How to use Real Estate to get an infinite return on your money

Get an Infinite Return on your money by buying a single family fixer upper home.

Difficulty: Moderate

Instructions

1. Locate a fixer upper type property. Make sure that 70% of after repaired value of the property is enough to pay off everything you will invest in it.
   
   Example: Property acquisition cost is $50,000. Repairs and holding costs total $20,000. After repaired vale of the property should be at least $100,000.
   
   Try to get a seller second on the place for a minimum of one year, negotiate for no interest, and no payments if possible.
   Make sure the property will net positive cash flow by at least 15% of the monthly income. Monthly income will typically need to be at least 1% of loan against the property in order to just squeak by cash flow wise.

2. Repair the property, put a tenant, or tenant buyer in place.

3. After holding the property for one year refinance the property paying off everything that you have invested in it and possibly taking cash out. Be careful not to take too much out as the more you take out, the more you will cut into the monthly cash flow.
   
   You should have a positive cash flow with now money invested, giving you an infinite return.

Tips & Warnings

• An infinite return on your money can happen when you have nothing in an investment. While “infinite return” sounds like a large amount of money- after all infinity is a really big thing- the way the math works out, it doesn’t have to be large at all. For example, if you get a dollar back from an investment that you have no money in, you have received an infinite Return on Investment or ROI. In fact I really think it should be called a “division by zero” rate of return on your money, as that is what the calculator tells me if I try to calculate it.
• You should note that you can also have negative “infinite returns” if you lose money each month on an investment. Leverage works both ways.

Resources

• Real Estate Go Zone

[promax]

on 2/2/2009 I would love to take advantage of this market and buy as many houses as possible on the low end.

[hoolihan0519]

on 2/1/2009 Excellent article. I am also a realtor in NC and Va. The market is wide open right now, best time to buy. RCRR.

[wildpen]

on 1/30/2009 Thanks for the comment.

It is easier to get started than most people think. Purchasing "subject to" is a powerful method that requires very little cash and none of your own credit.

It does require flexibility on the part of the seller, but in this market you shouldn't have trouble finding sellers who are motivated to be flexible.

[msblakely7]

on 1/29/2009 Thanks for the advice. I live in Wisconsin too and am interested in real estate investing. My father has a few properties and eventually I would like to acquire some too!