Usually, builders need to organize pre-construction sales to get their units at least 20% sold on paper. For example, a 300 units condo project should have at least 60 people signed up. Then bank will look at this and approve the builder for construction loan. This is a required process for most builders. Builders love pre-construction flippers like your parents see you come home…, builders love you. But you do need to know the information when this builder start to pre-construction release. Timing and information is important.

Ms GuMi’s case reminded me of a topic I would love to share with you my thought on. How to practice sequential investing strategy in this high price market?

Let’s say that I bought my current home 5 years ago. This current home doubled in value. In 2002, I bought it at 400K, now it rose to 800K. However, the market rent is not very high. I can only rent it out at 2600 a month.

1) You buy it from this current owner at 380K.
2) You find somebody with “Owner financing” to buy this condo at 450K in 2 years. You charge option fee of 5000 today. Monthly rental of 2200 a month.
3) Talk to HOA to explain that you found this buyer who promise to buy this house for 450K in 2 years, but they pay you the “owner financing” cost of 5000 upfront and 2200 per month. Please note, make sure that HOA understand that this is not rental fee, but owner financing payment to you like they owe your loan and pay you back mortgage payment. This is in fact a form of “lease-option”. But word it so that it looks like a “owner financing” setup.
4) Hopefully, HOA is okay with that.
5) After 2 years, most likely this family will not qualify for conventional loan so they will not be able to buy. That’s good for you. You let the option expire, you forfeit this 5000 upfront option fee.
6) You will find another couple to buy this house in 2009 with option price of 480K for another two year, raise your option fee to 8000 upfront, charge 2600/month financing fee.
7) Repeat this, every 2 year, raise option price at least 30K.

Leverage, i.e., using other people’s power or money to achieve your own goal.

Not: saving money into an IRA or 401K and avoid some tax.

If you train your children into IRA mindset, they will remain as great savers, but great savers remain middle class when they get older. Middle class mindset is in fact “poor mindset”. Middle class thought that IRA/401K is “investment”, but in fact, they invest in a frame work defined the super riches’s leverage machine. Super riches use CDO, Hedge funds and Mutual funds that middle class thought as “investment” as actual target of leverage. They are leveraging our middle class’s blood money to earn unthinkably large easy money from us. Middle class are all roped into this giant 401K, index fund traps as a feeder to feed the super rich leveragers.

but owning many rental houses, I am creating the same kind of effect as operating a profit earning company. Who are my employees ? my tenants! I didn’t hire them, I don’t have to pay their salary and health insurance. But they contribute nearly 1/3 of their salary to pay for my rent. They are indirectly paying for reducing my principle amount on the house. They are my passive workers. The more rental houses I buy, the more OPM I can control, the better I can suck other’s people’s blood earned money into my own pockets (PASSIVELY).