Revealing ALL of My Passive Income | 22 Rental Properties at 28.

hey everyone me kevin here i am a 28 year old real estate investor in southern california coming to you from a really old 1920s sears built kit home this home was literally shipped here in a box a hundred years ago and today we're starting to renovate it but in this video what we're going to do is we're going to talk about breaking down how much money i make from 22 rental properties that i own in southern california all of these are residential properties they're a mix of single family and multi-family and i'm excited to share with you some of the numbers behind why it makes sense to get into real estate investing and instead of carrying around this pickaxe i'm just gonna have a pickaxe shirt from runescape on let's jump right into this just a quick reminder that this video is sponsored by deal machine deal machine is an app that helps build my wealth investing in real estate by finding properties before they hit the market go to medkevin.com deals to get your first set of marketing totally for free and check out deal machine's youtube channel to see step by step how deal machine can help you find real estate in today's competitive environments before it ever hits the market all right let's get started with the video number one the only good real estate is real estate that's financed okay let me explain because i know that sounds crazy most debt is bad we know that car debt student loan debt credit card debt it's a burden that we carry with us and we don't want that in fact we hate debt so much that we like to be able to scream when we finally paid off our debt debt sucks and even in real estate there are debts that are nasty and suck that just drag people into bankruptcy or foreclosure with terrible loan terms like two year long balloon payment notes negatively amortized financing i mean when you're talking about the world of debt it's literally like you're walking into a minefield and it's just a matter of time until well click you hit one and that's not good you don't want to hear the click when you're walking on a minefield maybe only when you're watching some of those movies is it interesting to hear the click but beyond that you don't even want to think about minefields well fortunately the us government has created something that almost no other country has maybe with the exception of canada which is probably the only country that even gets close to this the united states government has sponsored something called the 30-year fixed-rate mortgage which is fully amortized that means if property values go down the bank doesn't call you to say hey yo pay up uh-uh it doesn't matter what property values are as long as you make your monthly payment every single month for 30 years that property is going to be paid off and entirely yours after 30 years some people even make an extra payment just once a year and they end up taking that 30-year loan down to like an 18-year loan but that's really a topic for a different video and after all why are we talking about debt when we should be talking about how much money all these rental properties make me well it's because debt is actually a tool that helps make a substantial amount of money when it comes to real estate think about it this way when you take an apartment building with five units and your total monthly payments on the thing with property taxes a manager repairs and all in is three thousand dollars per month but you rent out the building for five thousand dollars per month or one thousand dollars per unit you generally have cash flowing real estate heck you could move into one of the units get four thousand dollars in rent still cover all of your expenses and live for free that's called house hacking and so this goes to show that there's money to be made in real estate but we'll talk more about cash flow in just a moment when you have cash flow and a 30-year mortgage you have a situation where every single month your tenant is actually paying down your real estate for you and this is why when we ask how much money do my 22 rental properties in southern california make me i have to start out by talking about my principal pay down every single month when my tenants pay rent i take that money and i pay the mortgage since with 22 properties in southern california my entire portfolio once i finished this renovation and the other renovations i got going on my portfolio will be worth about 21 million dollars that is if i decided to after these renovations to just dump my entire portfolio i should be able to sell all of my portfolio for 21 million dollars at today's prices i'm not even talking about six months or five years from now today's prices with 30-year fixed-rate debt on all of these properties and an average of about 50 debt meaning i have somewhere around 10.5 million dollars in debt which that alone sounds pretty nuts i mean that's eight figures of debt but hold on we'll talk about the benefits of that i promise we'll get to that what a bunch of you're gonna click out and go this guy got over eight figures in debt i'm not i get it but stay tuned and listen to the rationale behind this because it's crazy with 21 million dollars in assets and 10.5 million dollars in debts coming when it comes to real estate i get two really really awesome things the first thing i get is inflation protection and then we're going to talk about some tangible numbers here some real numbers but i got a hit on this because it's so true especially in this day and age when we keep hearing about the federal reserve running that money printer faster and faster and faster in the event we see inflation or even larger inflation over the next few years debt becomes easier to pay off so one of the beautiful things to do in times before high inflation is to get more real estate debt or debt that's tied to assets because here's the thing as inflation happens the money that i could make working goes up the money that i in general make and the money in general society makes goes up but our money becomes worth less and that sounds really bad but in a debt situation it's really good my debt becomes worth less and see the bank never tells me hey we had one percent inflation you now owe us one percent more money even though i could go out and charge people one percent more for my 3d scans or my real estate services as a broker the bank doesn't tell me i owe them more so it actually becomes easier for me to pay off my debt and if you think about it that's why america never paid off their debt from world war ii the economy just kept growing and growing and growing and the debt that used to be really big kind of relatively became smaller and smaller and smaller as part of the economy and so as inflation happens and people's wealth grows or the country's wealth grows debt becomes less and less important as long as it's good debt ideally in our personal cases secured by real estate so as inflation happens the debt becomes worth less and so the long and short of it is the more debt i have in real estate the more protected i am against inflation and that sounds crazy but it's awesome and it's true as long as i pay the bank every single month i pay the bank my principal balance goes down and this brings up the next thing see i have tenants who are paying the mortgage for me and on 10.5 million dollars of debt tenants are paying down about thousand dollars of principal for me every single month that means every single year my tenants just paying their bills bumps my net worth by about two hundred fifteen thousand dollars doing absolutely nothing and i rounded the seventeen thousand a little bit it's a little more than seventeen thousand in case you're doing seventeen times twelve it works out to about two hundred fifteen thousand dollars per year where i get a bunch of mortgage statements i look at the mortgage statements and ordinarily we get a bill we're like ah crap i got a bill well when i look at my mortgage statement i look at that and go sweet how much did my net worth just go up from the tenant basically paying down my loans for me and this is true when you buy your first house as well when i bought my first house for 305 thousand dollars and i got the mortgage payment every single month i got excited to look at sweet how much money in principle did i pay down this month so principal pay down is huge so the first way we make money in real estate principal pay down and we get the bonus of inflation protection now we can't really put a value on that we just know that at some point in the future if we see inflation or more inflation that becomes useful even if it's only one percent inflation or two percent inflation that's a benefit to me that's an extra one to two percent that i get that the bank does not get and i like that then we get to cash flow so i've currently got nine projects under renovation and i'm standing in one this place needs some help and some love and this particular area in santa barbara california desperately needs not only love for properties like this but it also needs affordable housing and in this particular project what we're going to do is i'm going to take the front part of this house and turn this into what it used to be a really awesome two-bedroom one-bath house that's what this house used to be except somebody decided to add a loft onto the top in the attic space and add on to the back of the property and so what i'm going to do is i'm going to legally separate those units with permits plans and everything and i'm going to turn the top into a studio the back into a one bedroom one bath and i will turn this house into three units then in the backyard i'm gonna take this old barn and i'm going to restore this to turn it into a garage with a two unit apartment building so i should be able to have two one bedroom or even two bedroom one bath units in the back with garage spaces and that's gonna be awesome for my cash flow now in fairness could i have just yellowed all my money and thrown it onto bitcoin and probably made some good money yes i could have probably also just thrown it all into tesla stock and made some good money as well but for diversification's sake hey we got real estate and we got some renovations going on about half of the real estate i own is currently under renovation which means i got a lot of projects going on once all of my projects are finished and these insane improvements that i'm doing like adding units and creating adus and properties all legally and above board i should have an amazing for california at least cash flow after all expenses of around six percent now this is probably around two and a half percent better than what most of southern california gets so six percent is pretty dang good and it's possible because i bought these properties below market value substantially and i improved on them i mean just look around this place this place is a complete disaster and take a look at what it looked like before i mean it looks bad now it looked even worse before and this is what i do so just a heads up when i say that i buy properties under market value what i mean is unlike stocks when a house or multi-family building sells it usually only sells for the most money possible when it's in the most ideal condition ideal condition for multi-family means that the maximum market rents have already been achieved by the owner and ideal condition for single-family homes means it's not full of mold or stinky carpet it doesn't look nasty because it's got nasty bathrooms or nasty kitchens or any of that all of those things tend to make properties sell below market value and i teach exactly how to analyze and how to find these deals in my real estate investing course link down below out of all the courses i have this is by far my most popular and most course members who buy this course love it so much that they end up grabbing the other courses i have as well because my programs actually teach you how to build wealth and make money these are strategies that actually get you started and they come from a place of not only being an investor for 10 years but being a broker who knows how to be a lender how to be a salesperson how to work with sellers how to work with buyers how to do all of those things how to work with inspectors the city all of those things combined help you make money in real estate so that's one of the reasons i love real estate relative to stocks so much and look i love stocks too but the reality is when i buy tesla for 500 a share i'm spending 500 a share on tesla i'm only speculating that maybe it'll be worth more tomorrow or to be worth less tomorrow i don't know what's going to happen but with real estate when i can buy real estate below market value i know i could sell the property for more money tomorrow and that's because i'm taking advantage of inefficiencies in the marketplace that don't always exist in stocks but anyway six percent cash flow on 21 million dollars should net me around 120 000 per year or 10 000 per month in cash flow alone doing nothing but there's an asterisk here see because of the crazy real estate laws that exist that allow so many tax write-offs i could write off so many paper expenses like through cost segregation or real estate depreciation i don't actually have to pay taxes on the rental income that comes from my real estate so here's just an example of what that means let's say i get 120 000 in dividends from att and att does great in terms of dividends okay in terms of owning the actual stock i don't know but let's say i did and i got 120 000 a year in 18t dividends well i would be paying about 33 in taxes on that out here in california so that means i'm actually only getting about 80 400 from my dividends that kind of sucks because i had to partner with uncle sam on that i got the 80 400 they got the 39 600 well because of the tax write-offs that exist in real estate i get to keep the extra thirty nine thousand six hundred dollars now obviously we're just doing a rough overview here uh you know of my portfolio and we're not actually sitting down like a cpa and going through all these numbers so when it comes to tax write-offs make sure you talk to your cpa about depreciation and cost segregation to see if it's right for you so yeah that means i get an extra thirty nine thousand six hundred dollars that i wouldn't get to keep if i got the investment from a different source so it's kind of like i got an extra 39 600 of income compared to other investment strategies so this is unique to real estate therefore we're adding it to the list so that means we got 215 000 for principal paydown we got a 120 000 for cash flow and we get 39 600 in tax savings that's pretty dang freaking awesome but we're not even at the fun part yet this actually gets me to talking about another cool source of income and this has to do with how much i was able to get these properties under market value now we're not actually going to include this in my recurring annual calculations because this boost only happens once it happens when you buy the properties this is why you hear so many real estate professionals say you make a deal on the buy not on the sell you get a good deal up front that's how you make the extra boost of money so seeing as i bought most of my properties for 30 to 40 percent under market value and then i spent money fixing them up i can confidently say that my net worth increased by about 5 million simply because i bought properties below market value and i'm not even talking about appreciation here i'm just talking about i bought a place for here's just a very real example you can even look this one up on youtube because i made videos on it it's called the hoarder house so just type into youtube meet kevin hoarder house but anyway i bought a place for 450 000 i put 55 grand into it right now that place is selling in a neighborhood where the exact same model is selling for over 725 000 that place let's just say mine's worth seven hundred thousand dollars that means i'm up 195 000 in net worth on that one purchase alone obviously i could flip it but then i'd have to pay selling fees and i'd have to deal with taxes and i don't want to deal with that right now instead i'm going to keep these all as part of my portfolio because well once you get through this video you'll see why would i sell real estate if any time i sell real estate i reduce the size of my portfolio i just want to focus on growing the portfolio because the benefits of real estate are insane so this basically means for my portfolio i paid somewhere around 16 to 17 million dollars and this portfolio is now worth 21 million dollars and remember i started with nine thousand dollars buying my first property so anybody can do this i saved up nine thousand dollars working at jamba juice and red robin if you're watching this you can do this as well it just it takes time to build a portfolio i just started building it a while ago so it should feel inspiring i suppose is where i'm trying to go with that now let's talk more about this because buying deals below market value and improving on them is awesome but you have to know what you're looking for now i will also say one objection that i frequently get is hey well kevin i mean so what the properties are up in value how do you use that money and this year 2020 has been the perfect example of how you use that money so i had bought many deals below market value before the pandemic and when the pandemic started coming to america right around march 6th i got on the phone with my lender and i said yo we're about to have things hit the fan i want to refinance every property that i can to take out as much cash as possible to have that dry powder so to speak to go to war aka cash in my pocket to go to war and when the pandemic struck 30 days later and i had a bunch of money in the bank from these refinances guess what i was able to do i was able to go shopping for really dirt cheap stocks and then i started buying real estate again in around may and june which is right before real estate prices really started taking off again now i look back at that and i go oh my gosh some of the timing there was insanely lucky like you can't plan to replicate that but the fact that i had these below market value deals in on the books so to speak and available to be broken and smashed like a piggy bank to give me cash to go shopping in stocks that's what you want to prepare for and so this is why i want to take a moment just to again shout out a deal machine deal machine is a great opportunity to buy properties before they hit the market because what you could do is you could drive by a property take a photo of it and automatically send a mailer to the owner of the property whether they live there or wherever their mailing address is your information will go to the tax billing address of that owner and what's so cool about that is you can put your face on there and your name and your information on there and say look i'm in this town looking to buy some real estate for my family if you want to save realtor fees i'll make a deal with you before your property ever hits the market if you're interested in selling give me a chance and the cool thing is even if you find a deal that you don't end up wanting you could probably call somebody like me and go kevin i found a deal do you want to buy it i don't want it go check them out at medkevin.com now the next way we make money on real estate is absolutely my favorite way it's a way that takes absolutely no effort but it is location dependent so it's always always really important if you're looking into real estate that you keep in mind yes location location location does matter stay away from those high tension power lines stay away from those busy streets stay away from those highways stay away from the funky stuff instead focus on good quality areas that have low poverty rates and ideally population growth this helps you build real estate appreciation think of appreciation like tesla stock one day it goes down a little bit and the next day it goes up a bit and it goes down it goes up it goes down it goes up it's like a roller coaster but in general over the long run real estate prices tend to go up consistently in fact real estate on average trends up about three percent per year in the last 12 months real estate has been a little bit more spectacular it's gone up about 14 to 15 percent nation wide it has been absolutely insane in real estate in the last 12 months so here you know this is obviously a really nice opportunity where things have gone up and up and up and up and there will be downs so things will average out and so in this case we're just going to assume that over the long run real estate should appreciate around three percent per year well that means when i bought my first place that was worth around four hundred thousand dollars 450 000 after i fixed it up when three percent appreciation happened my net worth went up by about twelve thousand dollars a year doing nothing that was freaking awesome well now with a real estate portfolio and old kerosene lamps sitting around geez i'm gonna do with all this stuff now with a portfolio worth around 21 million dollars a three percent appreciation works out to 630 000 per year that's more than half a million dollars per year doing nothing see the beauty is control in america in order to succeed you have to have control and this is either controlled by owning real estate owning stocks or by owning businesses if you don't own real estate stocks or businesses you're going to have a lot harder time succeeding in america in fact the institutions that exist in america and your ability to write off expenses and take advantage of tax loopholes and tax savings is basically non-existent for you if you don't own real estate stocks or businesses so if you're working for somebody and all you've got is a savings account you really ought to consider getting into one of these things otherwise you're getting screwed in america this is why i made the video why the one percent screws the 99 in america watch that video i go through a ton of these detailed loopholes it's a great one if we add this up we get 215 000 in principal pay down it's literally just paying off the loans a hundred twenty thousand dollars in cash flow thirty nine thousand six hundred dollars in the tax benefit of not having to pay taxes on that one hundred twenty thousand dollars in cash flow and keep in mind that principal pay down i don't pay any taxes on that either which has its own host of tax benefits but folks i think after this video you're gonna want real estate enough we don't have to go crazy crazy here and when we add in real estate appreciation of 630 000 which is also not taxed we get to a grand spanking total of one million and four thousand dollars of annual net worth gains that i get because of owning this 21 million dollar real estate portfolio i literally don't have to do anything anymore the only thing that keeps me excited is sharing this information and literally every single day no matter what videos i do trying to recommend to you that you get into investing in real estate and stocks because it's worked so well for me now i don't want to say that there aren't downs there are always downs of everything i mean look at this place that i'm standing in this place i'm standing in has its headaches as well but the reality is real estate can be crazy what's even more crazy is because i'm a real estate broker and this is just the insanity that exists in this world because i'm a real estate broker and i spend so much time teaching real estate and investing in real estate and building real estate and renovating real estate i'm considered a real estate professional which lets me take even more tax deductions on real estate and an unlimited amount of losses to basically limit the amount of taxes i pay from other sources of income which is also unfreaking believable but again what did we say taxes or sorry real estate businesses and stocks help you eliminate paying taxes it's insane you got to get in to understand it though once you have these things it's a lot easier now in fairness lauren does manage these properties and she does deal with all the management regarding these i do have to deal with renovating the projects and setting them up and finding the deal and fixing them up so there is some work that goes into that but after everything we still sit at a place where oh my gosh real estate is insanely worth it but after everything i can happily say i invest in real estate alongside my stocks as a way to diversify and make what i think is much more guaranteed money see stocks look i'll go heavy on stocks like tesla and i've been throwing money into neo and i love stocks like square amazon apple redfin etsy i love these stocks you could see my top stocks by going to metkevin.com 1337 v 14. those are like my top 40ish stocks i love those but the reality is when i buy those i don't know with certainty and i'll do my fundamental analyses on them i think tesla is going to be a thousand dollar stock in the next few years but just wait for it at some point it'll be a thousand dollars again i believe it within the next five years we'll hit a thousand dollars at tesla again but with real estate i take way less risks because i can guarantee my wealth and that lets me put more money into plays like tesla because i'm diversified with real estate so sure could i just sell everything and yolo it all into the next charging stock the ev charging stocks that are going nuts or bitcoin of course but i wouldn't sleep as well at night because real estate gives me that foundation that i know is always going to be consistent and that's what i love about real estate especially since i can buy real estate below market value using the strategies that we talk about in my real estate investing course hey if you found this helpful consider sharing this video subscribe to the channel for more insight like this i have a real estate playlist dedicated to only real estate information if you like that there's also a stocks and federal reserve playlist that you can look at as well and that way if you're not so interested in news you have this content as well and if you specifically want to go deep and get ready to build some real wealth with real estate check out the real estate course down below zero to millionaire use that coupon code and folks we'll see in the next one [Music] you

Channel: Meet Kevin

Views: 139,695

Rating: 4.9207993 out of 5

Keywords: real estate, passive income, passive wealth, houses, rent, rental property, income, income from real estate, investing for beginners, cashflow, making money doing nothing

Id: xP7e7MvAfP8

Length: 26min 3sec (1563 seconds)

Published: Sun Nov 22 2020