Exactly how to START with $14,400 Investing in Cash Flowing Real Estate

Exactly how to START with $14,400 Investing in Cash Flowing Real Estate



pull these folks I'm having trouble believing this myself I just found a deal that could be bought with 3% down that's less than 20 grand including closing costs and you could pretty much get your entire payment cover and a five hundred thousand dollar house let's analyze the numbers and then since I don't like to speculate let's actually go look at the house check it out let's go oh by the way since I'm a real estate agent I guess I should say they've got Sprinkles Cupcakes right there right next to my stock brokerage TD Ameritrade oh and there's my car charging oh yeah and they get free unlimited super charging so thank you oh no come on let's be real I overpay for the car oh well so here we go if we buy the place for 480 thousand dollars and we put three percent down that means we're going to have a loan of 465,000 $600 that's what our loan is based on so if you ever wanted to run a mortgage calculator I like doing everything by scratch I don't like fancy spreadsheets it's a great way to make poor investment decisions by missing just one variable always start by scratch this is exactly when I teach in my real estate investing course link below so here's what's gonna go into our payment we're going to have principal interest taxes and insurance piti principal is going to be six hundred forty one dollars a month that's the amount we're basically paying off on the loan every single month if tenants are paying that for us they are paying off $641 per month for us thank you very much tenants I like tenants because of that the interest we're gonna be paying is 1649 interest goes down by about a buck a month principal goes up by about a buck a month it's sort of inverts after 15 anyway then we're going to have taxes property taxes I've made a video on how to never calculate property taxes again so we know the property taxes are gonna be $480 per month then we're going to assume about $50 per month for insurance that is our piti payment now we've got mortgage insurance the easiest way is to add the mortgage insurance premium to what the interest rate was so if the rate I was using was 4.25 percent and on add a mortgage insurance premium of 0.9 percent we will get to a combined rate of essentially five point one five percent that you are paying for this money which according to this handy piece of paper here means you are paying about two hundred fifty two dollars per month for mortgage insurance and you might be thinking yourself oh my god why would I ever pay that much money for mortgage insurance I'll just wait and end up never mind all right well then maybe you just click out of this video and stop seeing how you can control this five hundred thousand dollar house for free if you're still here make sure to smash that like button and if you're going to the 10x growth conference I better see you at the pregame and if you don't know what I mean with pregame the day before the 10x growth conference come on guys you know the drill anyway back to the numbers when I add this all up we are going to get to a combined payment of three thousand seventy two dollars per month to own this property for three percent down that means with our closing costs you're putting down less than twenty thousand dollars now remember we're also going to build in a five thousand dollar credit towards closing costs into this but we're gonna use that five thousand dollars to fix up the place a little bit so in other words still gonna be into it for 20 grand but I'm gonna get you a five grand to sweeten the pot a little bit we're gonna be able to paint the place so maybe you can do some fixes yourself I always recommend you learn how to do now that we get the numbers down let's hit the property let's see what we're dealing with and let's figure out what we can rent this puppy out for because folks we just bought a half million dollar property for four hundred eighty thousand dollars because we always buy in the wedge again a concept we talked about in the real estate investing course but anyways sorry I had plug it again I'm sorry they made a confirm lane change why would I want to confirm lane change and we stuck by in a semi-truck here's our nuts oh my gosh extended itself it literally just set the blinker itself on an exit oh my gosh it's exiting the highway itself oh my gosh wait I like this so far super convenient off the street I love how mature the trees are I mean the neighborhood was built in the 30s of course but I mean wow this is nice dealing with sunsets so we're just gonna borrow a parking spot there it'll be fast hazard lights solve all problems here's the house alright look at this look at this little cutie here we got a nice little front yard we don't really have a driveway here but that's because there's actually back alley access so let's get in this lockbox and let's find out what we can rent this thing for that way as usual will close the door behind us you know what happened last time but the paint is locking it right now somebody's coming up how's it going okay so you get in and it has a little bit of a dated flare to it which I personally don't mind because it's going to limit our buyer pool when we see this nice original hardwood flooring this one and a half inch oak flooring this is a great great opportunity to sort of leave that flooring maybe see you know maybe we'll get somebody out here that knows these floorings very well and can tell us how many reef finishes we sort of have left in them that'll give us an idea as to the longevity of this floor maybe you all will get rid of some of the tiling that we've got here maybe well neutralize the paint but some of these things I would be doing while I'd be living in this house because there's another little asterisk coming to this whole plan but don't worry I'd be painting all the molding white I'd be painting the walls sort of a more modern color kind of like what you see here a trim color here these are things that we talked about in the real estate investment course all the time what things to modernize and what things not to spend money on now let's see the kitchen you know actually you could probably update this kitchen very cheaply by just replacing the counter in the backsplash because we've got the expensive viking appliance package jenn-air over here full stainless Bosch dishwasher the cabinet's could work with a lighter countertop I mean it's fine the way it is now it's just a little bit sort of early 2000s so let's see we got plantation shutters or something this is this is a little intense you know there's some customizing that's been happening here but let's look at how we can own this property pretty much for free so what do we got over here we got bedroom number one over here's bedroom number two here's your full bath which what's interesting about this is you actually have this full shower right here and then over here you have this tub and shower and of course you have this one vanity here so this is really interesting stay tuned to what we're gonna do to this all right let's take you over here down this little hallway here check this out step down into our little addition here and what only out here we have a full on lockout Edition that is you can lock this which that's an original 1938 door with this whole skeleton key lock so I love those super cool almost vintage here's your kitchenette and here is you know bathroom this is awesome look at this this is great perfect and this is your living space this is your living room your dining room your foyer you're entertaining room well actually no you got your forty a right here see it's even designated by this one light that turns on and off just for this little segment hallway here then here's your lock out entrance ooh with security door so you can get a nice cross-breeze so you got the security door here on the side to get a good lock side installed upside down to get a nice cross-breeze and then you have another door over here oh and then here's sort of your separate locking gate entrance so why did I specifically bring you to this house well I discovered that this house was on the market and realized whoa wait a minute our payment if we put down three percent would be $3,200 we could rent this edition with its own heating system its own full bathroom two entrances and its own private backyard see this would be your private backyard for that unit this would be the private backyard for the rest of the house probably for about 1,400 bucks even though it's small for this area on this kind of street with a backyard and if you gave them the garage 1,400 bucks should be a no-brainer somebody in theory could make that their office right and then this is their thing what happened 1,400 bucks then you go over here and what do you do you rent out the front of the house whoo that reminds me of my days being a server oh wait never made it to server being a host and an expediter anyway you could rent this room out for $900 a month not only because you could rent it out as a room with kitchen access and house access but even though there's technically only one bathroom here you could designate that's your shower that's your shower it's like crazy okay yeah then you're gonna go over here so the front bedroom and you're gonna rent this one out for nine hundred bucks a month as well so let's do the math really quickly nine hundred dollars for one room $900 for another room is $1,800 plus $1,400 is 3,200 bucks and the payment was actually less than 3,200 ollars I think it said it was 3,200 us but it was just a little over $3,000 so all of a sudden you have like this $150 cash flow renting out all of these rooms and all you put into the deal was $20,000 buying it for 3% down with a four and a quarter interest rate paying your mortgage insurance as soon as you get rid of mortgage insurance which as soon as the house appreciates to 580 $1,000 you would be able to apply to get rid of mortgage insurance which would mean your cash flow would go up by another 250 $2.00 per month on top of the hundred $50 per month cash flow you already have on top of the $641 principle pay down you already have on top of the tax benefits that you're probably not paying taxes check with a CPA on the rental income that you're getting and on top of any kind of appreciation that this property is getting all of a sudden it's like Holy Smoke Asst oh how could you not want to be involved in real estate when you see numbers like this sure people are like oh yeah well I want to do big units I want my you know thirty-two unit apartment building fine go collect your thirty five percent down to do the deal but here you go three percent down you control a half million dollar property that you're buying for four hundred eighty thousand dollars but it's gonna be worth five hundred cuz we're gonna negotiate a great deal for you and we're gonna have five thousand dollars for you to you know spend some money on paint and maybe doing a little bit more flooring yourself you're putting less than twenty thousand dollars into the deal and they're controlling it so as soon as it appreciates four percent boom you got basically your money out of the deal and net worth as soon as it appreciates a little bit more than that well seventeen percent you get rid of your mortgage insurance now the big caveat with the deal like this is making sure that the addition is actually legal and then there's a second caveat as well obviously we're gonna want to do our inspections on this place we got two fireplaces it looks like they restock owed the exterior the roof of the house looks pretty good it's missing a chimney cap over the here the roof over the addition does not look too great so there are going to be some expenses coming up so anytime I say that there's gonna be you know hundred fifty two even three hundred fifty dollars of cash flow I usually just as well call that a wash I don't really care if the cash flow is zero especially when you're younger who cares if you have another 100 bucks cash flow or whatever you should have a job that's helping you control these real estate investments and get into these for low money down so you're controlling the asset which goes up in value because you're renting this thing out to three different people anyway then we go into this garage which remember we're also renting this garage space the person who's renting the addition unit but check out what we have over here see that folks this is a bundle of building plans which is the best possible indication we could have ever asked for that all the work on this house it's probably legal and permitted that means anybody who's buying this just getting all these upgrades that you're discounting this I like this is one of those deals where you go who cares what the markets doing forget the market who cares that the garage has a big crack in this lab who cares what do you got this paper though I mean you could just I mean I don't know about you but I really really like this deal they're listed at $510,000 they don't have any offers they just had an open house this is just asking for somebody to negotiate a good deal on it okay okay okay I know you're probably thinking to yourself come on Kevin whoops what's the catch what's the catch how am I gonna get into a place for 3% down and all it was suddenly rent out two rooms and the guest unit and I have cash flow and I put 3% down are you serious everybody would ordinarily be upside down- on this deal yep nope here's the trick though you're gonna have to agree to live in the property for the first year so for the first year you're gonna be paying that $900 in rent to yourself pretty much so you're gonna be paying $900 a month but you're probably replacing the rent you're paying right now anyway after a year guess what you're gonna do you're gonna rent you're gonna find another one of these puppies why because your goal when you're 26 years old like I am is it cash flow your goal is control my friends your goal is to control as much dollar volume of real estate possible because over the long run what does real estate tend to do appreciate some value the more of it you control the more wealth you build no matter what the market does this is how you can legitimately with the not some kind of speculative basic crap that I just made up somewhere actually buy a house in Southern California ten minutes from the beach five minutes from River Park the collection area five minutes from the 101 25 minutes from Santa Barbara an hour from LA an hour from Hollywood in the cloud house buy a property for 3% down and turn it into something that cash flows pretty much immediately and what do you have to look forward to in the future let's do a quick little summary of exactly that one tax benefits of the fact that your tenants are paying down your loan and you're not paying taxes on it to appreciation 3 rent appreciation I have some rules for tenancy and property management and dealing with rent increases and things like that but for you're gonna be getting rid of that mortgage insurance soon generally after 2 to 3 years most people get rid of their mortgage insurance as long as the market isn't like falling crazily and if it is well that's what the point of mortgage insurance is but worst case whatever you already did your numbers to assume the mortgage insurance payments so if you happen to get rid of mortgage insurance whatever even better for you in the meantime look at these trees look at this neighborhood look at my car waste of money but I love it all right and make sure you come to my real estate crash course at the TEDx Growth conference January 31st in Miami Florida because it's again a teen epic real estate crash course investing is made super easy whether you're already really good well you don't know what you're doing at all you