REAL Exclusive Magazine

JOHN’S STORY (Part 1 of 2)
Excerpt from 21st Century Real Estate Investing Featuring 1031 + TIC
By Jeff Riddell

John saved about $4,000 from his soldier pay during World War II. A year after finding a job and saving some more money, he was able to buy a duplex in 1948 for $15,000 with a $10,000 mortgage. There was never much cash flow from the duplex because John used the money to fix it up.  After five years, he sold the duplex for $22,000. John had $13,000 left after paying off the mortgage, which had reduced to $9,000 with the help of amortization and some extra money John occasionally added to his monthly payment.

John then purchased a four-plex for $50,000. His downpayment was $14,000 (which included the $13,000 from the duplex plus another $1,000 he had saved), he obtained a first mortgage for $30,000 and the seller carried back a short term $6,000 second mortgage. John also got married and he and his wife put in some sweat equity improving the four units as tenants came and went.

Seven years later, John and his wife sold the four-plex for $95,000 and paid off the $28,000 mortgage balance. The seller second had to be paid off within three years so that mortgage was long gone. Their net was $67,000 which they leveraged into a $350,000 six-store strip center with a $262,000 mortgage and a short-term seller carry-back second mortgage. John and his wife were able to add another $10,000 from money she inherited and, as usual, they tried to pay closing costs right out of their checking account so their real estate equity would not be eroded. It was 1960—12 years after John’s real estate investment career started.

Meanwhile life went on for John and his wife, and within the next eight years, they had two children. John kept working his regular job and was now receiving an extra $1,000 monthly cash flow from the strip center and he and his wife were able to buy a better home. Hard work and persistent real estate investing were starting to pay off.

Then John and his wife received an offer to sell the strip center for $600,000. They sold it and paid off the first mortgage and the $10,000 second they took out to help buy their new home—they netted $283,000. This time John and his wife bought several rental properties for a total of $1,100,000 consisting of their $283,000 equity and total mortgages of $817,000. That was 1968 when a million dollars was a lot of money.

John was 25 when he got out of the service.  By the time he was 46, John could call himself a millionaire. Well, maybe not quite because of the mortgages, but let’s let him brag. He started with $5,000 and before long he and his wife had $283,000 of equity. 20 years had passed.

John and his wife kept parlaying their mini-fortune for another twenty years, until 1988.  Then they retired with enough income from their real estate investments to live comfortably for the rest of their lives. They had been real estate investors for 40 years.

John’s story is the theme of this book: Everyone should be a real estate investor, everyone can be a real estate investor (regardless of age) and real estate investing can be active or passive. Real estate investing is for the long term and will reward you if you are patient—but you have to get started, so let’s see how it works.

IT’S NO SECRET

Andrew Carnegie said:

“More money has been made in real estate than in all industrial investments combined.”

Continued Next Month

BIO
Jefferson F. Riddell is a Florida Board Certified Real Estate attorney with thirty-five years of experience assisting people with a variety of residential and commercial real estate matters. U.S. 1031 Exchange Services, Inc is a 1031 exchange qualified intermediary (QI) and a member of the Federation of Exchange Accommodators (FEA). As President of U.S. 1031 Exchange services Jeff has been facilitating 1031 exchanges for more than twenty years. Jeff has been awarded the Certified Exchange Specialist (CES) certification.

As a licensed securities registered representative and real estate broker, Jeff is uniquely qualified to assist those who wish to avail themselves of 1031 and 1033 exchange tax savings and also guides investors in diversifying their portfolios with non-publicly traded REIT, LP and LLC real estate investments. Jeff’s new book, 21st Century Real Estate Investing Featuring 1031 + TIC has recently been published and is available at Amazon.com. Jeff may be reached at 941-366-1300 or via email at jeff@us1031.com.