How to Buy Your First Rental Property in 6 Steps

this is real estate rookie episode 136. real estate can feel like you're just jumping off a cliff and seeing what happens and seeing where you land but this is the truth of really what it is it's a path and it can be hilly it can be up and down it can have twists and turns but you just have to stay on the path and you guys can do and you can get there [Music] my name is ashley care and i'm here with my co-host tony robinson and welcome to the real estate rookie where we demystify real estate investing for new investors by breaking down the basis getting into the nitty gritty and giving you the inspiration and information you need to get started today we actually have a very different type of show for you guys we are going to break down how to be a newbie investor and get your first deal in 90 days so we have a special webinar recording that we are going to play for you guys and it is going to go through everything you need to know to acquire your first deal so tony what are a couple things uh that are highlighted in this webinar yeah well first we got to say ashley where is this webinar coming from don't sell yourself short here so tony this is a webinar that i recorded uh previously actually when i was live in denver and uh we are going to play it for you guys and we talk about basically um you know how to analyze a deal how to source a deal we also um it's really gives you a breakdown of the real estate rookie boot camp too that is hosted uh if you are interested in that and you want to get on the wait list it is you can go to biggerpockets.com forward slash bootcamp waitlist to join but this will give you guys an idea of a condensed version of how to get your deal in 90 days so hopefully you guys enjoy yeah ashley you did a phenomenal job putting this together and i'm sure all of our ricky listeners are going to love kind of getting into the nitty-gritty of how to get that first deal done because there's so much content i think on the podcast on the youtube channel on the bigger pockets forums but sometimes it can be difficult to kind of piece that information together yourself so i think this webinar is a great first step to kind of give you that curated path as the listener then obviously the boot camp is a very immersive experience for all the listeners to kind of go through this content with you together so you guys can always find more webinar content at biggerpockets.com forward slash webinars and there's like a bunch of information on there as well and other good webinars to dig your teeth into make sure you guys uh send tony and i a message on instagram if you do end up getting your first deal very very soon we would love to hear about it and feature you as a rookie rock star of the week you can find me at wealth from rentals and tony at tony j robinson enjoy the show hi everyone welcome to today's webinar uh so it's seven o'clock my time so i'm going to go ahead and get started thank you guys so much for joining me today and i'm super excited that you guys want to build wealth through real estate uh so today's topic is how a newbie can start building wealth through real estate so my name is ashley care i am the co-host of the real estate rookie podcast you can follow me on instagram at wealth from rentals so welcome everyone i'm so glad that you are here and today we are going to go through what steps you can take as a new investor a rookie investor to get your first property and things that are really important to kind of get you past that analysis paralysis or to even show you what the first steps are to getting that first property so we have um a free worksheet for you guys today if you guys want to go ahead and download this worksheet you can fill it out follow along and it's just kind of a guide for you guys as to what you need to get started into real estate so the the website is biggerpockets.com forward slash newbie worksheet okay so let's just go over real quick what we're going to be talking about today so the first thing is um intro and door prizes so if you stay until the very end we do have some door prizes for you guys um i'll explain a little bit about bigger pockets about me and why you should listen to what i have to say today so then we're gonna go into the six steps of getting started into real estate and then common newbie mistakes what are some of the reasons people don't actually take that step and get started and take that action then i'm going to show you guys some really awesome tools you guys can use to get started and then at the end we'll do some q a with everybody okay so in this webinar i'm going to show you the exact six step process you need to achieve financial freedom through real estate i would love if you guys would put into the chat for me i have it up on the side here if you guys could put into the chat for me why do you guys want to invest in real estate is it financial freedom is it for another reason what is your why that is driving you guys i would love to know you guys can put it in the chat for me so i can read it you see financial freedom retirement yeah build generational wealth awesome cash flow awesome love it love it guys i'll be my own boss yeah that's definitely one i love too is i don't want to be responsible to anybody okay so the door prizes at the end uh you guys are going to get the slide back here so you can go back through review it click on all the links everything like that um so i'll give you the link to that at the end and then we also have um seven years to seven figure wealth um this book for you guys too at the end if you stay till the end okay so you're ready the real reason how can real estate help you build wealth uh so we're gonna go over that today as to why real estate why you should pick real estate as your wealth builder to get that generational wealth to build financial freedom for your family okay so the first thing is the cash flow you're able to earn cash flow from rental properties whether short term long term so your tenant is paying rent the you're paying your expenses and then there should be money left over that you get to keep every single month and hopefully eventually that cash flow can replace your w-2 income or you know your current job right now in your current income number two is appreciation so over time the value of property increases and you can also um have loan pay down number four so you're building equity in the property so property real estate is an appreciating asset so if you think about a vehicle car it usually depreciates um after you buy it it doesn't appreciate like real estate so that's the value of if you hold on to a property for a long time it can be worth a lot more than what you bought it from and then three the tax benefits the tax benefits are you have depreciation so depreciation is when you purchase the property it takes the the purchase price of that property and kind of breaks it down over many many many years and it comes off of your your taxes so when you report that income it's taking the depreciation off but that's not actually money you're spending out of your your property spending out of your company in your business so that's a huge tax benefit if you guys have heard of 1031 exchange at all this is kind of like a tax loophole to benefit real estate investors where if you go to sell a property you can take the money that you've earned from that property the gain on the sale and you can put it into another property and never pay taxes on it i mean it's a little more complex than that but that's kind of the gist of it so there's many many uh tax benefits that come with real estate investing too and then loan paydown i kind of touch on that with appreciation because as the longer you hold the property the more of the mortgage that is going to be paid down by the tenants when they pay their rent and then the more the property is going to appreciate the longer you hold it and in today's market i mean i've seen appreciation uh greatly increase just from properties i bought three years ago so you never know where the market is going to go but if you look at the last 30 years you're going to see that property values have greatly increased um over that 30 years even if there were ups and downs in the curve okay so freedom we all want financial freedom we want freedom from our bosses uh we want a freedom to do whatever we want i like to say that i want the freedom to be spontaneous i want to take my kids and say hey we're going on a road trip this week or i want to wake up and i want to decide exactly how my day is going to go and a big factor for a lot of people is getting out of your w-2 job getting out of that commute to work so i i'd love for you guys to put into the chat right now what you are doing right now for work and if you're you want to keep doing that or you can't wait to stop doing that i'd love to see what some of your guys's careers are high school teacher retired program manager military army joseph worker awesome we got a nice mix of people in here cool very cool okay so also a big why and a big reason for people wanting to get into real estate and build this financial freedom and this generational wealth and this time is so that you can spend more time with your family and that's definitely possible with real estate so i'm really excited that you guys are here because my life has completely changed since i started investing in real estate and the time i get to have with my kids and the adventures we get to go on and also travel who here wants to travel uh tell me that you want to travel and where you want to go once you're able to quit your job and you're living off your your real estate income all over the world yeah that's the best answer hawaii europe okay so yeah travel is a big thing too um that you don't have to show up to work on monday you get to travel and especially with um i with kovid everything has become so virtual that it's so much easier to work from anywhere now um even more so many meetings or so many calls are virtual um and like even now i'm hosting this webinar to you guys virtually from my house actually i'm in a closet and i think that um when you're a real estate investor if you are a landlord there's so many property management software's out there that it's so easy for you to manage your rental properties from out of state or from anywhere so that's another great thing about real estate investing is if you put the systems in place you can really do this from anywhere and i see jesse said that here outer space well i mean more and more people are going to outer space so that might be in the plan for you okay so what is the problem why is not everybody doing this why isn't everybody a real estate investor so most newbies never buy a single property they don't take action they do a lot of people get stuck in analysis paralysis they just do research or maybe they read they they fizzle out they lose their motivation their inspiration okay so let's go into two of the biggest reasons it's foggy it's not clear a lot of times as to how do you actually start in real estate and that was kind of why uh josh durkin the founder of bigger pockets started this whole website was to connect real estate investors and to share ideas and to show you how to do it um and then that it can be amazed i mean you hear all of these people talking about real estate and with real estate investing there's so many different strategies there's so many different ways to do it there's so many different types of loans there's so many different types of property there's long-term rentals short-term rentals there's wholesaling there's flipping there's all these things and it can be overwhelming and that's why i'm so glad you guys are here today because we're gonna try and break that down and make it way more clear for you guys okay so a little bit about me and to why you guys should even be listening to me so i grew up in a rural town outside of buffalo new york very small town i'm the oldest of five siblings i lived with my parents we had a small farm where we had random animals throughout the years horses cows lambs a pig different things like that so i have three little boys now and i live on my dairy farm i started out as an accountant and i worked probably six months and i quit in the middle of tax season i hated sitting at a desk so much i it just wasn't for me i remember this conversation when so i had worked as an intern at the accounting firm before i graduated college i could not wait till the day that i was going to go full-time and they gave me my compensation package and i was like this is it i'm finally going to be making the big money and i was so disappointed it was barely more than i was making as an intern it was just full time and i was expected to work 50 to 60 hours a week during tax season so i remember the partner that worked at my office said you know this isn't it this is how it is i'm not making the money that i want to be making either that's just how it is and that was got my mind thinking a little bit but then i finally couldn't tolerate it anymore and i said to my husband i said i don't want to work anymore i want to quit my job he said okay you can be a stay-at-home mom so i got pregnant and i was going to be a stay-at-home mom so i put my two weeks notice in and when i put my two weeks notice in the partner she said again to me like you're crazy for doing this and just quitting like you went to school and blah blah like you're not gonna you know you should at least make some money and you put in went to school and i'm not even making as much money as you want to or blah blah all these things you know and it's just like i don't want to be you in 10 years i'm sorry i i don't want that so put in my two weeks notice and found out i was pregnant and i was just gonna be a sit home mom then let's see what happened next so i was uh pregnant and i'd probably not been working for a month maybe and my friend growing up i went on vacation with her family and we her dad owned a bunch of auto dealerships and had some investment properties and i'd known them since i was two so i knew some of what they had financially and they were well off and he said i need help i need someone to help me get organized and i need uh someone to run a 40 unit apartment complex for me and the assumption was was that i had been an accountant so i could i knew how to do that well i could collect the run i could deposit the checks i could do the bookkeeping but as far as the leases and as far as the rules and regulations of managing an apartment complex i had no idea so i started off working part-time i helped him acquire new properties he actually became a mentor to me just because every project he did everything he started or he jumped into he took me along with him and i was his right-hand man for everything and it was such a great learning experience so you guys as newbies as beginners if you get the chance to actually work for someone that is an investor and get paid to do that that is such an opportunity for you okay but i didn't even start investing until two or three years after i started working for this guy and just absorbing as much information as i could i always thought worst case scenario like i'm gonna buy a property a tenant is gonna sue me the roof is gonna fly off i was super nervous about making mistakes uh my husband and i didn't have a ton of money then and if i put money into a property that was that was our life savings um and i didn't want to lose my money or anybody else's money and i was just a newbie as an investor i had done property management but as far as being the owner and being the landlord that would looked a lot different so what i did is i found a partner i actually approached the the investor i was working for approached his son who i'd also known since i was two and we made a partnership where he was the money and i was the experience and i did a ton of research and i found us a duplex in a market that i knew and from there we got a couple rentals under our belt together and we built very slowly just one duplex after another well in 2017 i randomly discovered bigger pockets online and that is when my life really changed in a year and a half i tripled my portfolio just from going in the forums every day and talking with other investors in the forums and seeing different ways to do creative financing and different ways to buy property and uh how to make my property management better so it really transformed myself as an investor networking and growing with other investors on bigger pockets so over time i discovered the real truth about real estate and you know you can cut short the learning and testing and failing time because you guys don't have to recreate the wheel you guys all these investors are already doing it take what they're doing and just tailor it to your needs or how you want to build your life so as far as today i've purchased over 35 units i have a mobile home park under contract and i have a self storage facility under contract and i have another farm under contract so things have really changed for me from when i first bought that first duplex um i do mostly buy and hold i did do one accidental accidental flip this year that should be closing very soon and i like to rehab my properties and i'm financially free from my nine to five i no longer have to work a job anymore so let's get this for you guys too because it really is super awesome and such an experience to completely change your life and get out of the norm of going to work every day so the first question everybody asks is well how do i get started okay so here's the six step plan commit you have to be willing to keep going you're going to commit to analyzing deals you're going to commit to making offers you're going to commit to doing research okay the biggest thing though is you're going to need to commit your time at first it may take a bunch of your time to actually take that first step and take that action if you don't have time then you can find a partner who has time or has the experience learning and has the knowledge already and then your skills so what investing skills are you already bringing to the table so i would love if you guys could put into the chat for me what is one um reason that you think you would be great at real estate investing maybe you're a realtor you have some knowledge of the market maybe you have money you have money to invest so that's a great start right there you already have a leg above a lot of other people if you have the money to invest or maybe your license insurance agent and you know what insurance agents look for on different properties and stuff like that maybe you work for a property management company maybe you started lived in one house moved out of that and your first house is now a rental and now you want to grow even more uh so i'd love to see already a landlord facilities manager experience yeah that's great yeah if you have a construction experience and you're gonna do your own rehabs a realtor awesome okay and then you have to have the right mindset too so we had shown in the picture how you know real estate can be like a maze and you have to stay focused and you have to pick what strategy you want to do and stick with that so there's this thing called shiny object syndrome where you can just like get distracted with all these different ways to invest in real estate so i was on a call the other day where someone was talking about airbnb rvs and parking them in empty lots and running them out like oh that sounds easy enough for me to do but then it's like no you have to focus on what you're doing so having the mindset and being confident in yourself and knowing that you can do it like look around you look at all the other people that are investing in real estate right now and then money are you committed to if you are bringing money to the table are you committed to investing that and risking that and also um so when you're investing in real estate you want to make sure that you have cash reserves so when you have those cash reserves you have those savings you have to be prepared to spend those if something does come up um and not be you know super upset or distraught or financially ruin you if you have to use those those reserves to cover some expenses and then also if you're taking on a partner or you're using private money you're using somebody else's money i like to call that opm it's called other people's money to invest like i started out with make sure that you're going to be using their money responsibly okay so are you willing to do what it takes to find success because there are going to be times when you feel like you're just getting pushed down a hill and you're what you're going to do at that time is you're going to go in the bigger pockets forums or you're going to go on the real estate rookie facebook group and you guys are going to say what your challenge is and you are going to get people that are going to motivate you and encourage you and also give you ideas to bring you back up having a network around you can really really help drive you to get to that success because once you get that first property it really starts to get addicting to get the next okay so number two of the steps is to learn and plan okay so first what strategy are you gonna do there's flipping properties there's renting properties uh burr house hack etc so do you guys know what strategy you're already doing what you're gonna be looking for are you gonna rent the property are you going to airbnb it are you going to do a house hack i'd love to see okay house hack run it do burr um and for those of you that don't know so a burr is a buy you're going to buy the property you're going to rehab the property you're going to rent the property you're going to refinance the property so you're going to go to a loan or go to the bank and get a loan and pay yourself back for buying that property or pay back a hard money lender pay back your line of credit and then you're going to repeat the process with that same initial cash that you had or whatever the line of credit you had whatever you used to buy that property um so it's a very common way for people to get started my favorite though for newbies is house hack so house hacking where you're living in the property and then you're either renting out another unit or units or you're renting out the bedrooms too in your room or in your house okay so what market what location are you guys going to invest in do you guys have that narrowed down and if you know what market you're going to be investing in i would love to know if that's out of state for you or if that's where you live too seattle i'm actually going to seattle on friday um portland soquel annapolis raleigh memphis new york city awesome that's that's even just a great start that you guys know what location you want to invest in and then what kind of property are you going after are you going after single family do you want small multi-family you know maybe 12 units or less or do you want large multi-family like 40 unit apartment complexes it's going to be mobile home parks it's going to be self storage it's going to be campgrounds there's so many different ones but i want you guys to pick one and stay focused on that okay we got a single family small apartment complex great duplex awesome and then what condition are you going for so are you going for a fixer-upper were you going to do the rehab are you going to hire somebody to do the rehab for you i mean do you want a 10 000 house that needs to be completely gutted down to the studs and you're rebuilding it do you want just cosmetics so cosmetic would be maybe you slapped some new paint on you put maybe some vinyl plank where carpet was put some new light fixtures in or is it going to be completely turnkey where somebody else went in and they did the rehab and they even rented it out to tenants and they already have the property management in place and then what is your price range before you can even begin shopping or looking for deals you need to know what is in your price range so how are you financing the deal now and what is your budget if you're going to a bank they can pre-approve you for a certain amount and then how much do you want to profit what is going to be if you're doing a rental what is going to be your your monthly cash flow that you want on the property so after the rent comes in and all your expenses are paid including the mortgage is that going to be 100 is that going to be 200 that can be 500 what is your criteria on that okay so you don't need to learn everything and this is also another great part of bigger pockets is because they have so many like cheap tools i guess that you guys can use and i'll go over those those later too but you have to stay focused and i talked about the shiny object syndrome so you don't want to be distracted of all these different things especially when you're a beginner you're going to be the most successful if you stay focused on what you are targeted so what we just talked about on the last slide if you stick to that criteria that you built out and you do that and maybe you do that a couple times if you're going for a single family you buy a couple single family and then when you get that down pat where you can buy single family properties and rent them out in your sleep then you go off and you find you know maybe you want to move to large apartment complexes after that okay so shopping for a deal how are you going to source deals so mls this is free to use a realtor if you are the buyer so i suggest everybody sign up with a real estate agent in your area because those you'll get automatic emails of new properties that hit the market and even if you're going to direct a seller where you don't even want to buy one off the mls because they seem so expensive right now still get those free emails because you can still at least see what um comps are out there what are the comparables what are other properties you know being listed for in the area so is anybody already signed up to with a real estate agent to get these emails sent to them every day oh good good awesome that you guys are already doing that because it's free why wouldn't you and if you guys need help finding an agent biggerpockets has an agent marketplace where it actually connects you directly with an agent in your area too so just go to bigger pockets and click on the marketplace and it's um find an agent and you'll be able to find one right in your area that is an investor friendly agent okay and then number two direct mail so this is where you're pulling the addresses from the properties maybe offline and then you're sending mailers out to them saying hey my name is ashley i'd love to buy your property so then we have hold on i gotta plug in my computer real quick i forgot then we have um driving for dollars so driving for dollars is when you have um so you're just driving around and it could be on your way to work or it could be for a sunday drive wherever you're going but when you're driving you're looking or like me you have your kids look for you in the back seat for properties that you know maybe show signs of vacancy or need to be rehabbed or uh you know maybe there's stickers all over the windows like they're a bank foreclosure so then you take those addresses and you send letters in or you um look up their phone numbers and call and see who the owner is but deal driving is a super cheap and affordable way to source deals you can also hire that out too for somebody to drive for you or tell your friends and family hey i'll give you a hundred bucks if you um you know send me a property that you see that looks like it's vacant okay so number four is craigslist um or really any of the marketplaces so biggerpockets has a marketplace uh craigslist there's houses that go up for sale all the time on there uh also facebook marketplace i'm seeing more and more properties being listed on there for sale by owner okay so let's talk about analyzing a deal because once you find a property how do you know if it's going to be a good property a good investment so if you don't have the right math going into a deal you'll never get the right profit coming out of it so you might have heard before people say you make money on the purchase of the property and not on the sale so what this is saying is that you need to purchase your property at the right price to to make a real profit because going in no matter what you purchase it for your rehab is going to be the same and your sale price is going to be the same so you need to make get that purchase price right and that's what we're going to do when we analyze a deal here so the number one most important skill an investor can have is knowing how to analyze a deal so let's have some fun and let's analyze a deal okay let me get out of here so this right here is an actual property that was listed on the mls it actually got taken down from the mls and it never actually sold they just took the listing down even before it expired so i'm not sure what happened to it but i want to use this property as an example so the first thing we're going to do is we'll find this property on the mls find the zip code so we're going to go to the bigger pockets rent estimator and we can put the zip code in there and this one let's say there was a two bedroom one bath and this property is a three unit so let's say one of the the units is has two beds and one bath then we're gonna search that zip code and we're going to get what exactly the the rent comps are in that area so this makes it really easy to figure out what the rent is going to be so you know your income you know what your income is going to be on this property and you don't have to guess or try and figure it out so and you can even look and see on the side here it shows you the exact addresses of properties that were recently rented and what they went for so you can even google some of these addresses too and you might even see some of the pictures from the listings uh listed up i think you might be able to actually click on it too and it will take you and you can look and say okay this one has granite mine doesn't have granite so maybe mine would be a little bit less than that but this is a tool you guys can use um on bigger pockets okay so next we're going to go to the purchase of the property so let's just say we're going to put in um let's do 115 1000 okay that's what we're going to purchase it for i don't remember i think the asking price was 115 maybe so let's say we're going to start off running our numbers at exactly what they're asking and then purchase closing costs around 6 000 um for in new york state you have to use an attorney so an attorney fee and then your your bank closing costs okay and we're not going to be rehabbing the property we're going to take it as is a turnkey okay so what we're going to do is we're just going to get a conventional loan on the property i've saved up my 20 down payment i'm going to get a mortgage of 92 000 and the interest rate is 4.25 and i know this because i went to a bank and i qualified for uh the the mortgage at 4.25 percent i know that i can purchase up to say 130 000 of real estate uh so when you go to a lender and you get pre-qualified they can give you an estimate of what your interest rate would be what the terms would be how much money you'd have to put down if i was living at the property i could potentially only i could bring a down payment of five percent or sometimes even three and a half percent if it's an fha loan so using these properties as your primary residence you're definitely going to get better mortgage rates and you'll come with less cash to the table so that's why house hacking is such a great opportunity for you guys starting out if it's possible for you because you get into the property with so little money okay so and yeah justin put into the chat good point fha requires pmi though so yes that is true so if you are purchasing a property and you put a down payment of less than 20 percent tapped on to your mortgage and your mortgage payment is going to be pmi which is basically insurance that you are going to pay and you're not going to default so you're paying that insurance full so that the insurance would pay out to the bank if you did not pay your mortgage then once you've got built up that 20 equity in your property that pmi becomes removed so when you run your numbers you would want to put that pmi cost into the numbers when you run it because that will be a monthly expense for you okay so the long term we're gonna do the amortized over 30 years so my payments will be broken out over 30 years okay so then income uh so i went to the rental estimator and i saw that my place wasn't as nice as some of the other ones listed so i decreased some of the rents so the first one 800 a two bed one bath the other two say they're they're one beds one bath and then this place also has garages so the garages are rented out at 60 each okay the next property taxes if you're purchasing a property off the mls or you're a seller is telling you what the property's taxes are make sure you verify them so you can go to the county gis mapping website for your county that the property is in and search them you can just google a pioneer high school property taxes or um north collins village taxes so you can try these um you can just google them and they will come up um some really really small rural towns they don't have them online but most cities and suburbs have the taxes available online where you can pull them up and you can verify them online and look at the tax bills and then insurance so if you don't know what the insurance cost would be call an insurance agent they are also free to use like a realtor they make money from the insurance company when you actually write the quote and just call your insurance agent that you already have your primary residence with you maybe have your auto with and just tell them what you're trying to do and what property you're looking at an insurance agent can quote a property pretty quickly just to give you an estimate of it and then of course when you actually you know get the property under contract then they'll need more information on it to get a more exact quote but reach out to an agent and just ask them and they should be able to give you a good idea based off of the listing of the property okay so then we're going to go into some of our variable expenses that you're not going to be able to put a fixed number to because you don't know when the faucet is going to leak or when uh you know the flooring is going to need to be replaced so i like to use between eight to ten percent on a property for repairs and maintenance if it is a turnkey property and everything's already been updated then you could probably drop that down to five or six percent um the same with vacancy look in the area and see are there a ton of apartments available for rent then you might need to increase that vacancy percentage if there is nothing available and there's wait lists everywhere then you could probably decrease that vacancy percentage and then capital expenditures these are going to be if you have to replace the roof you have to replace all the flooring you have to replace some of the mechanics so these are the big expenses that go into the property and so you want to save for those because they will come up um and just like if it is a new build or you know complete remodeled property maybe you don't have to put eight percent and you could put lower but eventually some of those things are are going to come up and then management fees so is anybody going to be uh self-managing their property and not using a property management company you guys want to put it in the chat okay yeah and i that's what i did too i started off self-managing and now i outsource it but one very important thing to know is still put in that property management fee when you run your numbers because you may decide down the road that you don't want to self-manage anymore and this way you already have it counted and you know that you will still cash flow and in the meantime while you are self-managing take that management fee for yourself that's just part of your cash flow but still run your numbers and just call property management companies in the area and see what their fees are and then the utilities on the property so are they separately meteored um is each tenant so in this house here each tenant has their own electric meter they also have their own gas meter so they're responsible for paying their own utilities but water and sewer there's only one meter for that on the property so there's no way to know who uh how much water each tenant uses so that i put into my number that i would be paying that and then if it's a single family you would probably most likely have them pay all the utilities because there's nobody for them to share it with and it's them using all of it but that is completely up to you guys what you do there are some laws on as to if you can build back tenants on certain things such as water and sewer i know in some of the villages here you have to keep the water uh in your name as the owner you can't put it into the tenant's name so if you get the bill sent to them but it's in your name and they don't pay it's falls back on you and a lien gets put on your house and they don't get reprimanded at all so make sure you guys are looking at those kind of rules and guidelines too then if there's an hoa fee you got to plug that in because that's a monthly expense for garbage are you going to be paying for garbage will they be paying for it is it already included in the property taxes then um this is really nice that you can add in custom expenses so buffalo there's definitely snow so snow plowing expense and landscaping expense so obviously i'm gonna have landscaping one season snow plowing another season but i just break it take what the total is for each season and then break it out over 12 months to add it to the the calculator okay so now let's see what this property will look like okay so it's saying monthly cash flow is 237 dollars per month which isn't bad but remember we put that 20 down payment into the deal too so right down here it says our cash on cash return on investment is 9.83 which isn't awful but i know that in this market i can get a better deal than that so i'm probably going to lower my purchase price to increase that cash on cash return on investment so let's go to the rental income and expenses so you can see here that you can play with it so maybe i got on the phone with my partner and he said no no i know somebody with a house right there and you can actually get more in rent so i just slide this over increase it a little and then i go to save changes and it just updates it for me so now my cash and cash return is 15 and my monthly cash flow is 374 dollars be very careful that you are not fudging the numbers based on that you just want them to work you want the deal so bad that you're like oh maybe i could push the rent up or oh you know what maybe i can get a discount because my cousin is a landscaper so i'm gonna cut down on the landscaping expense don't fudge your numbers if anything you're going to change and it's going to the purchase price is the best thing to play with unless you know for sure like i knew for sure that i could get more in rent but make sure that you guys verify your numbers and you're not just guessing or trying to make it work so the deal will work and then you can see down here kind of does a an expense breakdown as to what the fixed expenses are which you're definitely paying every month uh with the mortgages and then your variable expenses so this 774 dollars this could be what you're saving um and putting towards your your reserves or you know this could be the you know the management fee that you're going to end up paying to yourself because you're managing the property okay so let's go back here okay so now financing a deal you know what deal you want and you know what strategy you want but how are you going to pay for it so in our example we just use the conventional loan where you're going to buy a investment property and you're putting 20 sometimes 30 percent as your down payment you're showing the bank that you have that money you have cash reserves and that it's going to be an investment property and then you you get your mortgage there's house hacking so um like fha loan is a great loan to use if you're going to be house hacking it's going to be your primary residence and then you're also when you're house hacking the goal is to get that house for to live there for free or very low cost so my sister when she graduated college she bought a duplex and she pays 45 dollars a month to live in a house that's i think now it's probably worth like 160 000 and she lives in the upstairs two-bedroom apartment and the people downstairs um live in a two-bedroom apartment and they pay i think a thousand fifty a month and she if she rented hers out it'd probably be probably 8.50 a month her apartment and she's paying 45 dollars a month to live there and all of her expenses are taken care of and then partnership so that's how i got started i didn't have any money so what i did was i went and found a partner who did and brought him in on the deal and it worked out and then using the bur strategy so maybe you have someone you could borrow money from for a short time or you have some cash you can use or you have a line of credit you can use but you have to pay it back so with the burst strategy you're using that initial cash right there and you're going to go and put it into a property to purchase it and have money for the rehab and then you're going to get it rented out and you're going to refinance so go to a bank and say hey look i have this beautiful property it's rented it's making income i want to get a mortgage on it and they look and they say wow the value of this property has increased so much we can give you all of your money because there's that 20 of equity still in the deal because you did the rehab and made the property appreciate and then you take that chunk of money and you do it again on another deal so if you guys want to know more about that your biggest hurdle right now is maybe you don't have any money um so this is a great book by brandon turner real estate investing with no and low money down uh just just know that this does not mean that you don't have any money at all you should still have cash reserves but even if you have money learn about the ways that you can purchase real estate with other people's money and not even use any of your own funds okay so here's cash conventional mortgage like we use in our example the fha loan we went over then the 203 k loan is when the bank actually pulls in the cost of the rehab to so if you're looking at a fixer-upper property this may be a good option for you to talk to a loan officer for it can be difficult for them to approve a property for the 203k loan and it's a it's a lot of work to get through that loan process but if that's how you're getting started it's definitely worth it to put the work in partnerships taking on a partner using a home equity line of credit so maybe you have a lot of equity in your primary residence or another investment property you can get a line of credit on that property and use that to purchase a property seller financing this is how i've done a lot of my deals and two of the deals i have under contract right now are the seller financing where i'm not going out and i'm not giving the seller a lump sum of cash i'm not getting a mortgage then giving them the lump sum from the mortgage they are actually at closing i'm giving them a down payment and then every month i am making a mortgage payment to them like they are the bank they are the lender so that's a great option if a seller agrees to do this and definitely check out different ways that it's an advantage to the seller and kind of pitch that to them because there can be a lot of tax benefits to them for doing seller financing uh lease options on properties using hard money uh private money doing the burger strategy like we talked about there's a lot of different ways to finance so if you guys want to take a picture of this or you can get the slides at the end of it and start looking into all these different ones and narrow them down what are options to you once you get them narrowed down you can start making multiple offers on a single property so if there's a property you want to buy and say you know you're approved for a conventional loan you could do an offer with that conventional loan or and then send in another offer and say hey but i'd actually give you 10 grand more if you decided to do seller financing and give them multiple options when you're making uh those offers okay so when you have a great deal financing becomes much easier especially if you're looking for a partner or you're even you're even going to the bank when you can show them show them the numbers and print out those bigger pockets calculator reports i've taken those to lenders before and shown them like this is the property i want to buy this is how much it's going to cash flow these are the expenses this is what i can rent it for and you're giving these people an opportunity a bank wants to give out loans on secure properties and for two people who are going to pay the mortgage that's what they're in the business to do and even a hard money lender or private lender they want to lend money they want to make money off of you okay so the sixth step the last one is to buy the property manage it and find freedom so there's five big mistakes that new investors commonly make so the first one is at purchasing they buy the wrong deal and maybe the purchase price isn't right or something goes wrong with the location of the property it's not in such a great market or such a great area they analyze the deal wrong so something was wrong with their numbers my very first property that i purchased i forgot to add in snow plowing it didn't kill my numbers but it still decreased my cash flow than what i expected it to be and what i had told my partner it was going to be so you can make mistakes and it's going it's going to be okay you're going to survive or lack of money you i had a mindset where i had to purchase an investment property in cash and that's why i brought on a partner i didn't even know there was hard money lenders or people would give you private money for it or that you could go to a bank get it i had this limited belief that you had to buy investment property with cash so look at just all the different ways we went over today that it is possible for you to get a property even with a lack of money and then a big thing is people don't do it because they listen to others negativity i think it was episode maybe like three or four on the bigger pockets real estate rookie podcast we had a guest on who his dad had been a real estate investor and he lost a ton of money it really hurt their family during the crash of 2008 and he had such a bad experience and what our guest did was he took what happened to his dad and took what his dad learned and he put it on to he just he took those mistakes and he learned how to not do the mistakes and to take value from it and he has become a successful investor because he took what his dad was saying and learned not to do it that way so if people are telling you not to get started or that you're making a mistake then please uh don't listen to them especially if they've never invested before okay so i don't know why you came here today but here are a couple reasons that maybe you did so maybe you are tired of working your nine-to-five job you're stuck in a rut uh commuting bosses servitude you just don't want to do that you don't want to build someone else's dream by working for them maybe you want to become a better spouse parent or friend you want more time to spend with them you want to be more present in your own life and you might need more freedom to do that maybe you are looking to spend more times on the things you love pick up a hobby uh i remember when i was a first guest a couple years ago on the bigger pockets podcast i said that i um i was asked what my hobby was and i was like i really don't have one it's buying houses it's real estate and since then i've bought a motorcycle i go to soccer with my kids like we've done i've changed and done a lot more and started to really love things again and enjoy life because i have the time and the freedom now okay so one thing that is true for all rookie investors is that it can be scary and that's why i took on an investor to start with me a partner to invest with because i was scared and taking on a partner was that's how i overcame that obstacle overcame that hurdle so think about what is scaring you from getting started how do you how do you overcome that what do you do to mitigate that risk that's scaring you so real estate can feel like you're just jumping off a cliff and seeing what happens and seeing where you land but this is the truth of really what it is it's a path and it can be hilly it can be up and down it can have twists and turns but you just have to stay on the path and you guys can do and you can get there and you need to take action you can't spend all your time researching and looking into um you know analyzing deals constantly but never making an offer on any uh i'd love to know in the chat is anybody right now like actively putting in offers on properties oh good we got some couple people yes yes absolutely yes good good even if there's a property that you see that you would like and if it fits your criteria except it's a super high price put in lowball offers practice making those offers practice getting rejected so are you committed to taking consistent action until you achieve your goals so that is you know maybe building your team finding a realtor to work with finding a lender is it you know anal practice analyzing deals and practice making offers okay so let's talk about how bigger pockets can help you guys because it really can fast track you like i said i tripled my portfolio in a year and a half just from finding bigger pockets you can get more deals you can get them faster and you can get them with less risk and all the tools and information is available to you so is anybody here already a member of bigger pockets pro yes oh cool awesome so you guys know the tools and the resources of how much awesome stuff bigger pockets has okay so the first thing that i want to point out to you guys is the calculator reports that we just went through and we did for our sample that was just the rental property calculator report there's a fix and flip one a bur one a wholesaling one so you guys here's the link right here because you actually you actually get a free one even before your pro member so just go to biggerpockets.com forward slash analysis and you guys can practice using these calculators when you're you're running numbers and then if you do become a pro member you actually get to do unlimited i can't even tell you how many i mean over a hundred deals i've analyzed through these rental property calculators and you can save them all right into your bigger pockets pro profile okay and then just like this webinar there's a ton of other ones that have been done by brandon and david and you get access to all of the replays so you can go there and watch um i'll show you guys so it's like on demand it's like your own personal real estate netflix and you can go through all of these different workshops and classes and webinars and watch them at any time okay so then here's just an another slide that i i pulled from there the beginner webinars okay so one thing with becoming a pro member is you get like this pro badge on your profile and this is something that we have figured out within bigger pockets is that when you post a question in the forums you are more likely to get a response or get someone to answer your question if you have that pro badge because you are taken more seriously and um that's what the forums are for the forums are there to network and connect with people and to ask questions in and get answers to those questions too and you there's other cool stuff like you get a forum signature you get to upload a video profile so you can kind of you know have fun with it and also tell everybody about what you're doing and who you are okay so uh you can use all the different data and statistics that biggerpockets has pulled so i showed you guys the rent estimator tool that showed us what exactly the rents would be in that area um i i highly recommend uh trying this out and seeing if you guys like it because um it's data is pulled from all over um the country to make this work and then this is i think one of the biggest the calculator reports are my favorite but this is probably the next favorite is if you're going to be a landlord reduce your risk with these state-specific landlord forms so they actually give you every single thing you need uh to do a lease agreement and um all the addendum forms that go with it too so the lease the pet lease the lease extension rental application these forms were all created by attorneys in every single state so if you're investing in north dakota they have the the forms for your state they're all state specific okay so number six because it works so this is um uh someone who had sent a message actually to brandon after he did one of these webinars and they'd be signed up to be a pro members i became a pro member last year and i went from one to four properties and seven doors i even dove too much i never even dove too much into detail there's plenty of knowledge but i didn't have to dig deep because everything is so readily available and handed to you all the time uh that made me gain basic knowledge quickly and allowed me to be confident enough to take appropriate action so he said the rest to learn via experience partners and mentors and we have another one the bp calculators are my go-to for analyzing potential properties there's no way i could analyze the volume of properties i do without being a pro member this i 100 agree with i locked up my first three unit almost a year ago that i'm now selling for almost a 70 000 profit that will go towards something larger the bp calcs were a huge factor in making sure my numbers were right uh here's one from patrick back in june i attended one of your webinars right afterwards i signed up for pro membership in the next couple weeks i analyzed a bunch of deals eventually i found a fourplex i got it under contract three weeks after signing up for pro and a week later closed on another property that was six units big thank you to you and the entire team final quick tip sign up for pro i made my money back at the closing table okay so you guys are probably wondering well how much is it to be a pro member i'm sure you guys see online all the time people like sign up for my course uh i'm going to show you how to flip a house come to my in-person event my mastermind so sometimes these are the prices that you actually see for even just a one-day event but biggerpockets does not charge us because the josh dorkin the founder of it um did not believe in paying these guru prices so the price for a pro membership is 399 390 for the full year to get access to all of this extra information but i do have um a little bonus for you guys did i skip it let's see okay how to invest with no or low money down workshop so you guys are going to get access to this workshop if you guys want to sign up today if you're not already pro so use the code newbie it's right there at the bottom of the slide and then also this is something new that's coming up it's an llc master class and it's going to be with a real estate cpa and a real estate attorney and is going to show you exactly how you need to set up an llc and what's the correct way to do it for your investment property and then the third bonus you guys are going to get today is the eight steps to rental property success it's a full day workshop that brandon has put together and you guys are going to get the recording for that and then bonus number four uh is with your free pro annual subscription you will get the finding great deals master class so um it's interviews on the best way to find deals in today's market so like i said before you guys don't recreate the wheel don't go out and analyze all of these markets trying to figure out which one to invest in look where other successful investors are investing in those markets and then start from there take those ones and then dive into them and see which one will fit you guys and which one will be the best and work for you guys okay so i mentioned it was pro but if you guys have already gone and punched in that that newbie code you can see that you guys can get a discount today it's 312 dollars for the full year so you're saving 20 percent um using that code newbie and you just go to biggerpockets.com forward slash pro upgrade and then use that code newbie so a lot of these things are bigger pockets has put a lot of time and resources and money and putting into these uh different bonuses that you're getting and they if you went somewhere else i'm sure they would be a lot more to purchase just one of these things so you're gonna get 20 off you're gonna get the finding great deals master class all webinar replays mp3 video interviews with creative investors and then the full day rental property workshop so they say that it's valued at over twelve hundred dollars and bonuses that you guys are gonna get for free today and then also bigger pockets is awesome so if you don't like it if you don't think the money was worth it within 30 days they will give you your money back um the full 312 dollars and then uh there is the difference you can you do the annual versus the monthly pro membership so the annuals you're paying the 312 dollars up front and the monthly is you're paying it monthly but you don't get all the benefits if you um don't pay for the full annual upfront so i highly recommend doing that because that's where you're gonna get uh the bonuses so if anybody has while i was giving my spiel did anybody already upgrade to the pro membership so they can uh analyze deals every day on the bigger pockets calculators oh good carlos said he did awesome okay and then if you're already pro you can still go to biggerpockets.com forward slash already pro and put the code nubian to get those um those free resources too and then here's what you guys been waiting for your bonuses from watching from the beginning so go to biggerpockets.com forward slash newbie slides put that in um and you guys can get a the copy of the whole slide deck and then also biggerpockets.com forward slash seven years and you guys can get the seven years to seven figure wealth okay and then just a reminder again of the different things that you'll get to to be a pro so use the code newbie at biggerpockets.com forward slash pro upgrade okay so let's go to the fun part now and do some questions let me uh stop sharing my screen here okay okay so uh the last website it was bigger pockets let me look at my screen go to biggerpockets.com and it's going to be forward slash pro upgrade and then the code is newbie um and then if you want the the slides that was biggerpockets.com forward slash newbie slides all one word and then the seven years to seven figure wealth that was biggerpockets.com forward slash number seven years yeah let's pull that up okay uh let's see alan has a question would you recommend wholesaling to start yes i would because there are so many ways you can do it with very little money um up front and so you can do driving for dollars you can um even look at expired listings on the mls and start contacting real realtors and say hey is this person still interested in selling and then you get these properties under contract and you find your buyer and your buyer pays for it and gives you an assignment fee so you may eventually have no money into the deal a lot of wholesalers may pay for marketing like sending out mailers or different things like that but there's definitely ways and even those can be pretty cost effective compared to what you're going to make off the wholesale deal especially if you connect with investors in the area and they tell you exactly what they are looking for then you can go and you can find them that and bring it to them and then you know make some money off of it i think that's a great way to get started okay let's see um do you have any advice on getting a heloc when the property is in an llc so i just did this actually um within the past year i was able to find a small bank it's upstate bank it's based out of rochester new york i think and they would give me a heloc on a property that was in an llc so it was on the commercial lending side it wasn't residential so you have to talk to a commercial lender and this is the only bank that i have found that would do this for me do the heloc on it but i actually did it on two properties so all you have to do is call these banks call and ask and ask and even better if you have a property that you want to put a heloc on i what i would do is i would call banks and i would say what your situation is and what you're trying to do so say you want to pull that equity to buy another property tell them that you own this property you have this much equity in it you have a mortgage on it um but you want to go and buy a duplex or whatever ask them what options they have available that they can give to you and let them lay out different things because there might be something out there that you don't even know about um as far as lending and then is private money lending only for rehabs from stephanie no you can i have private money lenders that hold the mortgage so i've done private money uh from an investor where you know maybe i'll borrow the money for one year and then i'll rehab the property and then i'll go and put a bank financing on and i'll pay him back but i used his money for the purchase price i used his money for the rehab i also purchased a property that was turnkey didn't need any rehab and i use private money to buy that and i have a long term i have a 30-year private money loan on that property so no it doesn't you can use the private money for whatever as long as that's what you agree with with the private lender um let's see how do you learn your market so you know if something is a good deal and if your math is correct from timothy okay so one of the best ways to learn your market is to constantly look at comps in the area so get those mls listings sent to you um you can look up on realtor.com sold listings and you can see what properties are selling for go um on to the rent estimator on bigger pockets and see what properties are renting for you can contact property management companies and ask what the the market rents are you can even just pretend that you are an interested renter and see what's available in the market my girlfriend and i are interested in house hacking tips for finding good quality multi-unit investment properties okay so the first thing is is by good quality i guess you mean you don't want a fixer-upper you don't want to do rehab the best thing you can do is get an inspection on the property uh when you purchase it have an inspector go through it and they'll be able to tell you all the things that need need to be fixed or could potentially be fixed down the road so what you can do is when you have that home inspector go through is you can ask them to make a list okay what are the things that are immediate that need to be fixed right now what are the things that i should fix or repair within the next year and then what are the things that i can fix or need to fix or repair in the next five years so maybe he'll look at the roof and say you're gonna have to replace this roof in five years so that's probably gonna be a ten thousand dollar expense or whatever so you can plan and prepare um instead of using a home inspector you could also find somebody that you know personally a family member friend that has construction or rehab experience and have them go with you to look at properties even if you have to pay them you know give them 50 bucks for coming and looking at the property for half an hour with you to say you know oh i see this i think this might be a problem things like that so use people you know um and don't take advantage of them you can pay them you can you know give them a case of beer take them off to dinner after things like that but um to know what's going to be a good multi-family is look in the market too so are you going to be able to find a renter for the other unit because it's in a good school district there is a low crime rate are you going to be able to get the rent you want to cover your part of mortgage use the rent estimator tool for that um how can a newbie get started in high priced areas aka the bay area from mary jane the best thing i can say for that is house hacking so having it's your primary residence doing a very low down payment three and a half percent and then renting out the rooms to other people um or you know i don't know about the bay area i don't think there's basements in california but around here we have basements and people transform their basements and i in denver they do this to transform the basements into separate units too so that you are house hacking your basement and paying out rent or there's uh adus that people are putting into their backyards as a separate little dwelling to rental or even the attic space above a garage too so one thing that you're going to learn as you become an investment that investor is there's many different ways to make money off of real estate so when you are looking at a property don't just look at oh it's a single family home i can rent it for this and that's it look at around us maybe it has a huge parking lot where you could park a couple motorhomes and charge people storage fees for their boats and motorhomes maybe it has a garage where you can charge rent for somebody to rent the garage maybe it has a third story attic that actually can be turned into another unit so try and look at properties and look at different ways that you can even make more income off of them so even if maybe you have a i have this little six unit uh apartments there it's actually three different duplexes all on one little lot and they have like a little road that goes down and there's a separate little uh grassy area and i've never done i haven't done this yet but i probably should do it soon as i wanted to put little sheds on there and then i could rent the sheds either to my tenants or it's in like a little village so there's other tenants there and charged you know they could buy a 500 to a thousand dollar little shed and charge 50 bucks a month or 100 bucks a month or something to rent these out because it's just really wasted space there and i have to pay to have it mowed all the time too um let's see if i have 200 000 what's a smarter move house hacking or small multi-unit investment or trying to do both so i would take both scenarios so find um a house hack run the numbers on it and what is your return going to be what's your cash on cash return on that property what's your cash flow going to be if any or is your you know your living expense going to be zero uh and then take a small multi-unit what is your cash on cash return going to be for that um what is uh your cash flow going to be on that are you going to make more money on that small u multi unit then you'd be saving on paying your own mortgage house hacking uh so compare the two run the numbers on both and see what they look like and then uh you may be able to take that 200 000 and put it into both so maybe instead of doing a 20 down payment you're gonna do a fha loan on the house hacking property and only put three and a half percent down and then maybe you're going to use the rest of your money for a 20 down payment on the multi-unit uh so you have to run the numbers because it's it's hard to say exactly which one would be better run the numbers on both scenarios and see actually all three of those scenarios and see what the outcome would be from that um what's your thoughts on rental forgiveness from coved well i actually just did the math yesterday and i have eighteen thousand dollars that is owed to me as of currently for back rent and um it's ten thousand of it is just from one tenant that hasn't paid um within the past year but i i think that as a landlord and seeing other landlords um struggle that i think that it it's not fair as far as how long it has gone on that landlords haven't been able to um get any relief for themselves so the in buffalo they did um some tenant relief where a tenant was uh tenants were able to get money that would be sent directly to the landlord but the landlord had to sign saying they would not evict the tenant for six months so and the one tenant that i've had a big problem with is of course they didn't pay anymore they got their one rent relief check um and then i know that there's um forbearance on foreclosures for landlords so if their tenant's not playing they can go to the bank and they can say well i you know i i need to you know you can't foreclose on me but i'm can't be making my payment right now and so that that the problem i have with that is i don't want to ruin my relationship with the bank because just like the tenant is hurting me and i can't pay my bills if i'm not paying the bank can't you know the bank's not making money and they're not paying their bills i mean really it's i know it's a lot different but i don't i want to be able to go to that bank i want to have a great relationship with that bank i want to show that i can pay my bills i don't want to be somebody that would stop paying my bills so if it got to the situation where i my rental properties couldn't cover my mortgage or something like that i would dip into our farm income and i would use that to pay our mortgages instead so i i understand people need help but i think that there was there should have been a different way to help uh people than uh the way it was kind of handled with giving um not doing evictions uh for this long of time too um i have a friend with rentals who is 38 000 behind as of april 2021 wow yeah it's crazy um and then uh can you write that off yeah you could write it off as bad debt expense um but um you can go after them with the judgment things i did have to do one eviction before where uh we went to court and we ended up doing a judgment against them where i think it was like 2 500 maybe so saying that if they ever sold something like they bought a house and sold it or bought a car and then sold it that i would have a lien on that piece of property and that when that sale went through i would be paid for that um it's been you know five years and i haven't seen anything from it i don't think that i ever will um [Music] let's see stephanie said this is why i want to landlord in landlord-friendly states yeah even just since i've been an investor new york state has changed their laws in june of 2019 i think it was and made it even worse um to be a landlord here and that's something we definitely go over in the market analysis too is to what do the laws look like too if you're looking to buy a rental property are they investor friendly or are they tenant friendly too because that can make a big difference um probably sold car for cash yeah and you know what's funny about that eviction too is i mean it wasn't funny then but i like two days later after they moved out i saw them at the verizon store and the guy was buying his girlfriend a brand new iphone yeah i usually wait that me too like oh hi how are you doing okay so back on track let's see what are the benefits of buying under an llc rather than personally so the benefits of that is really asset protection um so a lot of people buying their personal name because you can get better financing terms you can get financing on the residential side you know 30 years you can less money into the deal so usually you can get better cash flow getting the the residential mortgages than you can usually can getting commercial mortgages and you get that locked in fixed rate for a long time where if you have an llc a lot of times you have to go to the commercial side of lending and i have gotten one bank that did give me a residential loan on an llc so it definitely is possible it's just or outrageous interest rate it was like 7.35 percent um but it can be done uh i was fixed for 20 years i think but um when you have that the llc you have protection um as long as you are following how to actually operate a business an llc is running your income and expenses through the llc um and then so really it's for asset protection so that if you were sued or something were to happen that you know someone couldn't come after you personally and come after your personal house so that's the biggest reason as to why people put their property in an llc if you do put your property in your personal name you can go out and get umbrella insurance so umbrella insurance is put onto your property over your landlord policy so you have your basic your homeowner's insurance policy with the landlord policy wrapped into it and then you can go get umbrella insurance so that if you are sued you um that umbrella insurance would cover you up to you know maybe two million dollars or you pick what that that limit is that they'll cover you uh for that so you can use that as a kind of protection against yourself if you are sued as getting that umbrella um policy because that when i started out any property i bought by myself i put into my personal name and then i got that umbrella policy over it um any property i buy with partners though i put that into an llc right away uh i don't hold any property in my personal name with um any partners that's oh i always do that in llc just because i want to mitigate that risk of being responsible for to my partner and me being vice versa back to them um i i don't recommend owning property and personal names with people unless of course it's your spouse but i think get that llc uh to protect yourself okay so any tips on buying in areas that are being revitalized but are still largely low income uh one opportunity you can have here is that in those revitalized areas they might be opportunity zones so i don't know a ton about this but if anyone is going to the bigger pockets conference they usually have a talk on opportunity zones where you get tax benefits and different benefits from um investing into that area and fixing up the house the next thing is that um you could contact your local section eight um housing authority and uh get people into your house there that have vouchers so if you're having a hard time because it's still low income area and it's not fully revitalized yeah if you're having a hard time finding tenants to live there that you know maybe aren't coming back with the best screening um contact your local housing authority and figure out who the section 8 who gives out the section 8 vouchers and list your um apartment with them because with so what section 8 is for people don't know it's for people who are low income or they need help paying their rent and so they apply for this state aid and what will happen is um they're the agency the the representatives they will say okay this you qualify this person qualifies they will uh pay a large portion of their rent so i've had tenants that pay 25 dollars a month towards their 700 rent payment and the section 8 voucher is paying the rest so i get that money direct deposited into my account every month i see that as guaranteed rent i have not heard of one investor who hasn't been paid by section 8 during this whole covet thing too so a lot there's pros and cons to it some people say that you get uh bad tenants with section eight uh some people say you get good tenants but no matter what no matter where you get your tenant pool from that is going to happen you're gonna get the good and the bad um but the nice thing is is that um you get that guaranteed rent payment too so if you are investing in an area where you're having a hard time finding um really qualified tenants as to great um the screening comes back great great credit great income then maybe look to um section 8 attendance for those properties um my email again is ashleycare a-s-h-l-e-y hr biggerpockets.com okay um i am starting with a partner and he has done a couple deals already this is my first i am investing only he is investing and labor where can i find good resource to structure the percentage split so this is actually a very common question as to how do you structure a partnership and what's fair what's not fair and really there's no right or wrong answer uh so what i would do uh first of all if this is your first time investing together i would date this partner and just focus on one deal first and not say oh okay so every deal we buy in the next year we're going to do it together start with one deal and work up an operating agreement a partnership agreement and so if you're both putting money in you could divvy up the equity based on how much money is going into the deal so say the property is a hundred thousand and you're both putting 50 000 into it now so you become 50 50 partners and he is doing the labor so one thing that you can do instead of giving him more equity is that you could say okay so you're going to be paid an hourly rate based on the labor or we know the rehab on this property is going to take um you know it's gonna take this amount of time um so let's put a value to it of five thousand dollars so after we refinance the property you'll be paid five thousand dollars um or something like that i like the idea of thinking of the future when you're putting together a partnership and not just the now so in the future he may not want to do the labor anymore you might want to outsource it well you but he owns 70 and you only own 30 but he's not doing the labor now and you both put money in and now you're both equal but he's still 70 owner so if there are jobs or tasks that other people are doing um i like to put that into the operating agreement that you know you could even say that upon um him stopping his duties he no longer has a 15 equity and that becomes split between the two of you or or something like that so think about the future too and not just the now when you're building that entity uh structure uh partnership operating agreement templates on pro no there isn't but what you can do is reach out to a local attorney um if there's a real estate attorney in your area ask them for a template not even for them to put the contract together a lot of real estate attorneys just have these templates already put together or you can pull one offline um in the bigger pockets bootcamp class i do provide one um for everyone it's just like a template and then you go in and fill it out and then i just recommend that you take that and you have an attorney approve it for you too but if you go to an attorney this is what my attorney did for me is she went and she uh gave me templates for everything for lease agreements for operating agreements for the llc documents everything and then i would just fill them out and then i would say hey can you just look this over quickly it was a faster turnaround time because i knew all the information i was just plugging it in i could do it whenever instead of waiting for her to have time to fill it in um i wasn't paying to have her fill it in and i just my fees to her were super super low because that she just had to glance over it and i did all of the work um so if you have an attorney you're working with ask them if they have any documents that they would give you as templates and then you just hand it back to them for them to review and it'll save you a ton and um legal fees too so uh okay i'll take one more question then i gotta let my kids back in the house um let's see can you structure a partnership where you share cash flow but in five years you refinance and buy them out for sure you can definitely do that um a lot of people do that where it's just um that there is it's called a buy sell agreement and you put it into the buy sell agreement that in five years you're gonna refinance the property and they're cashed out and they're no longer an equity partner no longer an owner in the property so you would just state that what that exit strategy is in there and have them you know you both agree to it you both sign for it um and they take their money and walk away um make sure you do put some kind of value in there as to how are you going to cash them out what are you going to base that number off of too so that there's no dispute where he's saying well okay the appraisal was this so much and then you say yeah but it could only sell for this and much even though it appraises for this much and allow that stuff just put as much information as you can into the document um before uh you know things come up think about long term and exit strategies and putting in those details okay well thank you guys so much uh for joining me tonight this was a lot of fun i love the the q a part uh the most and i hope you guys took some value um if you guys want you can reach out to me on instagram at welcome rentals my email is ashleycare at biggerpockets.com so thank you guys uh very much and reach out to me and let me know if you guys uh signed up for pro and became pro members i have a bigger pockets profile you can message me on there okay thank you guys have a good night um [Music] you

Channel: Real Estate Rookie

Views: 49,018

Keywords: how to buy your first rental property, how to invest in real estate, how to invest in real estate 101, investing in real estate, real estate investor, real estate investing for beginners, real estate investing with no money, real estate investing 101, real estate mentor, real estate investing advice, rental property, rentals, income property, passive income, cash flow, financial freedom, financial independence, invest, biggerpockets, real estate rookie, real estate rookie podcast

Id: LX8RHpZGjIc

Length: 90min 2sec (5402 seconds)

Published: Sat Dec 04 2021