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Investing In Real Estate The Pros and Cons | What We Own


what’s up everybody I’m Rob I’m Reshawn
and this is learn hustle grow learn hustle grow is about creating a legacy
we’re sharing our passions for money marriage and travel with other legacy
builders like you what’s up legacy builders we’re here to
give you the game we started invested in real estate in 2013 we loved it and want
to see more people benefit from it Rob always wanted to be a real estate mogul
I was open to the idea of owning one rental he sold me on the idea of more
than one by appealing to my desire to leave my stressful job
we’ve both been blessed to have solid careers with good companies I spent
almost 20 years in IT Rochon spent over 20 years in technology sales if you want
to maximize your earning potential pursue a career in sales yes it’s
stressful but here are the advantages first sales is an area where your
performance is less subjective than other roles exceeding your sales goals
generally means that you have done well having a quota gives you a direct impact
on your earning potential in every business their revenue producers and
cost centers salespeople are revenue producers for that reason they’re alas
to get laid off back to the topic at hand why do we like real estate
investing before we answer that give this video a thumbs up subscribe to this
channel and click the notification bill number one people always need a place to
live regardless of the state of the economy if you have a roof over your
head you’re either paying rent or you’re paying mortgage number two interest
rates have been really good over the six years that we have been investing lower
interest rates means greater profitability number three cash flow our
properties cash flow enough to cover mortgage maintenance taxes insurance and
property management fees number four tax advantages when we filed
our taxes we write-off depreciation mortgage interest cost of repairs cost
of services utilities travel expenses and property taxes number five
long-term appreciation all of our real estate purchases have increased in value
we started investing after the market crash if you have read our blog or
watched our videos you know that we began our real estate journey by turning
our first home into a rental today we own a stake and a multi-family
syndication to single-family homes and a six unit apartment complex not quite
mogul status yet while people get really excited over the idea of multifamily
investing our single-family homes have been quite profitable in our first five
years as investors we purchase for single-family homes and participate in a
multi-unit syndication deal all forms the single-family homes have yielded a
favorable return our goal was to acquire one property a year for 15 years
unfortunately the syndication has yet to turn a profit we decided to give it a
try as our first experience with multifamily investing when we chose to
invest it seemed ideal the apartments are close to the campus of a large
private university we had always heard that student housing was a winner in our
opinion the investment has struggled because there’s so many high-end brand
new apartments on or near campus there was a time when it was generally
acceptable to move out of the dorms into a fairly basic apartment that is no
longer the case we all want the best for our children
unfortunately keeping up with the Joneses is real at every age it begins
in middle or high school and continues on in college a portion of the student
loan debt can definitely be attributed to housing we found this opportunity
through an investor who has a great experience with syndication
believe me we wish that were the case in our situation the upside of the
syndication is that we are able to capitalize on the losses when it comes
to real estate the old adage is true the three most important factors are
location location and location our single-family homes are in great
neighborhoods with excellent schools in the suburbs
our primary applicants have traditionally been families with
children no different from homeowners families who rent are also concerned
about their children’s education why would a family pay the price of a
mortgage for rent credit score the cost of a down payment and recent relocation
are just a few of the reasons while working in corporate Rochon was required
to travel for business twice a month when she was unfamiliar with an area she
searched for a Starbucks to find a hotel Starbucks does detailed studies before
they open a new store store profitability requires area residents to
have disposable income disposable income implies that there is less of an
economic struggle in the neighborhood our small multifamily property is in an
up-and-coming neighborhood Starbucks is open within a five-mile radius the
arrival of Starbucks is usually followed by other businesses and retailers
economic development is very good for property values how do we acquire this
Jim you ask in 2018 we use the sale of a single-family home to purchase the
multi-family be a 1031 exchange in order to take advantage of the IRS tax
incentive we put all of the profits towards the new property there’s a few
things you need to know before considering a 1031 exchange if you take
a dime from the profits your deal becomes ineligible for a 1031 exchange
the funds must be held by a 1031 exchange specialist these guys don’t do
this out of the kindness of their hearts a non-refundable fee is required for
their services the 1031 exchange applies only
to investment property you cannot swap your primary residence for another home
within 45 days of the sale of your property you must designate a
replacement and in writing you can designate up to three properties you can
even purchase more than one you must close on the designated property or
properties within 180 days of the sale of the old one the two time periods run
concurrently the total time allotted is 180 days the IRS provision allows the
upgrade to a larger investment property without paying capital gains taxes that
means you have to pay more for the new investment if you meet all of these
requirements the investment continues to grow tax-deferred until the point of
sale at the time of this recording there is no limit to the number of times that
you can execute a 1031 exchange when we are ready to sell another property it is
definitely an option for us before you make a decision run the numbers to see
if it makes sense financially in our case all of the following contributed to
our decision at 20% down payment a 15-year low-interest mortgage rate for
years of mortgage paid down by our tenants and market appreciation those
factors created enough of a gain to justify a delay in paying taxes it also
helped that we did not need to take any profits off the table after selling to
single-family homes and purchasing six units we went from four doors
to eight over a period of less than 12 months we doubled the number of units we
owned where did the second sale come from you ask a seller’s market is the
perfect time to capitalize on appreciation our single family homes
command much higher rents the tenants are high wage earners we have little to
no issues collecting rent in full and on time
unfortunately the has not been the case with our small
multifamily when we purchased the property four of the six units were
already occupied even with rents below market value some
of the tenants were unable to pay their rent on time we have property managers
for all three properties property managers charged 10% on average this is
negotiable we have found that it’s best to hire property manager within 30
minutes of the property if a tenant sends an email or letter documenting a
concern we need to know that someone can get there to check it out
are there false complaints absolutely either way someone needs to verify it
recently we inform the tenants and one of our units that we would not be
renewing their lease this was due to the non-payment of two month’s rent they
were not shocked within a few days of notifying them the property manager
receives two calls regarding flooding coincidence maybe the plumber snakes the
pipes and finds that there are hundreds of baby wipes stuck in the system
coincidence yeah folks it doesn’t matter what it
says on the packaging wipes and feminine products are not flushable the only
thing that should be flushed down the toilet is toilet paper once the plumber
clears the drain he finds a bigger problem of course he did we have a
policy of getting three quotes for large repairs this one was $5000 it did not
get any better everyone wants their kids to go to college send your kids to
apprentice with a plumber plumbers are rich our real estate business is
relatively quiet until there’s a need for repairs or upgrade not having the
funds to cover a $5,000 repair can definitely be stressful investors have
been forced to sell over the inability to cover repair costs we use the cash
flow from our investment properties to create a fund for these occasions
while we are not happy with the current situation we are prepared we’ve given
you the pros and cons based on our experience as real estate investors for
a more in-depth exploration check out the book on rental property investing by
Brandon Turner are you an investor or interested in becoming an investor I
hope we haven’t scared you off we want to hear from you comment below see you
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