How I Turned $10,500 into $210,000 at 19 (in 90 days) [Beginner Real Estate]

hey everyone meet Kevin here from your favorite educational set where rather than news and education you're just getting timeless education so if you see this set with the moss-covered whiteboard it is not a we'd covered whiteboard and just because there is a red helmet on the wall does not mean it's Christmas next to the green I don't know maybe I just failed at planning this one out okay but look I know it's a work in progress there's still work to do with this set but y'all didn't make me feel very good about myself yesterday anyhoo today we're back in this set and I'm wearing the glasses to try to offset the the green and the red theme okay see they're blue anyway in this video I want to show you how I invested ten thousand five hundred dollars and how you can as well and how I was able to turn that money into $100,000 in a matter of 90 days first it's helpful to look back at when I did this although you can do this at any time it doesn't matter but I did this when I was 19 years old I had about ten thousand dollars to my name at the time I was working at Red Rob and I was working hourly every time I'd go work for my boss I felt like it was a chore to get a raise even though I was working my guts out and I was really frustrated that I can work my guts out for a year and I get a raise from eight dollars an hour to eight dollars and ten cents an hour at that rate it would probably take me five hundred years to ever get rich and I'm like ah no no no this sucks and so looking back now and this is the beautiful thing about looking back is I can compare well what could I have done differently well I thought okay well what if I just took that $10,000 and invested it into an S&P 500 index fund okay cool I could feel like I'm a winner I would have tripled my money every one I would have tripled my money over the last 10 years and I would have turned $10,000 into $30,000 I would have been a hero not really because I'd have $30,000 and it still really have nothing and so that's when I realized something incredible while I was working at Jamba Juice and Red Robin I actually started taking my real estate licensing tests and they make you do all these dumb flashcards and memorize this crap that doesn't really matter but I was taking my licensing test I didn't even think I was gonna represent clients I took the test because I'm like dude I know rich people have real estate so there's there's gotta be something in these flashcards here that's gonna make me some money and I came across this thing called an FHA 203k oh three K these are two types of loans basically they let you buy a house for three and a half percent down so I realized wait a minute three and a half percent down that means I could buy with ten thousand dollars like a three hundred thousand dollar house I mean dollars is what I can control with about ten thousand five hundred dollars if I put about three and a half percent down roughly a little bit of rounding and that's insane because then I'm sitting there thinking wait a minute somebody like me 19 years old can control a three hundred thousand dollar house and at the time I paid off like all the debts I had I paid off my car I wanted no subscriptions I wanted no debt no monthly fee I was a financial minimalist I wanted nothing I was happy renting my bedroom and my girlfriend's parents house and I'm like that's it I pay my rent I pay my bills I go work 4-9 a well I ended up moving to Red Robin wearing a paid nine dollars an hour but there was a time I was working with Jamba Juice for $8.00 an hour near I was making eight to ten dollars an hour eight to nine dollars an hour and I'm like okay cool why would I go into so much debt and then I realized something else well wait a minute if I take my ten thousand dollars and I make 10% on my money that means I make about a thousand dollars but if I get control of a three hundred thousand dollar house and I get a ten percent growth in the value of that property well that means I made thirty thousand dollars so wait a minute the same ten thousand dollars the same ten grand can either control a three hundred thousand dollar house or it could be ten thousand dollars in stocks which is going to give me one grand or I could be risky with it and I could margin that up with dead end stocks right maybe I go to Robin Hood and I go for one for one margin risky folks okay fine I put 20k in ten percent return I get two K out right so think about that I could control a $300,000 house I can control $10,000 in stocks this would be very safe right because it's just all my money there's no debt and I'd make $1,000 there with the 10% return or $2,000 if I margined it up or I go to control a $300,000 house the value goes up 10% oh my gosh that's 30 grand instantly now there had to be a catch right and this is where I really got to serve you know thinking about okay well like what is the catch okay well I mean I'm taking on a lot of debt right and so then I got to thinking all right well as long as I can make the payment on the house then I guess the debt isn't that big of a deal right but then again everybody says that but what if I can't work anymore what if I can't make that payment anymore and I'm gonna lose my house and then I lose my $10,000 and then I realize wait a minute I don't have to make the payment if I can't afford the place if I'm living there I can move and I could put a tenant in this is me 19 years old going through real estate flash cards and I can't even bought real estate and trying to start understanding real estate like wait a minute I can control a $300,000 house and somebody else can make the payment for me if I needed to move out of it and they don't take my house away but what if the value goes down like what if that's $300,000 house because I bought I don't know at the top of the market or something like that becomes a $200,000 house is the banker to call me up because I know Robin Hood's gonna call me up if my 20k goes down to 10k because the market drops they're gonna call me up and they're gonna make sure they get their debt covered first and I'm screwed I'm selling my stocks at bottom or I'm throwing money into the fire basically well that sucks or well what happens with real estate with real estate I realized wait a minute if the value goes down because a lot of these home loans like the FHA or the Fannie Mae Freddie Mac conventional loans all this stuff that is learning in the flash cards because they're essentially sponsored by the government they don't want to see people lose their homes they want to see people own homes because they think that people are gonna go in and overspend on these properties and support the economy because they hang out at Lowe's every weekend and they blow all the extra savings they have and that's true but then I realized wait a minute I if I just cut out the to Lowe's every weekend and blow in all my savings and I just buy the house I get the benefit of owning real estate for three and a half percent down the bank can't take it out from under me unless I stop making my payment but somebody else could make the payment for me whoa I can control a lot of wealth with very little wealth in real estate and so that's when I decided I'm gonna get pre-approved with Lauren we used an FHA loan and we're gonna start looking for houses we ended up finding this place for $305,000 no kitchen no bathrooms and I'm like okay we can't we don't qualify for like the 400 or 500 thousand dollar houses in California we only qualify for like the crap that sound like three hundred thousand dollars at the time so like what we're gonna buy a house have no kitchen and no toilet and no bathroom and so I'm asking the lender I said what what am I supposed to do on this how do I buy this and then I remembered my flash cards wait a minute FHA a 2 a 3 B and FHA 2 or 3 K 2 or 3 B means you could put three and a half percent down on a house if you agree to live there you have the intent to live there for a year and you can put three and a half percent down on the property if it's ready to be lived in and I think pretty sure there's a fly around here which is really started I'm gonna have to get out my hatchet here and kill this file by name in the FHA 203k program lets me buy a house that I can't move into because the condition isn't ready to be moved into yet okay then let's do this FHA 203k three and a half percent down let me explain this other stuff so basically I ended up buying the place for three hundred and five thousand dollars I was up against two cash offers the cash people paid like two hundred eighty seven thousand and two hundred ninety thousand dollars and I'm like well screw the cash buyers ah I'm getting alone with three and a half percent down I can pay more and I'm not gonna flip the place even though I could because it was getting a good deal but anyway more on that in a bit I ended up putting three and a half percent down on this three hundred five thousand dollar purchase which was a drop in the bucket and they let me finance the fix-up and renovation costs on the house which the cool thing about that was I got to put four and a half percent down and they gave me the money to fix up the place which was about fifty thousand dollars the problem with these FHA 203k loans though is they make you have like HUD inspectors so it's kind of hard to actually get the money until you've done work and things go slowly so what I did is I ended up borrowing twenty five thousand dollars from just a hard money lender in my city you get literally just Google hard money loans ventura county hard money loans LA County you'll have like a million of them they're endless people willing to give you these loans at like nine percent which was insane but I'm like wait a minute I only need this loan for like two or three months I'm gonna borrow 25 grand from somebody who's gonna give me 25 grand secure it against the house so is the second mortgage against the house now I've got my first mortgage for three and a half percent down so it makes it seem like I'm upside-down but wait a minute I was buying this place in a four hundred fifty to five hundred thousand dollar neighborhood depending on the condition it was my first deal ever I was freaked out but I kept looking at the value of the neighborhood and I'm like how could I lose on this even if I have to sell it tomorrow after doing a little bit of paint and flooring and putting a kitchen in I'll be way up on this deal so three and a half percent down on the deal I borrow 25 grand from this dude to buy the material and start fixing up the place then I invite the bank over and they're like looks like you've done a great job Kevin and they give me their 50 grand which I used to pay off the second guy because I just borrowed his money temporarily and now I have fully financed this property the entire renovation the entire purchase everything with three and a half percent down now the FHA 203k a loan program only some lenders will do it if you're gonna do it you better get an expert lender who does these regularly because they take a lot of work but let's get into some special details here on what happened next so here's the scoop from closing this deal to having the property fixed-up took me about 90 days then Lauren and I moved into the property and not too long after we ended up doing a refinance we refinance the property and the property values in the market had gone up a little bit we got lucky with that I'm gonna talk about what happens if property values don't also go up because remember I bought this property thinking the neighborhood was like a 450 to 500 thousand dollar neighborhood well the market also went up on top of that and we ended up getting a refinance and the appraisal I guess the appraiser really liked us cute young couple and yes I thought anyway appraiser appraised the property for $550,000 a property that I bought and spent 90 days fixing up and working on and then I moved into it and then yeah I did a little knick-knack stuff after those 90 days you know just as any homeowner might but that refinance now look what that let me do let me get rid of mortgage insurance any time you get a loan for 80 percent and you put 20% down you don't have mortgage insurance since the property now appraised for $550,000 and we're putting basically 20% down I was able to get a brand new loan for $440,000 without mortgage insurance this is really good rents also went up in the neighborhood so if I still had to rent the property out and put aside money for fix-up and reserves and a property manager and vacancy constant all that a tenant would still be covering the payment on this property so I'm looking at this deal going wait seriously they praised it for 550 I can get a loan for 80% of that with no mortgage insurance but my old loans only 340 remember I bought the place for like 305 and put around three and a half percent down and then I borrowed 50 grand ish there's a little principal pay down which I learned about that too every month you're paying off the loan a little bit that was great anyway I replaced my old 340 thousand dollar loan with a new four hundred forty thousand dollar loan which meant for that original 90 days worth of work the refinance took longer i refinanced a little later but for that original 90 days worth of work and then doing nothing else I was able to get a new loan for 440 replacing my 340 loan which means they wrote me a tax-free check for $100,000 which is absolutely insane okay but come on I got a little lucky because property values went up you know property values could have stayed flat or they could have gone down yeah that's true let's do a quick analogy here what if property values were you know the property appraised for $450,000 and I put 80% down on a refinance then well in that case I'd get a loan for three hundred sixty thousand dollars which means I'd have about 20 grand in my pocket so yeah the appreciation definitely helped me get a really killer deal out of this property and yeah timing was a big factor in this but I think the biggest factor was even if property values went down I only owed three hundred forty thousand dollars on the property so property values could have fallen substantially and worst case scenario if I needed to bail out of it I could have just sold it but realistically I was planning on holding this property for the long term and if I needed to move because the market went to crap I could just move and rent it out because I bought the property so far below market value remember I paid three hundred and five thousand dollars for house that needed like fifty grand worth of work in a neighborhood that was worth between 450 and 5 so yeah in the real scenario that happened I ended up being able to refinance a property about for $305,000 fix it up refinance it for 550 take all my money back out and now I have a hundred grand tax-free that I used to go buy my first actual rental property which was my second purchase ever that's how I pulled it off again if values didn't appreciate as much I would have still refinanced still put tax-free money into my pocket and still had money in the deal because here's the thing I actually created a lot more money than that hundred thousand dollar title makes it seem like you think about this I took ten thousand dollars ten thousand five hundred dollars and I actually turned it in the real scenario into a hundred thousand dollars in my pocket but wait a minute I owe 440 on a 550 appraised property that means I actually have a net worth of one hundred ten thousand dollars plus one hundred put in my pocket which is like $210,000 now even if I had to sell it and pay some selling costs I was a realtor so they'd be a little lower but even if I had to pay somebody else to sell it so I had to pay 25 grand in selling costs who cares I still turned my ten thousand five hundred dollars into a hundred eighty thousand dollars I could pocket and because if you live in a property for two years you get a homeowner's exemption I could have that money completely tax-free so I realized really in no scenario was this bad for me even if property values fell I can rent it out and cover the payment if I lost my job I could rent it out and cover the payment by renting it again if property values went up a little bit I'll refinance and get rid of mortgage insurance because I got a good deal and if property values went up a good amount which which they did I mean they went from a 450 to 500 K neighborhood you know up to about 550 which was great I mean there was like a nice 13 percent jump in prices there which obviously I took advantage of that gave me money that I could now use to go buy other deals now I didn't actually have to move to get into my second property I just had to take the money from the refinance and go put it into the other property so what are the steps for you how could you take advantage of doing something just like this well step number one and I I wrote this down and like Evan this is gonna sound so lame but it's been so true you gotta commit to buying something and again it sounds lame but let me tell you why when the recession hit or I'm sorry when this pandemic hit and the recession that we're in now when this pandemic hit I said you know what I'm gonna buy stocks and not real estate I didn't even look at the real estate market for like three months and so I don't know what kind of deals I missed I don't know cuz I wasn't looking I wasn't paying attention I wasn't committed to getting anything so sure deals didn't just fall in my lap but as soon as around May hit I decided okay stocks are at a nice price I'm gonna buy real estate now like crazy I've got two to three properties in escrow we're about to find out on the third so we'll find out and these are all great deals and it's only because I said to myself okay now I'm gonna go hunting and then obviously I check the market every day which the best second stuff for you to do is contact a local loan officer and get pre-approved you can approve prove a letter you can actually go shopping for real estate now you're ready to go if a good deal hits the market and you got to get pre-approved you're too late you'll always miss out on those kind of deals you gotta get your pre-approval letter you got to commit and get with a really good agent in your area that works with investors I talk about exactly how to do this regularly in the real estate course in the link down below there's a coupon code that does expire July 4th I did extend that because I promised you I'd get back to some emails and there's no way I could get back to the amount of emails that you'll send me so sorry about that I'm trying my best I'm still working on them it's just me anyway fourth thing check the market every day like check redfin checks Zillow check everything every single day number five folks if you find a deal write the offer I don't know how many times like I've had clients where there's a good deal and they see the good deal and I'm like y'all this is a great deal you better write the offer and they're like yeah you know we're gonna sleep on it next morning three offers seller pick somebody else well at least get in the running by the way the whole like multiple offer thing like ah there are other offers like I don't want to compete with all these other offers you have to and the good thing about it is it actually tells you if you're getting a good deal if you're writing an offer on a property that's on the market like it's on the MLS and there are no other offers that's a bad sign that's a sign that maybe the deal you're looking at is not as good of a deal as you thought it was now if you're getting a deal off market and there are no other offers well that makes sense but if you're getting a deal on the market like it's it's on Zillow and it's on Redfin and you got multiple offers on it that's the market telling you it's a good deal ideally you find a property that needs some work because then you could usually buy them in the wedge there are four ways to get a wedge deal we're not gonna go through all of those in this video but this is a quick example on how I was able to take ten thousand five hundred dollars and turn it into a hundred thousand dollars plus within 90 days worth of work and remember I say ninety or a hundred thousand dollars plus because think about a hundred grand in my pocket plus the equity that's left over in the house realistically we should be titling this video maybe I will you know how I turned ten thousand dollars into two hundred thousand dollars with you know 90 days worth of work so anyway let me know what you think about this video if you like this video please consider sharing it with somebody you think would benefit from this kind of information if you want more of these sort of educational longer style videos let me know down below as well YouTube does not share these as much so as much feedback as you can give me down below would be very very useful so hopefully you found use out of this video I really appreciate you watching I hope you liked the the glasses I decided to wear today but anyway thanks again folks and we will see you again next time [Music]

Channel: Meet Kevin

Views: 1,697,962

Keywords: real estate, real estate investing, single family, multifamily, fha, 3.5% down, 3% down conventional, mortgage insurance, making money real estate, cardone, biggerpockets, making money, fast money, housing, housing market

Id: fnFWKmDGGUU

Length: 20min 41sec (1241 seconds)

Published: Sun Jun 28 2020