Now I had close to $300000.00 after I had paid all of my debts. Over a period of next two years with this $300000.00 I bought eight run down commercial buildings. Most of these buildings were bought at less than half price as there was a recession in the real estate market.

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Because of depression in the real estate market most of these buildings had no rents coming from their commercials stores which were on the ground floor. I opened my own retail clothing stores in those buildings wherever I had an empty store. Some of my stores were making profits lot more in excess of my interest mortgage payments and some of them were making enough money to pay at least interest payments on buildings. Some of these stores I leased them wherever I was able to lease them to other people at lower then marking rents. I could afford to rent them at lower rents as I had bought these buildings at much lower price. Where ever it was necessary I also did some minor face lifting and renovation to those units in the building which were vacant so that they can look better and then it was easy to rent them.

My import business was doing extremely well. Within three years I had lot of cash flow from my buildings as they were more than 90% leased. As I had good cash flow from my clothing as well as real estate business banks were willing to lend close to 90% loan to the value of new appraisals on these renovated and leased buildings. Over a period of next five years I was able to raise close to $ 2 million of new money by borrowing against these buildings. I kept on buying more commercial buildings which were empty and needed new faces and tenants. I only bought these buildings from people who were distressed and were willing to sell them with my conditions. I kept on refinancing my existing buildings and buying new buildings and also started buying raw land with that money. Within 15 years I had over $30 million dollar of commercial properties, agricultural, residential and commercial lands and $10 million dollar of borrowing. Five million of this borrowing was done to buy and speculate on land.

My down fall and blunders:
I decided to make quick money. I had bought few lands and flipped them with as good profit very fast. Land buying was an easy business as we did not have to worry about renovating and leasing of properties and was a much easier business. But lands did not have any cash flow and banks did not want to lend or in some case lend only fifty percent to the value of purchase price. Interest rates on borrowing against these lands were close to three percent higher than the borrowing against commercial properties. Banks will also charge close to another three percent as closing costs when they were lending money against these lands. Banks have a bigger risk when they lend money against the land so they charge much heavy interest rates.
I started raising money and bought close to nine million dollar of lands. I over expanded very fast. I started selling my commercial income producing properties and started buying land thinking that I can sell them and make faster money. I did not study the areas well, there were no new jobs created in the area rather some jobs had moved out. There were hardly any new homes built. I had no experience in the land development. In some cases cities already had lot of land already developed and local politicians were friends with existing developers and did not want any new developed land. To develop land it is important to be friend with the cities and local politicians. If you don’t know and are not friends with local politicians and city officials then at any time when you will go to city for land developments then they will not let you develop land and will put all kind of restrictions. It is also very important to hire good engineers and professionals who specialize in developing land who already are working with the city and know the officials of different Governments like planning and zoning, environments etc. Without having a good team to work it can take years to develop land.

By Ashok of http://becomerichinfiveyears.blogspot.com



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