Real Estate Investing – Equity Questions – Q&A #9

It is that time again. We’ve got Q&A
coming your way. Kris Krohn here on Limitless TV with over a hundred videos
on real estate investing and you’ve got questions and today you get the answers. First question of the day comes from
Michael Levan. He makes it sound unrealistically easy. It’s not that easy
just to walk into equity. Michael whatever you want to believe. I’ll
tell you right now that if you drop a comment in the link box below I’m
sitting on three live deals right now and guess what all three of them have in
common? Equity. I kind of cheated though I made
it easy for myself because I built a team over years and spent a lot of money
to put them in place so that they can do what they do. So it’s easy for me now but
there was a price to pay and learning how to do it and in the beginning when
you don’t have those resources you got to kind of go into the longhand version
of it. I’m offering everyone today a shortcut if you want to just take my
cheat and walk right in my deals you can do that. And Michael if it’s really
hard for you and you’ve been struggling and it’s unrealistic then let me give
you one of my deals okay? Next, Joe Silva. So say your tenant ruins the house or
loses their job and can’t or won’t pay the monthly rent. How can you prevent a
person, getting a person like that? Well so this is a really fantastic question
Joe. When I go into my nationwide markets, the market has over 300 sub markets.
Let’s take Orlando for a moment I’m looking at a picture of the Orlando city
map on the wall in front of me and on this map it’s got this hard in this huge
area for the county of Kissimmee. Kissimmee is right underneath the
Orlando Parks. In that demographic, the majority of people that live there all
work at Disneyland. The majority of those people make $60,000 a year
plus those people have a very easy time affording the payments and rent for the
houses of that type of style. So the nice thing is Disney is generally very
very secure in their jobs. That’s a very high income for the area and that’s only
one of the things that I look for in the demographics before evaluating going
into a particularly area so for this particular area what really works for me
in Orlando is that I’ve got really strong performing job. Phoenix was the
same way, Vegas was the same way, so go into a strong market place. This is the
benefit of going into a city that has millions of people into an area that has
a lot to draw from and has a strong economic pull and really good jobs.
There’s a lot of areas where you can do real estate where
you know the economy is definitely not that booming, you’ve got more Urban
Development. It’s kind of a smaller location lacking population and you can
get yourself in the opposite mess. And so what should you be looking for? You
should be looking for a really strong market and a house that is outside the
ghetto that’s going to perform for you. These videos talk about how you can
do that. Of course my team will set you up with those as well. Stanley Ho. Every house you buy you use the equity from it to buy another? Ooh! I love this question. Whenever I can Stanley, I do. While I am in the building
phase, most people watching these videos they’re not multimillionaires. And so the
question is especially for those of you that talk about debt you’re like, well I
want to stay out of debt. Okay we’re going to control debt for a sort, for a
short period of time. How I’d pay off my houses? Not by paying off the debt. I pay
them off by controlling for a period of time and then releasing them. I buy a
house for $100,000. it’s worth 150. I control it. I make a cash flow. I got tax
benefits. And five years later, the markets right. I sell it and I sell it
for one hundred and seventy thousand dollars. Well I probably in that five or
seven year period of time only paid off five thousand dollars on the houses loan
why? Because when I get a loan from the bank, majority of that just goes to the
interest. If I wanted to be serious about paying it off. It would take me 30 years
to do that with with the bank or I could put it on 15-year mortgage and all of a
sudden I’m negative cash flow on the property or I could take the extra cash
flowing and apply it to the property and see if I can pay it down faster. I’m not
trying to pay out the house. In seven years I don’t want it. You know what
happens after a tenant lives in a house for seven years? You don’t want it
anymore. So I hold a home for a period of time generally and then I swap it into
something else. That’s called pulling the equity from
one house into the other but sometimes you can do it prematurely. So if I get a
really good deal on the house and the markets moving, I can refinance some of
the equity out of the house and still keep the first one keep the cash flow
and have the money sitting in a different house also earning money.
now the same dollar that’s sitting here is also sitting where? Here! On this house
I’m making 10% per annum. Put over here what am I making?
I can’t calculate it it’s not my money. I mean it is kind of. It came, but it’s
in that other house. Oh my gosh looks like an infinite return. Yeah I got my
money making money for me in multiple places at once and so when I can borrow
from a house while still keeping a 20% position in it, as long as this house
below the median I do that all day long. That works. Sometimes houses don’t have
that extra equity to pull out the only way to get the equity out is by selling
it. And you know what? There is a life cycle for every house. Right now when you
walk in should be your highest position of profits and then over time you start
getting a diminishing return. Again one of the other reasons why I’m not holding
on to that house forever. If I can walk in with a bootie, you know
pirate bootie with a big pile of equity and I can transfer that into another home that
also has equity, now in snowballing equities and cash flows and that’s why I
pull money out of one home and put it into another. Great question. Okay Eden10.
She says, this video, he must have watched the video where I talked about
my very first house because he says, what a good informative video sir after
you’ve paid the $5,000 on the first home what’s the next step? how do you actually
pay the bank’s loan for the next month? Friend, if I’m living in the house it’s a
primary residence then I gotta pay for that. It’s either I’m paying for rent or
I’m paying my house. If I pay my house at least that can go towards equity. When I
bought that very first house, I was renting for 400 a months. I got myself into
a mortgage that was $800 a month. 800 is way bigger than 400. But because I could
rent the basement at first for 550 a month then, what I was actually paying
was about two hundred and fifty a month. So I was throwing, instead of throwing money
away at rent, I was actually putting it into a house that was pretty cool. Then
was able to refinance it, lower the rate, and then the entire basement covered my
entire mortgage. That was so cool to live for free. So your first year, first step,
is to make sure you pay your mortgage just like you would pay rent except now
it’s doing more for you and the second step is what I did later. Because they
bought it with the equity which created that situation for me I was able a year
later to use that equity. Tapped into it with the refinance and use it to buy my
second home. Second home was so much nicer than my first home but I wasn’t
buying it for me and I did never live in it it was actually three almost three
times bigger than my first house. It was still bought below the median. I got a
crazy deal on it. That house made me a pile of money
because it was more important for my money to work for me than elevating my
standard of living. And so keep snowballing your real estate. Buy a smart
investment. If you’re having trouble finding one then reach out to me and my
team in the comments below and and let’s hook you up. Brian to drove oh. Yes, but
how do you use that money to buy another investment property? As an example, if I
got an equity loan for $40,000 and the property is worth a hundred thousand do
I have to apply to another mortgage? and what happens if I can’t pay off that
equity loan? Okay this is a really really good question I want you to see this
math. Brian thank you for asking this. I got a $40,000 line of equity that
means that I’ve got $40,000 of equity in a home and if I pull out this $40,000
then my mortgage will go up. It’s like having a mortgage tied to a credit card
or a bank account and so that 40,000 that you borrow ,it needs to make sense
where you put it. Because if I just put it into a house boat that cost $100,000
and it has this thing that I can’t pay and it doesn’t produce cash flow, well
that’s just consumer debt. It’s not a business, it’s not making me money, it’s a
bad debt. But if I want to pull that $40,000 out and place it another home, if
that home has equity that then becomes its downpayment. That’s going to lower
its payment that’s going to create a cash flow and the cash flow between the
two homes should be greater than whatever your expenses are. So the other
thing is you ask how do I qualify for a second mortgage. Here’s the cool way the
map, the math works. Most banks are going to take 70 to 80 percent of the rent
that you’re getting on a contract and they’ll apply it towards the debt. So
when I bought my first house it had the eight hundred dollar payment and then I
had the payment dropped to five hundred a month with the lower interest rate.
Something cool happened. I went and put a tenant in that home at $1,000 a month
and I want to buy something different. And the bank said, oh okay but you’ve got
this $500 debt. Oh here’s the rent contract. Well what’s 70 percent of a
thousand a month? $700. seven hundred and five hundred that means that my DTI,
my debt to income ratio actually went down and my income went up? Yup! Buying my second property made me look even more financially attractive to the bank but that can
only happen if you’re buying smart with equity and the right price range. So
that’s exactly how you do it. Hushpuppy. Kris, why single-family homes? Hushpuppy,
single-family homes. Such a good question Why not multifamily apartments that are
valued by their NOI divided by their cap rate? I invest in single-family homes to. But all
the traditional gurus say invest in multi families to scale. You won hundreds
of houses around the country. Clearly there’s a reason you prefer them over
multifamily. Hushpuppy, I like your name. There is a reason why I do single-family
homes over, over multifamily. First of all, When you get into multifamily, when you look
first at triplexes and for plexes, most of those sell in the market without
equity. And if I can buy a home with equity I would prefer that than a
four-plex without equity. Also, have you ever had a bad renter? Well now imagine a
home with four bad renters. Four-plex for me? if I can’t get the equity the play
doesn’t make sense. However, if I have the chance to go in our multi-family with
ten, twenty, thirty, forty, fifty, units I can do that but now that takes millions
of dollars. So some people will go from single family into bigger projects. I do
this from time to time but more single family homes does not equal harder to
manage than one single project. I employ property managers. I apply, employ a tax
accountant. Guess what? It’s, it’s honestly not much work doing one compared to the
other and so it’s really a matter of what’s working for you.
If single families is tearing it up for you? then do it and do it more. Never
leave what’s working for an unknown of what may not work. You always want to go
from what’s working to something better and it’s good if it looks better on
paper but it’s also really important hushpuppy to check with with someone
else with a bigger knowledge bank on that particular deal and have them
review it and tell you about maybe some of the pitfalls and trial and error of
higher taxes or higher property management fees or some of the things
that you just may not be thinking about before you make a change in strategy so
you can walk in with as much knowledge as possible. But for the most part
an apartment complex for a hundred people or a hundred single-family homes
for me? not a lot of work difference and 100 homes are diversified. That one
project is not. Those are just a couple of the reasons. Okay the last question
that we have for today is coming to us from Phillip Sofia. Thanks Kris! quite an
appropriate video in the situation I’m in. What are your thoughts on investing
in gold? I really like this one. There’s a good question. Most people that I know
that do precious metals are kind of preparing for end of the world. When you
take a look at the investment of gold again I don’t buy gold with equity and
it’s speculative. What does speculative mean? Means that I’m a gambler. Means that I’m
going to Vegas. And friends, don’t ever invite me to go to Vegas with you. I’m
just telling you right now I suck at gambling. Like if I brought money I’d
probably lose all of it. I’m sure no one’s ever done that before. But put me
in real estate, partner up with me, put me at your side. Guess what? it’s going to be
like going to Vegas with a winner. I know how to play those high stakes game with
a lot of safety. So let’s compare that out because this is a really good
question Phillip. Right now, if I invest in gold
I call it speculative because great I bought a thousand dollars worth of gold
now what? uh-oh the value of gold went up 100%. Yay I made money! Gold went down
20%. Oh I lost, I got no control and I do own a physical property. I do like that I
can touch and hold the gold. What I don’t like is that I’m not walking in with
equity and I’m just hoping that the market goes up. In real estate, I’m not
hoping the market goes up I bought the waiver Warren Buffett talks about. I
bought with equity. I bought with instant equity. I bought below market. I got my
cash flow. Here’s my definition of investment this will help you. Is what
you’re going to buy, gonna pay you every month? Gold does not make babies. It will not pay you every month. So you know what? It’s not an investment, it’s speculative.
Speculative investments or things that truly I try to stay away from or
only put a teensy-weensy little bit of my money in. I love being able to control
my assets as much as I can and real estate afford so much more opportunity
for me than that/ I’m going to take one more question. I sold my home, my real estate agent charging me 6% and she was a friend. Did
I get ripped off? Friend, you didn’t get ripped off.
That’s what realtors do. If they help you buy and sell the home,
the same home, they’re going on 3% on each side for a total of six percent.
Anytime I have a listing with an agent and they’re going to do both sides I
asked them to do both sides at a reduced rate so that we’re not really getting
into a greed factor and to help a brother out.
So the realtor that right now has been selling off a dozen of my homes every
other month, I’ve asked them to do it for one and a half instead of three percent
but six percent is otherwise considered standard. I do like to get a deal and
sometimes I get what I want that often happens with Realtors. Friends. thanks so
much for joining us today fantastic questions keep them coming in. Wow! that was a lot of questions. Good work! Put me to work again! You know how you do that?
When you watch these videos, I want you to comment below. Make a lot more
questions and then I’ll shoot more videos like this because personally I
hope we get to meet in person face-to-face at one of my 3 day real
estate training events called limitless wealth intensive. But you know what? other
than that, keep shooting the questions and let me keep providing as much
helpful response as possible to help you successfully invest in real estate.

Leave a Reply

Your email address will not be published. Required fields are marked *