For the "You make your money at the time of purchase" there's also a second half to that saying "you realize it at the time of sell".
It basically just draws to the fact that if you buy smart, you have already made your money. If you buy a bad deal, you've most likely lost it or broke even if you're lucky. At least that's my understanding of the saying.
For the "You make your money at the time of purchase" there's also a second half to that saying "you realize it at the time of sell".
It basically just draws to the fact that if you buy smart, you have already made your money. If you buy a bad deal, you've most likely lost it or broke even if you're lucky. At least that's my understanding of the saying.
1- "You make your money at the time of purchase". Means never count on the property value increasing. You have to buy it cheap enough that if it never improves 1 cent you can still sell for a profit. Anything that it does improve is just bonus money. IE never owe more than you can get out of turning it liquid, especially not on a new asset.
2- "It's not the price so much but the terms of the deal". People see the end number of price and get fixated on it. I see people turn down all cash deals, with no inspection and a 3 week close to take an offer for 2K more, relying on inspections and appraisals and 60 day close. When they pay 2 more mortgage payments, have to fix inspection items and have to fix appraisal items and work on the timeline of a bank they always say the same thing. "You were right, after all of this I should have went with the other offer it would have been better". So it's not the purchase price it is sthe end number.
Very wise statements...follow them. You make your money when you buy. If you buy 20% under market on a 150K house you "make" 30K. You could automatically turn around and sell it to realize that 30K. Do you recall or still see all these "we buy gold" companies? There are not as many but they are still around. You take in your necklace, they weigh it, and give you an offer. How are they arriving at value? They calculate actual raw gold value, and then offer you 1/2 or so of raw gold value. Instant profit--they made the money when they purchased it. They turn around and send it to the smelters--and get a check. They didn't pay market value and HOPE gold goes up--they paid 20%, 30%, under market. The same applies to real estate.
As to "it's not the price as much as terms": if you could buy a house for 100K CASH--and you didn't have the cash OR you could buy it for 110K with a small down and they carry it...the terms make the deal attractive and you might overlook paying slightly more.
What do the following have in common: 1. stocks 2. bonds 3. commercial real estate 4. husbands They are ALL traded for future income value:)
The two sayings are NOT independent from each other.
Put the two together and it means you "make your money when you buy" because you worked out the terms and price that makes you the most money. You actually get "paid" when you exit the deal...that exit could be holding it as a rental, which again goes back to the terms you buy it at.
Yes, holds are an exit strategy. Entrance and exit refer to your cash/money...not you...you're just along for the ride. The terms you set upfront when your cash/money "enters the deal" establishes the money you make when your cash/money "exits the deal".
Oh gosh I got a good laugh out of your answer @John Thedford, also very helpful.
Thanks for the clarification everyone. I sometimes think things have a mysterious meaning that I'm missing when it's pretty obvious it just means what it means!