Invest In Real Estate – Q&A #1
Kris Krohn today, Limitless TV! and you know what? You’ve been asking so many questions about real estate that we decided to take all your questions and turn it into a big Q&A session. Here it comes. Alright. Okay. Our first question comes So our first question comes from Thomas McClever. Which says, how exactly do you only have to pay a three thousand dollar downpayment on $110,000 house? Aren’t down payments normally 20%? Thomas you’re absolutely correct. On investment properties, 20% is what’s really standard sometimes you’ll find programs in the market where it’s only ten percent down but investments I always like to put 20% down. So how did I get away with the 3% down payment? because when you buy your own home I stood by my own homes as if they’re investments which means I like to load them up with equity. Even when I built this house, I built it for 1.4 million dollars and had close to a two million dollar valuation. So on primary residences, you can get away with sometimes a 3% down payment or conventional with a 5% or FHA has a three and a half percent, in which case you need a lot less money. So a lot of new investors, if you buy a home that you’re going to live in even for a short period of time, with the plan of treating it like an investment or turning it into an investment, you actually don’t need 20% Alright next we got a question here from Fred Morris. Thank you Fred. It says, great videos and info with this concept work with houses that are rent to own. Rent to own gives people time to build up their credit before committing to buy the home. I was just wondering smiley face Fred, smiley face back at you. So rent to own is synonymous with what I also call a lease option in some of my other videos and I love doing rental homes and you can take advantage of a rental own whether you’re an investor trying to get into a home. In one of my videos I talked about sandwich leases and that’s really what that is. A rent to own does create time for you to be working on your credit and improving your credit and it’s a fantastic way to start investing. So frankly, whether you’re the one buying the house and doing a lease option slash rent to own, or if you’re the one that actually is the investor starting out wants to get into a rent to own, as long as you can negotiate it the right way, the way I’ve showed you in some of my videos, you are on the right path. Alright, question here from Mario Ortiz I’m 17 years old and I’m going to start already By the way, congratulations. Thrilled for you. Sometimes I meet people are like, “man, Kris, I’m going to, I’m gonna beat you, I’m gonna be financially free before you” and you know what I say? that’s the whole point of this channel! do it! rock it! Alright. One thing I received from Dave Ramsey, by the way, what do you think about doing this in Mexico? my dad is a citizen and we’re going to buy a big property down there for fifty five hundred dollars. $200 a month. Is there value down there? Well, I’ll tell you Mario this system works all across the world. Now the legalities and the rules and regulations are certainly going to change and you need to be familiar with what they are but you know what? Warren Buffett, richest man in the world, real simple strategy. A buy low sell high and that exists everywhere. Alright this is a question from Quintas Thompson. He says, to me leveraging debt is not smart. One thing I received from Dave Ramsey. which is in his good book Holy Bible, the borrower is slave to the lender. What’s your take? Well, I don’t know if you and I, Quintas are going to be friends after the statement but I’ll make it anyway. I think Dave Ramsey is a brilliant man to listen to if you plan on and financially having a goal of just becoming out of debt. If that’s your goal in life, man you and Dave, you guys are saddle up to the right person. But you know what? I have never met someone out of debt that could retire. Being retired doesn’t mean that you actually have a plan to put food on the table because you can’t eat no debt. And so I think Dave is a great plan for people that have no plan and you’re right, you can become a slave to lenders but here’s the reality, we’re borrowing money in real estate to do real estate and what we’re doing is, we’re controlling debt. You see there’s consumer debt which is a bad debt and there’s investment debt or business debt which is a good debt. So I’m millions of dollars in debt. And then what I do is, I control that debt. So for example, I just finished selling three homes that I bought in Arizona for a really low price. I got mortgages on all of them. I made $300 a month cash flow roughly on each one of these homes. I just sold them and I made roughly $45,000 on all three homes. So I made well over a hundred thousand dollars combined on these three homes but I went into debt to use them. So the question is, is it a consumer debt / bad debt or is it a business debt – good debt and are you controlling that debt? Ultimately, what I mean by control is I use it for a short period of time and then I sell it and alleviate the debt. And that strategy right there has made me millions of dollars. So we got to really look at what kind of debt that we’re getting into and in real estate, there’s really profound good debts that you want to get into. Alright. Fieatres Des Rose Did I say that like When I bought my first house and rent it out to someone and I’m responsible for fixing up whatever breaks or how does it work? is it better to just sell the house? This person says, I’m a bad maintenance man ha ha ha. You know what? I got a philosophy if you want something done right don’t do it yourself. If you don’t like fixing things then have someone else to do it but it is really important to not just sell a house just because you don’t like doing something. In fact, you’ve got to rise above your own personal emotional status of what you like and don’t like and you have to ask what’s best for the property and then do the things that you love to do and don’t do the things that you don’t like to do. Ok from Ghost Davis, we have in today’s market, good luck following that solution. This is referencing one of the videos where we talk about buying real estate and how to buy it with no money. And Ghost, whether you know it or not, these strategies that I’m sharing with you, actually work really well in this market. The only thing that doesn’t work really well in today’s market really just comes down to we’re in a seller’s market which means there’s very little inventory across the country. Which is why I do a lot of nationwide investing because somewhere around the country, there’s a really hot market you just got to know how to get in. So here in Utah where I live ,right now there’s very little inventory which is a great thing because when you find a great deal it’s going to sell top dollar and you’re going to do really really well on it. But absolutely the strategy still do work. In real estate, you got to develop that persistent mindset and you know in real estate, we make a lot of money because we live in a world of noes and it’s not going to work every single time or it’s not going to work on every deal or it’s not work with that Bank but you got to persist. First property ever did? back when Washington Mutual was a real Bank and alive that’s where I set up my first bank account when I 16 years old with my paper out. When I was by my first house at 23, I could have sworn that they were going to give me a loan. And you know what? they turned me down and the next Bank turned me down and the next Bank turned me down. But the fourth Bank said yes. And I had to be persistent because all the banks they’re a little bit different. They got different guidelines and being persistent is really important in a market where we can do really well in a world of No’s. Alright, this next one comes from Manny. How do you know that the bank will value the property at a $150,000 before buying? It depends on the each individual valuation agents. Some would say, one hundred and fifty thousand and some might say a hundred thousand dollars. You know what Manny? you’re absolutely right. I fired my first 200 Realtors because I couldn’t get any of them to consistently produce for investment properties. In fact, realtors in general don’t specialize in investments. And so I found that I would use certain keywords when I would search out a realtor. I’d look for the ones that said, great bank foreclosure, for sale by owner, handyman special, great investment, those phrases mean consistently that, that realtor works more with investors than maybe home buyers. And you’re going to have more luck with them and yet many of them don’t know how to produce consistent results and so this idea that some might say, a hundred and fifty thousand and some a hundred thousand, ultimately getting with a great realtor that knows how to perform a really good comparable market analysis, that’s going to do the best job of helping you hit the mark as closely as possible. Okay from Manny, number two. Before being the owner of the house how do you take the valuation agent inside the house without the owner being present. If the owner knows its value more than he would let you gain so much plus? please can you address my questions. Alright here’s how I’m going to interpret that Manny. When you actually get in the house if it is already locked boxed with the realtor then the owner does not need to be there for you to get in. If it is a for sale by owner, then what you do is, you’re going to call the owner and then the owner themselves is going to let you in on the property. So if you’re working with the realtor, you can generally gain access and once realtors are involved, it’s kind of like lawyers. You don’t really get to talk directly to the owner. What you’ll do is, you’ll speak to your realtor, your realtor will speak to his realtor, and his realtor playing the telephone game will speak to the owner of the house and so the realtors are moderators. And what they’re going to do is, they’re going to communicate back and forth. And frankly, that can be a huge advantage to you because it means that whatever your negotiation tactics are, you know, you might get to start with a price a lot lower than what you’re actually willing to pay and that, you might be nervous to do that in front of the owner themselves and so it’s nice to go through a mediator. Some people play games like that when they do the negotiating and and so that that arms-length transactional distance actually gives you an advantage and be able to communicate more freely. Okay, from Gretchen Hernandez, I’ve always wanted to invest in real estate but I’m in an impossible market, Vancouver BC. The cheapest house is $500,000 and people are bidding up a higher and higher on each house. How can I find a place that I can invest in with reasonable prices? and would a bank lend me to buy a home in another city that I don’t live in? This is a good question Gretchen and I’ll tell you right now, that I’m not going to encourage you to buy a home in Vancouver BC. I’m going to invite you to go into a different market place. This is one of the reasons why in the States, whether someone was in or out of the country I’ll help them buy all around the United States that has 350 sub markets and there’s always four or five amazing hot markets at any given moment. Which means that normally your backyard is not a great place to invest so what we’re going to do is, we’re going to take you to the places where you can successfully invest. Now if you are going to go out of state or if you’re going to be crossing some of the borders and County lines, it’s important to have a competent team that you believe in. When people actually come and work with my organization because we’re doing thousands of homes, were able to give you the advantage of bulk. Which means that I can go to the property manager who has five hundred my homes and lean on them a little bit and he’s highly motivated to do a good job. Sometimes when you’re out there all by yourself with a single property far away, you don’t have a whole lot of leaning power because you’re paying an 8, 9, or 10 percent management fee and it’s just not a lot of money to really convince them. So they’re not always highly motivated when you do it that way. And so that’s one of the benefits that we provide is that anytime you can do real estate in bulk with groups of people even though you get a hundred percent individual ownership on the house, Gretchen it gives you a lot more buying power and management power. So link below, you can check out more on our company and talk to our in-house experts on how we can take you to some better markets and you know, I typically buy homes between 100 and 200 thousand dollars. I don’t encourage people to do investments over the median which is generally two hundred and fifty thousand dollars. You’re in a very expensive market. The moment that market adjusts, it can turn a hundred thousand dollars on a dime and you can lose a lot of principle and money with a snap of a finger. So you got to be really careful about that. okay next question we have here is from neck mad behavior. When you bought your first property were you a full-time college student? if so, how did your bank actually give you a loan? did you have student loans? Good question, mad behavior. Uhm, when I bought my very first house, I was working full-time at a job. And so two things for you to know, can students buy real estate? Yep. As long as you have a two-year working history. And you know, I was often part-time. This was the cool thing, I bought my house in the summer right when I went from part-time to full-time. So on paper it showed that I had full-time employment and it also showed that I had a two-year work history and you know, I wasn’t making a lot of money and it was just enough to eat gone by and make something happen. Student loans I didn’t have me at the time but what do you do or don’t have student loans, they usually don’t play a huge factor in what you can qualify for. So if you’re in college, you can actually buy real estate but only if you have a job. Now, you also have the ability a lot of people don’t know this that let’s say that I got a degree in media and then right as soon as college gets out I get a job in media, then the bank will actually look at my four years of college as work history and so your starting pay might be $40,000 they’ll assume that you’ve been making that money for two years. They know you haven’t but because you were in school and because you got a did a job in the field of your degree, they’ll count that. Which means if you’ve got a year left to school, if you pick up a job for a year, you didn’t generally need two years you won’t qualify anyway but a year from now whatever job you step into, if it’s an alignment with your degree, you’re going to be able to qualify immediately for a house. Alright, Danny Smith, may not be a good time to buy a house since the housing market is likely in a bubble. Look up Harry Dent. If he’s right, we’re headed back into a much worse situation than 2008’s housing market collapse. I would wait til the bottom again meanwhile save your cash. Danny, this is a great comment and this is going to be a sophisticated response for you. I do want you to know that Harry Dent, he’s got a great tap on the market. If you want to know how to have your own because the market shifts and changes from place to place and where we live? ultimately what I really look for is I look at what homes are selling for and I ask myself, how much above the commodity building price are they building over? So for example, in 2008 you’re right. We were in a trough and we’re climbing out and people want to know, are we in doing the next bubble? When is the bubble going to hit? and what will happen? First of all, if you play by my rules and you’re buying below the median, you’re going to be safe either way. Because you whether you can sell the house or not, you’re gonna have a great cash flow on it if you buy it correctly. But more importantly, is that right now in my county for example, there’s building going on like crazy and a lot of people think, oh that means bubble. Well, it can take years for a bubble to form. First of all, when we hit our last collapse we didn’t build anything for seven or eight years. Which means there’s this pent up demand. Because guess what? population is creating a demand. We’re making babies and eventually we got to move out from our in-laws, and eventually we want to have our own houses. So there’s a lot of building going on and the question is, are we out building our need?s or are we building still for needs that exist? right now in our market houses are being sold at about ten percent above what they cost to build. This is encouraging more developers to get involved. And generally, before we bubble, we need to be a certain percentage above that building cost and right now we’re not very far not very high above it which means, will the market eventually turn? absolutely. And since we can’t guess, and since we don’t want to wait, what do we do? find homes with great equity and buy them below the the market and they really hard that market really hardly gets touched by the bubble. So good news is you can be investing now but there’s also a way to keep an eye on the market and right now I’m selling off a lot of my inventory that I bought in over the last five to ten years. Raking in, making a lot of great money. And I’m still buying houses but I’m playing by the rules. Choco orange, choco orange. Well I don’t get it. How come your first house down payment is so low? You know, I think we actually hit that one it’s because go ask the difference between investment lending and primary residence lending and you’ll find a gap of three percent down payment versus that 20% down payment. Jean Lenore, I’m self-employed. No credit but I’ve got ten thousand dollars saved up. I want to buy and sell real estate. How do I do it? Jean Lenore, my advice for you is to get into some seller financing real estate. That means learning how to buy a house instead of with a bank. Because you’re right, you’re self-employed. You’re not showing credit. So instead, you got to look in the market where you can buy houses under like a rent to own, a lease option, or for sale by owner situation because what you would do there to keep it real short is you talk to the for sale by owner people and maybe they say, hey the price you want is one hundred and fifty thousand and your comeback is going to be, well we can talk about price but are you willing to finance the house to me? Basically, be the bank. I can give you a $5,000 down payment and all of a sudden, watch one of my sandwich lease videos and we’ll show you how to negotiate yourself into a home where basically the previous owner is going to act like the bank. And as long as you can get a certain amount of equity on it and a certain margin for cash flow, that’s a fantastic way to get into real estate right now. Alright Neil Skoog Neil Skoog, what do you mean the basement covered your mortgage? good question. So a house that has a legalize department or that has a mother-in-law apartment, that’s basically a part of the house where you can have dual occupancy. I’m living in one part and I’m renting out the other. So when I say the basement paid for itself, what I mean is when I moved into the house I rented out my basement to a separate family and I collected rent from them and the rent that I collected was sufficient to cover my entire mortgage. Which meant that the three bedrooms that I was living in for me and my wife it was all paid for by the people down in the basement. Basement paid for everything. Lock on Gamer, Great if you can manage debt but it’s not for everyone. One bad deal can hit you hard. Lock on, I could not agree with you more. You can lose the whole farm on doing a bad deal and that’s really why I’m putting all these videos out there to help people keep from making mistakes and so some people are really going to, they’re going to take some risk when they do this and with risk comes the possibility of reward. Force it with real estate if you dot and if eyes and cross enough t’s the right way you, can mitigate that risk, manage it well and do really well for yourself. You’ll notice that I help people create million dollars over a ten-year stretch of time with a game plan as opposed to doing things that are really aggressive. You know, I stay in a price range where, where the prices are really low. Why do we do that? Well so that whether the market is crashing or going up, there’s an element of safety and the cash flow in the equity that you can negotiate upfront. But everyone really needs to be careful. It would be better to not do the deal if you’re not confident in your strategy and have all your facts lined up, then it would need to jump in haphazard and then risk losing everything. Last question for the day comes from McLean Mizuki. And it credit card? borrowing? why is going to debt even an option? that’s not smart at all. Well, you could be right. I’ve got a video that I made called good debt versus bad debt and in our country it’s strange that we just have this one word that can mean something so good or can also mean something so bad and going to into debt is a bad thing if it’s going to cost you money. So for example, if I buy a boat and as a $500 a month payment, that boat is not making me any money it’s just consuming my money. It’s costing five hundred dollars a month but if I go into debt to buy a house and the house is making me five hundred a month after servicing the debt, then what would we call that? Well, we call it a good debt. And those sounds strange right? good debt. It’s a good debt because it’s making me money. We’re going to control that debt for a space of time and then we’re going to retire that debt after we sell off that property and then we’re going to take all the reward and we’re going to take all the gains and we’re going to put it into the next property and frankly you bring up a good point. In real estate, you can get upside down if you don’t manage the debt and borrow appropriately, then if you don’t get a deal on the house if you don’t purchase the home with equity, if you don’t do your research to make sure that it’s got a really good positive cash flow, then every month you could be servicing the lack of money that it needs to service the debt and then that would hurt you and that would put you backwards. So debt can be a really great thing, it can be a mediocre thing, or it can be a really bad thing. And here, we want to teach you how to buy the kind of real estate where it ends up being an amazing, awesome thing. Something that you’re truly grateful for. Thanks for watching today’s Limitless TV video. And you know what? If these answers breed in a lot more questions, I want you to respond below. Type your questions in and we’ll make another one of these videos and share answers with you.