How to Buy Your First Rental Property (Noob vs Pro) | Step by Step

hey everyone me kevin here in this video i'm going to walk you through a step-by-step process on how to buy your first rental property in a noob versus pro style i'll share some really awesome industry secrets with you that nobody tells you about because most people don't know about them and the reason i know about them is because i'm a whole lot of things not only am i a real estate investor controlling over 12 million dollars worth of real estate without any partners single family and multi-family but on top of that i'm a licensed real estate broker i used to be a licensed lender and i used to be a licensed contractor working in all of these different fields so i have a ton of secrets that will help you make money and we're going to make it very simple i'm going to tell you this is what the noobs do and this is what the pros do so if you like this kind of outline let me know if you want some more noob vs pro in the comments consider sharing this with your friends or anybody that you know that could benefit from this information because these secrets are guaranteed to make you money all right let's get into it but first quick note from our sponsors on the video if you want two completely free stocks sign up for weeble in the link down below and you deposit just 100 and they will give you two free stocks worth up to fourteen hundred dollars for signing up also get life insurance in as little as five minutes by the link down below you could apple pay for it or you could android pay for it it's so easy to get it's not like they're brokering you out it's that company and it's awesome let's get into the real estate now first the very thing for very very first thing that you want to think about when you're starting to plan or even considering buying a house or any kind of real estate is credit credit is a tool a tool that you should use don't let your credit use you and here's what i mean by that you can usually buy a house with a credit score as low as 620 to 640 though usually you're going to pay more than somebody with a 740 credit score but it's a myth to think and a lot of noobs have this impression that you can't buy a house unless you have excellent credit and this is very wrong yes a 740 credit score is usually going to give you the best pricing in fact i have a lot of clients that ask me they say kevin i have an 850 credit score i worked hard my entire life not using my credit so i could get the best pricing possible what benefits do i get when i have an 850 credit score because i do and my answer is always nothing like they got screwed that's the new move the new move is i'm a good an 850 credit score it's a vanity number it does nothing once you pass 740 in some minor cases 760 you really get no additional benefits in real estate and this is very important for two reasons number one you want to get in and be able to find a great deal because even if you have to pay a little bit more because your credit score isn't above 740 finding a great deal can make it worth it pros know this pros always look at real estate from the point of view of the entire deal pros don't get caught on things like oh well i don't want mortgage insurance so i'm not going to buy pros don't get caught up on oh well my credit score is in 7.40 it's 7 30. i'm just not going to buy no pros don't get caught up on that they look at the entire package and that's what i'm going to teach you in this video we're going to learn a lot about packages and number two know that you don't have to be perfect so if you're anxious about well i don't want to apply for a loan because i don't want my credit score to get dropped or whatever big mistake remember pros know that your credit score is designed to help you make money use it by the way the most common reason i see low credit scores on credit reports which i see a lot of is late payments that is like the easiest thing you could do to not have a lower credit score is just make your payments on time the easiest trick for doing this is literally make a little spreadsheet that you check every single month you don't need a fancy app you don't need anything take a spreadsheet and put every single bill that you have that's associated with your social security score number make sure you check it twice a month as long as you check it twice a month there's no way you could be 30 days late even if you missed one of your checks you're still checking at least once a month and that helps you ever avoid missing a payment got a credit card put it on a list if they asked you for your social put it on the list the social is the danger because that's how you get exposed to a lower credit score if you miss a payment also if you have not yet go to annualcreditreport.com this is not sponsored by them at least it's sponsored by life insurance and weeble but not these companies you can get a free credit report from all three bureaus experian transunion and equifax and i recommend making sure that you get all three reports right away don't tell them oh i want one now and the other one later get all reports right now and make sure all of the information on those reports is accurate if there's something on there that you don't recognize call the bureau call the company whose name is on that report and solve the problem pros know that real estate is dependent on your credit score and you could even use credit karma to track your credit score after you've made sure that everything is solid but credit karma i think only reports with two bureaus and when you get a real estate loan they're gonna check all three so start with annualcreditreport.com and they usually pick the middle score by the way so if you have a 720 a 740 and 760 you qualify with the 740. step number two assets the easiest way to buy your first rental property is to start by living in the property for a year this is why i think it's maddening when noobs like to say well i'm going to start a family before i buy a house oh moving alone is hard enough you want to move with kids i got two kids you don't want to move with kids now no worries if you've already got kids hey you could still start this way but it's harder the easiest way to get started in real estate is to buy a place to live in it and agree to live there for a year even if you want to rent out all the rooms to roommates and you're going to sleep in the living room because you're doing whatever you can to make sure you get into real estate and other people are making the payment for you that's fine like you got to do what you got to do to get started in real estate the cool thing is in the united states you can put down as little as 3 to five percent and in some cases you could put no money down you might be able to get grants from your state or if you're a veteran you could use a va loan and put zero money down now for a lot of people three to five percent is going to be the starting point and so if you're looking at a three hundred thousand dollar house that's going to be somewhere between nine thousand to fifteen thousand dollars and if you put less than twenty percent down you generally have to pay mortgage insurance however this is often worthwhile if you buy a really good deal i'll show you all about that in the rest of this video so if you're worried about oh what kevin am i not over leveraged if i'm putting zero percent down or you know isn't it risky to put five percent down or what about mortgage insurance don't worry about that we're going to talk about that in this video and so you have an understanding by the end of the video keep in mind noobs focus on the small dollar like mortgage insurance pros focus on the big dollar pros focus on where the money is not the instant gratification short you know 50 bucks a month kind of thing pros are looking for the big money and we're gonna break that down next though let's talk about income and here's some really cool tricks for you lenders will usually want to see that you have income to qualify for a loan and this makes sense you got to have the ability to repay the loan that's actually a legal phrase ability to repay is a must i say this because there are some awesome tricks you can play as well to prove you have the ability to repay here's the general rule of thumb first though you generally want two years of tax returns to qualify for a loan if your income is going up they're going to average your two last two years income which means your income will be assumed that it's a little less than your last year that's okay because they're averaging the two if your income is declining lenders do the opposite and they take the lower year's income to qualify you they do not average your last two years tax returns they take they assume uh-oh declining uh revenue problem let's use the worst case scenario so keep that in mind now this is obviously easier easier for people who are employed by a company also really big hack here if you just graduated from college and you get a job in the same line as what you went to college for you could be deemed to have two years of tax returns day one yeah think about that you just graduated in computer science from i don't know uh uc santa barbara okay you just graduated day one you get a job and they're paying you 60 000 a year let's say your first year computer programming in socal awesome you go to a lender you could literally get qualified day one even though you don't have two years of tax returns that's because they're going to look at your two years in school as work experience at the same pay come on that's nuts in fact this is one of the best perks about going to college if you're self-employed you might have to learn about the double-edged sword of self-employment but i have a trick for that as well i got a trick for everything this is what i do for a living self-employed borrowers let's say you make seventy thousand dollars a year but then you're like haha irs i'm not going to pay you as much money in taxes i'm going to write off 45 000 great well now when the lender looks at your tax returns they go dude you made 70 man but you wrote off 45 bro i cannot qualify you on 25 000 of income this is where noobs think they're screwed and they have to pay more taxes to qualify for a loan wrong pros know how to solve this here's the secret if you're thinking about buying a house and you're self-employed depreciate your write-offs lenders then won't count the money against you so here's an example let's say i buy this macbook pro there's a macbook pro right here you can't really see it you see a little edge there okay macbook pro i pay 2 000 or you know what let's say i pay 3 000 for this macbook pro because i need it for work or whatever right what i'm going to do is rather than write this all off this year i'm going to write this computer off over the next three years talk to your cpa about this obviously i'm not your cpa so i can't give you tax advice but you can write this laptop off over three years one thousand dollars this year one thousand dollars next year and one thousand dollars the year after that that way you literally get the same tax write-off but lenders look and go oh you depreciated a laptop no problem we don't consider that an expense so if instead of making seventy thousand dollars and writing off forty five thousand dollars you made 70k and you depreciated 45k over three years lender looks and goes 70k 45k depreciation oh looks like you made 70k all right what do you want to buy boom by the way i'm going to share a lot of tricks like this with you in this video so if you like this video so far could i bug you to share it with somebody it might help i really appreciate you considering sharing it it really helps out a lot and it motivates me to keep bringing you as many tricks as possible but what do you do now if you don't have an income i got a trick for that as well and i ain't talking hard money crap either that's gonna make you go bankrupt watch this and this doesn't work for everybody but i'm gonna mention it if you don't have an income that could be okay let's say you just became a real estate agent and you know you're going to make money or you just started making money but you don't yet have enough money to qualify like you don't have the two years of self-employed tax returns sometimes they'll use one-year tax returns and then your year-to-date profit and loss but you know that gets complicated and if you just started it's hard to buy especially if you see a good deal what do you do then well you could ask and if you have someone consider yourself lucky this is good a lot of people have this a lot of people don't have this but i'm going to mention it anyway you could ask a parent or family member to co-sign on a fha loan this is a and they they would go on as what's known as a non-occupant co-borrower that means they could literally sign on a homeowner-occupied loan with you and they do not have to live there so let's say you and your girlfriend want to move into a house and you and your girlfriend are splitting the down payment and your dad's going to co-sign for you your dad could literally go on as a one percent owner on the deal you found the deal you came up with the money for the deal you're making the payments on the deal all you're doing is telling the lender hey uh let's use his income just to get me the loan now you buy the property with three and a half percent down your dad's a one percent owner you're maybe a 49 owner your girlfriend's a 50 owner boom you just got into a deal with three and a half percent down with zero income come on crazy world we're in right now i know to some this is like kevin like that isn't that like really risky like three and a half percent down seriously and you don't have an income well obviously you would only want to do this if you actually expect your income to be rising like some people are rock star sales people but they just can't prove it to the lenders and that's the issue so you obviously have to be comfortable with the payment that you're making of course if you're making five thousand dollars a month combined with your girlfriend you shouldn't have a housing payment for four thousand five hundred dollars a month you gotta be reasonable with your expectations as well maybe if you make five thousand dollars a month combined with your girlfriend or spouse or boyfriend or whatever it is maybe you have a payment of two thousand dollars per month that's kind of how i started anyway step number four talk to a lender the easiest thing to do is go on yelp and look up loan officer in your area forget like chase and wells fargo and all this stuff just type in loan officer in your area reach out to a few and find somebody who's a good fit for you you could even try online lenders like rocket mortgage but usually when you're starting out i really recommend a local lender they're going to help you get a deal accepted when it comes to writing offers usually when real estate agency online lender eh unless they've had a good experience with that online lender sometimes it's hard to get real estate agents to suggest hey seller let's take this offer they're using some random online lender compared to hey seller you should take this offer they're using a local professional who has great reviews online i know them i've done deals with them before see there's a lot more to just writing an offer and getting a pre-approval letter but i'm giving you the short skinny of it here when you talk to a lender please don't make the newbie mistake that so many people say to do and it's just like having been a lender this is the stupidest thing to do and so many people do this newbies say i wanna i get pre-approved for a loan oh but please don't run my credit because i don't want my score to drop oh no all that does is the following two things it sends a massive red flag to the lender that a you're not serious and there's enough serious business out there for the lenders and so not running your credit is the perfect way to signal to a lender that you're not a serious buyer which means you get thrown on the back burner so it's no surprise that maybe the calls and texts you're sending aren't getting responded to and maybe it's taking weeks to get a pre-approval letter and that deal you wanted it's gone pros know this pros also know that yeah so what an inquiry's gonna drop your credit score a few points after a lender runs your credit however the benefit is once you run your credit you lock in your score for 90 days so it's like boom run your credit okay you're good for 90 days so what if it drops a little bit in the meantime by the time the 90 days are up your score will be up again and pros know that if you apply for multiple lenders within the span of a few weeks the credit bureaus know that you're just being a savvy consumer and then you're shopping for the best loan they don't want to rip you off so the inquiries aren't likely to impact you that terribly i know people like to say oh but kevin it's a hard inquiry i don't care the most important thing when it comes to your credit is making on-time payments that's the biggest thing that is going to set you up correctly the only time it's bad is if for some reason they think like you're desperate and you're applying for like 10 different credit cards and you're having problems that's when the inquiries really start hurting you anyway what you're going to do is you're going to ask for a 30-year fixed-rate mortgage if you're in a different country then you're probably going to have to get like a 10-year fixed-rate mortgage and then an adjustable rate loan that's okay too i don't generally recommend you get the 15-year fixed rate mortgage when you're starting get the 15-year mortgage when you're ready to start retiring and you're on like the last 15 years of your wealth building phase that's the perfect time to get a 15-year mortgage for now get the 30-year you have the option of making more payments but you're not forced to make more payments also a lender is going to help you figure out how much your payments are going to be which is really convenient and so there are some really easy tricks that you can do here the easiest thing that you could do which i'm going to pull up right now is i just recommend and i'm going to teach you exactly how to use this in a simple way i recommend you go to the zillow mortgage calculator this is not sponsored but here's exactly what you're going to do you're going to go ahead and pull up the calculator which looks a lot like this once you download the app it's not my app i'm not sponsored don't worry about it you put in a price so let's put in 300 000 now let's put uh let's do 10 percent down that's fine great zillow automatically put in this interest rate of about 3.2 percent but what i'm going to do is for every 5 that i put less down under 20 i'm gonna add a quarter point to my rate okay so let me work that out it's really easy we are 10 below 20 by putting 10 down that means we're going to add a half percent to my interest rate and we're going to call that mortgage insurance so i'm going to go instead of 3.2 let's put 3.7 in as the interest rate that's a rough approximation for mortgage insurance it's not perfect but it's a good way to estimate it then for property taxes most states and cities pay anywhere between 1.2 to 2.4 percent in taxes california is about 1.2 percent taxes texas is about 2.4 for taxes now here's a really cool pro trick in this you are paying 300 000 for a house and you're putting 10 down here's what's so cool about 1.2 percent for every 1.2 percent you pay in property taxes your monthly payment is exactly what your purchase price is minus the last three digits so look at this we're buying a house for 300 grand and it says the monthly property tax amount is 300 per month if i now change this to texas and i double this to 2.4 percent see property taxes go to six hundred dollars this trick by the way works in all price ranges so look i went back to a one point two percent tax rate and now i change the price to four hundred thousand dollars and look at that monthly property taxes are four hundred dollars a month great way to estimate this if we're in texas and tax rates are double double it it's 800 so purchase price minus three digits works in a lot of areas just find out what the tax rate is in your area obviously if your tax rate is something in between and it's not like right by 1.2 or 2.4 it's going to be a little bit more involved then what we're going to do is we're going to go back here and throw in 300 000 again but let's go ahead and hop down and change the interest rate well we'll leave the interest rate with mortgage insurance to 3.75 homeowners insurance 50 bucks a month that's reasonable and if you have hoa dues you could kick that in as well i personally don't like having zillow add in the mortgage insurance i like to do it manually it gives me a little bit more control although you could try to play with that as well step number five find an agent the easiest way to find an agent is literally go to zillow.com go to look at that agent finder type in your zip code and watch what you're going to do i'm going to put in 9303 here let's pick here look at this lady heidi golf 21 local reviews six recent sales okay cool let's go ahead and click on her profile and take a peek at this i get a map of exactly where she sells real estate and now what i could do is i could zoom in and let's say i want to buy real estate over here i want to buy real estate between johnson and bristol holy smokers heidi golf sells like everything in this neighborhood i may as well call heidi because that's where she's selling real estate am i going to call heidi to help me buy real estate in los angeles and in a condo complex probably not because this is like an hour and a half away and this is where heidi is selling real estate that's just an example i'm sure she's more than willing to help you in many different areas but that's what i like to look for when i look for an agent is an agent who's selling real estate in the area that i'm looking to buy now the best way to actually start looking for a house is look within 30 minutes of wherever you live and find those favorite neighborhoods then look for something small on purpose look for like a two bedroom one bath house to start with this makes it very easy for you after a year to move into a three-bedroom two-bath house and turn the first one into a rental that's actually called bank hacking because then you're able to put five percent down on the first place and then you can move and put five percent down on the next place the noob ends up buying a big house day one because they're like well i want my dream house if i'm gonna buy and then they don't realize that if they buy a three bedroom two bath house it's very difficult to convince a lender that you're going to now buy a smaller house to actually live in it so a pro starts small and we'll talk about good deals in a moment so you're not worried about the over leverage of putting five percent down a pro starts small gets good deals and always looks for decent neighborhoods a pro defines a decent neighborhood very simply here's the question you ask yourself would you feel comfortable doing a craigslist transaction at 9 00 pm in the neighborhood if the answer is yes you're good if not don't buy there when you narrow down where you're looking it's easy to find agents in your area because of this silo trick so keep that in mind also it's a very good idea in today's market especially which is very competitive to reach out to an agent and say hi agent i'm so-and-so i'm looking to buy in this price range here's my pre-approval letter from a local lender oh by the way here are my proof of funds which is just like a screenshot of your bank's statement or whatever showing you have the money for the down payment and guess what this does it instantly proves to the agent that you're a serious buyer you're ready to go and you're not a time waster very very very important even if you're brand new you want to make sure you get the bare minimums out of the way and you rise to the cream of the crop in terms of being a newer buyer that's going to help you get the best deals so have these before you begin looking for properties now here's the next newbie mistake many noobs start looking for the cheapest house available in my opinion this is a big mistake because you usually end up with something called a yeah but a yeah but is exactly what you don't want and pros know this pros always look for non-yeah but property yeah buts are things like hmm wow this is a great house honey what do you think about it yeah but it's under a freeway see yeah but or yeah but it's under high tension power lines and i'm gonna glow in the dark when i sleep or oh cool you have to walk through this bedroom to get to another bedroom or worse it has unpermitted and illegal additions you want to avoid those like the plague then you don't fall victim to these silly things that noobs fall victim to noobs also tend to fall victim to classic homebuyer mistakes that start with looking for things that are pretty with staging and smell nice these are classic tricks to deceive you into overpaying for things that you're not going to get when you move in the smell is going to be gone and the furniture is going to be gone don't pay extra because things look nice and pretty be very careful even if you're buying new construction the model home is going to look so different from what you're buying be careful don't get tricked by the glitz and glam it's worse than the car dealer lots it's worse because the upgrades are a rip-off in real estate especially if you look at properties that are known as turnkey properties or flips these are usually problem properties in my experience when you look at turnkey properties or flips you tend to find properties that were renovated for the purpose of selling and not always but often the work is done by low quality workers who'd use low quality materials and they don't do the correct work and not always there are some very high quality flippers out there that would rather lose money than sell a bad product but it's very difficult to figure out okay where's the good one where's the bad one sometimes you don't know if they skimped out on the code requirements behind the walls because you can't see what's behind the walls and this is sadly very frequent and it makes me very devastated when i see newbies get ripped off in this manner and this is why i'm warning you instead if you want to buy something because you don't want to do work by new construction because when you buy a flip you buy a deal as is which means if there are problems on the walls it's your problem if you buy new construction and there are problems in the walls you generally get a 10-year builder warranty and you actually have a claim to protect yourself that is how pros look at real estate and pros also look at real estate for the sake of getting a deal let's now talk about getting a deal because that's what i've been alluding to here for a while pros look for single-family real estate and multi-family real estate but there are different things to look at for each of these let's start with single family single-family real estate you want to look for some dated cosmetic elements things like old paint carpet it's stinky or there's a lot of garbage or there's popcorn ceiling or there's ugly landscaping this is the ideal property to buy as long as ideally it has a new roof maybe the foundation's good and the electrical plumbing systems are updated you want to stay away from the expensive stuff so i would rather have the expensive stuff done like the windows and the roof and the foundations good but it's really stinky than the other way around sometimes you end up walking into a flip and they didn't do the electrical and plumbing but they did all the paint and carpet it's like literally the worst place to buy if you follow these rules it's very common to be able to buy a house for 300 000 in a four hundred thousand dollar neighborhood this is known as getting a wedge deal because of the cosmetic defects you're able to buy below market value you pay more than the flippers because in order to beat a cash buyer like the first house i ever bought in my life was me beating a cash buyer because i just paid a little bit more you still get a great deal in my case i was up against two cash offers for 290 000 and 287 000 and i said i want the deal i'm paying 305 000 after i put 50 000 into the house the house was already worth 450 000 and within a year it was worth 550 000 that's an example of getting a wedge deal that's how i bought a foreclosure against cash buyers and this is the kind of stuff that i do on a regular basis now the cool thing about this is if you buy a house that's say three hundred thousand dollars in a four hundred thousand dollar neighborhood and you put five percent down that means your loan is only 285 grand think about it five percent of 300 000 is 15 grand so your loan's 285 you fix it up which is going to take some extra money or some sweat from you you know putting in the effort painting it or whatever but wait a minute if you're in a 400 000 neighborhood and you finish fixing it up and you only owe 285 thousand dollars you now have 115 000 in equity in the property which means you can now refinance the property and instantly get rid of your mortgage insurance this is why i say don't worry so much about mortgage insurance it's better to do as the pros do and focus on getting a good deal if you get a good deal the options open up if you get ripped off and you get a big terrible deal guess what the mortgage insurance is going to do for you nothing it's not there to protect you it's there to protect the lender so don't get me wrong i don't like mortgage insurance either but i'm not going to pass on a good deal because i have to pay mortgage insurance i'd rather make sure i have a great deal now again if you don't want to fix things up then just buy new construction don't buy a flip buy new construction rent out the rooms house hack lower your costs now if you want to buy multi-family real estate you step into a different ball game instead of looking for fixer-uppers you want to buy properties with low rents this means you have to compare what the property is currently renting for to what the market might bear it usually is a good idea to talk to your real estate agent about this or a property manager to figure out hey i'm buying a duplex they're both two bedroom one baths at say 700 or 800 square feet how much can i get for these in rent be careful do not overpay for multi-family real estate and the best way to overpay for multi-family real estate is the rents are 800 and the market rent is 800 and then you get into a bidding war for the property you're not winning here instead look for a multi-family deal where the rents are 600 for a unit and the market rent is 800. now you can go in and you have room to raise the price of the rent over time you can take your time doing this and that increases the value and remember the cool thing is you could always move and do it again step seven write the offer and get inspections when it comes to writing the offer the secret to negotiating is information you can't negotiate if you don't know what the other offers are and where the kids are playing ball so you need to get the answers there is no single deal that i have done in my career where i went into the deal blind i always knew what i was up against and you will always lose in multiple offer situations if you have less information you got to find out what the seller's desires are and their motivations are how fast they want to close what certainty they want do they want to deal with the termites or not what can you do to negotiate your offer without always giving the best price i win many deals because i offer better terms and i don't always pay the most just last week i got an offer accepted thirty thousand dollars under what other people were paying on a fixer-upper simply because i cleaned up my terms and i gave the sellers more certainty that's how i now put net worth in my bucket that's what pros do and you wanna act like a pro be a pro out there even if you're just getting started and work with your agent on this once you're in the pros know that you're going to use your home inspection to look at issues for big things like red flags with the foundation the sewer line and the roof those are your big big expenses in the structure right or illegal additions that's where the big big ticket items are electrical and supply plumbing is next but those usually aren't as bad and avoid illegal additions when you can your home inspection is stop one you don't want to like send every contractor out and spend you know 500 on 10 different inspections day one start with the home inspection that way you're not spending all this money on a property you're not ready to buy yet get your home inspection if the home inspector says hey it looks like we've got some problems here with the drain lines guess what you do yep plumber hi plumber i've got problems with a house that i'm buying in the sewer system is there any way you can inspect the sewer lines under the house for me no problem we can open up a toilet uh we could take the toilet off stick a camera down the line and we could tell you what your drain health looks like it's gonna cost 200 are you okay with that sounds good come on over there you go you deal with problems when the red flags come up in your inspections and then get the actual bids before you close you want to know what you're getting into it's so common for people to say things like oh you're going to buy a house you're going to have to replace the roof but you didn't inspect the roof when you bought it you know uh so that that's like a newbie thing that people say about uh buying a house so be careful you don't want to fall victim that instead do as the pros do and get bids based on the red flags also if you're getting bids for renovating a property never ever ever make this mistake do not get a bid for the entire job like it's so common to have a contractor come out and go want me to just bid it all for you come on i'll get everything done for you i'll do the electrical the plumbing the kitchen the bathroom the roof the foundation i'll do everything you know what i'll rebuild the house for you no that is the wrong way to do it that's exactly how you're going to spend 100 to 150 000 with a contractor when you shouldn't have spent more than 30. just buy new construction if you're going to do that you don't want to buy do the work seriously like it's okay to buy new construction if you don't want to do the work but if you're going to do the work do it the right way instead the way to do it is this if you need flooring you go to a floor store if you have an electrical or roof issue guess who you call yelp electrician oh wow there are 20 in the area hey electrician i've got a problem i'm buying this house it's a rental property and i really want to make sure it's safe for a tenant can i hire you to fix the problems in my home inspection as cost-effectively and safely as possible and guess what they're going to say yeah sure we'll come on over you know and that way when they say you know this is an old electrical system are you sure you don't want to replace all the wiring you know i don't have the money to do that is there any way we can make the current electrical system safe because it's a rental and 99 of the time they say oh yeah totally no problem it's a rental no worries we'll get this rental safe for you boom that's how you save money it's kind of like should you replace the roof well i don't know hey roofer if we spend 800 bucks doing a tune-up on this roof can you make this roof last another four years if the answer is yes do it if the answer is no well then you probably want to plan to budget for a new roof you don't want to be a slum lord who doesn't do anything that's the difference a slum lord does nothing a pro maximizes the value of their dollar and a noob replaces everything and builds a new property all right just know that in the future your goal is building wealth not spending now two big newbie mistakes that come up a lot don't go custom when you're upgrading it's so common for people to go well i really want this midnight green countertop or this fancy brazilian flooring or this crazy tile that's got all these designs and weirdness in it because it's cool to us i like some of that stuff too i like crazy and modern and custom but if it's going to be a rental property why waste the money it's just going to end up being dated you want stuff that appeals to 95 percent of people and don't overspend in the future this is a rental it's not your forever house build a forever house when you have a net worth exceeding five million dollars until then everything you do is rental grade step number eight during escrow which happens after you get your deal negotiated and after you do your inspections you know during the escrow process if you find repairs that need to be done that you did not expect i highly encourage you ask the seller in a nice and reasonable way for a credit for repairs so if you have your home inspection i don't encourage you writing a letter to the seller going hey you know the carpet's nasty i want 2 000 to replace the carpet you kind of knew about that going into the deal right that's not going to fly instead if there's three thousand dollars worth of electrical expenses and some other stuff that you've got to do maybe ask the seller for five grand and hope to negotiate down to three this will help you cover your closing costs closing costs are usually between one to two percent depending on the loan you get if you take a lower interest rate you'll generally pay more money in closing costs if you take a higher interest rate you tend to pay less money in closing costs sometimes it makes sense to take the higher interest rate if you know you're going to refinance in the next few years because you want to get rid of mortgage insurance or whatever there are ways to get rid of mortgage insurance without refinancing as well talk to your lender about those step number nine when doing the work on the property follow a very simple order a noob walks in and tears everything out instantly don't do that big mistake don't remove the cabinets until you have a plan instead come up with a plan and ask yourself can i keep this can i keep the kitchen cabinets can i keep the vanities can i keep the bathroom tubs the showers and the tiling those are the big things go ahead and throw down new carpet throw down some luxury vinyl plank throw down some new paint scrape the ceilings and get the property cleaned up the best order to do the work in by the way is number one plan number two do your minimal demo then have your plumbers and electrician prep valves and electrical like adding ceiling fan brackets scrape your ceilings and redo the drywall as you need to properly paint the walls and the cabinets throw down countertops and flooring then pop in light fixtures and plumbing fixtures and your appliances to finish it off with your toilets generally you want to keep at least one toilet on the jobsite by the way then do your landscaping last and don't overspend on landscaping mulch and rocks look great with a little bit of grass you don't have to overspend now usually you're going to live in the property for the first year so you can do a lot of these repairs on nights and weekends heck some people even seed their grass to save money there are a lot of things that you can do step 10 when it comes to renting the property out make sure whatever you do you prioritize getting a high quality tenant over higher rent see i would much rather have a high quality tenant with job security income security and high credit and all the other forms of tenant leverage that i could get then have a tenant that's just paying me 50 or 100 bucks more but is a risky tenant big mistake well there you have it now what you want to do is repeat this process and you literally build yourself an empire you build yourself a fortune by buying real estate and starting by living in your first property when you move you're on to number two then rinse and repeat the process now you don't always have to move either you could start building wealth you could use a cash out refinance and take money from your first property to help build your real estate portfolio without moving you usually need 25 down to do that that's why bank hacking is so desirable finally if you want more information and more detail on any of these steps i have an entire real estate investing course that's dedicated to teaching you how to value properties and ensure you're getting a good deal i highly recommend you check that out use the coupon code in the description down below check out the other programs as well and folks you will not regret it i can't wait to see you there and we'll see you next time [Music] you

Channel: Meet Kevin

Views: 1,144,655

Rating: 4.9460325 out of 5

Keywords: real estate, loan, mortgage, how to buy a house, how to buy real estate, how to buy first rental property, first rental property, buying real estate, mortgage borrower, buying first house, first-time home buyer, wedge deal, buying a house, buy real estate, buy cheap real estate, cheap below market value, below market real estate, cheap house, flip house, buy house, no money down, pmi, mip, fha, mortgage insurance, home loan, home purchase, realtor, real estate agent

Id: 7TB_eRhSNV4

Length: 39min 44sec (2384 seconds)

Published: Wed Aug 12 2020