Invest In Real Estate – Q&A #3
Today we’re doing some Q&A on investing in real estate. My name is kris krohn here with Limitless TV. You’ve been asking questions and today we’re bringing the answers Right first video of the day comes from, Encurve. I hope I’m saying that alright and Encurve, Kris you own like 400 properties to me that seems like a lot to manage and deal with. You’d be right. if I was managing those homes What do you do if people are behind on rent for 3 months? what do you do if they break something in the house? That’s good questions. First of all if they break something in the house I ask them to fix it and sometimes part of renting is you got to fix it too. Part how I have weighed a lot of that anchor is that, I’ll go into markets where I’m getting into newer homes like for example when I buy them in Florida or when I buy them in Phoenix, some of the other markets they’re really new homes and then I’ll go into an area where there’s a higher standard of living. There’s a higher income. For example in Florida where I’m in Kissimmee County right south of Orlando Parks, a lot of the people working at the parks there make sixty seventy thousand dollars a year so in those homes, guess what? They’re breaking a lot less stuff and they don’t get us behind. So part of selecting a good market is actually selecting a specific demographic where I know that my tenants make more money than average. Like in Phoenix, my average tenant make sixty plus thousand dollars a year. But if you go into real estate housing in an area where people are making below the national median of forty four thousand dollars, guess what that’s going to come with? More problems, more headaches, and more repairs. So I really look at the big picture when deciding to do something like that and again, 400 homes is easy to manage when you’ve got a team that you trust and with that many homes I get the advantage of bulk. I love having that on my side. Great question. Next question from ESF games, Hey I’ve been thinking about investing in real estate for a while and I was wondering if you think it’s easily manageable to do real estate next to your day job? ESF Games, you can either do real estate as a day job or as an investment. And so if you do it as an investment it means that you get to be very passive. But if you treat real estate like a job? then it means that it’s going to send you to work. There’s a lot of people that think that I need to buy a home, I need to put my hands on the tools, I need to rehab the home, and it feels like you have two full-time jobs. The way that I like to do real estate is I pick more passive strategies. So buying a home, having a team get it rent ready, getting it, run it out, and from that point on guess what? it’s pretty passive. When it comes to selling, it’s pretty passive. If you’re doing something like flips though, you’re going to find that that’s going to compete with your day job and can really wear you out fast. Okay Daniel Hogue is real estate investing influenced by the country you live in? if so, how much? I’m living in Denmark and I was wondering if that changes the way I should be investing in real estate compared to your advice for the U.S.? Thanks in advance, love your channel. Daniel I love you thanks for loving the channel and let me tell you this, I don’t actually know the rules of investing in Denmark you’re going to have to get familiar with a lot of these strategies are going to work there but some of them might not. In fact from one country to the next country you are going to find differences. Some people will invest out a country but if you want to invest in your country, you really got to get familiar with the rules and regulations of what you live in and where you live and what that’s like so is it influenced by the country you live in? Absolutely. Here in the States, I’m really familiar with the cycle of markets, how they move up and down, how the political environment plays a role on that. And ultimately I go into niches where I can specialize. The more I specialize, the easier it is for me to mitigate my risk and ultimately that’s one of the really important things of expertly investing in real estate. So I give you fantastic advice for the states. Whether it works in Denmark or not, you’re gonna have to do some extra due diligence on that thanks Daniel. This one comes from Tom Hanks I am so honored Tom. I’m a fan of yours, I love your movies, I’ll never forget that one where you were trapped on that Island. Wilson! Okay Tom Hanks, I’m still learning and I’m new at this. I save up to put on a down payment with a home but I got a question, if I put $10,000 down payment on a home can I use ten thousand in equity to purchase another home and do the rinse and repeat? Tom you got a really good question here. There is a certain amount of equity that you need in a home. A certain amount to make sure that you can pull out and do it again. The more equity, the better. Typically banks like to make sure that you keep at least 20% of equity in the home. So for example, if you only have $10,000 it’s important that you’re buying a home that’s more like a primary residence. First house I bought with all that equity, I was able to get a twenty thousand dollar line of credit and that still left 30,000 of equity in the home so the bank was comfortable giving that to me and I use that $20,000 as a down payment to buy the next investment property that I bought. Absolutely can be done but remember if you don’t buy it with enough equity, you kind of screw yourself. Derrick Tom. So you would buy a home below the median, let’s say a median is $100,000. You would buy a home for $75,000 and not worry about rehabbing it, just rent it out. Get a monthly cash flow coming in and then four years sell it and then do it all over again. I just want to make sure I understand? Derek, you’ve got a great grasp of the situation you can absolutely do that. If the average median home price is a hundred thousand and I’m buying it for seventy-five thousand, that’s a 25% equity play. I’m going to make cash flow in the meantime a home in that price range is going to have a great equity position so I’m going to capitalize on on the equity. I’m going to get a great cash flow, 4 years sell it and double down and get two homes or three homes and a few years later turn three homes into more homes. Just know this, along the way you might be able to refinance pull some of that money out and buy your next home and if that allows you to velocitize your money, that’s going to be a thumbs up. Master G Alright. Hey Kris could you please do a video about maintaining property? I like what you’ve done but if the tenants break things what do you do? Master G, this is a great question because when you get into properties and you’re just doing rentals when things break, you got to fix it. So know this, the older home you buy the more fixing you’re going to have to do. Number two, if you buy a home in an area where people have a lower median income you also have more to fix. People that make more money break less stuff. And so, the third factor is the newness of the home. Ultimately, if you take those into consideration you’re going to do well for yourself but a lot of people will get into poor man’s real estate and what that really means is you’re going to buy a dumpy home, in a dumpy neighborhood with people that don’t make a lot of money and those homes will continue knocking on your door asking you to put money in. You might celebrate a get great cash flow but you may have to reinvest a lot of that. So look at some of the bigger demographics before you buy that home and just make sure, is my home newer? does it have the equity? and how much money is the tenant making that I am putting? all great considerations. Hushpuppy. Kris I understand that you like single-family homes. Caught me. Guilty. I do too. Awesome. And that’s what I have a portfolio of now but what about apartment complexes ?seems like it would be that it would supercharge the return on investment. Increasing returns to a scale rather than finding 10 more homes instead of just doing a complex. You know I like apartment complexes. It’s a bigger game and you just got to make sure you’re doing your math right. It’s more of a cash-flow play and then you typically get your money out if you can do some improvement. So typically, if you can get in on the apartment complex and if you got more money to play with, you can do well. You just got to buy really well. There’s one that I’m looking at right now where I can get it for 1.4 and it needs about two hundred thousand of improvements. It’ll be worth about two point two. There’s a good margin. So I’ll buy it, hold on to it, increase the rent, and once I’ve increased the rents after the management, I’m going to go ahead and bump up the price and I’m going to sell that. And in the meantime I’ll make great cash flow that I’m going to make a great gain on the back end. Just know that it takes more money or more investors money and you can absolutely play that game. Misty Springs, Which is better, a one-year hold? a two-year hold? a five-year hold? When it comes to rentals. Great question if you bought a home with equity the sooner you can get it out the better. So a one or a two year may work just fine for you. Doing, I like to sign one and two year lease option agreements if I can on homes without great equity and then I really want to work with that person to help them buy that home because it will free my money out of it. I’ll get a great cash flow in the meantime. And I can go back in the market. The sooner you can velocities money the better. But when a market turns you wanna also make sure that, hey market might take a while to come back can I keep running and keep making money? and you want to have that option which is why we stand on the median. Alright. Ramsey7. Hey Kris, I got twenty five thousand dollars saved up and I’m an accounting major at Drexel University and I just want to ask you where the best place is to find a diamond in the rough sort of speaking would be for my first house? then when I find it where do I go from there? Ramsey7, this a really good question. With twenty five thousand dollars saved up you can easily, if you’ve got a job, you can qualify or get a parent to co-sign and qualify and put 5% down. You might only need to put five seven eight thousand dollars down and get into a primary residence. Rent it out to some roommates and that’s going to work really well for you. Or you can talk with my company and chat with us. I’ll take you to some places in the Midwest in Florida where twenty-five thousand dollars can get yen on a nice hoppin high cash flowing property with a good equity play and both of those would work really well for you. Google user. So if you’re only keeping these homes for three to five years are you getting a variable mortgage rate? Ooh! this is a good good question. Also isn’t it true in a 25-year amortization that you really only start knocking down the real money at the end of the interest? so you’re really profiting after five years? Alright. good question Google user. I’m really glad you brought this up. So you got two great questions here. The first one is, I’m not making money by knocking down the mortgage as I pay interest. So that’s not one of my strategies because really got a hold onto a home ten years to even start paying down ten fifteen twenty thousand dollars of it. So that’s waiting. That’s, that’s, trying to that’s trying to make money the really slow way in real estate. How I really amp up my profits is I focus on cash flow, I focus on my tax benefits and most importantly the equity play on the house upfront. You’re going to profit far more there than knocking down the mortgage. As far as variable rates go, you best be careful. If your strategy will work with your thirty-year mortgage rate versus a variable rate, then that can work for you. But what sometimes, what people do is they’ll do neg am mortgage or they’ll pick the lowest rate option and they’ll actually be going into debt every month above and beyond. Getting the profit today but actually moving backwards and then when you sell it in five years you’d be hit hard upside down. So I’m not a fan of ever putting less than 20% down and I’m also not a fan of any neg am for sure or any variable rates unless they’re reasonable and I’ve done my Performa and I’ve calculated that it’s still going to work out. Then I will capitalize on a higher cash flow I just know that I’m not going to get it on the back end and it’s got to be something within reason. Good question Google user. Yanni Don’t you lose potential ownership of houses by sharing with everyone? aren’t you creating competition for yourself by in these videos? Yanni I like you a lot Right now there are 350 million Americans and there are hundreds of millions of houses that are out there and some rental and some that you can buy and I’m not really worried about competition because the deal of the decade comes along every day. There’s more than enough for everybody and you know what, when I partner with people, it means that they get to come in on the deal, and you’re right. I’m only making half as much but it means that I can do 10 times as much real estate. So guess what it means? means that I get to velocitize my time, my money, my efforts, I can move faster and I do it by sharing. I do it by having a team. I do it by spreading the word. So competition may increase but I’ve never felt it. I just, it’s one thing to make money in real estate is another to to do something you believe and do as much good as possible and I hope that these videos end up helping those watching that are taking it serious, buy thousands of homes. What is that going to do? it’s going to build up the economy. That’s going to help boost up the values in my home I can paint a really rosy picture where this is creating great benefit for me but most importantly what doesn’t impact my pocketbook, impacts my heart too. And that’s a huge consideration and really ultimately deciding what do I want to do with my life? There’s enough yani for you, to buy as much as you possibly can. There’s enough for me and everyone else watching this the same so let’s just help each other right? Alright question Yanni. Last question of the day. Buried with you music says, but how do I physically start investing? do i buy the property myself and just charge people under the table? or do I buy the house from our real estate business and then somehow become the head of a property and charge someone through the real estate business? where the heck do I learn the basics of the basics. It seems like everyone knows things but me. Buried with you music, I want to invite you to watch every one of these videos because we’re coming at life from the basics and I think with all the videos I’ve made the more of them you watch, you’re going to pay your price for learning the things that you need to. Ultimately, real estate is going to get simple when you have enough knowledge and when you settle in on a really good first starter strategy. If you’re not sure a great place to start you’re welcome to comment below. You’re welcome to click some of the talk to my team where they can make a game plan for you and see what possibilities lie out there for exactly how you need to get started because you know what I agree with you. Sometimes watching videos it’s good it will increase your intelligence but when it comes to really taking that first step you either have enough knowledge to know how to do it is what you learn or you have it. And if you haven’t, you need a team. You need an expert, you need a mentor and we can help line you up with those two. Thank you for asking all these amazing questions. Got more? then type below and we’re going to get back to you and make sure that we get more answers to your questions. Also don’t forget to subscribe and down below you’re also going to find a link where you can become a patron of our channel. If you’re appreciating the value that we’re creating, if we’re answering questions, some of these answers and strategies can help you out in massive ways in building your real estate portfolio. We’re giving you an opportunity to give back and become a patron where you can donate a few bucks to help us produce more of these videos for your benefit. Thanks so much we’ll talk to you later.