“You’re all right so far,” I responded. “OK,” Philip continued, feeling more confident, “then you either sell it or rent it. Probably rent it cause I need a quick five hundred to give the seller for the down payment.”
“Not bad for a beginner! You put an ad in the paper and rent it out. When the renter moves in, you charge him the first month’s rent and the last month’s rent plus a security deposit. That could be as much as fifteen hundred dollars, depending on your market. And with this money you buy the property. The tenant actually buys the property for you. And you’d have several hundred dollars left over for closing costs, repairs or a cushion for future repairs.”
I paused a moment to let it sink in. That seemed to solve Philip’s problem, but Steve still wanted to know where to get the four hundred dollar monthly mortgage payment. I waited until he came up with the answer himself.
“The tenant pays the four hundred dollars.” “Good. Suppose it’s worth $44,000 today, and you increase its value to $48,000 with minor fix up. That means you have an equity of $9,000. The property is now ready to farm—to sell, keep, refinance or trade. Which is the quickest method to yield $5,000 cash?”
Taken From:The ROAD TO WEALTH