes to real estate it is good to have negative cashflow." This person was obviously confused and me knowing the one real estate investment property this person has I know he was probably fed this line by the person who sold him the investment property. Don't let anyone ever tell you different. If you are planning on buying a property and holding it for a couple years than you absolutely positively do not want to be losing money every month.

This story goes to show how confusing real estate investing can be for some people. This otherwise prudent and inteligent man was duped into believing that it is good to lose money month after month after month. The only time this really pays off is when you have an incredibly high appreciation rate year after year but that possibility is a risky one to say the least.

The moral of the story is to always focus on positive cashflow. There are too many properties out there, especially now, that if bought correctly will have positive cashflow that you should never buy a property that has negative cashflow. It is as simple as that.

1.1 of 10 How to Make Money Wholesaling Real Estate

Like I explained in Part 1 "How to Wholesale Real Estate" making money through wholesaling has little risk and potential high rewards. Remember, you don't have to use your own money nor do you need to take on any large loans. You simply need to find the deal and find someone who wants the deal. Doing those two things will make you as much money as you want. You can do it over and over and over again. Find the deal and find somebody that wants the deal. Very simple.

Now there are two primary ways to make money through wholesaling. Both consist of doing the two things mentioned above but there is one major difference. One makes you a lot of money and the other doesn't. Wholesaling is also known as "Bird Dogging." More precisely, someone who is a Bird Dog is a wholesaler. Though a wholesaler is not necessarily a Bird Dog. A little confusing but let me explain.

A bird dog is someone who is more or less "hired" to find deals. An advanced real estate investor will have multiple bird dogs working for him in areas where they would like to purchase a property. Bird dogs get paid a fixed amount of money, and usually have negotiated this before they ever start looking for a property. Basically, an investor will promise to pay anywhere from $500 - $2,000 to the bird dog if the deal closes. Because a bird dog finds deals and gives them to someone who wants them they are essentially a wholesaler. Being a bird dog has it pros, but if you are going to do all that work then you should get paid accordingly, or at least I think so. Why settle for $500 when the investor turns around and makes $20,000, $30,000, or $50,000.

As a wholesaler you are becoming a true middle person by taking part of the margin just not a finder's fee. Let me break it down with an example. Let's say you find a pre forclosure you can buy for $100,000. After a some minor improvements ($5,000 worth) the property's resell value is $150,000. That makes the profit margin $100,000 + $5,000 and then subtract that from the $150,000 sell price. This means your profit margin would be $45,000. As a bird dog you would have already negotiated to make $1000 for providing the investor a deal like this. This means after paying you, the bird dog, the investor will make $44,000. Not bad for not having done anything except closing on the deal. Now as a true wholesaler let me show you how you can really profit.

Let's say you find the same property, do all the research, but instead of just turning it over to the investor you actually get the property under contract in you name at $100,000. You now have 30 days to find someone to buy the property. You already know the investor that was looking in that area so you call him/her up and say I have a property under contract it is worth $150,000 after $5,000 worth of improvements. I will assign the rights to this property to you for the price of .....you decide. It could be $110,000 or $115,000 or $120,000 leaving you with $10,000, $15,000 or even $20,000 in profit. The investor is still happy because they will make $25,000 - $30,000. The only difference, and its a big diference, is that instead of only making $1,000 you will make 10 times that. Very very powerful!

Now tell me. Why would anyone ever settle for just being a bird dog. You are already doing the same work...just get that property under contract and you will make some big dollars. No bird dogs...be a wholesaler through and through.

1 of 10 - How to Wholesale Real Estate*******

I feel like the first post in this series should be powerful, direct, and catchy. That is why Wholesaling is the first topic. It is one of the easiest ways to begin investing. Think about it...there is a way you can start investing in real estate without having to buy any properties, without having to get a loan, without having to use your own money, without having to quit your day job, and without a lot of risk. All it takes to become a wholesaler/bird dog is some knowledge of your market, some investor contacts, and some desire. It is as easy as that. I know it sounds too good too be true...just remember this is not an info commercial. I will not be asking you to buy anything. Just read on and learn.

First, what is wholesaling? When you think of wholesale you think of buying a product in bulk for a cheaper per unit price and then selling each unit individually at a higher price. You think of Costco, right? Well when it comes to real estate that is not the definition of wholesaling. You do not, and I repeat, do not need to buy properties in bulk and resale them. No. Don't even think about it. That is what developers do. Not you, a beginning investor. What is referred to as wholesaling in the real estate investor world is this. You will be a middle person, similar to wholesaling a product. You will find a deal, put it under contract, and then find an eager investor who will take over the contract for you. Sound complicated? It really isn't. Let's break it down.


1. Before you start ever looking for a deal you need to do two things, not necessarily in this order: join a real estate investment club and find a good title. A good title company is one that has experience working with investors. How do you know which title company is a good one? You go to your local investment club meeting and you start asking around. Talk to as many people as possible, asking as many questions as possible. You see, a great deal doesn't come around every day so when one does you need to be prepared to act on it. Being prepared consists of not only having a title company, but also a real estate agent, list of investors, and anything else you need to feel comfortable moving the deal along. Once you know what title company will work with you and you know some people who are looking to buy properties. Then you have to find a deal.

2. Finding a deal can be the most difficult and time consuming part of the process. There are many ways to find deals. You can read my other article about how to find deals in any city you live for more useful tips and hints. Do your homework and find a property that has a lot of equity and that will have positive cash flow. Later in this series you will learn more about positive cash flow. Without these two things no savvy investor will want to buy your property. Once you find the deal, the next step is to get it under contract.

3. Getting the property under contract solidifies your rights to buy or assign the property. As a wholesaler you will assign your rights to another investor who will buy the property. You will not have to buy the property unless you reall really really want to. Your goal is not to buy a property though. Your goal is to find someone who will take over the contract and close on the deal. You will only get paid if the deal closes. This means you need to provide the assignee (buyer) with all the information you can upfront so that there won't be any reason for the deal to follow out of escrow. Getting the deal under contract may take some of your own money, but it is completely negotiable. You can give as little as a dollar if the seller will accept that.


4. Find a buyer. Once you have the property under contract, by the way, the longer you have the better. Most contracts will say 30 days but that is negotiable as well. If you can get the seller to sign a contract that give you 45, 60 or even 90 days then the better for you because that is extra time you will have to find a legitimate buyer. Once you have the contract it is time to contact your potential buyers. The best way is to create a simple, clear, informational packet that you can email to all your contacts. By doing this you are saving everyone time and you appear to be more professional. You can also use Craigslist, the newspaper, or any other means to sell the property. Remember if you don't find a buyer or the buyer doesn't close on the property than you will not get paid.


5. Close the deal. Once you find a buyer who will take over the contract, you assign that person the rights to the contract. They are not the legal owners of what the contract offers. Your work isn't done though. You should do everything you can to help the buyer get the information they need to close on the property. Once the deal is closed the title company will get you paid. In post 2 of this series you will learn how you get paid. Just know that the money will come from directly from the title company. As long as the property closes you are guaranteed a check.

Sounds pretty simple, right? Well it is and it isn't. Once you get one done though it will get easier and easier. Pretty soon you will have built up enough capital (money) to start actually buying properties, if you want. I know a girl who is in college right now and made over $200,000 just by wholesaling. She has learned how to do it and so she just keeps on doing it. All it takes is a little desire and know how and you are on your way to make some good money as a beginning investor. Just think how many deals would you need to do to quit your day job? Probably not very many!

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BIG TIME NEWS


Top Secret Riches' (TSR) first blog series. This is big news. Over the next 10 days TSR will highlight 10 different ways to invest in real estate. There just isn't enough room to fit all of real estate investing principles into one blog posts. Darn near impossible actually. Hence, over the next 10 days you will be enlightened, entertained, and whooed by the principles you will learn. No doubt about it!


For many people, real estate investing is a "get rich" quick scheme. Here at TSR we know that there is no such scheme. One of my favorite blogs entitled "Get Rich Slowly" describes how the savvy, conservative, down-to-earth person approaches real estate investing: Slowly. For many of us, real estate appears complicated and difficult. We are more comfortable with stocks, bonds, and mutual funds. Yet, over time real estate can become the largest, most profitable part of your investment portfolio. After you first couple of real estate deals you will feel like a seasoned veteran.


In the upcoming posts not only will you learn the techniques you have probably previously heard about, but you will also learn many other ways you haven't heard about. Included in the posts you will find tax savings tools and ideas, explanations of important terms, and ideas on how to find you very first real estate deal. Can't you feel the excitement? I can. If there is any specific topic or idea you would like to have discussed over the next 10 days let me know by emailing me here. Otherwise, let the games and Top Secret Riches begin!

Real Estate Investing Success

Real estate investing is a vast subject. There are as many real experts as there are self-proclaimed experts. A formal comprehensive discussion of real estate investing will not be attempted here. Not now, at least.

Real estate investing is not for the faint of heart. It takes dedicated and planned action. Compared to investing in stock, real estate investing is much more difficult to begin because of all the different players involved and the range of legal knowledge needed. There are ways though to simplify the process and make some great money.
In the latest edition of Entrepreneur Magazine there is a story about a beginning real estate investor who recently netted $245,000 in a period of six months. This is a good chunk of money and the amazing thing is that really anyone can do it.

There are innumerable possibilities when it comes to investing in real estate. From commercial to apartments to single family homes. You can buy and hold, renting them out. You can flip them. There are tax advantages and secrets. The savvy real estate investor can truly profit in major amounts in many different ways.

His story goes as follows. He ordered a $50/month prescription to RealtyTrac.com where he is able to get accurate information about pending foreclosures and pre-forclosures. He then one morning went to the court house for an auction. He ended up buying two properties well below market value that needed a little renovation. After completion of the renovation and a period to sell the house, six months had passed and his bank account was $245,000 larger. Incredible.

Stories like these are what get and keep me excited about real estate investing. I am still slowly searching for my first deal and as I go forward I love to read the experiences of others.

Do any of you have experience with real estate investing? Have you ever either lost or made a lot of money? Share with us your experiences so we can all learn and become better off because of it.

The Million Blog List

During my latest blogosphere travel I came across "The Million Blog List." This wiki is attempting to create a list of 1 Million blogs. I added Top Secret Riches (TSR) to the list at number 1795.

The list was created in April of 2008. It looks like as of late April there were about 100 new blogs per day. That obviously has decreased quite a bit. I think it would be a fun project to follow. With a little help we can get this list moving a bit more. It only takes about 2 minutes to add your blog to the list. So jump on over there and add yourself. Once you finish let us all know over here at TSR what number you are on the list so we can go check it out. If you already are on the list feel free to tell us what number you are on the list.

The FaceBook Effect

Fortune Magazine's senior editor, David Kirkpatrick, writes a wonderful article about how a CEO of a major corporation has implemented facebook within his 900 employees to increase productivity and get the company thinking into the future.

The article describes a powerful way employees can begin to interact, get to know each other better, and consequently work more collaboratively. First he "told all the employees it's OK on a Friday for everybody to goof off and spend an hour or two on Facebook." A majority of the employees have begun to use facebook, specifically 800 out of the 900 current employees. Later he describes that:

"He takes out his Blackberry, calls up the Facebook application there, and starts reading status updates for various employees. "Winding down and heading to the weekend," writes the Germany country boss. Comments Burton: "It's 10 p.m. there so I know he's working hard." The guy who won the award for top telesales rep in the first quarter "is listening to the Roots." The head of all company sales writes that he "is heading home from Europe." His profile photo shows him holding up a beer stein."

What a powerful tool for any CEO or manager. This definitely could be a trend. You know what someone should create a software that is specific for each individual company. So instead of being open to a whole community the profile user is only able to view people from within the company. Basically facebook, just limited to each company. Now that could sell!

Stock Pick: Blue Tooth Headset Companies

Connecticut, New Jersey, and New York already have a law in place restricting the use of a hand held cell phone while driving. When this law was passed "Mike Faith, chief executive of online retailer Headsets.com, said that sales increased by 35%." With that kind of increase what do you think happened to the stock prices of companies like Plantronic: they went up. Fortune magazine's article on this topic is very informative. You can check it out here.

Well, if you missed that surge another one is coming. On July 1, 2008 California and Washington will be joining the other 3 states making driving and talking on a hand held phone illegal. California being one of the tech savviest states and being one in which commuters drive long distances will greatly increase the blue tooth sales of hands free devices.

I currently live in California and I can tell you every 16 - 80 year old will get one of these devices. Everyone here is about technology. With the new law, even slow adapters to technology are being forced to buy. Look for Plantronics stock to surge over the next couple of weeks and even months as all Californians and Washingtonians head to Amazon and Walmart to pick up their favorite color blue tooth device.

Personally, though I lean more towards government staying out of our business this law is very interesting because of the direct effects it will have on consumer decisions and business growth. In my young life, I can't recall one law that ever forced me to go out and purchase technology. I wouldn't be surprised if some government official was getting some supplemental income to move this law quickly along. Would you?

Women Only Want Money

Forbes headline reads "Life After Work: They've given up the grind but that doesn't mean they're retired." The story goes on to tell about 7 different individuals and what they have done after retiring.

I figured this would be an interesting article because yesterday as I sat at an 8th grade graduation it got me thinking about maybe becoming an educator when I retire. Now I am just getting into the workforce so I still have some years ahead of me but I really love to plan and think about the future. So this article really caught my attention. Yet the first story is about an over priced match maker. Yes she retired from her day job and started her own business doing what she loved which is great, but her business perpetuates the old social norms that supposedly Hillary Clinton has broken through. You know, that glass ceiling that supposedly hangs so heavy over all the ambitious women in our country. Yeah that one.

Point in case, Mrs. Spindell has rich male only clients. They pay her $50,000 up front with a bonus for a resulting marriage. She then has over 12,000 women all hoping that they will get picked by some rich guy. She says she meets with 80 - 120 new women everyday. That is a lot of women who are willing to get hitched to a guy just because he is rich. To me that is ridiculous. Yeah, when it comes down to it there has got to be chemistry and I'm sure no rich guy is going to pick an unattractive lady, so you also have to be hot. Last year there were around 60,000 women in the work force. To think that about one fifth of them are willing to participate in match making because of the chance to be rich is somewhat astounding. What if it were the other way around. Men who lined up for the chance to marry a rich girl would be labeled as lazy and ridiculed.

In our day when women have all the opportunities in the world. When they can elevate to the highest statures of all ages; Why do so many of them choose to belittle themselves? Any ideas?

Coming to Terms with the New Gas Price

With the sun beating down into my car, I patiently waited for another commuter to finish pumping their gas so I could take my turn. As I pulled up to the pump my mind flashed back to the price I saw while turning into the gas station: $4.48. As I got out of my car and began pumping, I leaned up against my car trying not to look at my total bill increasing up and up and up. Finally, I gathered my courage, took the nozzle out and checked the total. Though not as high as many of you probably pay, the total price was the highest I have ever paid for gas.

Instead of getting upset or frustrated, I thought about all the people in Europe who are in a total up roar as they see their gas prices climb up close to 10 Euros. Now that would be something to be upset about! It got me thinking about how you and I can constructively and positively come to terms with the rices caused by the world supply and demand of gas. Here are my 5 top ways to deal with the gas prices.

1. Buy stock in the oil companies. This will help you to have net positive feelings about paying more money for gas.

2. Know you are being conservative. When you know there is nothing more you can do to soften the increasing gas bill you will be able to control your negative feelings.

3. Convert your car to run on cooking oil. Make friends with the owner of Chevy's and make a deal to collect all their grease at the end of every night. Just make sure it has cooled down.

4. Organize a gas stealing mob. If you can't beat them, steal from them.

5. Participate in a gas stealing mob.

Let us all know what you are doing to cope with the rising gas prices. Don't forget to sign up for FREE to get all the FREE updates from Top Secret Riches (TSR)

The Purpose of this Blog

There are many reasons to start a blog. Some people want to make money, others just want to share thoughts and personal feelings. Still others use blogging as a hobby. The purpose of this blog will be to inform you, the reader, of all the articles in finance magazines. It would be impossible to keep up with all the great information that is in each finance magazine. Let me then keep you up-to-date with all that is going on. With work, family, hobbies, and spouses it may seem like you are unable to consistently read the newest trends and analyze the latest advice. Fortunately for you, I will read all the magazines and together we can discuss, criticize, and implement their counsel.

The easiest way for you to stay informed will be to sign up for my FREE updates. You can choose to receive my latest posts through email or through the RSS reader of your choice. I personally use google reader to keep up with all the blogs I find informative. There are many different readers you can use and if you like you can just stick to receiving the latest posts from Top Secret Riches in your personal email account. Whatever you choose, I promise that you will never get junk mail from me, only the hottest, latest, and most informative information from the best Finance Magazines there are. Thank you for your support and make sure that your voice is heard here at Top Secret Riches the blog.

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I look forward to hearing from you. Enjoy the reading!