Joe,
Here is what I recommend to do.
1) Establish credit history. To do this, get 4 credit cards, (American Express, MasterCard, Visa, and Discover only since they can be used to buy real estate if needed, stay away from Chase, HSBC, and store brand cards) with a limit of $500 on each. I would then go out and spend $100 dollars on each of them (buy some real estate books). Once you get your statement, freeze those cards in a block of ice so you will not use it. Pay off that purchase slowly so that you can start to building credit history.
With the credit crunch, if you can't get an unsecured card, then get a secured card (where you deposit the amount of the credit line with the credit card company) and then call in 6 months asking for the line to be switched to unsecured.
2) Grow your credit line.
Every 6 months, call the credit company and ask them to double the line of credit. If the customer service rep will not do it, ask for a supervisor and ask them (supervisors have more authority).
If you do that 6 times, your line of credit should be around $32K for each card or $128K collectively.
3) Keep working and saving cash, cash is king in the business and you will need it to get started.
4) Get a mentor (who can show you the business). Offer to work for free if it helps you get the experience.
5) Sometime in 2011 when your ready to make your first purchase, create a second checking account with your bank. Ask for one of those balance transfers checks where they are offering 0% interest for 6 to 12 months from your card companies. You want the balance transfer to be where you can cash the check at your bank so that you have cash to buy your first property. Then get it refinanced ASAP and pay off the cards.
The reason for the second account, is that when go to refinance, the mortgage company will want two months of bank statements. If they see a huge increase and then a large decrease, a red flag will be made. Thus, when you apply for your refi, use your original checking account to show your assets with. Beside, mortgage companies love seeing a checking account that has been growing.
By doing this, you are using other peoples money to buy with (which is what Kiyosaki says to do), you protect your cash for future use and you will be off to a great start.
6) Your first house, keep it small (-20 to +10 of the average price of the homes in the area). This is the range that most good renters can afford to rent with.
7) Use a management company to located, place, and collect rents with.
8) You want at a minimum, $200 cash flow per front door. When factoring in cash flow, take your rent, subtract the mortgage (principal and interest), taxes, insurance, and management company expenses).
9) Continue to read and talking to other investors.
Aug 05 '08, 09:42 AM
