do you want to fix toilets wake up at 2: in the morning with angry phone calls and cancel all your vacation plans just because of some mean tenant me neither so we're not going to talk about that today instead we're going to talk about how you can invest your money in residential real estate for Passive and amazing returns that will blow all other Investments out of the water my name is Brandon co-host of the world's largest real estate podcast the Bigger Pockets podcast as well as the author of the book on rental property investing and when I'm not writing making videos or podcasting I'm actually investing in real estate I have currently 45 residential units that provide a great monthly cash flow and best of all I manage them less than two hours per week how well that's what I want to talk about briefly today you know everybody has a crazy uncle or a brother-in-law who did the real estate thing and has a ton of terrible stories about how bad it is and in fact when I first decided to get into real estate investing my own parents told me I was crazy they said you'll go broke homeless be living on the street because your tenants will drive you mad but instead over the past decade I've discovered four interesting facts about real estate that has helped form my personal investment philosophy and those four things are what I'm going to share with you today number one there are literally hundreds of ways to invest in real estate so forget what you've heard single family multifam flipping wholesaling whatever there's a ton of ways to make money in real estate and despite what the late night TV real estate gurus might say there is no one right way that's best for everyone however there might be a great way for you to give you the kind of returns that you're looking for with the time commitment that you want to provide number two real estate can be more or less passive depending on how you run it some investors work 40 hours a week on their Investments others work 40 hours a decade and I think that's pretty awesome because it's in your control what you want to do number three real estate allows you to leverage creativity for cash you see with most investments in order to make money you have to have money but with real estate you can replace the need for cash with something much more valuable hustle now I'm not saying you should over leverage yourself or you can get rich quick this way but understand that you do not need to be rich in order to get rich with real estate through creativity passion and hard work you can actually do some pretty amazing things using other people's money in fact of the more than $2 million in real estate that I own today almost all of it was purchased without using my own money now that's not to say you can't use your own cash you could and maybe should but the point is real estate investing gives you options all right number four real estate investing is sexy I mean let's be honest when's the last time your spouse or one of your friends said hey let's sit down and watch stock Hunters International no I mean people love real estate I love real estate it's tangible it's beautiful and it's improvable plus it's time tested people have been becoming millionaires through real estate longer than any other asset class on the face of this Earth so let's wrap up this video as I explain to you what you'll learn in the full length video that I put together I'm going to be sharing with you my three favorite strategies for investing in real estate and the best ways to get started in all three of those you'll also learn about the mistakes that I made while I was building my portfolio and some of the tips and tricks that I personally use to make sure my time invested is minimal all right let's get out of here all right my name is Brandon with Bigger Pockets and I will see you later hey what is going on everyone my name is Brandon and today we're going to talk about how to get started with passive real estate investing and I'm going to talk a lot about what exactly that means what do I mean by passive because uh in real estate investing as I'm sure you know there is a wide scale of passivity as I like to say and so things could be more or less passive depending on how you want to run it but overall our goal today is to talk about different ways you can invest in real estate using mostly passive methods and so that's what I'm going to be talking about today again my name is Brandon Turner we'll talk a little bit more about me in a minute uh but first I just want to say thank you for watching this video I think you are are getting a lot out of it today I think you'll thoroughly enjoy this hopefully you learn some new stuff about real estate you'll see that uh real estate is not just the pie in the sky late night TV Guru kind of get-rich quick stuff there are actually a lot of people out there investing in real estate the right way and they're making a good return from it they're making a better return than they can get a lot of other Investments and so that's what we're talking about today uh so I just want to say welcome and uh let's get started so first of all let's talk about if you're in the right place I mean maybe you're not even uh you don't even want to watch this video and so I want to get you guys out the wind out the door if that's not what you're into so let's talk about are you in the right place first of all you might like this webinar or whatever you want to call this webinar video Whatever today you might like this presentation if you don't want to work your job forever if you'd rather not work your job forever if you have an end point in mind and it's sooner rather than later I hope you're going to get some good stuff out of today's presentation uh secondly if you want to have an amazing retirement a lot of people get into real estate not because they want to quit their job now but maybe 10 years down the road 20 years down the road 30 years down the road they don't want to live on just Social Security they don't want to live on just Medicare or whatever like the government programs are for them so if that's you if you want to have amazing retirement hopefully today you'll enjoy this get some good stuff out of it and third reason people might like this and the third reason people join get into real estate investing that is is because they want extra income to live in extraordinary life now right so I mean those are kind of the three main reasons people jump into real estate is because they want to quit their job or they want a good retirement or they want extra cash now and so the the there's a lot of ways to do that in real estate we'll talk about a lot of those a little bit later but those are what I'm hoping to address in today's uh presentation so hang tight let's get on with that uh in this webinar or presentation or whatever you want to call it I don't know what we call these things I don't know weird all right so what you're going to learn today you're going to learn my three favorite strategies for Passive real estate investing and once again when I put passive there I put a little asterisk next to it because like I said there are so many ways to invest in real estate some are more or less passive I mean there's ways that a guy could be working 40 hours a week at real estate and there's some people that are working 40 hours a decade at their real estate and it's everywhere in between and so that's what we're going to talk about today is I'm going to give you three of my favorite strategies for getting started uh and I'm going to kind of walk you through what it is how to get how to get through it uh how to get started some actionable tips of things you can apply today in your life uh keep in mind I do like to tell everyone this this is not easy or fast again I know the real estate Niche has a lot of get-rich quick guys that are teaching you know crappy stuff but what I'm talking about today is just not it's not easy it's not fast but it's not complicated or impossible either I mean it's is just real life stuff that millions of people have done for thousands of years uh maybe not all these strategies but I mean real estate investing has been around for as long as there's been people that have bought and sold real estate and so uh again this is not easy or fast don't think this is get rich quick this is it's it's hard work uh you know I love this quote from Winston Churchill who said a pessimist sees the difficulty in every opportunity an optimist sees the opportunity in every difficulty the reason I bring that up today is because real estate is probably not as easy as a lot of other forms of investing that you've possibly done it is not as easy as calling up a stock broker and telling them to buy a couple stocks for you it's not as easy as uh calling up your financial adviser and you know switching your mutual funds around a little bit real estate can sometimes take a little more work now again there are ways to make it easier and less work and we'll talk about that a little bit later but just keep that in mind that it might take a little more work a little bit more head knowledge you'll need to learn uh and honestly that's one of the things I love about real estate is that the more you learn the more you can make uh and so just keep that in mind again that quote from Winston just says that a lot of people are going to look at real estate and say it's too tough it's too difficult I'm I'm quitting I'm I'm going to go back to what I was doing I'll go watch Dancing with the Stars or something but I want to encourage you guys to be the ladder there be The Optimist that sees the opportunity in the difficulty and so again this is not too difficult uh but I just want to prepare everyone that this is not uh get rich quick so let's get on with it our agenda today first of all we'll spend a couple minutes talking a little bit about me I won't stay on there long we'll talk about real estate investing why invest in real estate why should that be an Avenue that you want to put your money into I know there's a lot of options for you to invest your money why should real estate be one of them I'm going to talk about the four wealth generators of real estate real estate can generate wealth and wealth in four distinct ways I'm going to talk about the four of those and we'll talk about some of the different strategies that that more or less use those uh generators um next I'm going to talk about my three favorite strategies and the first steps for each so I'll talk about three very distinct ways that you can invest in real estate specifically today we're going to talk about rental properties because I I'm not sure a lot of people watching this are going to go out and flip houses or anything fancy like that because you're looking for more passive returns but maybe you are going to flip houses and you know there's a lot of resources out there as well for that but we're talking about investing today not the business side of real estate so again I'll talk about my three passive semi- passive or more so of investing in real estate and like I said I'll give you some actionable tips for what you can do today to get started at least just to walk down that path and I'll also talk a lot today about the mistakes that I've made in my investing I'll give you a whole list of them and you know I want to explain those because here's the truth right mistakes everybody makes them and you know your mom told you when you were a kid like learn from your mistakes and you were like I don't want to make mistakes and you were all upset and stuff but you know when you make a mistake you feel stupid and that's what people tell you is we'll just learn from your mistake that is true and that you should definitely learn from your mistakes but here's the cool thing about mistakes is that you can also learn from other people's mistakes you understand that so you don't have to just learn from mistakes I mean mistakes suck so what I'm talking about is you can actually learn from other people's mistakes and not make them in the first place and that's why I'm so open about the mistakes that I've made because I don't want you to make the same on so we'll talk about that and then finally we're going to talk about some different tips and tricks that I've used to minimize the the amount of work I put into real estate so I've condensed down what I used to work 30 40 hours a week at real estate today I'm working less than 5 hours a week at my real estate business sometimes less than two or one hour a week and I don't do a lot of work in terms of managing the stuff that I have going on because I've got systems in place we'll talk about that as well a little bit about me my name is Brandon Turner uh that's me there my handsome mug and that there is me and my wife Heather Heather is the um kind of anchor in my life she's very very awesome and uh she helps me a lot with my real estate investing uh I I started investing I started in this game when I was 21 years old I bought a house and I had no idea what I was doing but it was cheaper at the time than renting so I bought this house at 21 had very little income I mean I barely made above minimum wage I had no experience I had no knowledge but I jumped in anyway and everyone said I was stupid and I was going to lose all my money and I was a fool but I kind of made it work so over the the following few years I used real estate in order to build up enough cash flow which is the extra money coming in every month to quote unquote retire by 27 now I say quote unquote retire because uh you know I wasn't sitting there playing shuffle board on a beach in Florida with a bunch of old people right like I was still working at my real estate business trying to improve it and trying to make it better but I had quit my job I was done I had enough I had more income coming in than expenses going out I had more passive income coming in than going out and so I hit that kind of that freedom number as I like to call it uh my buddy Clayton Morris uh called it the fre number and I like that I had that number I hit that and it was awesome and that's what real estate did so anyway today I currently own around 45 units both single family and multif family I'm always buying more I'm always kind of looking around seeing what I can find I'm not a guy that buys a dozen properties a month or anything like that because I'm not looking for the business side of it I'm just looking to invest the money that I make from uh my businesses my other things and and the income I make from sites like biggerpockets.com where I write and I do a lot of work for them the VP there and uh I try to invest all of that money and the cash flow that comes in I try to invest as much of that into new properties so again my goal is just to keep investing my money and getting a great return on it trying to build that up so hopefully that can you guys can identify with that again I'm the VP biggerpockets.com the real estate investing social network we're kind of like uh Twitter or Facebook or G+ except for instead of cat videos and politics we're talking about real estate investing and how people can survive that game cuz is a game it's like a big game of Monopoly sometimes I'm also the co-host of the Bigger Pockets podcast which is the world's largest real estate podcast uh and uh been downloaded I think 10 million times or something like that it's crazy I'm an author of the book on rental property investing as well as the author or co-author of the book on managing rental properties I co-wrote that with my wife uh those two books are currently well the book on rental proper invting is currently the number three real estate book in the country uh at least on Amazon which is kind of fun it was number one uh for a little a while anyway kind of cool I also wrote the book on investing in real estate with no and low money down which just talks about creativity when you're investing and I'm a travel addict I travel all over the place I went on a six- week road trip last we year across the country I went to Ireland I went to uh Disneyland I went to uh I don't know a lot of places like that so I really like traveling um and thank you to real estate for making that possible I mean I've used real estate to be able to travel a lot because I kind of have that freedom to be able to do that which is cool and I'm not a multi-millionaire uh but real estate has given me both equity and cash flow that has enabled me to live life on my own terms and so that's that's why I love real estate that's why I teach this stuff online because I'm just so passionate and in love with it uh and it's very addicting I'm going to caution you real estate's addicting and so today I want to show you guys how you can kind of do the same how you're going to be able to invest your income into real estate whether or not you have a lot of money or a little money I mean you could have $5,000 or you could have $500,000 and I'm going to show you guys how you can invest that to start making some returns in real estate so if you guys are ready why don't we jump in first of all why real estate investing why invest in real estate well first of all these are just things that I love about real estate I'm not saying that other avenues for investing are bad or you shouldn't do them I'm not trying to compare it I'm just telling you what I love about real estate number one it's tangible I love that it's there I can go look at it I can drive by it I can knock on it I can it's it's like a physical thing it's not a thought in someone head it's not controlled by a board of directors that are going to drive the price up or down based on what they want or or you know somebody else is going to do something you know I don't know some CEO is going to go have an affair with somebody and drop the stock and like I love that it's tangible it's just a thing it's there I I love that I love that it's it's diversification uh in in within the asset class I mean there are like I said hundreds of ways to invest in real estate in fact I wrote I wrote a post one time called 100 ways to invest in real estate you can Google it you'll find it uh and it just talks about everything from house flipping to rental properties to buying apartment complexes to note investing to tax leans to wholesaling to you know all sorts of tactics for using real estate to generate wealth I love that and so you're not just relying on one thing even if all your eggs were in one basket like real estate you're not you don't have to rely on just one asset of real estate you could be in a little bit of commercial a little bit of industrial a little bit of residential a little bit of you know high quality low quality like there's a lot of things you can do with real EST love that it's also directly actionable and I touched on this a minute ago about like the you know I don't I'm not relying on a board of directors yes I will fully admit that the market goes like this it goes up and down and up and down and I get that but I love real estate because it's directly actionable which means I personally can affect the return on my investment not just pulling money in and out of a stock or something like that but I can actually affect the return what I mean by that is so I buy a property and then I can fix it up I can hire a contractor to go and add a new bedroom or to remodel the attic or uh paint the outside of the house to bring it up to the standard the other properties are in the neighborhood and I can add value if the market drops I can go and find ways to increase the value of that property I can run it better I can manage better I can cut expenses I can increase income because real estate's kind of cool because it's combining kind of the business aspect of running a business with the idea of an asset that you can invest in and put your money in and so it's very forgiving in that way because is directly actionable it's also improvable like I said you can go in and fix a property up and make it worth more this is especially true with commercial real estate investing and we'll talk about that later but uh things like apartment complexes they're valued based on the income they bring in so let's say you you were to improve the grounds and and do new landscaping and raise the rent on every unit by 10 bucks a month on average you know that could increase apartment complex by hundreds of thousands of dollars in value because it's improvable you can fix it up you can buy it crappy and then improve on it and I love that you can also get great returns with real estate I mean let's be honest we're not in investing because we're bored we invest our money because we want to make more money and I believe that you can make incredible returns with real estate especially if you're willing to get uh invest your time into learning how to make that happen I love that you can get great returns and what I mean by great returns how much can you make I mean really the sky the limit depending on how much work you put in I mean it's just like anything right the more you put in the more work you put in the higher return you can make but then it becomes less passive potentially I would say I I will tell you this I don't buy anything if I'm getting less than a 12% cash on cash return which is the immediate return I get on the cash flow I don't want to buy anything under 12% you know so when I look at guys making you know I think it was my my one of my best friends sent me a paper the other day showing he made over the last year he made 2.4% on all his mutual funds and I said you know that that's great and the Market's been great the last year here but he made 2 and a half% or whatever and I know a lot of you guys are saying well he did things wrong or he should have moved things around or allocated things differently but he's not a Savvy investor either am I when it comes to that kind of stuff I just I I don't I don't do it but I know real estate and I know how to get a consistent 12% return if not higher 15 20 25% is not out of unheard of with some of the things that I do and so I mean even if I want to do a lot more work like flipping or fix up a property I can get 100% or 200% return and I don't have to do the work so again great returns you can get with real estate there's also numerous options I said kind of under diversification a little bit I mentioned that but there's just so many ways to invest in real estate it's just crazy like how much you can do there's so many different options you have for how involved you want to be so let's move on and talk about the four wealth generators of real estate I mentioned this earlier there are four distinct things that I find help produce a return in real estate and one of the things I love about real estate is that there's it's not just one way to make money if you do it right you can make money in four different ways and here they are number one you can generate income through cash flow now cash flow of course is the extra income that's left over on the property after every bill has been paid and I'm talking about every Bill I'm talking about things like yeah of course you got to pay the mortgage potentially if you have one of course you got to pay things like uh you know the water bill if you have a water bill or you got to pay the taxes or the insurance but there's also things is like what about the roof I mean the roof you have to replace every 20 years and that cost 20 grand well shouldn't you be setting aside money every month for a new roof because that's an expense we call that Capital expenditures or cap X so I'm talking about actual real after the end of the day cash flow the money after everything's been paid out I love cash flow because what it does is it g it like for me it gave me that freedom number right so for me at the time when I was 27 I needed 3,000 a month to survive to pay my bills to be able to quit my job and be done now I know a lot of you are saying 3,000 is you know way too little for me and that's fine you might have a different Freedom number but for me I lived in a small town I had a cheap house and I could afford to live really well on 3,000 a month so what I did is I went out and got $3,000 a month in cash flow and it took me a few years to get there and I got it and I quit my job so that's what I love about cash flow is it gives you that freedom the flexibility gives you the monthly reoccurring income which I love the second wealth generator I want to talk about today is a appreciation now I'm not talking about like I appreciate you though I do appreciate you for watching this presentation but I'm talking about appreciation in terms of property values going up or the value of your your real estate investment going up over time so I bought a property maybe for 80,000 and a couple years later it's worth 100,000 or I bought a property for 500,000 and a few years later it's worth 900,000 I love that now there's two sides to the appreciation game there is natural appreciation and there's forced appreciation now what's the difference natural appreciation is just is is what happens because of the market uh now it's largely driven by things like inflation and uh you know a lot of things like you know supply and demand things like that so the market is going up and down up and down up and down all the time and so if you buy it on the bottom and you sell at the top you got that natural appreciation now I know a lot of you who are uh you know buying property back in 2003 2004 uh might say well there's nothing natural about what happened there and that's true there is definitely some you know things that pushed values a lot higher but overall it means that I didn't do anything to get that appreciation it came naturally the second half of appreciation is forced appreciation now do you remember a few minutes ago where I talked about if you could increase the rent by just a few dollars per month on your units because the value is based on how much profit it makes on Commercial properties you can force up the value uh in other words you can force appreciation on real estate now there's a couple ways to do that but typically it involves either making the property nicer uh for example I recently bought a house and again don't get confused by the Numbers here when I tell you numbers about a property that I purchased a lot of you are going to say oh that's way too expensive for my area or other people will say that's way cheap for my area just forget about it it doesn't matter the math Works no matter what so uh don't shut your brain off and say that well his area is different than mine it's not going to apply to me everything applies to you so I bought a property for $70,000 and then I a single family house needed a bunch of work so I went and hired a contractor to put in $30,000 worth of work and I paid $30,000 to fix this property up now I've got a total of $100,000 into it however the property is not worth $100,000 at this point the property just appraised for just under $150,000 because of forced appreciation now in a way I didn't actually for it what I did is I brought it up to the level it should be at but it's the same concept is it was worth this because it was a dump I made it better and now I've got a ton of equity in the property Equity is that spread that money that I've got that value and uh you know it someday I'll realize that when I sell it I'll get that value out and I'll get to be able to spend that so again that's the second wealth gener of real estate is appreciation and I love appreciation it's fun I would caution you on this never buy a property at least in the beginning if if you're not Uber Uber rich don't buy a property only hoping for the second appreciation wealth generator here's why because the market doesn't always appreciate am I right have you guys been around in 2007 2008 2009 2010 we had a severe decline in the market it dropped significantly so a lot of people that were trying to buy properties back in 2006 and 7 they bought them for let's say 400,000 and a year later they're worth 200,000 because appreciation can work both ways now typically over time real estate has always over time gone up but that's not always the case in a short term I believe real estate will always generally go up because I believe inflation's always going to go up here in America at least in the foreseeable future and so it's always likely as Jobs go up income goes up rents go higher everything just kind of increases in value so again that's kind of the idea of appreciation and why you probably shouldn't necessarily buy a property just because of it if you want to do that you might as well go to Vegas put all the money on you know Blackjack and then you might have just as much of a chance there are people who do it because over time they realize that over long periods of time appreciation does tend to go up and will bail them out even of a short-term thing but those people are generally more wealthy or lucky now let's move on to the third wealth generator and that is the loan pay down also known as amortization now what that means is your tenant is paying down the mortgage for you it's like automatic wealth building and here's an example let's just say I bought a property and I paid uh $100,000 for it like I said earlier I got that property I bought for 70 I put 30 into it so now I got 100 into it my mortgage now I went and got a new loan on the property my loan is for $100,000 so let's just say hypothetically the property was only worth $100,000 when I got done let's just say the price never climbed any higher it never we never got appreciation the number two wealth generator it stayed at 100 forever and let's just say hypothetically that the cash flow was zero on this property I never got a penny in cash flow after all at the end of every year was just always cancels out the zero and let's say we didn't get number four what I'll talk about in a second we didn't get that W generator all we got was the loan being paid down every year well guess what if I had a 30-year Loan in 30 years from now I'm going to have a property worth $100,000 because it's still worth the same level we're hypothetically saying but I paid that down my tenant paid it down every month so I didn't have to save up $100,000 to buy that property my tenants basically saved me up $100,000 so again real estate doesn't operate in a vacuum prices do go up and down we do get cash flow or negative cash flow things do happen but just understand that that is a major wealth generator is the fact that your loan if you have a loan gets paid down now if you buy all cash then you don't get this wealth generator if you're if you're paying all cash and that's fine there may be reasons to pay pay all cash that's probably a topic for another day but understand that uh paying down the loan is a major wealth generator and number four wealth generator of real estate is the tax savings and there's a lot of tax benefits to investing in real estate because in the government loves Real Estate Investors we're supplying housing to the world or to Americans and the government wants to incentivize good behavior and so they incentivize it by giving tax breaks and what I'm talking about is a few things like this for example if you're buying rental properties and you're holding them for at least you know I'm not a CPA so I'm not giving you advice here but if you hold them for a certain amount of time like a year year uh you don't have to pay and then you were to sell that property later you don't have to pay self-employment tax on that income even though you bought and sold a product just like if I were having an Amazon business but I don't have to I'm not self-employed uh same with the cash flow it comes in on that cash flow I don't pay self-employment tax on that cash flow in fact I'm paying a very low tax rate on all of that stuff uh because of the tax incentives additionally the cash flow that I do get is typically wiped out the tax on the cash flow is typically wiped out by something known as depreciation it's a longer conversation but typically uh I don't pay a lot of cash uh a lot of taxes on the cash flow because of this thing called depreciation and again that's a much longer conversation but the bottom line is this if you have two guys and I and my let's say my friend Bob and Bob makes $60,000 a year from his job and I as a investor a real estate investor make $60,000 a year in cash flow who gets the keep more money by far I get to keep far more money than Bob who's an employee or what about Sherry who's a business owner she owns a business to make $60,000 a year who gets to keep more money still I keep far more money so $60,000 income in real estate is worth almost probably the equivalent of 80 90 or 100 in one of those other either self-employed or a business owner or I mean or an employee so again those are the four wealth generators again I'll review them number one was cash flow two was appreciation number three was was loan pay down and number four was tax savings all right we got those let's move on I want to talk about my three favorite strategies for getting started with real estate investing now these ones uh you know they could be newbies or even Advanced people are doing this stuff all the time but I'm going to keep the cookies on the lower shelf so if you're new to this hopefully uh I'm not going to overwhelm you so let's get to the three favorite strategies number one let's talk about single family house investing just buying single family houses so what is it that's probably the easiest one to Define right single family house investing is when you buy a single family house and then you rent it out now a lot of you are saying well I don't want to fix toilets I don't want to get a call in the middle of the night I don't want to you know calm down simmer down simmer down and we're going to talk about later how to make that more passive but for now understand that you can buy single family houses and they can be awesome so why do I love single family house investing why do I buy houses that are single family there a few reasons number one they're everywhere there's like 178 million houses in America they're everywhere everybody's got a house everybody wants to live in a house at least most people do um most people understand them which is a number two here benefit they're easy to understand people get houses they're they're not a complicated thing people understand them number three they're easy to sell and I don't mean like easy in terms of like oh just you know throw it out the window and it's it's sold but what I mean is like they're easier than a lot of other Investments the ones that we'll talk about here in a minute they're probably the easiest to sell why because because there's hundreds of millions of Americans that want to live in a house and so they're easier to sell than a lot of those things now granted I will fully say they're not as easy to sell as a stock right so to sell a house it might take you two months three months a month and a half I don't know 10 days if you're fast but if you want to sell a stock you can do it in 15 minutes or five minutes or whatever so understand that it's not as quick as stocks I fully accept that number four financing is a little more simple when it comes to single family houses the financing and again one of the things I love about real estate in general is that leverage that you can use Leverage is being able to get a loan so again the financing is fairly straightforward and simple because everybody generally in their life at one point or another will get a mortgage they get that you go to the bank you put down a down payment you get the property an investment property like single family house loans are very very simple just like your home loan that you got when you bought your house all right next one with single family houses you can get cash flow and appreciation you know I said don't buy a house just based on appreciation but at least with single family houses they tend to rise in value better than a lot of other uh real estate Investments people just homeowners that just want to buy a house tend to push those Higher and Higher and Higher and so single family houses you do get appreciation uh and hopefully anyway and you also can get cash flow if you buy right and again everything I'm saying today everything we can preface with if you buy right uh not I'm not telling you you just go out and buy a property and you're going to be successful it's not true at all in fact I say most properties are just terrible investments in general uh you got to find the right ones all right next they can be easy to manage or easier to manage what I found in my own investing life is my single family houses are typically a little easier to manage I found that just the the tenants tend to take better care of the properties and I don't know why that is but you know they just have a a feeling of ownership they feel good about that's their property and so you know if there's a mouse in their house they're not going to call the landlord typically and complain they're going to go buy a mouse trap and they're going to put it down it just th it's those kind of things that I just like about single family houses also single family houses are largely improvable meaning you can fix them up you know you can flip them or you can buy a junker and then redo it and then make it look beautiful if you wanted to and increase the value in fact like I said earlier I bought that house for 70 put 30 into it now it's worth almost 150 you know I improved it so I start my you know I start the property owning it with $50,000 in equity now that's great right so if I had to sell I could sell it even at a discount I could drop it and sell it for 130 if I had to sell it you know next week because I'm going to do a discount and I still would make money on it and if it's worth 150 appreciation meaning that the value goes up every year which on average it's been around 3% over the past 100 years just a little bit above inflation if not equal with it if if it goes up it's not going up from the point I bought it at 70 it's going up from the 150 Mark and higher there so a few years from now it might be worth 160 and then maybe 170 and yeah you know the market could drop and it could drop down to 130 well that'd be sad or 12 20 that'd be sad but I still only owe 100 on it and that's why I like one the reason I like single family houses because they're improvable you can build that Equity from the start if you want to you don't have to if you want to and again uh tenants tend to take better care of the property and again I don't know why that is but they do I just found that time and time again so that's a little bit why I like single family houses so what kind of returns can you get on a single family house well I'm going to give you guys an example but first understand this it all depends on the de deal you get and The Leverage you use I'm going to say this multiple times in this in this presentation today it all depends on the deal that you get and The Leverage that you use we all cool with that okay so uh now now a lot of you might be saying what do you mean by leverage I'm talking about the loan typically speaking when you use a loan to buy a property and you put a down payment down so you're using leverage you're leveraging uh a bank loan and putting a small amount of force a small down payment to apply a big purchase when you use that you typically see a higher return on investment not always and there are reasons to buy for cash I'm not saying you shouldn't I'm just telling you that typically you see a higher return on investment but we'll get to that so what kind of returns can you get Let's do an example walk through here a single family home that we purchased together you and I thank you for $150,000 and we put down 20% Which was a $30,000 down payment and we're going to put in about $5,000 in closing costs there's no Rehab on this property this is just to buy the property own it uh and so total we've got $35,000 invested in the property we all track in on this good all right so next the total rent on the property we're going to rent this property up for let's say $2,000 per month so we rent it out to a nice family who the guy works out the county and the the wife is a I don't know a teacher at the school and they're a great family they just didn't want to buy a house and or couldn't afford one right now they're saving up for a down payment whatever they're great family rented for Grand a month and the total expenses on the property come to 1,600 per month which means that they're spending uh you know we're spending 1,600 now what does that mean that's everything that's accounting for vacancy and repairs and maintenance and those Capital expenditures that you had to set aside money for the reserves uh that's the the water bill if you have to pay one but with single family houses typically the tenant will pay all the utilities so we don't have to cover most of those but it might be taxes insurance and of course the mortgage payment so after all of that said and done all of that comes to an average of 1,600 per month which means on average we're making 400 bucks a month in cash flow every month in our pocket at the end of the day so $400 times 12 because there's 12 months in a year figure that uh and that's equal to $4,800 a year in cash flow again that's after all of the expenses have been paid including the ones that are only occasional that we need to set aside money for so after everything said and done our total profit at the end of the day is4 $4,800 per year well just using some very very basic math and return on investment math $4,800 divided by $35,000 investment in a very simplistic way of looking at this is a 13.71% cash on cash return now of course this is just cash onh return which means remember the four wealth generators this is just the cash flow return this is not looking at appreciation this is not looking at tax benefits this is not looking at loan pay down if you want to get real fancy you can get into an ey r r internal rate of return that's going to factor all of those things in but we're not going to worry about that or total return some people say as well your total return but I'm just looking right now at just a cash onh return of already 133% on this deal again that's a very simplistic way of looking at it but it's enough for me to be able to decide if I want to buy a property or not that's what I look for as long as you have those income and expenses right and as long as I can plug those numbers in I feel pretty good all right so that's the number one single family house how do you get started with that well first of all these are some action steps for you guys number one contact a local real estate agent and ask them to set you up with automatic alerts automatic emails for homes in your area that will match what you're looking for for example if you're looking for a house under $185,000 cuz that's what you want to buy in that area and that's what you can afford and you think is going to rent well you set up an automatic email alert with your agent and say hey send me a link to every single property that comes on the market under $185,000 they can do that for you for free takes them about 2 minutes and there you go bada bing bada boom you're getting leads in your in your uh inbox great then learn how to properly analyze a deal and there's a lot of expenses out there that people forget to account for things like that you got to save up for the roof make sure you're setting aside some money for things like that if your roof's going to be bad in 5 years you know you better plan on that and that can get a little bit complicated but it's not too bad you can learn this stuff there's lots of Articles out there lots of books lots of um webinars videos whatever that teach this stuff so again learn how to properly analyze a deal I like to recommend you know just analyze one or two a day just go and spend some time if you're interested we have analysis calculator on Bigger Pockets you're more than welcome to try that out uh if you have a fancy spreadsheet you can always get those and borrow one buy one or make your own if you uh you know want to make sure you get everything correct on there but you can do that as well you can even do it by hand in fact that's what's behind me on this thing here is is analysis of a property um and then finally speak with a local lender to find out what financing options are available to you you know I don't know what the ideal financing for you is going to be maybe it's a 30% down pay maybe it's 10 maybe you're going to live in the property and so it's only 32% down there's a lot of options you have all right let's move on and go to small multifam properties small multif family is the number two way that you could get started investing in real estate so what is it I'm talking about two unit three unit or four unit properties so small multifamilies are pretty cool because they kind of blend a lot of the benefits of owning larger multif Family Properties like apartment complexes with the benefits of owning a small property so they're kind of cool like that and I'll talk about that in a second so why do I love it let's talk about it number one less competition in fact there's there's just not as many people looking for a duplex or Triplex or fourplex as there are looking for a single family house so you can really narrow your search and become an expert in that and it's a little bit less competition for those deals potentially there's higher cash flow you know if you were the deal we talked about earlier you were making $400 on that house and $400 on a single family house in cash flow is great ever on a small multif family what if you could make 150 per unit per month and you bought a fourplex well now you're looking at $600 a month in cash flow you know so overall those are just like you can get better cash flow with small multifamilies also you got several units Under One Roof which is really helpful because if you know like you there's the economy of scale thing right there maybe one roof that covers the whole property so the new $10,000 roof that you got to pay for there's only one of them even though you got four properties but you only pay for one roof and maybe one electrical service or one you know plumbing system or whatever like there's there's economies of scale you can save a lot of money on by having Everything Under One Roof uh next simple financing and and what I mean by that is the financing for a small multif family a 2unit a three unit or a 4 unit is identical pretty much to buying a single family house uh most of the banks don't differentiate between a duplex Triplex fourplex from a single family it's all residential to them the numbers are the same to them so it's fairly simple most banks can do it uh and you could probably qualify for it and then finally it's more scalable I mean if you if your goal was to buy four units every year you could buy four single family houses that would take a lot of paperwork and a lot of work and a lot of searching or you could buy one fourplex right so it's just a little more scalable you can buy more units at one time so what kind of returns can you get again it completely depends on the deal you get and The Leverage that you use uh but let's look at an example of one a fourplex purchase for $250,000 with a $50,000 down payment and we'll say $10,000 in closing costs so in total we're investing $60,000 in this property now let's say that the total rent for the property of all four units total rent was $ 6,000 per month so we're averaging what 1,500 bucks a month per unit now total expenses on that property we could say are $5,400 per month meaning that we're left with a total cash flow of $600 per month and so we got 600 per month time 12 is $7,200 per year and then doing that same simple return on investment calculation the amount of money invested divided by or the amount of money that we made in a year divided by the amount invested works out to 7200 divided by 60,000 is 12% cash on cash return and so again 12% cash on cash return uh and that's um not counting the appreciation the tax benefits the loan pay down all of that that's going to help as well remember this is just the cash onh return all right so how do you get started with small multifamilies well it's going to be very similar to what you just saw contact a local real estate agent and ask them to set you up with automatic alerts for small multifamilies in your area that match what you're looking for next learn how to properly analyze a multi-unit there's a lot of expenses that people are forgetting to account for so make sure you know what those are uh and then speak with a local lender to find out what financing options are available for you all right number three apartment complexes so what is it it's any property that's residential over four units so five and up uh I own a 24 unit apartment complex right now that I I really love I love having that thing and it's it's a great investment now they're obviously a little more expensive but let's talk about why I love it number one far less competition there's not a lot of people out there that can go buy an apartment complex you know so I mean the ones that do they're a little more savvy so you got to you got to definitely pick up your game when you're going to invest in apartments but it's less people are are looking for them oh also value is based on profit when profit goes up value goes up I mentioned that earlier already a couple times but I love that so my apartment complex I bought it for $550,000 I got a great deal on it and when I bought it it was mostly empty it was over half empty and so I did all the work needed to fill the property up I fixed up some units I repainted it I did a lot of work on it and now it's worth a little over $900,000 and so I built that Equity up I built the value value of the property up quite a bit just because I improved the profit now how do you improve profit well you could either decrease expenses or you get increased income and I did both our average rents were around 475 and now they're right around 535 and so over time just as the unit got nicer as the property as people moved out we'd raise the rent a little bit to match what the other nice area things in the area were and uh increased the value also on those apartment complexes management is assumed in other words like most people don't buy an apartment assuming they're going to go manage it themselves the cost of management is just part of the deal and so it can be one of the most hands-off Investments you can buy as an apartment complex and then finally it's the most scalable honestly you could you could buy a 100 unit or 200 or 500 unit a property a lot faster than you can buy 200 or 500 single family houses right so it's the most scalable option now what kind of returns can you get again I'll say it again it depends on the deal you get and The Leverage you use it really does but here's just an example example let's just say you found a 24 unit property and you purchased it for 1.5 million and you put a big 30% down payment 33% down payment of $500,000 and you came up with a 100 Grand in repairs and closing costs so it needed a lot of work we'll say so total your invested in this property is 600,000 now a lot of you are saying well I don't have 600,000 that's okay they're cheaper apartment complexes out there like I said I bought mine for half a million and I hardly put any of my own money into it you don't have to necessar put put a huge down payment down if you learn how to invest creatively and that's kind of what I spend a lot of my time talking and writing about but uh so you get let's just say though you invested $600,000 and the total rent every month was $22,000 total came in and the total expenses that went out were $177,000 which means at the end of the day you were clearing right about $5,000 a month after management after taxes Insurance vacancy repairs all that stuff you were clearing 5,000 a month well 5,000 a month times 12 months looking at $60,000 per year now again that simple calculation 60,000 divided 600 is a 10% cash on cash return and that's with very very passive if I have do buy it like your manager is just looking after it now it's not completely passive you got to make sure your manager is doing their job you got to check the numbers and make sure that they're not stealing from you and things like that but this is again 10% cash and cash return without the appreciation of the tax benefits of or the loan pay down right this can be a great a good return right now now and a great return later on overall with your total return I mean for example if you bought it you know for that $ 1.5 million and you put in $1,000 in repairs my guess is it's probably a lot more it's worth a lot more now you probably raise rent let's say you raised every one of those units you know by a 100 bucks a month you know that could bring an extra $2,400 a month in rent over the course of a year you're looking at roughly roughly 30,000 if I'm doing the math in my head right roughly 30,000 a year in extra income that could likely raise the value of that property up $500,000 or more that's that's again how how drastic it can be when you raise the profit up you can raise the value up quite a bit so let's just say that that's what happened you increased the value when you bought the property was 1.5 million and immediately within a year we'll say after you bought it it's now worth 2 million that's pretty awesome right so let's say you held that property for 5 years and then sold it not only were you getting cash flow every month for 5 years you were making that 10% return at the end of the day you sold it and made an extra 500 Grand in profit and during that time you paid down the loan as well and so like there's a lot of other reasons that you're going to get uh return out of those uh again the four wealth generators pretty awesome stuff there all right so how do you get started with apartment complexes a little bit different than the other ways I'd recommend first of all read the top three books read three book of the top books on apartment complex investing if you want a good one to start with a very basic good one to start with uh there's one by Ken mroy called the ABCs of real estate investing and also one called uh the advanced guide to real estate investing they're both by Ken mroy MC l o r o y they're both pretty good there's a really good one called like investing in apartment buildings or something like that by Steve Burgess b r GES or is it b r g s something like that anyway also an excellent book basic understanding of how Apartments work next learn how to properly evaluate an apartment complex deal this is not as simple as just plugging in a couple numbers on a on a back of a napkin it takes a little bit more work to figure out what an apartment complex is ultimately going to produce for you and then start analyzing potential deals based on what is in your Market or where you want to buy you know like you don't have to actually buy the deals but start analyzing them start pretending start just doing the numbers and seeing hey you know I think that deal is they're asking 1.7 million I think I could pay 1.4 million and that would make it worth it to me and the more practice you get the better you get at it and also understand that apartmentss are a very hot investment right now in fact they're one of the best most popular investments in the entire us right now uh people investors especially outof country investors love apartment complexes so the competition is heating up a little bit on them and uh you really got to know what you're doing because there's a lot of idiots out there buying deals that they're never going to make a return on you got to be smarter than them all right let's before we get out of here I want to talk about five mistakes that I've made in my investing career number one I try to do everything myself from the beginning I used to fix toilets I used to do everything and I never made any money at the beginning because I was doing everything myself I was too busy working in my business than working on my investments and so it just it's it was rough I was managing it all at the beginning I did all the repairs and I analyze properties as if I was going to do all the repairs forever not realizing that someday I don't want to do them I spent way too many days under houses and on top of properties and I use my hands instead of my head I try to do everything myself I was screening tenants taking phone calls doing everything uh today I outsourced almost everything like I said we'll talk about that in a minute I didn't analyze the deal right I mean that was a major mistake at the beginning I didn't account for property management I didn't account for those big things like the capital expenditures the big ticket occasional repairs I didn't think about the time value of managing certain kinds of properties in other words when I was looking at a dumpy little four unit over in the worst part of town I didn't really think about you know that's going to take a lot more work that's GNA have more repairs that's GNA have more management headache a lot more turnover more eviction cost it's going to have all those things that I'm G to have to account for I didn't really think about the time value of managing certain types of properties number three in the beginning I managed way too soft in other words I didn't say no a few things I rented to family and friends big mistake it's my number one rule today as I tell people don't rent to family and friends no matter what it never works out good it never works out good somebody's getting screwed no matter what it always ends up that way you never keep the relationship number two I had a hard time enforcing rules at properties in the beginning I used to be soft like they'd say Hey you know I you know my my paycheck was late from work and so I didn't get paid on time can I pay next week i' be like okay sure and guess what next week they wouldn't pay they'd have another excuse and I'd be like okay sure and before you know it they're three months behind in rent and really the whole time it was lies just lies over lies I mean there's a there's a Truth For You tenants lie all the time it just happens all the time I get lied to and that's part of the business of being in real estate and managing properties now today I Outsource a lot of that management so I don't have to deal with the lies anymore but I know they still lie to my managers now all right next I let tenants get behind on rent that's a big mistake I mean now today I I run our business and we I instruct our Ma you know the management team to uh don't let tenant get behind on rent give them a three-day notice to pay rent and I know that sounds harsh but they always pay I'm doing them a favor by enforcing the rules and I know that sounds really silly but trust me when they get behind on rent they get farther and farther and farther and pretty soon they're so far under they either move out in the middle of the night cuz they're you know desperate and they don't know what to do or they scramble or I have to evict them or something bad happens right so by enforcing the rules it makes tenants get creative and they figure out how to pay the rent and they stay current and I'm actually doing them a favor I'm saving their credit saving their uh their their future ability to get new Properties by enforcing all the rules and being strict being firm but fair number four I let AEM motion cause me to buy bad deals I do that a lot I let motion caus me to buy bad deals and so it just you know I'd look at a property and say oh that looks so cute I just really want that property and i' you know oh they come back to me and they want a higher amount for it oh that's okay I could pay more emotion it's bad so remember real estate is a numbers game don't let don't let your excitement to buy a property take over it's a numbers game stick with the number because it's better to buy no deal than a bad deal don't buy a bad deal and learn the math take the time needed to learn how to properly analyze a deal and number five mistake I bought properties just because they were cheap just remember that cheap does not mean a good deal um Zig Zig Ziggler talks about PR in one of his books he talks about price versus cost and you say well what's the difference well price is the amount you pay for a property cost is how much you pay over time for a property in other words the price might be cheap on that dumpy house down the street in the in the bad neighborhood the price might be cheap the cost of owning that though is going to be High not just the value cost like the monetary cost but the mental cost and the anguish and the irritations of of dealing with those properties so understand that price is different than cost buy B based on cost not based on price and buy for long-term enjoyment don't buy a property just because it's cheap buy because you want to own that property in 10 years from now because you think it would be fun to own that property because it's going to get better over time it's going to attract people you want to rent to in fact uh some an investor once gave me a tip and said I only rent to people that I would feel comfortable having over for dinner cuz he wanted it to be enjoyment for life he didn't want to rent to people that he wouldn't want to be seen with in public because they might mug somebody you know so again buy properties not because they're cheap but buy them because they're valuable all right and then I know a lot of you guys are again are saying but I don't want to fix toilets or I don't want to crawl under a house and you know what good you don't have to let plumbers do and this took me a while to figure out but let plumbers do what they do best let electricians do what they do best contractors do what they do best managers do what they do best and and let you do what you do best and that is investing your money so how to invest in real estate with minimal time and this is the last section of this presentation we're going to wrap up number one you got to utilize other people you got to use utilize other people you got to use your property manager if you want to hire a professional property manager that's great or hire someone that you know like your spouse or a partner to do the management or maybe hire an employee fact I just hired my first full-time employee I've been I've been using a lot of part-time people over the years but I just hired a full-time assistant that's going to help me with my real estate business cuz I want to utilize other people so I don't have to put in even the few hours that I do I want to ramp up my investing I want to buy a dozen properties this year maybe but I don't want to do any more work for it and I know that sounds like greedy but that's just what it is I don't want to do it so I'm going to hire other people to do a lot of work for me I'm working with a partner my spouse does a lot of work on managing our properties I'm going to use employees it's going to be great all right number two buy good properties and good areas now the danger of that of course is sometimes good properties and good areas are not deals you're going to lose money on them don't buy those but look for properties that are in good neighborhoods not in ones that you'd be scared to go at during the daytime or at night like again there are investors who like to buy in all sorts of areas but if you want a more passive investing look for The Better Properties maybe look for a crappy property or that needs some work on it in a good area because then you can improve it and then it's a good property in a good area but don't buy a crappy property in a crappy area next buy fewer but better deals you know you don't need to go out and buy 50 properties your first year just to get some under your belt you know find what you want set your criteria and go buy something that's amazing that will last you for the next 20 30 50 years uh next create repeatable Outsource systems in other words everything you do with real estate think of it in terms of this is a system that I'm going to build and I'm going to do it the same way every time and I'm going to have a manual on how to do it or videos on how to do it and then I'm going to have somebody else do it that goes back up to that utilizing other people but just think from the beginning think in terms of systems and process that you can eventually Outsource so if you could only and this is a Tim Ferris 4our Work Week thing but he says if you could only work two hours a day and I'll say or two hours a week if you could only work two hours a week what would you do with your business I I would challenge you what if you could only work two hours a month build your business your real estate business in a way that you could work an hour a month or two hours a month on your business to make sure it's running well and then even if you had to work more in it at the beginning I understand that it sometimes takes more work at the beginning but build it as if that's your goal and build those systems next consider TurnKey real estate investing but be careful now what is TurnKey there are companies a lot of them are in the midwest that will buy properties for they'll buy the property they'll fix it up they'll put a tenant into it and then they'll sell it to an out of area investor and then they'll manage it and so for the investor it's almost completely hands-off it's like oh I don't have to do anything and so that can be a way to do it you can consider TurnKey investing but just be careful because a lot of TurnKey companies are terrible with the math they fudge the numbers and they're like oh yeah there's no repairs on this property and there's No Vacancy on this property ever so make sure you run your own numbers so be careful also and I didn't put this on the slides but I should mention it there are a number of other really passive ways to invest in real estate for example you could put your number your money into a Reit a real estate investment trust it's kind of like a stock or a mutual fund but for they invest in a big apartment complexes and shopping malls and things like that I personally don't do it so I'm not going to tell you a lot about it but I know some people that's part of their strategy another option though today that's becoming more and more popular is a fe a phenomenon or you want to call it called uh crowd funding and crowdfunding for real estate so what that means is this there's companies out there uh for example like uh realy Mogul is one of them or realy shares is one of them there's just two examples of of ones that I know of and realy shares.com realtymogul.com you can go there and you can put your money in let's say $50,000 uh into their fund and then they go out and fund real estate deals like they might go buy a 50 unit apartment complex and then there's different ways every I mean there's dozens of these companies these crowdfunders out there and there's dozens of ways that they structure things sometimes they're just uh Al loone sometimes you just make a flat certain percentage sometimes you get a piece of the deal sometimes it's a little bow so just everyone's different look into that but that can be a really passive way to invest as well uh and it's kind of like TurnKey so you don't actually own the property but you can get a nice return just be a nice way to diversify your Investments and then finally the last last one I want to talk about is if you're managing yourself if you're going to take care of the properties train your tenants or your manager if you're going to have manager but train your tenants from day one you have to train them just like a child just like you TR train a child uh when they're growing up they don't know right from wrong they don't know that they need to pay rent on on time they don't realize that if they pay rent late this month and next month and next month eventually you're going to have to evict them it's going to destroy their life you got to train them so you train them by being firm but fair don't let them get away with things have rules have carefully outlined rules rules that are designed to help the tenant do exactly what they're supposed to do all right so wrapping up what did we learn today well we covered a lot of stuff today right we covered uh everything from uh the three strategies you get into we talked about the four wealth generators we talked about how to do it more passively some tips for doing that that worked well in my life and uh you know hopefully you learn something from all this and learn from my mistakes that I've made of course this is just an introduction to real estate investing if you want to know more about it uh you're going to have to jump in and read some books or listen to some podcasts or uh you know Google some terms like how do I buy a rental property uh or uh you know jump into a real estate forum and start asking questions take a local real estate investor out to lunch that can be an incredible way to learn how to invest in your own area is you get to go bring a local investor out to lunch and just say hey can we uh connect for lunch I'll buy you a nice steak dinner or something like that and and learn from them what they're doing anyway those are just a few ideas uh thank you for watching this presentation if you enjoyed this uh hopefully you come check me out on biggerpockets.com come sign up for a free account there you can learn more uh and just join The Social Network where we talk about more than politics and Cat videos where we're talking about how to become more wealthy using real estate investing and uh with that my name is Brandon from biggerpockets.com and I will see you around
