Too many people get all tangled up with complicated strategies. They seem to have the same mind set as runners who insist that without pain there can be no gain. If you want pain, I suggest you buy a $100,000 house with $850 mortgage payments and rent it out for $600 a month. For those who need higher levels of pain, buy a motel or a small business opportunity. If you overcomplicate your wealth building plan, quite often you’ll become distracted by information you don’t really need to make money.
My yellow pad studies are purposely simple. I’m only interested in cash returns. The two questions I ask myself are: will I make profits on this deal if I spend x number of dollars and when do I get to have those profits in my hand? That’s what every day ordinary investors need to know. What I want to see clearly is how much money I will invest in the deal to start, how much more for fix-up and what my monthly costs of operation will be when I’m done. After that I plot in the expected income, month by month, usually for five to ten years or perhaps to a future sale date. Sticking to basics means buying properties that I know will return me a profit of some kind. I determine this by studying all the dollar number plotted in year by years.
A friend of mine is mine is a computer buff. He has drawers full of complicated studies! He figures out his rents per square foot, how much paint he’ll use the next 20 years and the number of qualified renters in the county. Still, he has one serious problem. His computer shows his net worth at nearly $500,000, but he’s paying out $2,100 every month in hard cash so he can stay in the rental housing business. Although he has a good paying sales job I figure if he buys a couple more rental properties using his current strategy, he’ll soon be broke.