THE AUTOMATIC MILLIONAIRE HOMEOWNER

A Powerful Plan to Finish Rich in Real Estate

I'll never forget when I met my first Automatic Millionaire Homeowner. I was in my late twenties and was on one of my first book tours, giving a talk at a bookstore in San Jose, California.

After a long down period, the real estate market in California was starting to take off, and many of the people who had come to see me had questions about whether now was a good time to buy property. In the middle of discussing the benefits of homeownership, I called on a young woman named Karen, who seemed particularly excited. "David," she asked, "what do you think about the idea of setting up an LLC for real estate? I'm trying to decide if I should put my property investments into an LLC or a Nevada corporation."

An LLC, by the way, is a Limited Liability Corporation. Don't worry if you don't know what this is. Neither did Karen when she asked the question.

I told Karen there was no simple answer to her question. "It depends," I said. "What type of real estate do you own?"

Karen blushed a little, then said, "Actually, I don't own any yet, but I just read a book on real estate that said I should put my real estate in an LLC or Nevadacorporation, because then my assets would be protected against frivolous lawsuits." She shrugged helplessly. "It all sounded so complicated. I'm not sure where to start."

"Well, let me ask you something else," I replied. "Do you have a lot of assets right now?"

Karen shook her head. "Not really."

I smiled at her. "You just read a book on real estate," I said.

"Why? Is it owning real estate that matters to you or the financial freedom you're hoping to get from it?"

"The financial freedom," Karen said firmly. "I want to get out of debt, stop renting, and finally get ahead. I'm tired of living paycheck to paycheck."

"That's great. Congratulations on knowing what you want and making a decision to get there. You've already done the hard part-something that most people never do. Now, how about we focus on it one step at a time? Instead of worrying about whether or not you need a complicated LLC structure for your assets, let's look at how you would go from renting to homeownership. That's really your first step in building assets."

Karen nodded enthusiastically. "I know," she said. "My parents told me that I should focus on buying a home. The book I read said I should look at foreclosures and buy real estate with no money down. But the book didn't really explain how to do it. It just said rich people do this all the time."

LEARNING FROM THE REAL WORLD OF REAL PEOPLE

I knew the book Karen was talking about. At the time, it was very popular and I had read it myself. It contained some valuable ideas and information, so I didn't want to single it out. Instead, I looked around at the audience and asked, "How many of you have seen one of those 'No Money Down' real estate infomercials?"

There were more than 100 people in the room and pretty much all of them raised their hands.

"Great," I said. "Now, how many of you have actually bought a property with no money down?"

Out of the 100 people there, two raised their hands.

"OK, so we know it's not impossible to buy real estate with no money down. But we also know it's not very common, nor is it necessarily easy. Now, how many of you own property and have it in an LLC or Nevada corporation?"

Not one hand went up.

"Interesting," I said. "Here's another question for you. How many of you own your own homes or condos?"

About half the audience raised their hands. "For those of you who own a home or condo, keep your hand up if it's the best investment you ever made."

Nearly every hand that was already up stayed up.

"OK, keep your hands up and let me put a question to the rest of you who don't own your own homes. How many of you have had your parents or grandparents tell you that their home was their best investment they ever made?"

Now, nearly EVERY single hand in the room was raised.

"Isn't that interesting?" I said. "What we just did was conduct a real-life test on real people about what seems to work in the real world. And you know what we've learned? We've learned that there's a lot of 'razzle-dazzle' out there in real estate. 'Buy real estate with no money down.' 'Protect your assets with an LLC.' It's not that you can't do these things. It's that they're not what you should be focusing on.

"What we've just seen is that there is one thing that is being done over and over again that works like a charm consistently-and that is buying a home and owning it for a while."

I turned back to Karen, who smiled and laughed. "Okay, I get it," she said. "Stop renting and buy a home! That seems to make a lot of sense. Now if you could just help me with the down payment, I'd be all set."

The audience laughed.

"I've got a better idea," I said, laughing along with them. "How about I teach you how to save up the money you'll need for a down payment and how to get the financing you'll need from the bank. The truth is that there are many special loan programs for first-time homebuyers that can help you buy a place faster than you'd think."

Karen's smile widened. "Sounds good to me!" she said.

THE MOST IMPORTANT INVESTMENT YOU WILL EVER MAKE IS YOUR HOME

As Karen sat down, I caught sight of an older couple I had spotted earlier in the back of the room. They were sitting there with their arms crossed. When you're speaking to an audience, crossed arms are usually a bad sign, but these two folks were both nodding and smiling.

After the question-and-answer session ended, I spent twenty minutes or so signing copies of my book. To my surprise, I noticed the older couple patiently waiting for me to finish. When I finally did, they came up to me. "David," said the man, "do you have a few minutes for us to share a story with you?"

"Absolutely," I replied. "All my books are based on the stories of real people. I love to listen-and learn."

"WE'RE MILLIONAIRES BECAUSE OF THE HOMES WE BOUGHT"

Their names were John and Lucy Martin. They looked to be in their early sixties, but young for their ages-fit and athletic-and excited about life.

"I hope you won't take this wrong," John began, "but we didn't actually come to the bookstore to hear you speak. We were just browsing when we heard the commotion in the back and thought we'd check it out. You were really engaging, so we decided to stay and listen."

"You were right with the advice you gave that young woman Karen," Lucy piped in. "A house is the best investment you'll ever make."

"And renting never makes sense if you can avoid it," John added.

John and Lucy looked at each other and smiled. "We know from personal experience," said John. "In fact, we're millionaires today because of the homes we bought over the years."

"Really?" I said.

"Now don't misunderstand," John continued. "I don't mean to boast. It's just that I think it's really frightening how many of these young kids seem to be making so much money in the stock market so quickly. They don't realize that all those dot-com profits are just on paper-and that until they sell their stock and invest in something like a home, it's nothing but pure speculation." This was the 1990s, and John was wise to be skeptical.

"WHAT MADE US RICH WAS HOMEOWNERSHIP"

Lucy nodded vigorously. "We've invested in the stock market ourselves over the years, but we've always been well-diversi-fied and in it for the long haul," she said. I nodded in agreement.

"But here's the thing," Lucy went on, "what made us rich was being homeowners. When we were young, we never thought we'd be able to even buy a home. But it turned out to be so much easier than we imagined-and ultimately it helped us build real financial security."

John beamed proudly. "I still find it hard to believe, but we own more than $3 million worth of real estate. And we've done it simply by buying a handful of homes, living in them, and being smart about which ones we kept as rentals and which ones we sold for a tax-free profit. To tell the truth, it's been fun."

"And so much easier than we imagined," added Lucy. "Can we tell you how we did it? We'll take you out for a latte!"

We all laughed. In the presentation the Martins had just sat through, I'd been talking about what I call The Latte Factor(r), a concept of mine that explains how the small things we spend money on (like lattes) can end up costing us a fortune-or make you rich if you learn to cut them out and pay yourself first.

So we headed off to a coffee shop-and a lesson about how to get rich through homeownership.

GETTING ON THE HOMEBUYING TRACK

John did most of the talking, but the story he told was definitely a joint effort. If anything, Lucy seemed to be the one who had originally gotten them on the homebuying track. "We actually didn't buy our first home until we were in our late twenties," John started off. "And truth be told, we didn't really give much thought to money. I was in the military at the time and wasn't making much. But we weren't spending a lot either, because we lived on a base in Oakland and a lot of our living costs were covered. One thing that definitely helped was that the military had a bill-paying system where you could elect to have money taken out of your paycheck automatically. Basically, we saved money automatically, just the way you preached in your talk. We had a car we were paying for, so I had them take out the money for that. Then one day it was paid off, and we started discussing what to do with the extra cash that had been going to our car payments.

"It was Lucy's idea that we start saving for a house. My response was, 'Why should we save for a house when we can live on the base for practically nothing?' But Lucy insisted. She said that owning our own house would give us options. Renting would keep us trapped.

"Thank goodness I listened to her. Within two years, we had saved enough for a down payment."

"Don't make it sound so simple," Lucy interrupted with a smile. "Even then you weren't sure, were you, honey?"

John grinned back. "No, I wasn't," he admitted. "Our car was getting old, and I was in the mood for a new one. But Lucy put her foot down. She said, 'No way. We're not wasting this money on a new car. We're going to go look for a house.'"

"That's right," Lucy agreed. "We were starting a family, and I told him we needed to move off the base and find us a nice neighborhood with a good school system."

THE NEIGHBORHOOD WASN'T IDEAL, BUT THE HOUSE WAS AFFORDABLE

John resumed the story. "At first, it seemed pretty impossible. As we began looking, we quickly realized that we couldn't afford very much. It was hard because we'd both grown up in nice homes. Our parents certainly weren't rich, but things were cheaper in their day. The homes we were being shown were insanely expensive.

"To make matters worse, our friends were giving us a hard time for wanting to leave the base, telling us we were wasting our time. But Lucy was relentless. Every Sunday, we pored through the paper to see what was out there. We went to open houses on weekends and drove around neighborhoods we liked looking for 'For Sale' signs. But the more we looked, the more depressed we became. It seemed like nothing was in our price range in the places where we wanted to live.

"We were about to give up when we saw an article in the paper about this area called Walnut Creek. Back then, Walnut Creek was in the middle of nowhere, in the absolute boondocks. But the houses were affordable, and the schools were good, and more and more young couples were moving out there.

"We called a real estate agent in the area and went out looking with her. In two days, we found a home for $30,000. Now, Walnut Creek really wasn't where we wanted to live. It was about twenty minutes farther out than we wanted to be. And the house wasn't perfect. It was small and it needed a lot of sweat equity, as they say. But it had three bedrooms and two baths, and we felt we could afford it. We had enough saved for a down payment, and we felt that with a lot of belt-tightening we could make the mortgage payments. Still, back then, $30,000 seemed like a fortune to us."

"YOU START SMALL AND YOU WORK YOUR WAY UP"

"While we were looking at the house, Lucy noticed I wasn't too excited about it. I think I even said to her, 'You know, this isn't exactly the dream house we've always talked about.' And she said, 'John, dreams start small.' And then our real estate agent said something I've never forgotten. She said, 'You don't buy your dream house with your first purchase, but it will be your first house that someday helps you get your dream house.'

"We realized she was right, and then and there Lucy and I made the decision to go for it. We made an offer and it got accepted."

A $30,000 INVESTMENT EVENTUALLY TURNS INTO $1 MILLION

John leaned back in his chair, a faraway look in his eye as he recalled that fateful day. "That was nearly 35 years ago," he said. "Today, that little house is worth nearly a million dollars. I know because we still own it."

"We paid off the mortgage years ago," Lucy chimed in, "and we rent it now to a nice young couple with kids. They pay us nearly $3,000 a month. Hard to believe we bought it for less than it now brings us in rent in a single year."

"Our second house was a lot more expensive," John said, resuming the story. "It cost us a little over $100,000. Of course, it was bigger and it was in a new development-with a pool!"

"We needed both the space and the pool," Lucy laughed. "By then, we had three kids."

"And even though I was out of the service by then and making a little more money, we once again had to stretch to make the purchase," John continued. "But-and this is really important-we didn't stretch too much to buy it. In fact, we actually stretched a little less than we could afford because we had decided not to sell our first house but, instead, to keep it and rent it out. So instead of selling, we refinanced just enough to pull out a down payment on our new place."

AGREEMENT OF PURCHASE AND SALE  买卖协议A binding contract that contains all of the terms, conditions and obligations involved in purchasing a condominium suite.

COMMON ELEMENTS 公共设施Property area in a condominium, except the units, that can be used by all unit owners. This may include lobbies, parking areas, recreational facilities, elevators, roofs, etc.

CONDOMINIUM CORPORATION共管委员会 A corporation without share capital, created under the Condominium Act, responsible for the ongoing administration of the property including maintenance and operation of the common elements and property. Most day-to –day supervision is typically delegated to a  qualified property manager.

CONDOMINIUM DECLARATION 共管章程The constitution of the condominium that effectively creates the condominium corporation and sets out the responsibilities of the owners and the corporation. It defines the boundaries of maintenance and details each owner’s percentage share of the overall common expenses.

CONDOMINIUM OWNERSHIP  屋主所有权Ownership of a condominium consists of separate ownership of a specified amount of space(the suite) in a multiple dwelling environment plus tenancy-in-common ownership of the portions used jointly with other owners(the common elements).

DISCLOSURE STATEMENT 发表声明A narrative description of the relevant aspects of the Condominium project. The Statement will contain the proposed Declaration, By-laws, Rules, Management Agreement and Budget Statement. An Agreement of Purchase and Sale is not binding on the purchaser until the copy of the Disclosure Statement is received.

EXCLUSIVE USE ELEMENTS 独家使用设施Areas in a condominium that you have exclusive use of but are maintained by the Condominium Corporation with you maintenance fees.

INTERIM OCCUPANCY 过度期The period of time from the occupancy date to the date of title transfer.

MAINTENANCE FEES管理费 This a monthly charge relating to your share for the maintenance upkeep, administration and insurance for the common element areas. This fee may or may not include additional costs such as heat, hydro and air-conditioning depending on the individual building. Your percentage portion of these expenses is set out in the budget statement usually within your Disclosure Statement.

OCCUPANCY DATE 入住日期 The date established by the Developer upon which you must take occupancy of your home.

OCCUPANCY FEE 入住费The monthly payment, payable by you, for living in your home prior to registration. This consists of your maintenance fees, taxes and monthly interest component.

REALTY TAXES 地税Each suite, including parking and locker units, is separately assessed annually by the City based on current property value. Realty Taxes are the responsibility of each individual owner.

REGISTRATION 注册登记When the condominium’s declaration and description are ultimately registered in the land titles office, following their approval by governmental authorities.

RESERVE FUND 储备基金A fund used solely for major repair and replacement of common elements and corporation assets.

TITLE TRANSFER/FINAL CLOSING 过户Refers to the date after the condominium is registered and upon which you receive title to your home.

据英国《每日邮报》报道，一对年近60岁的英国教师夫妇（如图）1990年辞去工作，一心投资房地产。凭借敏锐的市场眼光和“以房养房”的办法，17年来他们总共拥有了707套房子，目前总房产价值已经狂升到约2.4亿英镑（约37亿人民币），而且仍在以每天2.8万英镑（43万人民币）的速度持续增值。据预计，到今年年底他们拥有的房产将超过800套。

　　下海专职搞房地产

　　弗格斯·威尔森和朱蒂斯·威尔森夫妇年近60岁，是英格兰肯特郡首府梅特斯通市人。

据悉，二人原本都只是领微薄薪水的中学教师，1975年俩人存够了钱，以8200英镑买下第一套房子。这是一套位于梅特斯通市的三居室，幸运的是，他们选对了地点，20年后，当地因为邻近英法海底隧道的阿什佛德站，成为英国最热门的房地产市场。

　　看着房价飞涨，威尔森夫妇首次产生当“包租公婆”的念头。于是，他们把第一套房子租出去，用租金来付第二套房子的贷款，此后开始进入房地产市场。1990年代初，夫妇俩正式辞去教师工作，全心投入房地产投资。


　　最高日升值7万英镑

　　靠着准确的眼光购房，然后再出租，并依靠租金再支付下一套房子的贷款，这就是威尔森夫妇这么多年来不断重复着的事。据透露，威尔森夫妇现在手上共有707套房子，市场价值高达2.4亿英镑，其中一半系按揭贷款。据他们预期，今年底他们手上的房子将超过800套，甚至可能达到1000套。

　　据威尔森先生说，现在增值速度一天只有2.8万英镑。而在去年夏天英国房价飙涨时，他们的财产一天可以暴涨7万英镑。

　　据悉，威尔森夫妇的投资始终坚守一个黄金定律，那就是不在自己不熟悉或者太远的区域置业，因为买了房子就得随时注意状况。此外，他们还建议，理想投资目标是价值约18万英镑的房子，因为租金太高很难租售出去。

　　亿万富豪只开二手车

　　据悉，这对“抢钱夫妻”成功的经验业已引起英国电视台的注意，而弗格斯答应参与制作一档类似美国《飞黄腾达》的真人秀节目。不过，“包租婆”朱蒂斯对此似乎毫无兴趣：“我可不愿将自己的投资心得免费与人分享”。目前，她已应邀到伦敦帝国大学讲授地产投资，并被聘为兼职教授。

　　有趣的是，即使早已坐拥亿万财产，威尔森夫妇从外表上丝毫看不出来是个富豪。他们开二手车，从不出国度假，只有与房地产经纪人打交道时会穿上体面的衣服。威尔森说，“我们的成长经历让我们更习惯过‘穷人的生活’。我们宁愿过着中产阶级的教师生活，我想这就是我们。”

　　据悉，现年59岁的弗格斯·威尔森战后出生在英格兰艾塞克斯郡一户贫穷人家，父亲是名汽车工人，家中共有8个子女，其中2个夭折。弗格斯说，他清楚记得1958年10岁那年的圣诞节，因为一个妹妹一出生就夭折，为了埋葬她，全家没钱过圣诞。

When I started in real estate, I thought there was only one way to buy real estate: Borrow money, buy property, put my name on the title, rent it, put up with tenants, have the tenants pay off the mortgage and other costs, and make money over time. With luck, I would make money every month.

Then I learned how to wholesale property, fix it up and sell it, or lease-option it. I also learned that I did not have to use my own money or credit to acquire property. Most people, including myself sometimes, have no hands-on experience in the subject matter about which they are giving advice. You should seek advice only from experts. Even my mother would say, "Robert, this no-money-down stuff, I don't buy it; I don't believe it can be true." Still, to this day, every time I go to my mother's house for dinner, she says, "Robert, I've seen you on TV and have looked at your books in the stores. Why do you keep telling people they can buy property without using their own money or credit? Stop it!" She still will not believe me. She's an expert at being a mom, but she has not done any real estate investing. But it's true: For the last 400 properties that I have bought, sold, and made money on, I have not used one penny of my own money or one point of my own credit. You will learn many ways to do that, too.

The concepts and systems I present here work for everything: houses, duplexes, land, commercial buildings, apartment buildings, trailer parks, development conversion projects; small properties, big ones, cheap ones, and expensive ones. There is no difference between a $1 million property and a $100,000 property; the process and paperwork for buying and selling them are exactly the same.

As a full-time real estate investor, I have bought or sold approximately 700 properties in the last five or six years. At one time, I had more than 300 tenants, living in properties I owned and managed for years. Today, I still own and manage more than 150 rental properties. I constantly buy, flip, lease-option, develop, rehab, and broker properties.

I decided that working at a job for 50 years and waiting for retirement was not for me. I recently purchased a beautiful penthouse condo in South Beach, Florida, and now I get to live where many people only vacation. I am now wholesaling expensive properties there, and am active as well in Los Angeles, California, Las Vegas, Nevada, and in Costa Rica and Latin America. Once you learn the concepts and systems-the how-to's-you, too, can go anywhere. My students have demonstrated that the concepts and systems in this book work in even the most expensive real estate markets in the world: Manhattan and San Francisco. They will work in your town-or 25 miles up the road.

HOW ONE MAN CHANGED MY MIND-AND MY LIFE

I am from Nashville, Tennessee, a gathering place where talented people go to make it big. Sometimes one becomes an "overnight success," as did Garth Brooks, my neighbor for five years-but only after getting kicked out of every record company, and singing and playing guitar on street corners for 12 years. I've experienced that kind of overnight success, too.

Approximately 12 years ago, I did not know a thing about real estate and did not want to. I was a financial consultant working for a New York financial planning firm. Our high-net-worth clients had to have between $3 and $10 million just to qualify to invest with us. Again, I had no interest in real estate and no desire to get involved in it. That is, until one day, when I was sent by my firm to visit an older couple living in a small town outside Nashville.

Upon my arrival, I was shocked. I noticed a beat-up pickup truck parked outside a dumpy old office. Reluctantly, I got out of my car and knocked on the front door. An elderly gentleman greeted me warmly. I noticed that he and his wife did not have computers; nor did they understand advanced finance-they did not even know what a term like "return on investment" meant. "Obviously, you are not qualified to work with my firm," I said as I stood up to leave. The old gentlemen replied, "Come over here, Sonny." He picked up a large, worn accounting book, paused, then said, "When I was working about 25 years ago and making hardly any money, I started buying little houses without using any of my own money. I'd fix them up, rent them, and sell them." He then opened his book, the kind with old ledger sheets and lines crisscrossing the pages. He kept (and still does) all of his own records using just that book and a pencil. I learned he owned 125 houses, all paid for. He then showed me he had a $65,000 monthly net income, after all expenses. He explained that he and his wife go on vacation for six months every year. Then he looked me in the eye and sternly asked, "Robert, how's your job?"

Suddenly, young cocky Robert became very interested in this man's profession: real estate. In the back of my mind, I thought, "If this 80- year-old guy can do it, I've got a chance! If I did only one-tenth of what he did, I would be better off than I am now." I also found out this man still picks up rent checks every month and closes more deals. He certainly does not have to. But for him, real estate is fun.

QUICK TO PLAN, SLOW TO ACT

Needless to say, my interest was piqued. I followed him around for several months during this time. I interviewed 200 investors and some 300 tenants. I put together a big plan for my real estate business. And guess what I did with the plan for several months afterward? Nothing! As the expression goes, "I was thinkin' about it. I was a fixin' to do somethin." That went on for about eight months. During that time, I looked at about 150 properties. Of those, at least 50 were great deals, but I did not understand wholesaling and lease optioning. I had no system, no mentor. I was scared and so took no action. Because of fear and ignorance, I let millions in real estate profits pass me by.

Finally, I did make an offer on a duplex, and it was accepted. But that scared me, too. How would I close on it? I borrowed money and bought that duplex. At that time, my written plan was to buy 12 duplexes and retire. I figured each one would draw from $300 to $500 a month in cash flow, which I could live on. It was that old couple's success that got me started.

TAKING ACTION: ONE DUPLEX TURNS INTO A DOZEN

Because I have a form of dyslexia, I struggle doing many of the things that come easily for others, and that some people take for granted. For example, I cannot follow simple directions to put together a four-year-old's toy. I am unable to read maps. Certain mathematical things I cannot do. And even though I have rehabbed at least 500 houses, I know absolutely nothing about construction or repairs. When contractors talk about roof trusses, drywall, and wires, it is as if they were speaking Chinese or Greek. Their language simply makes no sense in my brain.

I tell you this so you'll understand when I say that after closing on my first duplex, I became hopelessly lost trying to find my duplex. For a day and a half, I drove around Hermitage, Tennessee, looking for it. They all looked the same. In frustration, I finally called the broker and asked, "I can't find the property I just closed on. Where is it?" I was so embarrassed. He came to meet me and drove me to it.

Fortunately, after getting help, I did find my first duplex, and rented it out. Then I bought 12 more duplexes. After a year and a half, I quit my job and retired. For a year, I did not do anything, because I had approximately $4,000 to $5,000 of tax-free money coming in every month. Then I thought, "Gee, if it works with 12 duplexes, it has to work with 20 or 25; and if it works with 25, it should work with 50; and if it works with 50, it has to work with 100, 200, and 300 properties. (Now I do have help: one person who helps me manage all of my properties, and a part-time secretary.)

WHY REAL ESTATE INVESTING

Maybe you want to buy your own home and learn how to save thousands of dollars on the transaction. Maybe you realize there is no job security in Canada what with layoffs, downsizing, reengineering, and forced early retirements-so you want to run your own business. Even if you have a great job and things are going well, even if you are wealthy and successful, I challenge you to begin investing in real estate.

Think about it: You live somewhere right now. If you pay rent, you are probably making someone else wealthy. You are contributing to that person's investments and security, not yours. You pay your rent on time and thank your landlord, but at the end of the year, you have nothing to show for it except 12 canceled checks. If you own a home, you are already a real estate investor. You probably know somebody-a friend, a relative, a coworker, a grandparent, an uncle or an aunt-who has made a lot of money in real estate, often by accident. Most people spend 40 to 50 hours a week stressed out, working to make $40,000 a year, and then, with one real estate deal, they make $40,000 almost by accident in a short amount of time.

"Will you be successful as a real estate investor?" Yes, you will if you possess the following three components, which combine into a formula for success:

1. Belief and desire

2. Basic knowledge and information

3. Persistent action

The individual who wants to reach the top in business must appreciate the might of the force of habit-and must understand that practices are what create habits. He must be quick to break those habits that can break him-and faster to adopt those practices that will become the habits that help him achieve the success he desires.