How many of you all invest like this...

[William Huston]

Hello All, 

So Tuesday night i decided to drive out to one of my local real estate investing meetups. At the meetup there was a speaker who was talking about his success to financial independent and when he went through his list of rentals he bought over the years it left me with a lot of questions. 

1: Most of his rentals he bought in B+ to A area's in the 300-450k range in Florida.

2: His numbers just didnt make sense, one deal he posted it showed literally like a +$5/month cashflow only....

So afterwards i started to talk to him more and he mentioned that he is not the type that invest in cashflow, he is a equity investor... intrigued me so i asked more questions and basically he went on to explain to me that he buys properties that need a little bit of work, but have built in equity in the deal, but he has 4 main rules he goes by... 

1: If the Roof is greater than 10 years, he always puts a reduction in his offer for a replacement roof.

2: If the A/C is older than 5 years, he always puts a reduction in his offer for a replacement a/c.

3: If the house is older than 30yrs old, he always puts 10-15k reduction in his offer for a water line replacement.

4: He refuses to buy houses with pools....

Anyways after a bit of talking he explained to me that he buys larger 300-450k houses, because most investors are educated to not buy them, so there is a lot of room to wiggle on the deals due to lack of competition on offers and most people in that price range are easily able to be purchased with a few % out of the deal to skip agent commisions..

Example he gave me, he recently bought a 455k deal for 405k, but the ARV 535k, because he talked them down in needing a new roof, and a/c and offered to pay cash instead of going through an agent if he would drop 4% off the price for that...

So i asked him, how are you FI if there is no cashflow?, his answer was his cashflow is in the equity and principle every year. He said that his renters are paying down over 400k/yr in principle on his rentals, that he rotates HELOC and refinancing on his properties to cash out that 400k a year. Then he keeps his eyes out for another deal and lives off the remaining each year without working..