I couldn’t make the game on October 27th for the Twin Cities Rich Dads and Moms Cashflow Club but I understand that it was a good game. In attendance were James and Debbie Greelish, Mike Marques and Sue Sudhalter, Danielle Rocheford and Dan Langford.
The following was sent in By Debbie Greelish:
We had 6 people playing Cashflow 101 tonight. James and Debbie took opposite stratagies. James bought anything that was either underpriced or had a good return on investment…no matter how much he had to borrow or how negative his cash flow went. at one point, he had a negative $6,000 per month cash flow. That equates to living off your credit cards and borrowing from your 401K. One player commented on how it was hard to believe someone with that negative a cash flow could ever get out of the rat race. One house buyer later and he paid off all his dept and left the rat race behind.
Debbie played the doctor and was ultra conservative. She would not buy anything unless she had the cash required for the down payment. No borrowing from the bank at 120% for her. She eeked along with a few stock deals, paid off her retail debt, bought a couple of undervalued 3 bed/2 bath houses that were good deals, but didn’t have much for cash flow. Then came the $1 stock. After buying 10,000 shares at $1, (not borrowing, just paying with cash) she hit it big with a $50 / share payoff. Sitting pretty with 500K in the bank, Debbie paid off her credit cards, school loans, and car loan. Then she went looking for big deals. She got lucky and any draw was gold. 8-plex, 24-unit apartment building, Car wash. Then that same house buyer that put James out snapped up 3 houses from Debbie, bringing her back to over 500K in cash in the bank. Another 12-unit building and Debbie was out of the rat race as well.
The best thing learned tonight is the benefit of having capital gains properties as well as cash flow properties. The cash flow gets you out of the rat race, but the capital gains speeds things up. James could not have overcome his negative cash flow without having a property to sell that had lots of equity. Debbie would not have even looked for those great big deals if the stock sale had not given her cash. She also may have been driven back to small deals before reaching her cash flow goal if the small properties with big equity had not sold. Both strategies required the player to be willing not only to buy properties that had cash flow(the end goal) but to be willing to sell properties for profit (the means of reaching that goal). There is great truth to what is said: ‘You make your money when you buy the property, not when you sell it.’
Lee’s comment: I find it interesting that there was no partnering on deals in this game. I can’t really say why since I wasn’t there though.
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Lessons from October 27th 2007
For a while now, we’ve been talking about adding a house rule that allows someone in the Rat Race to leave their job and become a full-time real estate investor. If you’ve been around real estate investment clubs for any length of time, you’ve met someone who’s done this.
Starting with the game on Saturday, October 20th 2007, we’ve finally pulled the trigger on this rule. Essentially, when you are down-sized, you can choose to go to work for yourself if you like.
Instead of waiting two turns to get a new job, you pay your expenses and roll normally on your next turn if you want. Your income is limited now to your passive income. Pay close attention as you play or you will be bankrupt!
If land on down-sized again, you roll one die.
Role a 3 or less: the space acts as a another pay check. Essential, as a self-employed person, you control your destiny and work life. You take a month off, you can even if it’s not always the most wise thing to do. And lose a turn.
Role a 4 or higher: there is an economic downturn and your passive income cuts in half for 3 pay checks. But you don’t lose a turn.
If you choose to wait two turns and get another job, everything is the same.
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Self-employed in the Rat Race
The next two Twin Cities Rich Dads and Moms Cashflow Club are coming up. There’s is a game today, October 20, 2007, here in Leominster and another game in Fitchburg on October 27, 2007. Networking starts at 5PM, and the game starts at 6.
Subscribe to the newsletter for directions and to RSVP if you are coming and sharing in pizza. It’s free to play. Expect to contribute $5-7 if you want pizza.
Last month in Leominster, we had a hard money lender as speaker, 14 people here during networking and 11 playing on two tables. In Fitchburg last month, we had 14 people on 3 tables.
We play both Cashflow 101 and Cashflow 202 and all are welcome.
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October 2007 Cashflow Games
Tonight, on “Mad Money”, Jim Cramer said “cash is king”. I know it’s not the first time he’s made this pronouncement and he was talking about stock portfolios.
He says that if you have only 5% cash in your portfolio, you are maxed out. He recommended keeping at 10% cash portfolio with a strategy of taking some gains off of the table (he calls it “schnitzel”), even if that means you raise your cash position to 40%.
He talked about making this mistake himself in the past.
I think this applies to real estate also. I know I’ve made this mistake before and I’ll bet most real estate investors have too.
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Jim Cramer: Cash is king
I’m pretty sure that everyone reading this blog is trying to escape the rat race.
We need tools to do that so to help you evaluate real estate, I’ve posted some mortgage calculators at Beko Investments.
So now you all have access to this kind of tool and don’t have to go searching for them. I still prefer a good old financial calculator (link to come so you can buy one) but they aren’t always with you. So check these omortgage calculators out.
Source:
Real estate tools
