Almost every investor I know has paid too much for income property. It happens more frequently when you first start out. There is almost no defense against paying “too much” at least once or twice. I’ve done it more times than I care to admit. However, in my case, buying multiple units fix-up properties allowed me to add value and improve the income stream more quickly than if I had overpaid for non-fixer type properties. By fixing up properties I was able to recover from my buying errors much faster because I could raise rents. The best education in the world for understanding real values and what the true expenses are is learned very quickly buying and operating you own properties. I’m not talking about a single house here. That’s not quite enough action for me. I’ve found that multiple fixer-uppers (on a single parcel) often don’t require any higher down payments than a single house…yet the cash flow potential is many times greater.
Properties where the owners will carry back the low interest financing are the kind of transactions that allow you to buy real estate with minimum cash down payments – and still be able to get cash flow. Bank financing with higher interest rates or the variable rate mortgages are not the kind the kind you want. Bank financing will seldom be much of a problem when you buy older, rundown type properties like I recommend. The reason is; original bank loans, if there were any, have long since been paid off. For most of us, it makes more sense to buy cash flow properties with uncertain futures than to acquire high potential properties without enough cash flow to operate them today.