Q-I came to the U.S. from Poland almost six years ago and found a job in a bakery. I start work at 3 a.m., but go home by noon. My boss let me live in a run-down house that he owned. My wife and I fixed it up to be very nice. My boss sold it to us for no cash and he takes his mortgage payments out of my paycheck. About three years ago, we moved out to rent it for almost $350 per month more than our expenses.
We bought another fixup house for no cash, took over the old mortgage and moved in. We just sold it for a profit of over $70,000. I am now at work on a third fixup house we bought for $5,000 down with a VA foreclosure mortgage. We now have two great little kids who slow me down, but I want to keep working at the bakery (where my boss sold me half interest last year), and fix up houses in the afternoons and on weekends.
My wife says the equity in our houses is now about $250,000. This could only happen in America. We read your column every week. How can we make really big money in real estate?
A-Congratulations on getting rich in U.S. real estate. You have accomplished more in six years than most U.S.-born citizens achieve in a lifetime. To have a quarter-million dollars in real estate equities, plus one- half ownership in a business, are major accomplishments of which you can be very proud. If you can do it, anyone can.
You may not realize it, but you are doing everything right to earn a fortune in real estate. First, you are acquiring single-family fixer-upper houses for little or no cash. That is called ”leverage,” which allows you to control a property with very little money.
Second, you are adding market value to each house by making valuable improvements, which increase the price a buyer or renter will pay for that house.
Third, by living in these fixup houses as your principal residences before selling them at a profit, you are able to defer the profit tax as you build your fortune. If you keep doing this, you will pyramid your real estate wealth and own a million-dollar mansion, all without paying profit tax along the way.
To answer your question, there isn`t much I can add except to keep using the same successful fixup formula over and over. For years I have recommended buying single-family fixup houses, adding capital improvements to raise the value by $2 for every $1 spent on renovation and then either selling or holding for long-term investment.
To give you some further ideas, I`m sending you a copy of my special report ”How to Maximize Your Profits from Fixer-Upper Houses.” Readers can obtain a copy for $4 from Tribune Publishing Co., 75 E. Amelia St., Orlando, Fla. 32801. By this time next year you will probably have at least a half-million dollars in equities if those wonderful kids don`t slow you down too much.
