David Green from BiggerPockets joins us to talk about how to get into real estate, step by step, from zero to 100. We talk about what it's like being a former law enforcement officer and how to transition from the streets to the real estate industry. We also talk about the benefits of working with the transit police and what it takes to be a first responder in the city of San Francisco and how important it is to stay involved in public service. We hope you enjoy this episode, and we appreciate all the support we've gotten so far! If you like what you hear, please HIT SUBSCRIBE and leave us a rating and review on Apple Podcasts and other podcasting platforms! We'll see you in the next episode on the 20th of October, where we'll have a special guest in the house! Peace, Blessings, Cheers! Cheers, EJ & Rory. - The Freshly Fit Crew - EJ and Rory and EJ's Dad, Mike Subscribe, Like, Share, and Retweet this episode! - Cheers - Rory & EJ & Ej's Dad - Ej is a real estate investor and investor, and is a good friend of the FreshlyFit Crew! EJ is one of the best in the country! and is also a former cop, so you should know who you should listen to this episode. He's a good dude! And he's a great friend of EJ, so don't miss this one! . Ej and Ej is a great guy, too. EJ also has a great story about how he's got a great perspective on how to invest in real estate and he's good at it all. Ej gives us some great advice on the future of real estate... Thank you EJ has a good sense of humor too! EJ gives us a lot of good vibes, so we hope you guys enjoy this one. We love you guys are having a good time! Thanks EJ! - Rory's Dad has a nice day, Ej & Rory is a very good day! (Thank you Ej! Ej) . EJ: on this episode of Freshly Pockets Podcast , EJ + EJY Thanks, Rory:) - Thank you for listening to the show!
00:05:50.000If you guys notice on the channel, if you go to any of our old videos or anything we've recorded before, if you look at the, you know, progression bar, the timestamps are there now.
00:05:59.000So we are pretty much, you know, good in that respect.
00:06:02.000So we'll see what ends up happening later on.
00:06:54.000I kept buying rental properties, eventually started a real estate team, started a mortgage company, and now I host the BiggerPox podcast, biggest real estate podcast in the world, and I teach people how to be good with money and invest in real estate.
00:07:13.000Yeah, I started in jails as deputy sheriff, worked a little bit of marine patrol, and then I moved out and worked with the transit police doing patrol.
00:08:48.000So I got my license and started selling real estate as a cop and in my first year I ended up being like one of the top agents in the whole brokerage and I was doing it like with 25% of my time maybe.
00:08:58.000So when I got to the point that my feet were so bad I couldn't work as a cop anymore it was a natural move to go and start selling real estate as an agent.
00:09:06.000I was good at that, but I did not love having the amount of conversations that you have to have when you're a real estate agent.
00:09:19.000As an investor, I did really well, but I wasn't a great agent.
00:09:21.000So I ended up hiring people on my team who loved talking to people but did not have the knowledge and the expertise I had so I could coach them with what to say to the clients.
00:09:38.000We're one of the biggest lenders in the country right now, so we can do loans all throughout the country.
00:09:42.000And it just makes sense as you continue to grow businesses and save money and learn things about life, especially in the world of real estate, that you'd have more information to share with other people.
00:09:52.000There's a lot of people right now, if we're being frank, that can give you information about real estate investing.
00:10:00.000There's not as many people that you can trust that can give you information about business, personal budgeting, and investing in real estate, especially with the economy you're going into.
00:10:08.000Be very careful where you're getting your information from.
00:10:12.000And a lot of people will sit there and try to tell you, oh yeah, this is how to real estate invest or whatever, or they'll try to give you some advice and they don't even have any property.
00:10:21.000And I'll tell you this, I've been fortunate enough, I've got 16 houses now, and I've been able to really learn a lot during the process of each closing.
00:10:32.000Yeah, a lot of the things that I learned, you would not learn unless you had actually been in a deal, be under contract, deal with the BS that comes with the real estate market because it can absolutely be trying.
00:10:43.000I know some of you guys might be wondering like, well, Myra, Myra, what are you talking about?
00:10:46.000Guys, like during the day, a lot of If I'm not sleeping right at the gym, I'm on the phone with my real estate agent and we're going over deals.
00:10:51.000We're going over figuring out if this works out, if this doesn't, cash on cash returns, etc.
00:10:55.000Which we're actually going to talk about here.
00:10:57.000But my point with this episode, guys, you guys have asked a lot about real estate.
00:11:00.000And Dave was in town, so I said, you know what, man?
00:11:03.000Let's go ahead and knock this out and get you guys pretty much a video that you can go to at any time that you can refer back to when it comes to real estate.
00:11:10.000But real quick before we get into it, Dave, you just dropped the book, didn't you?
00:11:13.000Yeah, this is the hardest book I ever had to write, my sixth one, but it's the one I'm most proud of.
00:11:17.000It's called Pillars of Wealth, How to Make, Save, and Invest Your Money to Achieve Financial Freedom.
00:11:23.000And basically, this is a book to combat all the garbage that you're going to see on TikTok and Instagram and YouTube about people that are pretending to educate you on real estate to get you into their course, and you may or may not learn anything useful.
00:11:34.000So it's not hard to sell people on why they should invest in real estate.
00:11:37.000That's why most people are listening to this right now.
00:11:40.000It's very difficult to build a strategy that will sustain you for the long term.
00:11:43.000The people that I've found that actually are good real estate investors that make it for the long term, which is really how you make your money in real estate.
00:11:48.000You hold on to it for a very long period of time.
00:11:51.000They're people that focus on more than just acquiring it.
00:11:53.000They are good at saving their money, which is playing defense, and they are good at making money, which is playing offense.
00:11:58.000My advice that I've been giving to people for a long time is you need to be good at these three things.
00:12:02.000If you can't save your money and you can't budget, it doesn't matter how much money you make, you're not going to have anything to invest.
00:12:07.000And there's some people that are great at saving money.
00:12:11.000They've been driving the same Toyota Tercel for 45 years and trying to keep it going.
00:12:15.000But they don't make enough money to ever get ahead and invest in real estate.
00:12:18.000You need to focus on all three of these.
00:12:20.000So the book basically spells out for each of these three pillars specific strategies that you can incorporate to get better at budgeting your money, better at keeping what you've made, and better at making more money and then investing the difference.
00:12:34.000What I'm going to do, guys, I'm going to read the chats, and then from this point forward, we're only going to read 20 and up because I want to make sure we got 10 things that we got to go over here.
00:12:41.000This is going to be the most robust step-by-step guide to get into real estate.
00:12:45.000So let's go ahead and hit these things real fast.
00:13:42.000I invest heavily in Connecticut because I have an infrastructure there, but wherever you decide to invest, I would say have someone there that can help you.
00:13:50.000What would you say, David, to that real quick?
00:13:53.000The $50,000 a year, what he should do?
00:13:58.000I prefer buying a primary residence first because you can put much less money down, which means you have more money to keep in reserves, or put into making the property worth more.
00:14:06.000I think it's a bit of a fallacy that people think that putting more money down on a property is automatically safer.
00:14:12.000Because you do get more equity, but that only matters if you're going to sell the property.
00:14:15.000It doesn't make as big of a difference in the payments as you think.
00:14:18.000I'd rather see someone put a quarter of the money down, 5% instead of 20%, keep the extra 15% set aside for tough times for reserves, and maybe improve the property.
00:14:27.000There's things that I talk about where you can add units to a property so that it will cash flow more, turn something into an ADU, an accessory dwelling unit.
00:14:37.000And also when you're buying a primary residence and then you house hack, which is a strategy where you rent out rooms in your house or rent out parts of the house, not only did you buy real estate, but you also are saving money every month that you would have been wasting in rent.
00:14:48.000The goal is to get out of that as fast as you can.
00:14:50.000So house hacking really hits the investment pillar and it hits the defense pillar at the same time.
00:14:54.000So you can save more money and you're acquiring real estate with less money.
00:14:56.000That's why we're so big with telling our audience for their first property, even if you got the equity, you should probably FHA it just so that you can keep more capital.
00:17:23.000Are there any specific cities and states you do not recommend owning a house or having a rental in?
00:17:27.000California is obviously to be avoided.
00:17:29.000Let's say a place is not so obvious that you never think about.
00:17:31.000One that comes to mind that is not good is Detroit.
00:17:34.000Michigan in general is not a good place to invest, even though you could get houses for good prices, but the tenant laws are definitely in the tenant's favor.
00:17:48.000It's not as cut and dry as that makes it sound.
00:17:50.000So the issues of is it landlord friendly, tenant friendly really only come into place if you've already made a lot of mistakes and you're having an eviction.
00:17:57.000So what I find is the better of the area that you...
00:18:00.000This is a thing that goes back to law enforcement too.
00:18:02.000What I found is I don't think I ever took one person to jail that had something to lose.
00:18:15.000People who have nothing to lose are more likely to be defiant.
00:18:20.000So when you're buying in really good areas where you're getting better tenants that care about their credit score, that would be embarrassed about getting evicted, it never actually makes its way into the courts because they are not gonna make you evict them.
00:18:29.000If they can't pay their rent, they just leave.
00:18:31.000So if you're in a state with worse laws that favor landlords, just buy in better areas.
00:18:38.000You can sort of mitigate how likely you are to actually end up in court.
00:18:42.000Another thing too is basically the magic number is about $60,000 per year or above is the threshold where you significantly reduce your chances of having to evict somebody.
00:19:32.000Improve your credit and save for the down payment.
00:19:38.000And the reason why I say this is step zero, guys, is if you don't have the foundation laid where you don't have good credit, well, it's going to significantly impact your ability to get good deals.
00:19:46.000It's going to significantly impact your ability to cash flow when you do get a loan.
00:19:50.000Quite frankly, it's going to make your whole process very miserable if your credit score sucks.
00:19:56.000You want to show some type of financial responsibility off the rip and get your credit score up.
00:20:02.000That means using your credit card and paying it off.
00:20:04.000Trying to stay below That 30% of your max credit cards.
00:20:09.000I know someone here asked, hey, should I open up another credit line?
00:20:11.000If it's going to increase your total amount of available credit, do it.
00:20:15.000Because let's say you have one credit card that's only $1,000, right?
00:20:59.000And even if you're buying residential, it's an eights, which is really high.
00:21:03.000So you best believe if your credit score sucks, and that's me with a credit score damn near almost 800.
00:21:08.000So if you have a credit score that sucks, you're going to be getting 9%, 10%, and then it's going to completely destroy your ability to cash flow, which is already limited thanks to the market.
00:21:18.000I think people forget how much credit is important, and I think for most people, I like it to like school.
00:21:23.000So let's say you want to go to a good school like Yale, or for example, Harvard.
00:21:27.000You want to have a good study of the work that you're going to have to do to pass your exams to get into that school, and people study their whole life for that.
00:21:36.000You want to build your foundation the correct way to get into the school of life, which means, for example, your credit score from day one.
00:22:32.000So you do have to have a minimum credit score for different loan products, but as your credit goes up, you just get better rates, but they're not wildly different.
00:23:23.000When you buy real estate, you're on the hook for what could go wrong.
00:23:25.000And so you're going to need to have some cash reserves.
00:23:27.000And I like people that look at real estate like the carrot that's going to have them put their financial house in order so that they can go buy it.
00:23:34.000And also, this is a two-part step, guys.
00:23:36.000Not only are you improving your credit, right, to be able to even get into the game of real estate, you're also going to be saving money while you do this, okay?
00:23:44.000This might be, this is step zero right here, this might be a one to five-year mission slash plan where you're effectively, you know...
00:23:53.000Dave talked about it where he was a police officer and he was working seven days a week to save up that money.
00:23:57.000Typically, getting your first property is going to be the hardest, guys.
00:24:00.000But once you get that first property and you have that tangible asset and you control it, then things become easier and easier and easier.
00:24:22.000Save up money so that you can put a down payment.
00:24:24.000Now, you have two options when it comes to that.
00:24:25.000You can go the FHA route, or you can go ahead the investor route and put that 20% to 25% down.
00:24:30.000I think for a lot of people, for their first home, house hacking is probably the best option where you're putting 3% to 5% down.
00:24:35.000And if you can, try to get a duplex or a triplex, or a fourplex, because this is a residential loan, so you can buy a property of up to four units to stay within residential.
00:24:44.000After that is commercial, and that's a whole other game, which Dave could probably speak to that more.
00:24:50.000But you're able, and you live in one of the units, and then you're able to collect rent from the other tenants, and then that will offset your living costs.
00:25:11.000So VA loans are available to someone that was in the military.
00:25:14.000You could put 0% down if you're going to be living in the house as your primary.
00:25:17.000Most lenders, like a real estate, like you're living in it as your primary residence or you are going to be renting it to someone else and it's an investment property.
00:25:24.000If you live in the property, you are considered lower risk.
00:25:27.000So they will let you get away with the worst credit score, you'll get a better interest rate, and you'll put less money down.
00:25:32.000So the idea here is you get better lending standards if you're going to be living in the house.
00:25:36.000Now, there's nothing that says you have to live in it for the rest of your life.
00:25:39.000You buy a four-unit property, you live in one of the units, you rent out the other three, you live for free or maybe make a little bit of money, and then in a year you move out.
00:25:47.000You go buy another one, you put 5% down or 3.5% down if you have an FHA loan available.
00:25:51.000Now, it cash flows more than it did because you got an extra unit to rent out, and you go repeat the next thing.
00:25:56.000You don't have to be a huge baller that has tons of money putting it down on expensive real estate to build up this snowball if you're willing to be a little uncomfortable and move every year.
00:26:15.000Yeah, you might not be in the inner city or the cool area with all the hoes or whatever.
00:26:19.000But it's going to set you up for life because what you're basically doing is you're acquiring an asset for a With very little money down that you can control and the bank is giving you damn near 95% of the money.
00:26:30.000W, and actually speaking, guys, you're probably wondering, okay, I'm working a regular job.
00:28:22.000Luckily, my realtor showed to him, Nick, he mentioned White Green.
00:28:26.000There's a program you can use, government funding, where they fund your repairs, and I got into that program, and I covered it, but for the most part, without reserves, bro, you're screwed.
00:29:34.000And it's important, guys, because you need to know, the reason why getting pre-approved slash pre-qualified is so important, because you need to figure out what you can actually afford to And then look at houses in that range.
00:29:44.000I can't tell you how many times people just will go ahead and start looking at houses.
00:29:47.000They never got pre-approved, never got pre-qualified, don't know what they can actually afford because you think you might be able to afford something.
00:29:52.000But then they go ahead and look at your debt-to-income ratios, etc.
00:29:55.000You know, you want to buy that new Mercedes and you got that monthly payment.
00:30:02.000So that's going to ding you where your debt to income ratio goes down regardless of how much money you make.
00:30:07.000There's a point you mentioned earlier on a different podcast where whatever you buy within that time period could mess up your lending process.
00:30:29.000So this always pops up when someone's got the housing contract and they're excited and they go to the furniture store to furnish it.
00:30:34.000And they don't have the money, so they open another line of credit to buy the furniture.
00:30:38.000Or maybe you're like, I got a new house, I'm gonna have a new garage, I want a new car.
00:30:42.000So you go to the dealership and you open another line of credit.
00:30:44.000What happens is that counts against your debt to income ratio.
00:30:47.000And most people buy the most expensive house they possibly can for the debt to income ratio they have.
00:30:52.000So when you open this new line of credit or you take on additional debt, it bumps your debt to income ratio down so you no longer qualify for the loan that you had.
00:31:00.000And at this point, your earnest money is often at risk.
00:31:02.000You can't get your deposit back because you've waived your contingencies.
00:31:05.000You've already spent all the money on the inspections and the stuff.
00:31:29.000Because the thing is, you guys gotta understand is that the banks and lenders are extremely sensitive nowadays to any financial activity because of the housing crash that went down back in like 07, 08.
00:31:40.000So they were giving out loans like candy, the market crashed, so now they're a lot more strict.
00:31:45.000That's why you got private mortgage insurance paying, if you don't put down 20%, you gotta pay something called PMI. All these rules and regulations come in, so if you even move money around, you open up another credit line, et cetera, That can fuck you up and they can yank their loan from you.
00:31:58.000Imagine doing all the hard work, saving for two years, maybe a year and a half, and you can't get a profit because you made one choice.
00:32:23.000There's a lot of rules that there's no way that we could go over every single thing.
00:32:26.000Like during the last crash, or actually no, I think Bush put this in a place, where the lenders, if they're going to be doing loans that are sponsored by the federal government, like Fannie Mae, Freddie Mac loans, they have to source the funds.
00:32:39.000They have to know where the money came from.
00:32:40.000They want to make sure terrorists aren't bringing money into the country and laundering it through you buying real estate.
00:32:45.000So when you put money in your bank account and you show proof of funds, the lender actually has to go back and say, where did that money come from?
00:32:53.000No one would ever think about that if they just wanted to go look at houses and then try to get pre-approved at the last minute when they want to buy it.
00:33:01.000See what you are actually able to afford, okay?
00:33:05.000What you think you make and what you can afford are two different things because other things are going to come into play when they run your credit.
00:33:12.000Hell, you might have a bill that you didn't even know that you didn't pay for a hospital visit that you had five years ago that's been eating away at your credit score.
00:33:18.000So you really need to figure out, get pre-approved, get pre-qualified, figure out what you can afford because that's going to save you a lot of headaches.
00:33:25.000The worst thing ever is you go out looking at houses, you find a deal that you like, like, oh my God, I love this place.
00:33:29.000And then you go ahead and you try to make an offer and go through the process and you find out, oh, you can't even afford this.
00:33:54.000And that pays up when we check your credit.
00:33:56.000So I tell people that at the one brokerage, the loan company, when we look at your credit, it's like a doctor checking your blood.
00:34:02.000You might not have known that you have these issues, but the quicker that you get yourself pre-approved, we can say, hey, did you know, like you said, you have this thing that hasn't been paid.
00:34:35.000That segues perfectly into number two.
00:34:39.000You can talk about this, Dave, in detail.
00:34:42.000Hire a good realtor slash start interviewing realtors.
00:34:47.000Can you talk about the importance of having a good realtor and how having a bad one can absolutely destroy your ability to procure property?
00:35:06.000They're trying to build themselves up to be a bigger deal than they really are.
00:35:10.000They're trying to wear the nicest clothes they can, the flashiest jewelry, drive the nicest car, because they're compensating for the fact they don't really know that much about real estate.
00:35:17.000What's that show in LA? Selling Sunset.
00:35:46.000And everybody flocks into that industry and it's all about show.
00:35:49.000It's all about their social media and the way that they present themselves, but they don't actually know what they're doing.
00:35:54.000And they're not getting paid unless that deal closes.
00:35:57.000So you either have a realtor who's not very good at their job and desperate for money and is going to tell you whatever you want to hear in order to get that deal closed.
00:36:04.000Or you have a realtor that's really good and they're going to be able to shoot straight with you because they don't need the paycheck, but they're probably not going to answer their phone the second that you call every single time.
00:36:11.000You've got to pick and choose which direction you're going to go there.
00:36:15.000And the thing with realtors, guys, is, you know, not to make fun of, you know, people, but when we have our show, how many girls come on the show and say I'm a realtor on the side?
00:36:24.000It's a job that you can get part-time, guys, and let's be honest here, if you're doing something part-time, you're never going to be that good at it.
00:36:29.000So I would say one thing you can use to filter out is hire a full-time realtor.
00:36:34.000Don't hire the hot girl down the street that was referred to you because you want to get laid.
00:36:39.000Hire a realtor that does a full-time, that's experience, and preferably you want to deal with a realtor that works with investors because they're going to have a different mindset.
00:36:48.000Buying a house as an investor, guys, versus buying a house just to live in are two different things, and you're looking for different things when you're trying to invest in it versus living in it.
00:36:57.000And yeah, first, you might be buying it as living in it and as an investor, but you want to make sure that you're buying it with that investor head-on as well.
00:37:04.000What you should do is do your research for yourself.
00:37:07.000Go on YouTube, Google, BiggerPockets, read his book, right?
00:37:10.000Learn about the terms and also the terminologies you need to learn in that space.
00:37:38.000You don't match my terms or my terminology.
00:37:40.000Once again, if you don't know what to do at the very beginning, how are you going to question him to figure out if he's good for you or not?
00:38:23.000My favorite question to ask is what works in this market?
00:38:27.000Because if they're not selling a lot of houses and they don't have their finger on the pulse, they do not know how to answer it, you're going to get a long pause.
00:38:46.000If they know that houses sit on the market for six or seven days and they get multiple offers and you say, hey, I want to write at 20% under what it's listed at, a good realtor is going to say, bad idea.
00:39:26.000The more they're doing that, the less in control they are of the market and knowing the inventory and giving the better advice to their clients.
00:39:33.000You're hiring a professional who's supposed to be educated and understand.
00:39:36.000That's a very good fact, because a good realtor is willing to tell you no.
00:40:02.000Interest rates are too goddamn high for you to buy a deal and have it actually cash flow or be worth it, right?
00:40:08.000We're talking about cash on cash returns of like 5%, which is fucking trash, right?
00:40:12.000So, working with Roger, I'm like, you know what?
00:40:15.000Since interest rates suck, let's go ahead and try to do owner financing, which is basically the owner becomes the bank, and you can negotiate a way better interest rate.
00:40:24.000Yeah, you have to put more money down, and then you have to do something called a balloon payment at the end, right?
00:40:30.000Long story short, we're going to make an offer for a house where it's five years, right?
00:40:35.000Five years where I pay as if I'm on a 30-year loan, so the payments are for what I would pay as if it was a 30-year loan at a fixed rate of 4%, right?
00:40:42.000And then at the end, I got to do a balloon payment of five years, which is going to be a couple hundred thousand.
00:40:52.000And then the house is going to appreciate it because I know this market is on fire.
00:40:55.000And if at the end of the five-year term, I don't have the money to balloon payment, I can easily cash out, refi one of my 14 other houses and just pay that thing off.
00:41:09.000But this is where you start getting, this is where you can spitball with your real estate agent, and you can come up with strategies on how to do this.
00:41:15.000So we're in the process right now of doing this for one of the houses, guys.
00:41:17.000But you're not going to be able to do this if you're with someone that's always telling you yes, with someone that's not experienced, and someone that's most importantly not creative.
00:42:04.000It's building relationships, having a network as well, and delegating for things to happen.
00:42:09.000Imagine that you work at a restaurant, you're a waiter, you have to know the menu, you have to know how the kitchen works, you have to be able to talk to the clients, you have to be able to handle the register, and now...
00:42:19.000Nobody comes in the restaurant on their own and sits at your table.
00:42:21.000You have to leave the restaurant, go outside, and find someone to convince them why they should come eat at your restaurant and then do the whole job.
00:42:28.000Very few people in the world are prepared for a situation like that.
00:42:32.000Almost all of us have had W-2 jobs that somebody came to us and then we just closed the deal.
00:42:37.000As a realtor, no one brings you leads.
00:42:39.000You have to go hunt, find the client, convince them to eat at your restaurant, and then do that entire job and hope that they order something.
00:42:45.000They might just want to sit there and listen to the music and look at the girls and drink and waste your time.
00:43:22.000And you could be a little bit more risky, of course.
00:43:23.000But I'm saying to be safe here, err on this side of caution.
00:43:27.000And actually that works out pretty well because we had come up earlier with that number where you should have 20% ready to go.
00:43:32.000So let's say you guys are going to buy a house, etc.
00:43:35.000And you get qualified for $100,000 up to $100,000 loan.
00:43:39.000You should go ahead and look at a house that's about 80K. Is what you should be doing.
00:43:43.000Because that way it gives you wiggle room if something happens.
00:43:46.000This is where your debt to income ratio comes into place.
00:43:48.000Let's say you're already paying a mortgage or you're paying a renter.
00:43:51.000Because you're going to have some bills that are recurring every month that's going to hit you with the income to debt ratio.
00:43:55.000So to be safe, you don't want to go ahead and max out how much house you can afford.
00:43:59.000You want to be comfortably below that so you can actually afford it should something happen.
00:44:05.000I think you start at where you're saying, and then that's what you aim for, unless you find something that if you paid more, it would cash flow more.
00:44:26.000So your mortgage goes up by $150 spending a little bit more money, but that unit brings in $1,000 in cash flow, that's a good financial decision.
00:44:34.000Don't do it because the kitchen looks better or you like the paint color more.
00:44:38.000Those are the wrong reasons to spend more in-house.
00:44:40.000Yeah, and I agree with you on that one.
00:44:41.000And a lot of lenders a lot of times will take that into account, the cash that comes in from the house, so that could help you as well, or market rents or whatever it may be.
00:44:51.000But to be safe, guys, let's say you're going to buy a house and it's a single family home and you're not going to have tenants in there, then maybe this 80% of what you afford can work.
00:45:03.000But if it's a duplex or triplex, fourplex, then you can go ahead and afford to be a little bit above that 80% because the money that you're getting from your tenants will offset that percentage that you're going over.
00:45:56.000Can you explain what those words mean?
00:45:58.000A cap rate, this is a good question and it confuses a lot of people.
00:46:02.000It is a measurement of how much demand there is for that asset or that income stream at this time.
00:46:07.000So imagine if you're buying a million dollar commercial property, and if it would bring in an 8% return, if you paid cash for it, it would be an 8 cap.
00:47:31.000What they're referring to is a cash on cash return residential real estate.
00:47:35.000And that's one of the red flags that when I hear someone who tells me that they're an investor and they talk about cap rates with residential...
00:47:56.000Yeah, cash-on-cash return is a way of measuring how much money you're going to get paid for how much you put in it.
00:48:00.000And it's necessary because you're going to have different investment opportunities and you're going to want to compare if I put my money in a bank, if I put it in a CD, if I buy stocks, if I buy real estate, which one's going to pay me the most?
00:48:10.000To calculate it on real estate, you're basically going to take the income the property makes...
00:48:15.000Subtract the expenses, and if it's a positive number, that's your cash flow.
00:48:18.000That's how much you make every single month.
00:48:20.000You're going to multiply that by 12, because that's how much you're going to make in a year, and you're going to divide it by the money that you put into the deal.
00:48:27.000Your down payment, your closing costs, and how much money you spent to get the property up.
00:48:31.000And the goal is to get that number as high as you can.
00:48:34.000Because there's two metrics that determine the cash on cash return, which is the cash flow and how much money you put in, you've got two ways to improve it.
00:48:41.000You improve the cash flow, or you decrease the amount of money that you put in the deal.
00:48:45.000So that's how we become creative with real estate.
00:48:47.000Like the BRRRR method is one of the strategies that I talk about where when you refinance money out of the deal, once you're done with it, you have less money in, which means your cash on cash return will go up.
00:50:34.000Most properties lose money if you're looking at them.
00:50:36.000You get 12%, that's a very, very good return.
00:50:38.000I used to be 10% or above, but with the higher interest rates and the competitiveness of the market, if you're getting 8% cash on cash or higher, I'd say that's a fantastic deal.
00:50:47.000Yeah, these are benchmarks that we shoot for, but there are things that will change that, right?
00:50:51.000You may accept a 2% cash-on-cash return if you're buying into the hottest neighborhood of Miami where you believe, like, man, rents are going to skyrocket, the value's going up.
00:51:00.000Or maybe you're buying in Kansas somewhere in a big, huge field where it's never going up.
00:52:28.000Now it's time to make an offer with your real estate agent.
00:52:31.000I would say this is where it makes a brick cute with your realtor.
00:52:34.000He should shine for you if he knows what he's doing.
00:52:38.000Dave, I'll let you take it from here as far as making a strong offer, etc., and how to go about this properly, because so many people fucked this up.
00:52:43.000Okay, I'm trying to give a good analogy for you guys.
00:52:48.000Say you got a girl that just hit the market, just broke up with her boyfriend.
00:52:53.000She's not a girl that a whole lot of guys are going to be interested in.
00:52:56.000So are you going to go and say, hey, I'll take you to the most expensive steakhouse and you're going to jump on it in like 30 minutes after she posted that she's single?
00:53:04.000Probably not going to be something that you need to do.
00:53:06.000But let's say this is like a high quality woman that a lot of people are going to be interested in.
00:53:18.000He's going to call her when you texted, right?
00:53:20.000There isn't a rule that you could follow of how you're supposed to ask out a girl or how you're supposed to buy a house.
00:53:26.000You need to look at the supply and demand dynamics of this.
00:53:30.000So to simplify, and this is, I don't know why no one talks about it, but working as a realtor for as long as I have, what I've learned is the number one thing you want to look at is the days on market.
00:54:03.000It's been on the market for six months and nobody wants it.
00:54:05.000You'd be stupid to go pay full price for that house.
00:54:08.000But what people do is they hear this stuff and they go, well, I'm just going to throw a million lowball offers and one of them is eventually going to stick because they're just too intellectually lazy to ask why did it stick and what should I go do?
00:54:20.000So asking yourself how desirable that house is, how many other investors are going to want it will help you know.
00:54:24.000I mean, I pay over asking price for houses.
00:54:35.000So, like, the list price is not how much the house is worth.
00:54:37.000That's just, like, a suggestion the realtor's starting with.
00:54:40.000If it's been on the market a long time, you should offer less than the list price, and if it's Just hit the market, high quality house, very rare location, going to perform very well.
00:56:07.000And the other thing, too, is that if you go ahead, because some of y'all will go ahead and say, oh, I'm just going to send a lowball offer in, you're not going to get a callback, bro.
00:56:12.000In a hot real estate market where it is a seller's market, you send lowball offers, etc., they're not going to take you seriously.
00:56:19.000They're just going to ignore you, and you're going to lose deals because you want to be a cheapskate.
00:56:22.000People forget, there's BlackRock, other investors that are from out of town, out of state, out of country, willing to pay more to secure a good property.
00:56:30.000And if you don't want to do it yourself, they'll do it for you.
00:56:32.000So I think on some level, if the property's worth its weight in gold, don't waste time.
00:56:35.000But a realtor should tell you, listen bro.
00:56:37.000That's where a good realtor comes in and tells you.
00:57:20.000So when I was representing clients, still the people that I'm teaching right now, It is a skill to get that listing agent to tell you what price you'd get the property for.
00:57:28.000So if I'm representing Myron, he wants this property at $4.50.
00:57:31.000He obviously doesn't want to pay more than he has to, but he doesn't want to lose it.
00:58:12.000Why don't you call your client right now and ask him what price it'd have to be for us to get this deal done right now?
00:58:17.000And there's, from the outside looking in, this sounds like you're not representing your client, but what you have to understand is, when there is only you trying to buy the house, it is you versus the seller.
00:58:25.000And at that point, you're trying to write the lowest offer you can get away with.
00:58:28.000But when there's 10 other buyers, it is you versus those 10 other buyers.
00:59:10.000So she's literally like, she's like, this house generates this amount of money, or let's say it generates a certain amount of money, but she's like, this is way below market rent.
00:59:17.000We'll kick these tenants out or raise the rent on them, right?
00:59:20.000Well, it can't come out, but you get what I'm saying.
00:59:22.000We'll raise the rent on them and or get new tenants and we'll be where we need to be.
00:59:26.000Yeah, a month or two of maybe vacancy, but it's worth it.
00:59:28.000We should offer this much, we're going to make this much, and we can get the rents at this much because I know the competent area.
00:59:33.000You want a real estate agent that's competent also and knows what rent is going in that area and knows what you can get for that house.
01:01:23.000You have to do such a good job that Myron tells everybody else, this is the realtor that you need to use to get that referral business coming your way.
01:01:31.000And if you don't have that work ethic, if you don't have that attitude, if it's, oh, it's Friday at 7 o'clock, what's he bugging me with right now?
01:01:37.000You're indirectly telling that person, I don't want your business, I don't want your referrals, I don't want the next 10 years of money I could be making.
01:01:44.000We have this joke in our office that when someone doesn't answer their phone because they're eating lunch, that's probably a $10,000 sandwich that they just ate.
01:01:50.000When you're in this type of an industry, you don't have the luxury of saying, I'm not working, it's the weekend, I'm off.
01:01:57.000You guys understand that because you're putting in the hours.
01:02:01.000Now, it doesn't mean you're going to work your life away.
01:02:03.000You do have to have some mental health there, but if you're trying to be good at making money, the offense pillar, you have to understand that you need to be excellent.
01:02:18.000Make good offers, and that offer should be contingent directly on the value of the property.
01:02:24.000Don't lowball a house that's going to get you a 10% cash-on-cash return so that you can try to make 13%, right?
01:02:31.000When you easily can make 12 or 11 at a better offer, and you acquire the home.
01:02:36.000You know, and then there's other things in place as well.
01:02:38.000Like I said, you could come in and increase the rents, right?
01:02:40.000If they're paying rent, you could value add.
01:02:42.000You can do, Dave gave the ADU, which is, I didn't even think about that, where you can put a, you said it's called an accessory dwelling unit.
01:02:50.000Yeah, so these are all ways that you can increase.
01:02:53.000Hell, I've done it before where we, you charge for parking.
01:02:57.000You can go ahead and add in a parking fee to increase the cash flow.
01:03:17.000You add these little units, all that does is bump up the income.
01:03:21.000And those are literally the principles that are in that book.
01:03:23.000You want to be able to make more money, and you want to be able to save more of the money that you make.
01:03:27.000It's kind of like, remember the karate kid?
01:03:29.000He's teaching them the wax on, wax off, and he doesn't know what he's learning is karate.
01:03:33.000When you focus on these fundamentals, they make sense within real estate, they make sense within business, they make sense within your personal life.
01:03:39.000Everything gets easier when you master this.
01:03:40.000And I would say you're better off creating the cash flow than trying to save the cash flow.
01:03:46.000And what I mean by that is, give the seller what the hell he wants if it's a good deal.
01:03:50.000You become creative and find ways to maximize your profit once you acquire the property by raising rents, by ADUs, parking.
01:03:59.000Hell, you could put a laundry thing in there to make money.
01:04:02.000I know Grant Cardone talks about that all the time.
01:04:04.000I added a washer dryer, raised a rent by quite a bit.
01:04:10.000It's better to find ways to monetize, to increase the cash flow after you acquire the property versus telling the seller, hey, give it to me for a better deal.
01:05:13.000Don't get just locked in with this tunnel vision of, where is it right now?
01:05:17.000If you buy in the right locations, and there's constricted supply, but demand increases, like the market you guys are in right now where you're talking about.
01:05:24.000People are moving into a business that are moving there.
01:05:26.000You want to know where the rents are today because you don't want to lose money.
01:05:29.000But you're not buying that property for today.
01:05:30.000You're buying that property for the next 40 years.
01:05:35.000Yeah, the benefit, the negative of being in a hot market is you're paying more a lot of the times, but the other benefit is you can increase rents to compensate for that.
01:05:44.000And also, occupancy is going to be lower, because more people want to live there.
01:05:48.000Now, if you are paying attention to what we're saying, you're recognizing that this is delayed gratification.
01:05:53.000Oh, you meant vacancy is going to be lower.
01:05:54.000The longer that you wait, the better that it's going to pay.
01:05:59.000So what I'm saying people should do is think about, how do I survive?
01:06:03.000How do I own that property for 10 years or 20 years?
01:06:06.000If you barely, like your situation where you got lucky, you didn't have any money left over, you could have went into foreclosure pretty easy because you didn't have enough reserves, right?
01:06:14.000But you wouldn't make that mistake again.
01:06:16.000Don't buy a house and then think you're rich and go spend your money on dumb things.
01:06:20.000Keep saving that money so that when things go wrong, you survive and you get to the point where rents are 2150 instead of $800 a month.
01:06:59.000And what ends up happening is, Most of the time, there's gonna be something wrong where, hey, this thing needs to be replaced, this thing needs to be fixed, this needs to be updated, etc.
01:07:10.000This is your chance to go back to the seller and renegotiate.
01:07:46.000But the inspection period, guys, is where...
01:07:49.000And also, it's a grace period where you're able to back out the deal if you want.
01:07:52.000Like, if the inspection comes back and you don't like it, that's your way to get out, okay?
01:07:56.000This is why sellers love it when you waive the inspection contingency, that even if the inspection doesn't come back the way that you want, you're staying in the deal.
01:08:03.000So you can see how a seller would say, oh, well, if the inspection comes back fucked up, you're going to stay?
01:09:21.000So what you want to do is rush into a one-on-one fight and then slam the brakes on when you get there and take a good, long, hard look at what this thing is.
01:09:34.000So a person will come in here with a little camera and they'll check to make sure that the sewer line isn't leaking as it goes out to connect to the The city, at the sewer lateral area, you can actually inspect what the rents are going to be.
01:09:43.000You can dive deeper and ask the property manager, well, how much vacancy is there?
01:09:47.000I know that my initial inspection showed I could get $1,500 a month, but what's my competition look like?
01:09:53.000Is there a lot of other units for rent where maybe the tenant's not going to choose mine?
01:09:56.000You get to inspect everything, assuming you have a contingency that allows you to back out of the deal.
01:10:01.000If you don't have that, like my understanding, you're waiving contingencies, you're not forced to close, but you would lose your deposit if you don't close.
01:10:07.000So your deposit is what's actually at risk.
01:10:10.000And when the inspection shows up with something that you didn't know was there or it's worse than the other houses in the neighborhood, you can go back and what you're telling the seller is that I will go back out of this deal and you will have to put it back on the market and sell it to somebody else or you can give me this credit and I'll stick with it.
01:10:26.000Now, you gotta understand the leverage when it comes to buying a house, right?
01:10:30.000Just like in the dating game, there's leverage that each side has, and if you understand that, you know when you can push it and when you don't have things on your side.
01:10:36.000When a seller first puts their house on the market, they have all the leverage.
01:11:40.000All the buyers that were initially interested don't see it anymore.
01:11:43.000The odds of them getting an offer as good as yours goes down.
01:11:46.000So what you're doing is you're saying, if you don't want to give me this credit, you're going to have to put your house back on the market.
01:11:51.000And if it's a red-hot market, they don't care.
01:11:53.000A lot of times they'll have a backup offer too behind you.
01:12:01.000We have another person going to pay more than you.
01:12:03.000But if they don't, that's when they're more likely to accept your credit you're requesting, and you can go with a higher credit or a price reduction or some combination of the two.
01:12:12.000And there's nothing wrong with being a backup buyer, guys.
01:12:14.000I've had it before where they took another offer.
01:12:42.000It's going to be the financing falls through, which might not be that you couldn't get the loan, but maybe rates went up from the time you went in there.
01:12:55.000The other one would be the appraisal comes in low.
01:12:57.000So when an appraisal comes in, though, the bank won't lend you as much of the money, so you have to bring more money to make up the difference, and people don't like that.
01:13:03.000It also makes them feel like they got ripped off.
01:13:06.000So they'll back out for that reason, which is funny because people in 2015 backed out of deals because the appraisal came in five grand, and now that house is worth like $200,000 more than it was.
01:13:34.000And the thing, too, I want to say, guys, if you make an offer on a house and it appraises less or there might be some situation with inspection that you don't like or whatever, look long term.
01:13:44.000Is this house going to more than likely appreciate significantly?
01:13:48.000Am I going to be able to make up some of this money on rent, etc.?
01:13:51.000Think long term, and a lot of the times you're going to realize that, okay, I'm paying $5K over asking, or the appraisal came back $10,000.
01:13:58.000I offered $100,000, the house came back appraised at $90K. Yo, is that 10k difference that much really?
01:14:07.000Because remember, you're going to have to come to the table with more money to make up the difference because the bank is only going to give you 75 to 80%.
01:14:13.000But long term, in a year, two years, three years, if it's a hot market, yo, you're going to make that money back in appreciation easy.
01:14:29.000But it doesn't hurt your request unless there's a backup offer and you can't make any mistake at all because someone else is going to swoop in there.
01:14:36.000Which you should assume if you're in a hot market and you make an offer and it gets accepted and there were a bunch of other people, guaranteed there's going to be a backup offer.
01:14:59.000If you're going to have me sell one of your houses, I'm going to say, Myron, you might not like this, but you're going to pay $500 to get a home inspection on this house, especially if we're in a hot market.
01:15:08.000And it's going to cost you $500, but you're going to pay to have the inspection, and then we're going to give that to the buyers before they write their offer.
01:15:14.000Now what they're going to try to do is they're going to say, oh, look at all the problems with the roof or whatever.
01:15:20.000But if this is a hot market, I'm getting a bunch of offers from other people.
01:15:24.000And I'm going to come back to them and say, hey, you can ride it like that if you want, but just so you know, these four other people are paying a lot more than you.
01:15:33.000And then I'm going to come back to them and I'm going to say, by the way, you're going to need to waive your inspection contingency because I've already given you all the inspections.
01:15:40.000I now saved you $10,000 to $20,000 in credits that they probably would have requested during the escrow period because they had to pay for their own inspections.
01:15:48.000So for that $500, you've saved yourself thousands of dollars in credits that you probably would have had to give once they got the inspection report.
01:15:55.000You've also saved yourself the chance of them backing out of the deal because of what they saw in putting your house back on the market.
01:16:00.000If you're selling, it is way smarter to take that approach.
01:16:06.000No one ever talks about what I'm describing.
01:16:08.000In fact, I take that same principle and I apply it to the other things that cause houses to fall out of contract.
01:16:13.000So the other thing that could blow up our deal is if the appraisal comes in low.
01:16:16.000So before I accept that offer, I'm going to go back to that agent and say, hey, if the house appraises low, I need you to write into your offer that you agree to pay $10,000 over the appraised price.
01:16:27.000Because that's when we have the leverage.
01:16:29.000And I'm also going to say, hey, your lender, just so you know, I don't know this lender.
01:16:33.000I don't know if they're full of shit or not.
01:16:34.000We're going to have them get approved with my company so that my team can take a look at the person who's saying to buy their house and we can see what's their debt to income, what's their credit score.
01:16:43.000Are they actually full of it or is this deal going to close?
01:16:45.000I've now removed the majority of the reasons that this house would fall out of contract and your chances of closing have gone way up because we prepped it ahead of time.
01:16:54.000Less than 1% of agents will even think about doing something like that.
01:16:57.000Yeah, I was going to say, I've never heard of a seller having an inspection report ready to give to you.
01:17:01.000I do that 100% of the listings that I take, I tell them, this is what you're going to do, and it's going to save you tens of thousands of dollars.
01:17:07.000Because that's when the buyer has all the leverage, is when that inspection report comes back, and they're like, hey, you're going to give me the credit, or I'm going to back out.
01:17:13.000I don't want to put my client in the position where they can even do that.
01:17:40.000So I've done this before, too, where I've written contracts up where if it's a really hot market and it might not appraise, what I'll do is, and I really want the house, I'll say, look, I'll cover up to $10k difference.
01:17:53.000That's how you get your offer accepted.
01:17:54.000Yeah, that's a good way to be competitive, guys, in a hot market is you offer.
01:17:58.000If it doesn't appraise, I'll pay up to $5,000, $10,000 above asking with my, you know, With extra funds or whatever it may be, because that will make you a better potential buyer as well.
01:18:11.000Yeah, you've got to stand out from all that.
01:18:12.000You're competing against the 10 other people that want that property when it's a hot market.
01:18:15.000Just don't apply what we're seeing right here to a slow market.
01:18:19.000You don't have to be aggressive if not as many other people want that asset.
01:18:22.000Yeah, if it's a slower market, then you can start being a bit more frugal and stuff like that.
01:18:27.000But in a hot market, you can't afford to do that, because you're going to lose your house every single time to someone that's going to...
01:18:32.000It's amazing to me how many cash buyers there are.
01:18:33.000That's the thing that would be killing me a lot of times.
01:18:35.000Cash buyers will come in and be like, I'm buying a cash, blah, blah, blah.
01:18:38.000And they'll make a cash offer above asking.
01:18:40.000Bro, it's the Canadians, it's the Russians, the Black Rocks.
01:18:44.000Think about the guys that are good with women get more than women, right?
01:18:48.000The guys that are good with money have more of the money.
01:19:02.000You've got to find somewhere to put it, right?
01:19:04.000Just like it's not luck that certain guys are better with women.
01:19:06.000It's not luck that certain guys are better in the gym.
01:19:08.000There's principles that people follow.
01:19:11.000And so there's a lot of cash buyers out there because there's a lot of people that have been sitting on a lot of cash that are good at making money.
01:19:16.000Where else are you going to put it right now?
01:19:43.000You're paying your loan back with dollars that are worth less than they were when you took out the debt.
01:19:47.000And at the same time that's happening, rents go up because of inflation.
01:19:51.000I wasn't a genius because the rents were 800 and now they're 2150.
01:19:55.000That's just what inflation did because our government printed a lot of money.
01:19:58.000So the way I look at it, if you are not investing into something like real estate, you're losing money every single day because inflation is eating it up.
01:20:05.000Real estate is one of the best asset classes to combat inflation by far.
01:20:09.000Actually, inflation works in your favor as a real estate investor.
01:21:45.000I live in Montreal, work in cold call sales for five months, and want to get into real estate, but I live in the highest tax province in Canada at 15% thoughts.
01:23:22.000And there's only a few banks that do it.
01:23:24.000But if you live in it, it's very easy to get a home equity line of credit.
01:23:27.000And I would say, a lot of the times, a home equity line of credit is better than a cash-out refinance because that money is available to you at all times.
01:23:34.000And you can basically use it to pull that money out, buy a house, and then you can go ahead and replenish those funds later on so you don't pay too much in interest.
01:24:08.000But usually if the rates go up, so does your payment.
01:24:10.000The cash out refi, you know you're locking in a lower rate.
01:24:13.000So that's really like the balance that you've got to weigh is if I'm going to use the money or not.
01:24:18.000HELOCs are best used for short-term purposes.
01:24:21.000You're going to get that money, you're going to use it to improve a property, then you're going to refinance it out and go put it somewhere else, or you're going to flip a house, you're going to pay off some debt, and then save it back up.
01:24:29.000They're not a great strategy for, let me pull 200 grand out of a house on a HELOC, and then go buy more real estate with that money.
01:24:35.000Because if rates go up to 12, 13, 14 percent, your HELOC's going up.
01:24:39.000Yeah, that 200k you took out, now you're paying a higher interest.
01:24:41.000And who would have thought we'd be sitting at, what did you get, 8.8 percent?
01:24:45.000Yeah, who would have thought that a couple years ago when they were at three and a half?
01:24:49.000Yeah, it sucks, but like I said before, it's better that I invest that money, get that property, right, cash flow, with a high interest rate, with the tax purposes, et cetera, versus letting it just sit in a market and get eaten by inflation anyway.
01:25:03.000So, but yeah, a HELOC, I would say, in most situations, I think a HELOC is better, but HELOCs are harder to get than a cash or refinance, especially if it's an investment property.
01:25:11.000We have them on investment properties at the one brokerage, but the rates are not fun.
01:25:25.000You don't get interest on it until you pull the money out.
01:25:27.000Until you actually pull the money out.
01:25:28.000But it is good where you have that money available to you and you can use it anytime.
01:25:32.000That could have saved you if you didn't have that loan that you looked out for and you had to get some money to pay for that air conditioner that broke or whatever the issues were.
01:25:40.000It's a great lifeline to have that you could go pull some money out of a HELOC. Even if rates are high, if you're pulling out $10,000, $12,000, that's not going to kill somebody.
01:25:47.000You can go pick up a shift waiting tables and make that money back.
01:25:51.000Versus the cash out of refi, it takes, what, 30 days to close or whatever, but you get that money out and you're able to use it as well.
01:25:57.000So think of the HELOC, guys, as a gun that's always loaded, ready to be used, but you've got to pay if you use that gun, versus a gun that has one bullet that you're getting one time.
01:28:06.000Hey guys, I'm in New Jersey and want to buy a 2-3 family house.
01:28:09.000My mom is wanting to take a HELOC against her home for the house.
01:28:12.000Should I refi a home to pay back HELOC or only refi to buy a second property and use the profit from the rent to pay back HELOC? Good question.
01:28:20.000Should I refi the home to pay back the HELOC or only refi to buy a second property and use the profit from the rent?
01:28:26.000If you can find a second property that's going to cash flow positively, you can get a good deal on, you're better off doing that.
01:28:30.000But in today's market, it becomes very, very hard to find more property, so it wouldn't be the end of the world to refinance the money, pay off the HELOC, and like you said, Myron, you still have it available if that other property comes.
01:28:43.000Especially with the way HELOCs are now, I guarantee the interest rates are above 10% with the HELOC, so yeah, it might be better to pay off that HELOC and have it available.
01:29:43.000Hey boys, I'm from a pretty wealthy family, top 5% income, but we're Muslim and interest is prohibited, meaning no loans and any property has to be bought all cash.
01:29:50.000With that in mind, is real estate a good investment since only upside is appreciation?
01:29:55.000Yes, because you can still go ahead and write off depreciation and cost segregation on your taxes, so it's still a good asset class.
01:31:36.000And then a second portion, or maybe in the middle.
01:31:38.000But I guarantee there's a clause in there where they say, if you don't fulfill obligations, we reserve the right to come after you for XYZ. Garnish your bank account, whatever it is.
01:33:34.000You got the time to make this shit happen, but it just comes down a lot of the times to time management skills.
01:33:39.000Maybe if you're working that much, it might be in your best interest to work out in the morning first thing before you even go to work because you might be too tired after working a shift.
01:33:48.000So rearranging things around can be a huge benefit to you, man.
01:33:53.000But yeah, priority number one, you need to lose weight, bro.
01:34:02.000Fedge goes, sup guys, I don't know if you remember, I'm the guy that got hired by Jay Waller about 10 days ago, got some good news, and just seven days of work, already got promoted, wanted to tell y'all, let y'all know it's going good, and I wanted to see if you may need an SFC editor, I don't know what SFC stands for, but, oh, short form content editor.
01:34:18.000No, we're good, man, but thank you so much, and I'm glad you're doing well with Waller, man.
01:35:02.000Open up the HELOC so it's available to you and also simultaneously save so you don't have to use as much from your HELOC when you eventually do take money out of it.
01:35:10.000I bought two properties in Canada totaling $1.9 million.
01:35:12.000I put 20% down and payment was $7,500 Canadian a month.
01:35:18.000Now interest hikes of me paying $13,000 Canadian and I only received $9,500 in rental income.
01:35:22.000Should I hold and take a monthly loss or sell?
01:36:29.000And he mentioned that that's a problem that they have over there, is they're constantly having to refinance, and so when rates go up, you're stuck.
01:36:36.000Which is what we're going to be seeing in the commercial space here.
01:36:38.000In Canada, they basically only have arms, which is what we have.
01:36:41.000It's the equivalent to having an adjustable rate mortgage here in New States where you get a fixed rate for five to ten years and then it could shift to the market.
01:37:00.000So in that case, then you might have to take the strategy where I know a couple of real estate investors that do this.
01:37:05.000They get arms on their properties, hold it for five to ten years, depending on how long the arm is, and they sell that bitch out once the arm is over.
01:37:11.000Which in Arm, guys, is an adjustable rate mortgage.
01:37:13.000Let's say they're locking it at 5% because that's the market rate for five years.
01:37:16.000By that fourth year, they're looking to get rid of that house and sell that house and then go ahead and buy another one.
01:37:23.000There's people that do that too that do it mid to short term depending on how long they're able to lock their adjustable rate mortgage in.
01:37:40.000You might want to, yeah, maybe sell, bro, and look at investing here in the States instead, dude, where you can get like a 30-year fixed or something like that.
01:39:13.000Yeah, they just ask general questions.
01:39:15.000Yeah, if you're not super financially savvy, you don't want to go put a mortgage on this house when you're not used to having to pay one, a HELOC would be a good idea if you're financially responsible.
01:39:45.000If you're going to open up a HELOC, guys, that money is only to procure other assets, nothing else.
01:39:51.000And you need to understand how to underwrite an asset, which is what we're talking about in today's show.
01:39:55.000This person sounds like they're not really familiar with real estate, so before you even worry about what to do with the property, spend some time educating yourself, read some books, listen to more real estate podcasts, find out what Myron's buying and go buy what My thing is, I don't even want somebody opening up a HELOC because I'm worried that you might take that money to go buy a boat,
01:40:28.000Sell the house and take my half and purchase a duplex or HELOC to buy her out and keep the house because I like this house and the location.
01:40:36.000No way I could replace the house for the same money or interest rate, which is 3.25 fixed rate 769 credit score VHA loan.
01:40:55.000I mean, the number one thing is as long as you get her out, that's all that matters, bro.
01:40:59.000So, I would say objective number one is get her the fuck out of there.
01:41:02.000And then you can go ahead and make a decision after that.
01:41:06.000But yeah, figure out a way to buy her out and get her out of there.
01:41:09.000When you're making the decision, I would ask myself, if I had the same amount of money, would I buy this house right now, or would I buy that duplex?
01:41:24.000We got Soma goes, hey guys, I'm about to purchase my first property and use most of my savings, but I have a work trip coming up that's going to bank 15K. Do you still think it's a good idea?
01:41:38.000Don't bank on money you haven't made yet, man.
01:41:40.000Don't bank on money you haven't made yet.
01:41:56.000Again, that $15K isn't guaranteed, and again, if you're going to go ahead and buy a house and use all your savings, you're going to be in the same situation that Fresh described before, where you become house poor.
01:42:51.000You're young, probably, more than likely.
01:42:53.000If you're watching us, go ahead and take the risk.
01:42:55.000But just understand that you better have some money ready to go or have good credit where, God forbid, something happens, you can go ahead and make an emergency purchase on a house or a fix.
01:44:00.000Man of Stripe goes, which is better, have a loan on one house and spend your money to buy another house, or just pay off your house and why?
01:44:09.000I know Dave Ramsey is going to tell you pay off the house and have no debt.
01:44:12.000Other people that are a bit more savvy with the real estate are going to tell you spread that money out across multiple houses so that you can go ahead and control multiple assets that appreciate while getting tax benefits.
01:44:21.000I would say put down the minimum required to control the asset to a varying degree.
01:45:10.000I mean, again, this comes down to your risk tolerance levels, but I would say a healthy medium, though, is putting 20% down as an investor.
01:45:18.000And saving a whole bunch of money in reserves.
01:45:20.000Yeah, and saving money because what ends up happening is if you put 20% down as an investor, you have equity in the home, right?
01:45:26.000You still got to make a monthly payment, but it's not going to be as high.
01:45:53.000$200,000 plus to buy anything in Miami that actually makes sense.
01:45:59.000Dallas, I don't know the market, but Texas in general is good.
01:46:02.000You might not be able to buy in the city of Dallas, but you'll probably be able to buy maybe in a Plano or somewhere in the Dallas-Fort Worth area at a good price.
01:46:10.000But let's continue on with the list here because we've still got a couple things to hit.
01:46:25.000And we figure out, pretty much, we talked about it a little bit earlier, and this is step seven.
01:46:30.000Closing cost, guys, is the amount of money it's going to cost you to basically close the deal.
01:46:34.000We would, what, 1% or 2% pretty much of the purchase price, you would say?
01:46:39.000Closing costs are going to be between 1% and 3% most of the time, but you can get sellers to cover a lot of your closing costs.
01:46:45.000So one thing that people do if, let's say, we agree on a purchase price of $500,000, is I'll say, I'll give you 510, but you've got to give me a $10,000 closing cost credit.
01:46:53.000So what that allows me to do, assuming the house appraise, is I can borrow a little bit more money from the bank, but I get $10,000 that I don't have to spend on closing costs that allows me to save more money.
01:47:35.000At or above, you can go ahead and say, that's a smart way to do it actually, where if you don't have the capital, you can offset that to the bank instead.
01:48:12.000So, they've talked about this with the ADU, you know, when you guys get the house, right, assuming it's not a turnkey, and turnkey, guys, is when you basically buy a house and it's just like...
01:48:25.000But, you know, a lot of times you gotta come in, you gotta do some shit, paint, whatever it may be, improve some things.
01:48:30.000Don't be afraid to renovate, guys, especially if you're a handyman and you're good with your hands or you have a contractor that's always available.
01:48:36.000That's a way where you can kind of pay less for a house and then come in, make the fixes, and then increase the value significantly with not that much elbow grease, depending on the market that you're in.
01:49:37.000Now, if it's your first property, guys, right, because some of y'all might not have a property manager for your first property, here's some rules that you can go by.
01:49:45.000Try to, obviously, do your background check.
01:49:49.000Make sure they're not a felon or something like that.
01:49:52.000$60,000 tends to be the threshold where you're going to have a significantly lower chance of having to evict somebody once they make that much or more.
01:50:05.000And yeah, man, just interview the tenant.
01:51:21.000Even though it was an investment property, the bank just didn't look at that.
01:51:24.000So he gets a check for like $6,500, forges my signature, pays me the first three months of rent with my own money, and then just stops paying.
01:51:42.000So then you try to get them evicted, and you have to have somebody serve them the paperwork, and they don't answer the door, and they're dodging you, so you have to hire somebody to now go serve the paperwork, and then you have to go through an eviction.
01:51:51.000It's like six months before the person actually gets out of there.
01:51:54.000Meanwhile, you're still making mortgage payments, and then I got a judgment against them eventually, but the guy has no money, so there's no way I could get money From the person, long story short, had I just paid 8% to a property manager, I would have saved like $10,000 in the fees of an eviction.
01:52:11.000So I lived in a property, a triplex, and I don't know if this is good because most people can't do this, but I became cool with my tenants.
01:52:19.000I built a relationship with them back and forth, and I said, you know what?
01:52:42.000Learn how to do it yourself so you kind of understand what you should be paying, what you shouldn't be paying, what's being overcharged, etc.
01:52:47.000But I will say that, as a foundation of doing that though, when I raised the rents, you know what?
01:53:09.000Yeah, I mean, what it really comes down to, guys, is, especially if you have a job, like you were a cop, you were working seven days a week, et cetera, to be able to acquire the capital to purchase homes, Yeah, you might want to outsource it even if it's your first real estate property.
01:53:20.000There's nothing wrong with taking a grace period maybe six months to a year where you do it yourself and you go through the turmoil and toil.
01:53:32.000Yeah, and you get people to take advantage of you more.
01:53:34.000So what I tell most people, if you own the home and you're renting out rooms, you're renting out units in your house, just tell them that you're the property manager.
01:53:41.000It's better than saying I'm the owner.
01:53:42.000Yeah, you want a great separation too.
01:54:39.000And so when tenants stop paying, then usually the properties are going to end up in foreclosure unless the person has a lot of money saved up.
01:54:45.000My tenants are like older men, older women, if they knew I was the landlord, me 23 years old, they'd have been like, what the fuck?
01:55:11.000You work for the military, and you don't pay your rent, you're going to call their commanding officer and say, that's not a good sign for that person.
01:57:10.000Step six, do your inspections, and if something returns with the inspection that might be problematic, go ahead and ask for a credit from the seller.
01:58:09.000If you're the first-time person interviewing tenants, you might fall for their soft stories because you're a human being and you don't want to be a fucking dickhead.
01:58:30.000Make the property an LLC and begin the process of protecting your assets and use a quick claim deed to convert the purchase from your personal name over to an LLC. This is very important, guys.
01:58:39.000A lot of people, right, they'll go ahead and they'll try to buy the house under an LLC. That's okay, but the problem with that is I've noticed and I've done split tests with this.
01:58:48.000You get way better terms when you buy it under your personal name than buying it under an LLC. Yeah.
01:58:52.000You get better interest rates, better terms, etc.
01:58:55.000So I think the better way to go is acquire the property through your personal name and your personal credit, which is, if you're doing what we're telling you, it's going to be good.
01:59:01.000Then, after you close on a deal, go ahead, do a quick claim deed, create an LLC, and then switch it to that LLC, and then have a holding LLC that controls all of them and a holding company, etc.
01:59:10.000There is a little bit of risk with it.
01:59:31.000This is coming up a lot more with the creative financing stuff because nobody wants to pay an 8.5% rate if they can take over someone else's 3.5% rate loan.
01:59:38.000But you got to remember that the lender made the loan to you.
01:59:40.000And if you're assuming that loan, they never looked at your credit score.
01:59:43.000They never looked at your debt to income ratio.
01:59:46.000So they have the right in most cases, what's called a due on sale clause to say, hey, if you've given that title to somebody else, we have a right to demand the entire mortgage be paid off.
01:59:56.000It doesn't mean that they're always going to do that.
01:59:58.000Most of the time, the way that their systems work, as long as that check's coming in, they don't care.
02:00:03.000And it's very common for real estate investors to put it in an LLC. But yeah, if you try to shield it and sell it to somebody or some other, yeah, that can fuck you up.
02:00:31.000So it says here, you know, rinse and repeat.
02:00:33.000If you acquired it through an FHA, guys, wait a year, live in it, and then you can go ahead and get another FHA. I think you can have up to, what, four FHAs in a lifetime?
02:00:41.000No, usually you can only have one at a time.
02:02:23.000There is some deep stuff that most people will spend their whole life investing in real estate and not understand with negotiation tactics.
02:02:29.000I mean, last time I was here, you only had like six properties.
02:03:36.000From an investor standpoint, but I can't talk to you from a realtor perspective.
02:03:42.000I could give you guys kind of an idea from the lending perspective because I've dealt with it, but I'm limited to only the loans that I've done.
02:03:47.000Dave could talk to you all about all of it because you're involved in almost every spectrum of real estate, man.
02:03:57.000This is someone you definitely want in your corner, guys.
02:04:00.000Okay, Cardinal goes, is there an accepted standard formula for calculating the rent on a property in return to turn a profit and stay competitive for price per square foot?
02:04:08.000No, not price per square foot, but there is one for the purchase price of the home.
02:04:48.000Your content has taken my credit from 640 to 720.
02:04:51.000Now being smarter, but what credit cards to get?
02:04:53.000I'm sales driving for a company, one of them boys, and use all my time slash they're working listening to books and podcasts, WFNF, to also just purchase your book, David.
02:05:05.000You think I should do a real estate wholesaling part-time while I'm working full-time, making $25 per hour, or work two jobs and only focus on the jobs?
02:05:14.000How did you know that pH was per hour?
02:05:18.000Because I said 25, full-time making 25.
02:06:28.000But see, that person does have a pretty big advantage because they can buy real estate and pay a price that I couldn't pay.
02:06:33.000Because I got to go pay a contractor or a handyman and there's a margin that I'm going to have to pay.
02:06:37.000They can do that work themselves and they can do it over the time that they live in the house so they don't have to pay hard money or anything to get that place fixed up.
02:06:43.000They should be looking for messed up houses and Captain Save-A-House.
02:06:55.000That's a W. That's a big W. That's where I would say it might be worth it to spend that time doing it yourself because your returns are gonna be crazy.