How to make lots of money

[mglenn]

Ok here it is... Mike Glenn's secret to making lots of money!

Its based off a simple 80/20 principle. Take your paycheck and pay off all your reoccuring bills for the month (utils, house payment, rent, budget for gas). Now with what you have left take 20 percent and thats your spending money for the month (eating out, beer, new DVD's, etc...). The other 80% goes to into a Mutual fund or savings account, which you do not touch for a minimum of 5 years. During that five years you get in contact with a real estate agent and explain to him/her that you are interested in buying a house to rent out and would like to start looking at houses now and then. Explain that you are not in a hurry but that you would like them to call you when they are going to be showing a duplex or other properties that would make good rentals. Learn what to look for when buying a house! Ask questions of the agent. Spend that 5 years learning everything you can about the housing market in your area.

So every month you are putting away 80% of you spending money and its earning interest. Now after 5 or so years you should have enough for a down payment on some form of rental property. Take your time now... tell your agent that you believe your ready to move if you can find the right property. Take what you've learned in the past years and find the right house. Buy it... Rent it... Use the rent to pay the morgage on the new property any profits are put into your 80% account that you are still putting money into every month. After a few more years the real fun starts.

Now you have equity in the rental property from paying the morgage plus you have more money in your 80% account. Using both you can now find a second property (hopefully bigger and better as you should be able to make a larger down payment). Buy, Rent, Repeat. Every few years use the equity and savings to leverage the purchase of more property. If you start at the age of 25-35 by the time your 65 you should have a nice solid income every month in rent checks.

[starbug]

Now with what you have left take 20 percent and thats your spending money for the month (eating out, beer, new DVD's, etc...). The other 80% goes to into a Mutual fund or savings account, which you do not touch for a minimum of 5 years.

That's lovely. Here's my first question:
what if you don't have anything left after you've paid off all the stuff that you have to pay? Plenty of people live like that.
How do you ever get out of that hole?

Your theory is absolutely dandy for those who start off earning more than they have to spend (and it rather assumes that you have a sizeable chunk left over) but for those who don't, I'm afraid it's pretty silly.

And it doesn't work worldwide. House prices in some areas are ridiculously high. Put it this way; we bought a flat (apartment) in London and not in the best area, last year. Mr. S and I spent £220,000 (that's $350,000 or thereabouts). Do you know what we get for that? A victorian terrace ground floor flat with one and a half bedrooms, a decent kitchen but a need for an entire redecoration exercise; new carpets etc. A garden, about 30ft by 26ft. I love living there but believe me you don't get a lot for your money. I certainly don't think that 80% of my disposable income would cover another rental property. Mr. S and I earn good wages but there is NO WAY even we could afford another property.

Can I recommend you a book? Nickel and Dime (I forget who it's written by).

[MartinPierre]

Here Québec also it's not a great idea...

House prices go up by around 10% per year these year, if not more but the regulations on rent increase make it impossible to make money.

If you buy a 200,000$ can. duplex, you'll need 50,000$ cash down and pay 150,000$ mortgage.

that's around 1000$ per month.

That duplex will probably have a 600$ rent and a 650$ rent, totalling 1250$.

After you've paid the 3500$ per year property tax ( 300$ per month ) and your mortgage you are making a -50$ per month profit !!!

The only option is to rent at a higher price, but guess what ? You cannot increase the rent by more than around 2-5% per year, depending on the inflation.

So, after 1 year, you have : 630 and 680 rent. However, an increase of 30$ can be constested and won. LEt's say you do get the increase...

You now make 10$ per month !!! Great insn't ?

But there is more... you must pay for ALL repairs, and heat the common areas ( and winters are damn cold here ) and to top is up, who will mow the lawn ? and plow the snow out of the entrance ? YOU ! You don't have money to pay anyone for it...

And you can't increase the rent by 30$ every year, because otherwise, you won't find a renter : they'll buy a house like we did a few months ago !

[mglenn]

Good points guys... I should have stated that this has worked for me and I live in the US... outside the US I've no knowledge of housing markets and even inside the US the housing markets are different in big cities like NYC and such were there are rent caps and such.

But then I could spin off in to a whole thing on socialism and the government trying to control market forces that you have made clear.

Once again... no plan is foolproof. The point is not that there is one plan that will work for everyone. You just have to apply yourself and truely want to better your life.

[fnordboy]

Good points guys... I should have stated that this has worked for me and I live in the US... outside the US I've no knowledge of housing markets and even inside the US the housing markets are different in big cities like NYC and such were there are rent caps and such.

You also live in PA which is probably the cheapest place to live in the northeast. I know it is definitely the cheapest in the NY/NJ/CT/PA area. A friend of mine just picked up a 3 bedroom house with on a fairly large amount of acres in PA, for 135k. Unbelievable.

[mglenn]

A friend of mine just picked up a 3 bedroom house with on a fairly large amount of acres in PA, for 135k.

True True. But it won't be like that for long if Govenor "Fast" Eddie. Has anything to say about it.