Is Renting Out A House A Good Investment
Kris Krohn here with Limitless TV and today we’re discussing real estate and whether renting a home is a good idea or not So is renting a house a good investment? It depends. I’m going to share with you in this video when you should rent and when you absolutely should sell because there’s a difference but first step most important, is to have a winning mindset and real estate to make sure that you start right and win which means starting with the end in mind. And what does that really mean? it means that anytime you ever buy a house you need to view it as an investment. This is either something I’m going to sell to make money on or this is something that I’m going to rent and make money on. Because if I buy it with the discount and I buy it right I can rent it out and I’m going to capture a cash flow. That’s a residual income That’s automatic money. That’s mailbox money. It comes in every single month whether I work or not. Or it’s a house that I’m going to sell and I’m going to make an equity margin play on it. Which means if I bought it with $40,000 of equity than what I sell it I’m going to get what? well I’m going to get some of that money out. Maybe all of it, maybe more. And so how do you know whether you should rent or not? First of all understand this, renting is a brilliant idea with the right kind of investments because when you have enough homes that are rented out making you a cash flow, you got that automatic mailbox money coming in. You just need to know the difference of when to rent and when to sell. When to rent, when to sell. Let’s put these up on the board. Let me give you some examples of both of these scenarios and I’m going to see if you can tell me when to rent and when to sell. But before I do, I need to give you context. I’m all about velocitising my money don’t look up that word velocitising I think I made it up. I make up lots of words but what it means is it, means to create velocity with your money. Once your, if money is sitting in a bank account earning 1% then what kind of velocity do you have? boring velocity! but if I take it out and I put it in the investment earning 20% that’s more exciting. But maybe I’m sitting it in a long term investment if I have a chance to pull it out sooner and put it to work again then what I’m doing is I have my money earning in multiple places at the same time. This is an important factor when deciding to rent and when to sell. So I’ve got a property and let me give you the scenario on it and then you get to be the judge of whether we should rent or sell. the house has a value of one hundred thousand dollars for simplicity what I owe is fifty thousand dollars and if I were to rent it it would have a cash flow of one hundred dollars a month. Now let’s just pause for a second. Every year this property’s rented out, you could get, you could make twelve hundred dollars a year. But remember you’re gonna have some repairs this is not a strong cash flow and yet you’re sitting on how much equity? you’re sitting on $50,000 $50,000 could buy you two homes. And if you buy them right with cash flows of three hundred dollars a month, what we’re talking about is my opportunity cost. Two homes producing a total of six hundred a month or one home making me a hundred a month. Which one’s bigger? What do you think I would do? In that scenario, I would sell absolutely. If you guessed correctly give yourself a high five. Like that. Awesome. Okay let me give you another scenario. You have a house that is valued at magically one hundred thousand dollars. You owe $90,000 which meant that when you bought this house you really probably weren’t thinking a lot about equity or buying the house with some pirate booty in it. But you can rent the house and this house has a cash flow $300 a month should you rent or should you sell? Well, if I were to sell it am I going to get my 10 grand out of it? Well if I’m selling it on the open market with the realtor and then I’ve got closing fees, I might sell this and actually break even. I might even make $2,000 or I might lose a few thousand dollars. So is there money to get out of the home? No there’s not. But guess what there is? there’s three hundred dollars a month cash flow, thirty six hundred dollars a year. That’s 300 less dollars you need to produce every single month for building up your residual income. Guess what I would do on this house? correct. I would rent this house. Alright let me give you one more scenario and see what you do. Let’s say that I have a house that is valued at oh my goodness how’d that happen again? $100,000 Let’s say that I owe $50,000 on it is starting to look familiar. But I have a cash flow of $400 a month. Why? well let’s say I’m using one of my aggressive strategies like a lease option. You can watch a video on that. here on limitless TV. It’s awesome. So I’ve got a $400 cash flow but I have equity. Man, what should I do? We’re going to velocitize our money. How are we going to do that? we’re going to do both. We’re going to keep the house, we’re going to refinance or do a home equity line of credit. You can also watch a video on how to do that. And I’m going to pull out let’s say $30,000 but I’m going to keep the house. My $30,000 is going to cost me $100 a month. So now, my cash flow goes from 400 down to 300 but the $30,000 is used to buy what? a second house. And on this house, I’m going to not only just putting $30,000 now but I let’s say I bought it with $20,000 of equity. So guess what? On this house it’s valued at a hundred thousand I owe, fifty thousand because I put thirty down and bought it with twenty thousand of equity. And let’s say this house cash flows four hundred dollars a month. Well, on this house and now owe eighty thousand but I’m making three hundred here, I’m making four hundred here, guess how much I’m making? seven hundred dollars a month and let’s check out where my net worth is gone. My net worth increased by a net twenty thousand dollars now I got fifty sitting here, I got twenty thousand here. Now I have a $70,000 net worth and a seven hundred dollar month cash flow. So renting and selling sometimes you get a beautiful in-between option the overarching principle of, should you rent your house is, how am I velocitizing my money? Is my money invested correctly? What’s the ROI that it’s producing? and right now should you rent? it really comes down to this principle and economics called, “opportunity costs” What are you trading the equity or money in that home for? and is it moving you up or is it moving you back or is it moving you sideways? when I buy real estate I always want to level up my financial life. And if you make that your rule too, watch some of the videos here, subscribe on Limitless TV and learn all about that, you’ll learn when to rent, you’ll learn when to sell and how to grow your finances. If you need some help click the link below, reach out to my team. Because you know what? it’s time to do something about that property you gotta figure out whether you should be renting it we’re selling it. Thank you so much for watching Limitless TV. Don’t forget to subscribe. I’ll see you soon.