In Los Angeles a commute is unbearable. In fact, INRIX®, a leading international provider of traffic information, reports that the City of Angels is in second place for the worst congested city in the nation.
Many Angelenos drive three hours per day just to be able to work. I thought that was bad until I discovered people who commute into the city every week and only see their families on weekends.
The sacrifices made by individuals just to make a basic living (food, clothing, shelter) for themselves and their loved ones is mind boggling. I know what it’s like to drive hours every day to punch a clock, it’s tough!
Even if you love your profession, commuting for hours, putting up with office politics and trying to please demanding bosses, can be overwhelming and very stressful.
Plus, with an economy like this, wages and salaries are just not very generous. Companies seem to be using the “bad economy” as an excuse for poor pay, lack of benefits and company perks. It seems everyone is complaining about the limiting amount of career opportunities that are available.
When I was in college, I was not taught about finances at all, in fact nobody ever discussed salaries. When I discovered how much journalists make, I was shocked (and greatly disappointed). Let’s just say it’s a career that you definitely have to be passionate about it because the pay is modest.
Having loved media since I was a child, I decided to enter the trade and watch my pennies so that I could invest as much money as possible in something that I knew was a sure thing: real estate.
You see, because I educated myself on the mechanics of money, I knew that most millionaires made their wealth in real estate. I understood vital concepts about the time/value of money and how location and appreciation could easily skyrocket a person’s net worth.
But the hardest part I thought was getting started. So my husband and I worked hard to accumulate the funds needed to invest. They were busy years and we were handsomely and surprisingly rewarded when we managed to buy a home with no money down in one of the most high-priced areas of the nation. How? We found a seller willing to carry a portion of the note and used private money to get into the deal.
Since we didn’t need any of our own money to buy our home, we used our nest egg to purchase a small apartment building. It was then when everything began to change.
With a few short years, our net worth skyrocketed. Things were appreciating steadily back in 1994 and the equity in the properties was rising much faster than our ability to earn a paycheck by working in our professions.
This is the beauty of real estate. A property can appreciate either due to market conditions or by adding value through a rehab. Profits can come quickly, much faster than a person’s ability to “earn” a living.
The average national salary in America is $41,673.83, according to U.S. Social Security administration. Having a job can provide for the basics just fine, but what quality of life can that type of salary provide?
In the real estate world, $40,000 is not an astronomical number. One can do a deal and make that much per transaction either by buying and holding for cash flow or buying and flipping for profit. I even personally know someone who made $30,000 on one wholesale deal, and she did not even own title to the property!
Most of the deals my family and I have done over the years have grossed us over $100,000 per transaction — we are lucky to live and be able to do deals in California where the spreads can be great. One of my favorite deals was when my husband and I purchased a small multifamily property in Hawthorne, Calif., a blue-collar area of Los Angeles.
The market was really hot in late 2004, and it was tough getting the deal because there were five other offers, but I wrote a personal letter to the seller assuring him that I would make the best landlord to take over his building and he sold it to us, even though another offer came in higher.
Upon purchasing the property, we did slight renovations, one unit at a time. Nothing major, just new carpet, new paint and I think we changed the cabinets in the kitchen of one unit. The hardest part was managing the property because some of the tenants had an attitude because I raised all the rents to market.
About one year and half into the deal, we decided to cash out. We purchased it for $425,000 and in 18 months sold it for $659,000. A gross profit of $234,000! How many people can make that amount of money punching a clock for 18 months?
And what do they have to go through to “earn” that money? Get up at the crack of dawn, commute to work, put up with bad tempers and attitudes, constant deadlines and job stress.
On the other hand, we created wealth by simply buying, managing, repairing and selling an asset. Can it get any easier than that? This is exactly why I get so excited about sharing the benefits of real estate with people because wealth can be created much faster and easier than by “working” at a given profession.
Even in the work force, I noticed that those who invest in real estate do much better financially than those who only go to work and do the best they can to save for the future.
After being in the work force for 20 plus years now I’ve come to realize that more wealth can be created by focusing time and energy into finding and buying properties than by climbing the corporate ladder. Buying one property a year or every few years can really make a difference in your life and in the legacy you leave behind.
The time has never been better to get started or to expand your portfolio. Never have we had a combination of so many distressed properties to choose from coupled with the low interest rates of long-term financing.
The moves you make now can determine your family’s future. So don’t make excuses about how busy you are in your profession. Be sure to take time off from “work” to concentrate on building “wealth”.