How to Invest in Real Estate in 2024 (Step by Step for Beginners)

trading stocks is a blast here's a screenshot of being up over 25% in a week and a half on trading a 30-day long put on an overblown Tech stock but stocks aren't for everyone and so the question is can you still become a millionaire in 2024 in real estate and never pay taxes on it in this video we're going to review not just if it's possible but how to make it possible note this video is brought to you by my real estate and finance with Innovation event coming up June 21st to 23rd in Vegas this year so make sure to meet us at the millionaire Symposium go to meetkevin.com to learn more and book your calendar for June 21st to June 23rd Ben Mala will be there the $250 Million Man and many others stay tuned for more speaker announcements as more announcements come out the price will be going out now quick note this video was posted a few days after I expected it was going to be posted which means when you hear about summer later in the video summer already had her surgery which is really exciting and I'm just happy to report that she is a happy little baby she's I don't know how to easily say this but it's like the most exciting thing I could possibly say she's going potty this is really really good her her insides were detached okay so this is a really really big moment for us in the family so we're really really happy and I wanted to share that with all of you so if you hear reference is to Sumer in her surgery coming up the Good News by the time we've fit post on this thumbs up so far so good can you still become a multi-millionaire in real estate in 2024 as a financial adviser real estate broker former licensed contractor former license mortgage loan originator rare to be all of those things by the way my answer is absolutely hands down absolutely in fact I think it's one of the best ways to build wealth you got to get your money out of cash and into assets because cash is going to become worthless to inflation I study the Federal Reserve like crazy and if there's one thing we can all guarantee it's that they won't be pausing their money printing regime anytime soon in fact they purposefully engineer inflation so you have to get your wealth out of cash into the assets that could be ownership in businesses or ownership in property or what I encourage is both now this is obviously a real estate video but I like to be balanced with everything that I do I'm a big fan of 50 % property 50% business ownership which could be in your own businesses or stocks so the first thing that you want to do is check the local per capita income in the area that you want to invest in so look zip code by ZIP code per capita income usually what we find is per capita incomes that are most stable are going to be in excess of $30,000 per capita that means per head so when you're in excess of $30,000 a family of four would be somewhere around $120,000 of income above 30,000 you usually have more stability so higher credit scores higher incomes easier to manage and potentially you're going to go for some more premium improvements on the property that doesn't mean it's bad or you have instability if you go lower if you go under 30,000 so between maybe 22 to 29,000 pretty common range what you're going to be looking for is stable incomes stable credit maybe a lower credit score you might be instead of 72s on the 30k plus you might be 650 plus stable job but what you're going to do is you're going to change the quality of improvements now we'll talk about that because most areas in those income thresholds aren't going to require as much of a renovating budget first know your location are you comfortable there and then what is your per capita income what is your clientele in that particular area that's going to guide you through the rest of this video of course you could check crime statistics you could check Megan's Law database just to understand are sex offenders not because maybe you care but because your prospective tenants might care because keep in mind there are people that are on the sexual predator list that you know I'm not trying to like defend being on the list but I'm just saying some people get on the list for kind of go and pee uh behind a tree and then they're on the list but it doesn't matter it doesn't matter how minor or s it was what matters is that when people are on the list it's going to affect the ability for you to attract tenants to your property so check Megan's Law check crime but frankly if you have to check the crime stats it means you don't actually know if it's a good or bad area and so generally if you know the area you can even skip this instead use that per capita guide to help you for the rest of this video once you've picked that sort of the zip codes that you're interested in the regions that you're interested in within 30 minutes you need a car that can get you within 30 minutes you got to be there why City inspections utility issues tenant issues property management issues vacancy issues dealing with repairs making sure the neighborhood's not going to poop you want to keep an eye on what's going on in the hood so to speak best way to do that is by living there and seeing is the area getting worse or is it getting better are people investing are people taking care of their Landscaping this person we've got solar panels nicely kemped yard this person solar panels nicely kemped yard that's great they put in artificial turf over here that's wonderful new paint job solar panels as well awesome this is wonderful uh you know then we've got uh this house over here needs a little bit more love who knows I don't really taking care of the Landscaping but we got a mix over here so we're like 50/50 the more of those higher quality Renovations we're seeing the better I like seeing more Renovations because it means people want to live in the neighborhood if people are adding on to properties it's also a really good sign because cuz it means people want to stay there if nobody's adding on to the homes like that TW story we saw then it's a sign that people want to leave the neighborhood well what is that mean more turnover for your tenants see one of the things you have to think of is you have to think like a tenant when you want to be a landlord landlord is such a dirty word but if you're a good landlord it shouldn't be a dirty word you're providing housing to people see this car looks like it's been here for a hot minute but we've got an addition over there too which is nice still got the Christmas lights so I feel like it's like a plus and a minus this one's a little better got some nice Landscaping over here look at that brand spanking new roof they painted uh the protrusions coming through the roof new paint shop garage door looks new uh nice wreath everything's well manicured this one's well manicured too see I feel like I could conduct a Craigslist transaction here at 9:00 at night and you want to ask yourself are you comfortable with your mom your boyfriend your girlfriend conducting a Craigslist transaction where you want to rent at 9:00 at night if the answer is no you probably don't want to be a landlord there it's going to be a lot harder for you to have tenants that want to stay because everybody's using your housing as transitory housing and they want to get in and get out because it sucks uh or if you have a high quality neighborhood maybe you never have turnover see another thing to consider is you have a lot of choice you can not only pick a location but you have single family versus multi we'll talk about that separately but you got to get the location right first look at this souped up Tesla over here brick on the side added on this whole section in the front is added on I actually think it has a separate entrance uh those are custom colored dual paint vinyl retrofit windows I can see that from here the wind those lights that they put next to the garage door and that custom garage door that's nice that's a nice garage door they probably spent 1,500 bucks just on the garage door not including the opener those lights are custom that's pretty nice all the one of the light bulbs is out they added the solar panels as well driveways a new pore they added the Ada handy so that they made a mother-in-law sweet there maybe for you know well their mother-in-law or whatever very nice job see that's the kind of stuff I want to see I feel comfortable doing a craz transaction there and you know what kind of house I want to buy the house right across the street from it look at this one so what do we got here original garage door see that look at that original driveway see all the staining and how it's not patterned it's the older kind of style concrete it's ancient it's this 50-year-old concrete see the weeds coming out of the gutter come on nobody's been maintaining this look at the windows original windows The original window in fact if you look at Megan in the latest uh photoshopped a photo of them or whatever one of the people one of the people who was sort of going viral circling things that were wrong in the photo they circled the window because they're like oh the lines of the window aren't straight now don't get me wrong I think the the photo was photoshopped but one thing I didn't think was photoshopped were the windows cuz look at those windows again look at how funky and and wavy that is that's because of years of paint jobs uh and quite frankly just age so roof is old here doors are old windows are old landscaping's tattered uh I mean this this this is the kind of wedge deal you probably want to get if it came up for sale that right across from the other one I love that kind of house something that you should know about your neighborhoods is if you're comfortable there you don't even have to do what everybody tells you to do everybody says oh look up the crime report if you know the neighborhood you don't need to look up the crime report because you know what the crime is like is the crime good the crime in good or is it bad you're going to deal with the tenants in that area you're going to deal with the complaints you're going to deal with the headache everything about property management has to do with how happy your tenants are living there the happy they are living there the L they complain now even within good neighborhoods there are properties you don't want to buy such as properties right next to the freeway which is right next to the railroad truck which is right next to the gas pipeline infrastructure okay maybe that's not that big of a deal but look at all this over here what what do we got over here I don't even know what we got over here I mean what looks like a nice bike trail but anybody in the neighborhood can take advantage of this bike trail this looks cool but what is this we got oh some kind of like storage units over here with barbed wire I mean it's that I don't want to be right next to this so these are things where a tenant's going to look and go oh is the crime really bad they got all these you got all the noise ah I'll pick a different rental you want to get rid of those yeah butts because something can look like a good deal but then you look at the price you go Ah that's a really good deal yeah right on the free yeah it's right next to Railroad Track yeah it's right next to the explosive uh Cliff or the gas pipeline or the barbed wire or whatever it is the graffiti and sometimes even you you get this idea of oh but it's a nice Trail in the background well you know who likes being on the trails in the background especially in California yeah crime a lot of different things to evaluate you know it doesn't surprise me at all that the property next to the railroad track uh the storage area the barbed wire the walking trail and the highway has this going on old van old electrical panel single car garage no re driveway two cars in the whatever you would call this thing a dead roof flowers coming out of the gutters you've got multiple cats living under the front of this car it actually looks like they're like four or five cats I see under that car car and there's they're actually little um feed trays so they're feeding yeah I see five cats in this shot they're feeding the cats under their car we've got the thrown in Tire park bench couple wheelbarrows trash I got see ladders thrown in the backyard weird shed that looks rotten uh it's not a surprise that this quality of living is what's attracted to being okay living next to this unfortunately it's probably because they had to because of affordability issue uh and and this is this is one of the things where stay away from yuts that's all I like to say because it the people who are okay with yuts might not necessarily take care of your property the way you would expect them to so if you want to be the yah but landlord that's fine just understand you're going to have to price lower much lower and then not only you're going to have to price lower but then the people you will attract to that unit will potentially require more maintenance or intervention now it's very important to remember that the quality of your property will determine the quality of your management it starts with a property nobody thinks of it that way I've been doing this for over 14 years now and I want you to know that I love what I do but it's also been very successful for me I became a multi-millionaire in real estate before I ever started YouTube now keep in mind that means I myself with my wife bought 27 different properties each of them a wedge deal that increased our net worth by over $100,000 many of them2 to $300,000 you multiply that by 27 properties you can see we made a pretty penny investing in real estate and I think the same thing can still be done going forward that's why I created a real estate startup doing exactly what I preach not somebody telling you how to do something and then I never do it I did it and now I'm doing it at greater scale and there's no shortage of opportunity now let's get into actually talking improvements for a property and Property Management let's start with the sub 30,000 per capita income renovation usually you're going to find these single panel doors in the oak color along with Ivory wall switches for your lights Ivory outlets and most of the time you're not going to do much here you're going to go usually with simple paint and carpet we like to call it that is your basic style renovation for an under 30,000 per capita income rental unit often times you're not painting kitchen cabinetry maybe you're replacing some door hardware but really what you're trying to do is make the property livable in a more expensive style renovation over 30k usually what we like to do is we like to paint any of the oak wood a nice Swiss coffee semigloss prime it first with a nice non sand primer and then Swiss coffee semigloss I personally prefer contrasting wall paint like this we call this Edgecomb gray it's a color match Benjamin Moore we also like to replace all of the old light switches like this which you might not on a sub 30k with the newer switches and the newer Decora tamper resistant Outlets usually get that GFCI protection going as well especially if the property is ungrounded this is a case where you actually take a two-prong outlet and turn it into a three-prong Outlet the only way to appropriately do that is if these are GFCI protected and then labeled no equipment ground GFCI protected in this case I believe we have a ground we'll make sure we verify with the electrician something that we like to do in almost all of our rental properties is quality of life Improvement like a ceiling fan in this case we have an electrician run the four wire cable that's ground plus three others 3 plus one so that way you could switch the light and the fan separately we like an electrician to do that so that way it's switch controlled right by the door and that way we have properly done conduit here since we don't actually have a ceiling in this property we go straight to the roof essentially that's the way this property was designed and we can switch that right here this is a quality of life Improvement we'll actually do in both types of properties that way we have one Central source of light and some Cooling in each room and they have to be professionally installed make sure they have the ceiling fan box otherwise those fans come crashing down it's your liability speaking of liability everybody when it comes to rental property is afraid of liability one of the most important things that you have when you get into real estate is a good relationship with an insurance agent it is the most important thing frankly if the house burns down and everybody's alive and safe which is the most important thing property can always be replaced that's the most important thing to remember now some properties will require additional earthquake or flood insurance but most on a basic level require fire and liability insurance basically the way it works is if you take the building and you kind of turn it upside down and shake it everything that's attached to the building is generally covered by insurance I verify that with your insurance agent what that means is a pipe burst in your attic you're like oh no the liability well everything that didn't move the insurance company will place for you subject to your deductible now don't get me wrong you don't want to go down that road CU it's still a headache you deal with insurance and adjusters and contractors it's a pain in the butt but insurance is really designed to prevent you from having a massive catastrophe that really hurts you and so what I generally recommend is make sure you have a good landlord policy and then on personal rental real estate you have get an umbrella insurance policy to extend the coverage usually you'd go for like a $300 or $300,000 landlord policy and then you'll get an umbrella that'll boost everything to an extra million bucks which is kind of cool for all your rental properties to have so you have sort of an umbrella over all your various everybody likes to get into llc's and all that good stuff let's be real the only real benefit to an LLC is in the event you get sued on a property like this that you're willing to let that LLC go bankrupt lose the property and try to protect your other assets or your other personal wealth from being attached so to speak in a lawsuit good luck with that first of all best first line of defense Insurance second umbrella Insurance uh next and this is probably even before insurance but we'll put insurance in there because there are times during renovation you might want insurance but you want to make sure you actually properly maintain and renovate your properties so for example here we're replacing the roof we're replacing the windows we're updating the plumbing the electrical we want it to be a safe property for people to live in so they're actually we're replacing the water heater as well for ex I'll show you the water heater moment and the point of that is to make sure that we have a Quality Property we're giving to a tenant so there aren't actually many leftover liability issues that could happen because we've updated a lot of the property that reduces our liability being a good landlord reduces your liability substantially not being a slim Lord having Insurance an umbrella insurance that helps you a lot having entity protection for the vast majority of people not necessary it's a great way though for a ha say it attorneys and CPAs to sell you more tax filings more complicated tax structures under the benefit or guys of liability protection and I know the attorneys and CPA is watching this are like come on Kevin like you got to have it you got to have it I'm not saying don't have it I'm just saying it it would be like much lower on my priority list yes are there benefits if you actually operate these better uh or effectively like separate books and records and you really operate it like a separate entity sure most people ain't going to do that so make sure you're a good landlord you're in a good neighborhood you're getting great tenants and you're doing good work for your properties see in here this is an example of what I hate this is like a slum Lord level right here okay so let me show you a few things first of all this is a natural gas water heater we're in California where there earthquakes see this when this happens in an earthquake guess what happens your pipe Burse your gas line ruptures the exhausts come out it's bad and I'm barely putting pressure on this I feel like I'm putting less pressure on this than a 5B trigger on a gun that's bad imagine a real earthquake in addition to that oh by the way way you fix that is proper blocking this is obviously improper blocking blocking is is like this and then strapping look how not tight this is if this was tight now I can't really shake it anymore so really it could be as simple frankly as getting in here and tightening the bolts to make sure it's snug up against the blocking anyway then we've got corrosion right here uh this is basically ready to blow I don't want to deal with this mess so this I've already said we're replacing everything here looks janky whoever did the plumbing and the soldering got everything burned over there it's nasty you've got two gas lines over here you got a gas line sticking out over here a new gas line over here the bonding wire looks like absolute crack look at that look at this this is the bonding wire can almost pull it out I guess you can't really see it cuz I just pulled the part that was loose but I just yanked on it and I got that bonding wire to move about this much felt it might not have seen that on the camera but that means the bonding wire is not even tight an option and don't worry you don't have to know all this stuff for electric you know electrical world or Plumbing world you just have to know to surround yourself with good contractors let's talk about that in the kitchen here's an example of a kitchen style that I like using for 30k plus quartz countertops wouldn't do that in sub 30k white cabinets wouldn't necessarily do that in sub 30k and then of course we'll be adding Hardware new stainless sink and these windows the reason we painted over them is because we are replacing them with retrofits don't worry that's all planned and it's all in the schedule this particular Kitchen By the way was super closed off before we could show you before and after here and obviously this is still in progress but uh opening this up was a big win we did lose the refrigerator spot here but that's okay because we just decided to move the refrigerator to over here and added some beautiful new Cabinetry white Cabinetry that we didn't even have to paint to match uh the rest of the kitchen waterline electricals in here so we're looking pretty good now we're going to throw up on screen some Afters of projects we've done this right here on screen is going to be a matterport it shows you what our kitchen looks like with the white cabinets look at the flooring we've got the colors this is a 30k plus median income area this is what this project is going to look like that we're standing in right now we use pretty much the same formula every time and as you can see we try to make it very nice very livable now what I'm going to show you over over here is usually a kind of project that I don't like getting involved in I usually don't like getting involved in big projects where we're doing things like new electrical panels they still got to be labeled we've got the arc faal circuit interruptor right here which is great those are two code we've got permits Galore on this property uh and we're thinking about adding an accessory dwelling unit now one of the biggest risk factors when it comes to real estate and most people screw this up is doing too much the problem with real estate is it is so easy especially on older real estate to overspend the best way to save money is to say no to certain projects and in many properties you can get away with we don't need a new panel we don't need a new roof let's patch the roof let's fix the panel let's fix the AC versus replacing this one was just so bad we had to do it all and that's okay we can do that but you have to surround yourself with a network of contractors they going to help you out so how do you do that well you start you pick up the phone you call five different electricians you get quotes and every single one of those electricians you ask him hey got a good drywall guy every electrician knows a good drywall guy because who's going to patch up the house after the electrician does their work this is how you get vendors and you start becoming known in your neighborhood as somebody who hires people pays a decent price you don't grind them down to zero it is better to do less work and pay fairly than to pay re unreasonably low and request more work that's dangerous bad for your long-term reputation people want to want to work for you or they'll cut corners on your house somewhere else that's bad so you got to be careful with that and there's a balce you don't want to get overcharged either there have been plenty of times where all we had this joke in the office the other day which I loved but we had a contractor a new contractor come in with this $118,000 proposal for a forair unit AC and ducting and wanted to do all this this work listed it all out I looked at the pro proposal and said this is maybe a $10,000 job but I don't even want to pay that because I feel like we're getting ripped off here this is absolutely ridiculous for what the size of the house is and so I told the team here's what we're going to do we're going to get on the phone with them we're going to call them up and we're going to say hey we have a budget for this project of 10K that's all we got we got 10K on this project and while we appreciate your bid we're going to have to call other vendors so what happens after we hung up the phone said that the team within 24 hours we'll hear back well it was just 24 minutes later and we got a revised quote of under $10,000 for the entire project now that is not necessarily a sign of oh my gosh this is like amazing negotiating it's a sign of being aware of when you're getting ripped off versus not see if they came in with a quote at 10,500 hey okay well that sounds reasonable that's the market price for this project how do you know what the market price of a project is you have to talk to a lot of people if you go to a general contractor you're going to get sold a lot more than if you go to specific vendors every specific vendor though is also going to try to upsell you oh you need to replace the Ducks because they have the asbest oh you need a new panel you always need a new panel every electrician's going to sell you a new panel every roofer is going to sell you a new roof every plumber is going to sell you a new water heater every HVAC person's going to sell you new Duck and so many times these systems are totally fine and we need to tell contractors hey we're going to Sho string budget here this is a rental property what's what do we need to do to make this a reasonably safe property so we can get a tenant to move in we don't get a lot of complaints because we're calling you for service calls because we want to build a relationship with you they want projects not service calls so they want to get you into the next rental property where we can get to doing more projects that's the relationship you want to build now that vendor now knows hey we're not going to roll on high prices so you either play ball with us at market prices but don't try to rip us off that's hard becoming an expert in those valuations is hard becoming an expert in knowing are you actually getting a good deal is also hard and you're not always going to get a great deal but your goal is to continuously hit singles and doubles over and over and over again and most importantly get started let's get to the next section I'm going to give you a very quick formula if you spend $500,000 on a house say $450,000 plus 50 fix up you're usually trying to aim at aund $100,000 wedge so you want it to be worth 600 when you're done you spend a million on a property all in you want it to be worth about one two that's usually the goal problem is the higher you go in price usually the lower rental cap or yield you're going to get cap rate is your yield on real estate usually this is another rule of thumb most real estate is going to average between a 3 and 1 12 to a 5% cap rate now that would be taking your gross income subtracting a percentage for taxes Insurance maintenance management utilities reserves and then what's left is your net rental income divide that into the price boom you got your cap rate now keep in mind different states have different cap rates and different states have different expenses so if you look at a Texas you might be using a 50% expense ratio because You' got high property taxes California you might be closer to a 65% expense ratio so see what's normal in your area and then you can actually appropriately evaluate what the cap rates are in the area usually what you'll find is the higher cap rates will be associated with higher rates of poverty lower cap rates will be associated with coastal towns high quality properties high quality locations locations that are always going to be supported by jobs and that's the next piece we get to talk about people always ask me why is real estate priced different in different areas what is the one driving factor and the answer is always the same jobs often times you'll see small towns that have one jobs provider and you get this 10% cap rate oh my gosh 10% what happens when that one jobs provider that one school closes that one Factory closes down what happens to the town turns into a ghost town so the market does a really good job at telling you if the cap rate is too good to be true there's probably an external reason for that we were looking at a 14 cap rate in Kansas a few weeks ago right next to Hospital Medical Center we're like this is great doctors you name it well why was it a 14 cap so it turned out that hospital had actually closed down and been converted into a mental institution which look there are people who definitely need mental health and there are plenty of those in California so we need those sort of support services but that is a different type of animal compared to what it used to be it actually turned out doctors were selling that project so usually when you're looking at high caps it looks too good to be true often is the Market's really good at telling you when something's too good to be true now here's one way to get a good look at real estate fly over it now one of the biggest mistakes people make when it when it comes to real estate is over improving see a rule of thumb I like to do is if you're going to spend 25k of work you probably want to make at least 50 you're going to spend 50 in work you want to make at least 100 you get that kind of theme Here the worst thing people do over inprove they they improve too much crown molding is not necessary the most expensive appliances aren't necessary the most expensive HVAC isn't necessary the most expensive furnace isn't necessary most expensive water he heater isn't necessary most of the stuff that's available in stock at Lowe's is available in stock at Lowe's and is not a special order for a reason it's the most common stuff you want to go with stuff you special order that's where you start getting ripped off now a lot of people hate landlords and there's a real reason for that landlords have a really bad reputation for not wanting to take care of their properties because they're pinching pennies problem is real estate is a customer service business if you have a really good quality building good quality property and you take care of your tenants you have way less Property Management headache and you end up saving more money and making more money in the long run now a lot of property management companies fight with landlords because landlords are looking for that net operating income and the reason for that is they want to sell these buildings to somebody else that doesn't necessarily mean you get the best tenants see landlords who are trying to get the highest pop for their rental get the the most management intensive tenants landlords who want the best quality tenants the best conditioned property for the long term don't necessarily go for the most expensive rent they might actually even go slightly below Market we prefer to do that we might rather go $50 below market value or even $100 below market value higher quality tenant take takes care of the property longer and less turnover see turnover is a big risk factor in real estate every time a property turns especially a single family probably spend more money than that security deposit so if you can keep a tenant for 7 to 10 years that's glorious because now you're buttering out your renovation cost over multiple Years you'll actually end up with more money in the long term so for me property management is customer service and quality of product first and then you have happy tenants a lot easier to manage takes a lot less labor see we have a real estate startup called House Haack we're actually fundraising for that right now if you're interested in it learn about it at house.com 2024 link down below as well and this company is what I believe will be the greatest democratizer of real estate rental income in the country think about this for a moment right now only about 3% of tax returns so about 6% of actual Americans when you consider a lot of these are joint filings receive income from rental properties so in other words very very few people actually make money from rental real estate most people don't over 94 4% of people don't make money from rental real estate we want to make real estate so accessible that you could simply swipe up and invest in a slice of a rental property at market value with no fees for the asset management acquisition renovation none of that bull crap just the basic property expenses are obviously built into the yield of that property we make it that simple to own real estate and take advantage of the appreciation without even splitting a share of that future appreciation that's what house hack is all about so that's my real estate startup we're basically doing what I talk about at scale we make money on the wedge anybody who invests in the properties themselves makes money on the properties so if you like what we what I talk about with the wedge you like our property management philosophy and our real estate investing philosophy you think we're going to make money considering investing in house Haack house.com 2024 but as far as how this applies to you think about this if we can scale this model to thousands of properties you can acquire 1 2 3 maybe five of these over the next 10 years and have way more wealth likely if you do it in the right way than anyone else again only 6% of people receive income from rental property that means if you just have $1 rental property income coming in you're already in the top 6% do that five or six times you're quickly in the top 1% of Americans now a lot of people have a reputation or have this feeling that landlords and corporate landlords suck or whatever but here's the reality people need a place to rent people are always going to need rentals whether they're in an area for a shorter period of time they can't qualify to buy they don't want to buy they want to rent by choice if nobody wanted to rent they wouldn't be landlords but the most important thing to remember is that while my goal is to become and create the biggest landlord in America we don't want to just create the biggest landlord we want to create the best landlord the best landlord who does the best service for tenants who takes care of their tenants and lets the vast majority of Americans invest in real estate at scale now what's super important when it comes to real estate investing is not paying taxes look nobody wants to pay taxes and in real estate there's a way to never pay taxes now that seems wild but let's talk about that two types of Tax Strategies for Real Estate two main ones first one has to do with defer your capital gains forever so let's do an example let's say that you bought property throughout your entire life and you kind of every 2 three years bought another and eventually you had $10 million of real estate gains capital gains you have a few choices you can keep the property a lot of folks are like what good does it do me if I have all these gains and equity and property how do I live off of it well easy if you want to you can take a credit line or refinance your real estate where your tenants are paying your debt and that's not a taxable event you don't pay taxes when you take a loan against property it's not taxable which is great because you could functionally use your Equity with tenants paying your loans for you without actually having to pay taxes which is fantastic now of course always talk to a CPA about this but what you could also do is take that $10 million portfolio and sell it and be done with real EST estate but the problem is if you do that you probably have to pay taxes maybe somewhere between 15 or likely 30% because of state taxes and long-term capital gains taxes plus how much you're realizing in gains well that means you're left with seven at the end of the day so you just paid $3 million in taxes what's a way to avoid that well there are two ways you could permanently avoid that one is unfortunately you get hit by a bus and your family inherits those properties at a stepped up basis which means they don't have to pay taxes so if you sell on March 31st you pay $3 million taxes or you don't sell you get hit by a bus on April 1st your family sells on April 2nd no taxes kind of incredible now obviously verify all those strategies with a CPA over a certain amount obviously you're going to start hitting estate tax issues but here's something else to consider there's something known as a Delaware statutory trust a Delaware statutory trust enables you to sell your real estate and 1031 it into a real estate fund it's actually something we're doing with house Haack if if you're interested in this email us at Kevin house.com or IR house.com and let us know you're interested but what's remarkable is you could sell your real estate 1031 exchange your capital gains into a real estate fund and defer your taxes while still getting the upside of appreciation cash flow and not having the headache of dealing with tenants and toilets so two big ways you can avoid taxes with capital gains now what else can you do everybody always wants to know how to wash their hands of real estate you know get rid of the liquidity or the liquidity problem with real estate people like oh real estate isn't liquid real estate is pretty liquid if you have a good quality project and you price it right same thing goes with renting properties if you price it right it rents it's overpriced it doesn't rent pretty simple actually now when it comes to understanding selling real estate my general rule of thumb is don't do it because it costs 7 to 10% so every time you transition on that 1031 exchange you're spending a lot of money now if you want to get completely out of the real estate industry the fact that you can get into a DST 1031 into something and have none of the headaches of owning real estate anymore is a game changer and a 1031 can also eventually be moved into a publicly listed security now again email us at IR house.com if you want more details for that we're just setting up these uh procedures now and the fact fact that you can avoid taxes like that or differ I should say is pretty incredible and obviously we'll be involving a lot of CPAs for this but what I want you to know is there are ways to defer taxes forever in real estate and it is one of the best ways to build your wealth since you can take liquidity out without ever paying taxes hey so we're in the niku with summer I just wanted you to see her she goes in for surgery on the 20th so make sure to pray for her Summer She's a beautiful identical girl that has a little a to me bag right now her small intestine is actually detached right now from her large intestine got to put them back together we love summer and I'm going to be hanging out with her all day today but first I'm going to go grab a little food and coffee finish out our video and I'm going to hang out with Summer she's sleeping now anyway we'll let her rest okay now the next thing is depreciation depreciation is one of the big tax benefits of real estate it's a non-cash expense that's a fancy way of saying you kind of tell the IRS your building's losing value you're not actually losing value more in a moment now one of the big things that I love about real estate tax benefits and depreciation is you work with your CPA most people are going to go straight line depreciation but what a lot of people do is they go for accelerated depreciation cost segregation those video topics are really past this video we go into a lot more detail of the courses on building weth link down below but really most importantly the idea is whatever income you're getting you want to shelter the cash flow as well so not just the long-term appreciation of the property the actual cash flow you're getting you want to pay less taxes on that as well now a lot of people ask me about single family versus multif family real estate or even commercial real estate let's walk and talk about this because we're walking up to a building we've been looking at here's the Scoop multif family different animal from single family usually single family you're competing against home buyers 80% of the time it's a home buyer who wants to live there 20% of the time it's somebody trying to provide housing for somebody wanting to rent that property we when we buy we like to buy distressed properties that wouldn't otherwise be livable or the owners having massive management issues or a loan coming do or whatever with single family style real estate or one to four Style real estate mostly mom and CS single family specifically though 80% home buyers as soon as you get to like duplex Triplex 4lex you start getting closer to 50% non-owner occupants soon as you get to 5 plus the vast majority of the people you're competing against are people who have done this before so when we look at a building like this a mom and pop isn't buying this to live in there this is a multif family building with retail attached let's go through some of the pros and cons of each of these so multifam with retail attached biggest red flag to me is what happens when that retail goes vacant what happens when I got to find a new tenant willing to sign a 7 to 10year lease oops and then I'm taking a gamble on that business because that business might sign a 7 to 10e lease but what if they go bankrupt and they can't pay it's a different ball game and that's why most of the time these particular retail style properties at least in this market today in 2024 are actually going to sell for a discount now that creates an opportunity because you might say hey if I can get a multif family building with retail and because it has retail it's going to go for a discount maybe I can kind of get the Department building for a good deal and the retail for free if I negotiate it correctly now that's not always going to be the case but in this market there's a potential for that so what are some of the pros and cons here single family let's go through single family least headache once you renovate a single family property lowest Property Management headache you could possibly ask for these are easy properties to manage one person could probably manage two to 300 single family units Alone Now go to an apartment building and one person might struggle to manage 100 100 units and these are units that might have 1/3 to 1/ half the rent why because you have shared walls anytime you have shared walls which is true of duplexes triplexes and fourplexes generally as well you have noise complaints pet issues people making noise in the middle of night people moving furniture people scraping the walls people smoking and doing stuff they shouldn't be doing people parking in other people's places it's a headache it's like you're playing a mom to tennants it's a lot of work so the management intensity of multif family is really high relative to single family though it doesn't compare to the management intensity of room rentals which would be the highest room rentals highest management intensity that's like the drama of roommates and college dorms very challenging High management intensity but you get rewarded with a higher cash flow but it's a job that's kind of up there with short-term rentals right High management intensity property managers property managers excuse me for this will usually charge $30 to 40% because it's high intensity multif family buildings usually have an on-site manager that on-site manager is going to take a salary and so your management expenses are probably somewhere around 12 to 14% once you incorporate that on-site rent discount or salary single family management might be closer to 6% see the differences now retail management when you have a tenant on a triple net lease where basically they're covering their share of things like property taxes or otherwise and maintenance there's almost no main it's there's almost nothing you have to do but the risk that comes with retail is what if what do you do rather when it's vacant so what's my favorite and how do you get deals on these different properties all right here's a straight scoop you got to write this one down this is really important how do you get a deal on a single family there's only one way condition mom and pop don't want stinky carpet ugly paint nasty kitchens nasty bathrooms nasty nasty Landscaping it's very simple if there's mold if there's a leak we can solve those problems everything in real estate is solvable with some dollars now you might think oh come on Kevin everything's solvable with dollars wrong just came from a hospital because I've got a daughter going in for surgery it doesn't matter how much freaking money you have they're going to survive or they're not doesn't matter so that's intense real estate way less intense in my opinion because it's all solvable either the insurance is going to help you and bail you out or it's going to cost some dollars and even at the end of the day you still get your life even if things go bad but we don't want to go down that direction so single family is all condition based we got to get a condition wedge we call it needs to be a fixer uper got to have something we can fix up TLC I want to put a dollar in and get $2 worth of value that's the goal paint carpet kitchens bathrooms Basics don't over improve the more structural things you do foundations roofs yes we did a roof earlier today you're really only getting a buck to maybe 8 80 cents back per dollar you're spending but sometimes it's necessary okay single family what about multif family multif family like this how am I going to get a deal on something like this well the only way I can get a deal on something like this frankly there's only one way it's if somebody's got a lot of debt coming du or the building's being mismanaged let's say half of these units are vacant and they can't get them filled they don't have the time they don't have the patience they got a loan coming do they got to move on to the next project they just built the project they got to move on well what do you do then hey cash we can close in 5 days take our number that's an opportunity to get a multif family deal now can you get a multif family deal like a one like a two to three to four unit deal and house hacket traditional house hack where you're renting out the other units yes but keep in mind you're competing against more sophisticated investors so the odd odds of you getting a wedge are generally smaller so yes some of your payment can get covered which is nice you're usually not always usually having a harder time getting a really good deal on multif family unless you could really come in guns blazing with cash it's harder because you're competing against more sophisticated investors so that fix up isn't going to get you far there you got to get a mismanaged building with low rents that you can raise or some other Factor like a developer loan coming to great place to go retail get a vacant retail unit man you better know what you're doing to get that thing filled so often times vacant retail is a risk I generally don't recommend people starting out touch so that's a little bit of a difference between singles and multi now people say oh but Kevin you know if I have a 4unit building versus one house and one tenant leaves in the house one tenant leaves in the multi oh I'm only 25% vacant on the multi I'm 100% vacant on the single family it's such a the reality is the single family house is probably worth a lot more it's probably worth two or three of the units of the multi anyway so you get a couple houses and versus a 4unit I'd rather have two houses than a 4 unit Why management intensity Zero versus high management intensity no shared walls big difference now I also have less turnover on the single family so the odds are I'm going to have less vacancy and it's easier to rent them faster in single so when a tenant gives me notice what do I do I start advertising it for rent so I could get it rented right away and minimize my vacancy factor it's very important it's also easier to have people with pets which is very desirable in America people love their dogs people love you know we got a golden doodle my father has a golden doodle it's it's beautiful we love it it's a family M houses are conducive to that multif Family come on man you're bothering everyone else so they're pros and cons I'm not pooping on Multi versus single we own both I manage both I know what it's like but I want you to be really aware that they're pros and cons of each I think the best way you get a condition wedge single family if you can get a rent wedge or a developer default wedge that's multif family but don't go for a condition wedge on multif family unless you're also getting a really good deal on top of that that the only way I want to fix it up all right let's get to the next topic now something else you got to know is especially when you're looking at these larger multifamilies you better be picking good areas or at least know what you're getting into because let's just say not too many minutes or less from where we just checked out some real estate we also looked at a deal it was technically five units so we were looking at a four Plex so one building with four units and then a single family it was sort of a package deal that they were selling we're looking at going hm the numbers on this seem pretty good wonder what's going on so we go there and we've got footage of this go through the vacant unit that they have in the fourplex looks pretty good but what do you have oh right next door the single family house smashed in window in the back you got a magician in the back alley doing crazy things shooting lightning bolts through the glass place smells like mold it was a disaster uh and you kind of look around and go huh there's some interesting uh uh locks you got and not only that does this look like some crowbar damage so now steps we should talk steps on actually getting into real estate most important things let's just make it simple income you got to have income a lot of people hate the WT job they working for an hourly rate or salary but it's the best way to buy real estate because makes it so easy to qualify you have your own business hardest way to qualify want to be able to qualify for a loan got to get that credit score ideally above a 740 that's going to be your max best pricing some credit unions will let you go to about 760 although their lending has tightened a lot with the whole small Bank crisis we've been through so usually you're looking 740 plus so stable income credit and ideally limited debt every single dollar of debt that you have is unfortunately going to reduce your buying power for a home by about $2.34 per month so think about that if you've got $10 of debt you can make $2 $23.40 less of housing payments that's how they're going to qualify you so obviously you can extrapolate that however you'd like now as far as actually starting should you start with hiring a real estate agent or should you become a real estate agent usually what I recommend is work with an agent work with an agent and a great property manager just to get your feet wet you can always become an agent in the future in the long term I know that's an ambition most investors have you could always pull it off in the long run but start with an expert somebody's going to teach you how to do with the forms the local practices do we include refrigerators do we not what about washer and dryers what's normal in the area what's not all of those things are critically important because otherwise you're walking in and your tenants are going to qualify you they're going to go hey well what landlording experience do you have are you going to be a a bad landlord what reputation do you have if you don't have a reputation it's actually harder to get tenants you need a reputation of being a good landlord and that's hard when you're just getting started let's talk more on the plan so this has been a dramatic amount of information and there's a whole lot more to cover in fact that's exactly why we're holding the event June 21st to June 23rd in Vegas come join us go to meetkevin.com buy a ticket because we're going to go deep on all of this you can learn in person how to do real estate now not only that we're also going to do finance and Innovation speakers and all the other good things so it's going to be a really fun Finance event I think the biggest of the year now if you decide for whatever reason just doing it yourself isn't for you because I mean look out of the window there is a lot of real estate out there and it's a lot of hard work and if you decide that doing it isn't for you that's okay maybe investing in a real estate related company or in real estate indirectly like slices of real estate is for you and that's where I encourage you to read our PPM at house hack.com 2024 you can learn all about what we're doing with my real estate startup house hack how you can be involved and diversify from this crazy Tech AI stock market into some good old American Real Estate check it out see all the links down below make sure to subscribe share and follow for more thanks so much and we'll see you soon by can not advertise these things that you told us here I feel like nobody else knows about this we we'll try a little advertising and see how it goes congratulations man you have done so much people love you people look up to you Kevin PA there financial analyst and YouTuber meet Kevin always great to get your take even though I'm a licensed financial adviser licensed real estate broker and becoming a stock broker this video is not personalized advice for you it is not tax legal or otherwise personalized advice tailor to you this video provides generalized perspective information and commentary any third party content I show shall not be deemed endorsed by me this video is not and shall never be deemed reasonably sufficient information for the purposes of evaluating a security or investment decision any links or promoted products are either paid affiliations or products or Services we may benefit from I also personally operate an actively managed ETF I may personally hold or otherwise hold long or short positions in various Securities potentially including those mentioned in this video however I have no relationship to any issuer other than house act nor am I presently acting as a market maker make sure if you're considering investing in housec to always read the PPM at house hack.com

Channel: Meet Kevin

Views: 68,493

Keywords: investing, stocks, stock market, real estate, money, making money, passive income, wealth, starting to invest, meet kevin, house hack, househack, j bravo, graham stephan, reventure consulting, bottom line report, blr, bottom line, caleb hammer, calebhammer, caleb hamer

Id: Gzvd-s9P-dA

Length: 54min 57sec (3297 seconds)

Published: Sun Mar 24 2024