What Is The Best Strategy For Investing In Real Estate?

[Music] dave do you have a do you have a um a formula or percentage like in that scenario if someone was going to do both were they were going to do some real estate and some just just putting in an investment do you have any kind of percentage or use whatever you're comfortable with whatever you're interested in just whatever you're comfortable with um mine has resulted in being much heavier real estate yeah because you love real estate hey i love real estate but the other thing that happened was 2008. yeah yeah i bought like uh about 200 million worth of real estate in 2008 for about 20 million dollars wow about 10 cents on the dollar real estate was just a it was on sales on fire sale so consequently my net worth is lopsided just from the fact that i got that i stole that stuff right and that changed it but uh so even more so than just investing steadily into it i just i just caught that wave the best wave of my entire 60-year life yeah in terms of the market being way down and it was really good for people who had money right to buy stuff while it was way down and so uh and then we've developed these properties right the the our offices are in and they're very expensive too so i've got those two things that's caused mine to be very heavy real estate you certainly would not want to do that if you don't want to deal with tenants yeah and in my case we've got rachel's husband winston as you know runs all of our property management and our development and all that and so i'm blessed that i have winston and a company that manages a real estate company that does that for me day to day so that takes a lot of hassle off of me personally yeah uh i'm not over trying to make sure the heat and air is getting fixed on a house or something i'm not because i got to run this place and so but anyway all that to say that when you're first starting you know you you can you can change the ratio back and forth you could get into real estate and go i don't like it yeah and move back towards mutual funds or vice versa let's talk about this real estate things i'm thinking there's probably people listening right now that they may be in that spot where they are ready they've maxed everything out and they want to get into real estate they've never done it before other than their own home that they've paid off and they're looking to save up and pay cash for their first piece of real estate do you have any advice for them like hey you've got to do this you're just getting into it here's what you need to know from someone who's done it um things to look out for that type of thing yeah the uh cheaper the property the better the rate of return typically is and the higher the hassle factor interesting so you can buy lower income stuff in that end of town that uh that your roi your math on it is really sweet okay but your roi on your time is not quite the opposite yeah so on the other end of the spectrum is like uh credit commercial real estate so if you've got a a a a household name as a tenant or let's even go further the post office wants you to do a build a suit on a commercial so the post office is your tenant the federal government right well that's kind of like automatic right you're going to get your check right you don't have to worry about the collections and it's a 50-year lease it's kind of just becomes you just go the mailbox open it there it is in your there's your money but your rate of return is way down on that they don't give much of a cap rate much of a rate of return on that so like a walgreens there's a lot of walgreens walgreens doesn't buy those properties they do build the suits and they get investors and but walgreens is a credit tenant meaning that they're you can actually take that contract to the bank and borrow against it it's that strong wow and so but on that end of the spectrum that's the least hassle and so kind of in the middle is like just regular offices or apartments and then on down a little bit it's just a nice single-family home you're not gonna make as much on that but you also are dealing with a little different class a person typically and how you're how they're how you're going to interact with them and the hassle factor goes down so that's thing one thing two would be um your money is made at the buy and what happens on almost all of us including me on our very first investment property we get really excited yeah about being an investor yeah and you pay too much you pay too much you should always buy investment properties at a discount you should never pay appraisal ever okay and in a market like today that sidelines you right it's very different you don't have a chance very difficult to find deals today it's quite the opposite of 2008 and so but but if you buy a 200 000 property for 200 000 is a little tougher to get your roi on it but if you can pick up that 200 000 property for 150 now you got that built in 50 to start with and you're gonna always not only have the appreciation but then your rents on you're ready to return on that 150 because your rents are based on what you paid for it they're based on what it's worth right right right that makes sense 200 000 house rents for the same whether you've got a mortgage on it whether you don't whether you paid 250 for it or whether you paid 150 for it still rents for the same amount yeah and so uh your rate of return on your rents and everything is changed by the monies made at the buy which requires this most difficult thing in real estate and that's patience yeah and you're just shopping and shopping and you're not emotionally involved and you're looking for a deal we're not trying to hurt anybody's feelings we're not trying to rip anybody off but i just don't put money in stuff unless it's a deal yeah and i own um because that's why why you're doing it is to make money that's why you're doing it if you remember that that's going to help you resist that temptation to overpay this is a trans a mathematical transaction right nothing else right but there's something about real estate that's just very emotional yeah for all of us and uh even if you're not gonna live there the first house i flipped i made 800 bucks on wow translation i almost lost money yeah yeah if i hadn't crawled around under the stinking house and put the pipes in myself yeah i would have lost my cost money so i didn't even make my labor back yeah you know i probably made a buck an hour on working on the stupid thing right on my labor and didn't make a dime as an investor so that's unwise yeah but i was all excited i had to buy it and i thought it was it was a hud foreclosure i thought uh because it said foreclosure on it it meant deal i didn't think that but something in my emotions it's justified it's got to have some i got to work on it i need some ways to fix it up it's a fixer-upper but i paid stinking obviously full price for it almost yeah uh because it took 90 days to sell the stinking thing it didn't sell super fast and i had to work on it and i barely got out even with my own labor in it for free yeah so that's all about i was excited to be a real estate investor now granted i was 21 years old but but still that's the mistake that beginners make yeah that's a good discussion

Channel: Ramsey Everyday Millionaires

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Id: n_U7uPWSKrE

Length: 6min 35sec (395 seconds)

Published: Wed Aug 11 2021