What is going on everybody? In today's video, we are going to be going over five different rental
property investing lies. And as a full-time real estate investor myself and make a full-time income
just from my rental properties alone, I have a pretty good idea of the truths,
the lies, everything in between. So at this 10 minute real estate video we are going to cover
all of that. So let's get started. Lie number one is that rental property
investing is passive. Now there are ways to set it up so that it can be
more passive but when you're first getting started with rental property investing
it's probably going to be a lot of legwork, there's probably going to be a lot of unexpected
expenses and things that you're going to have to do to take care of your tenants. For example,
on a few of my properties at a retaining wall collapse in the middle of the night one time.
Luckily it was on the exterior of the property, but it's still a significant cost and burden to
get that fixed. I've had carbon monoxide issues. I've had the heating go out on a four unit
building on one of the coldest days of the year. So basically I had to get all the tenants and move
them into a hotel that was close by. And of course it happened on a Friday night and so the company
wasn't even able to go out there until Monday or Tuesday. So it was really a massive headache.
However, once you get your property really set up and really optimize, and maybe you increase the
rent, you fill out the units, you fix any items that are broken. You can hire a property manager
if you don't want to do it yourself. And in that scenario, it's going to be much more passive.
And there's a lot of landlord apps right now. They're always changing. They're always updating,
but there's so many different apps for landlords to make it much more passive. And I would just
say that in the beginning it's probably going to be a lot more work than you're
expecting. Eventually it can become more passive. And that leads me to a point number two, which is
that a lot of people are saying, you should get single-family rental properties and I pretty
much completely disagreed with that. As someone that owns both single-family and multi-family,
I would just go straight for multi-family, it's going to be so much easier to manage those
properties. Even if you just start with a duplex or triplex, a four unit, which actually I would
recommend as opposed to just jumping into like a 100 unit building, which is pretty difficult
to do anyways. But if you start with a smaller multi-family apartment, it's just going to be
so much easier to manage. Like, let's say you have a four unit everything's in that one building. If
you have four different rental properties all across the city, that's four different loans,
four different contractors you probably need to call, and it's just more of a headache overall.
So try to just stick to multi-family. You can get a residential loan for up to four units. So
that's how I got into multi-family investing was with an FHA loan, I only had to put down
three and a half percent and you're allowed to go up to four units with that type of loan.
And then you get a feel for the business and then you can purchase additional duplexes, triplexes,
four units, and pretty much scale it from there. It's going to be much more scalable if you stick
to multi-family. I would only do single family if there's just a really big spread. I have some
single family rentals, but I'm clearing basically a thousand dollars per month after expenses and
everything like that. If you're just clearing like a 100 or $200 per month with single families,
it's going to be very difficult to make a profit and to make a passive income on that.
Lie number three is that property values always go up. So in 2007, 2008 investors,
I don't even want to call them investors because a lot of it was just pure speculation, they were
purchasing properties that they'd be losing money every single month. They may or may not have had a
tenant in there, but they were losing money every single month in hopes that the values would just
keep skyrocketing. And eventually that comes to an end. Real estate historically has been very
cyclical, I can't imagine any reason why wouldn't continue to be cyclical. So that's why it's
important when you purchase a rental property to buy it for the cashflow. The appreciation is nice
and think of it almost like a bonus, but the main factor you should focus in on is the cashflow.
The cashflow. There's some neighborhoods, just as
an example, in like Detroit and Baltimore, where property values haven't even gone up in 20 years.
In fact, they've probably gone down over the last 20 years. So that's why not only should
you purchase your cashflow, but make sure you know the areas that you're getting into because
you can do some types of predictions when it comes to appreciating property values, but
you really have to know the area and you have to know the development that's going on,
you have to know the trends. So you really want to study the markets you're investing in.
Lie number four is that you need a lot of money to get started in rental property investing.
And I'll just tell you two quick stories from how I got started and you don't need a lot of
money whatsoever. So the first way is just using your FHA loan if you're a first time home buyer,
like I mentioned. You only have to put down three and a half percent. You can get up to a
four unit building. And depending on how many roommates you have by the end of that year,
you do have to live in the property for at least a year, at least that has to be your intention.
By the end of that year, with everyone paying their rent,
you'll have a sizeable amount or a down payment on the next property. So definitely try out the FHA.
And the other strategy, if you're doing off-market deals, if you're looking for off market deals,
which I recommend. And I have some videos below on how I find these off-market deals, but if
you put something under contract at enough of a discount and use a hard money lender or a good
private money lender, they can pretty much fund the entire deal, sometimes even the repair costs.
And then what you can do is after you've fixed up, after you put a tenant in there, you can refinance
into a longer term type of load and actually take some money out. Take a little bit of equity out
and put money back in your pocket. So you're kind of making money or at least breaking even so it's
basically zero money out of your own pocket. And as a quick example, I had a property under
contract for 85,000 and it was making close to $2,000 per month. And this was a fixed
up single family house. And what I should've done is just gotten private money lender to fund that,
and then just refinance it to a longer term loan. I ended up wholesaling the deal for about 10,000,
but when I had it under contract at 85,000, it was worth, I think about 150 or 160 with a few
touch-ups. So it was an incredible deal. And if I'd been a little bit savvier, this was probably
maybe 10 years ago, I would have just had the hard money lender pay the entire 85,000,
would have done a few touch ups, gotten the tenants in there. Actually the tenants were
already in there and then everyone just spoken to a local bank about refinancing this into a longer
term investment property. And all they need is really 25% equity. So I wouldn't really have had
to come out of pocket whatsoever. So if you want to find deals like that, watch the video below on
how I use PropStream to find some of these deals. The fifth lie I hear all the time
is that real estate is the best investment. And that is just completely subjective because
it's going to depend on how good of an investor you are. There's amazing real estate investors,
there's people that you would never want to invest in real estate with. So it's going
to be very subjective and a couple of ways to become a good real estate investor are this,
number one, you should be educating yourself as much as possible. Listening to podcasts, watching
videos like this, reading books, you should just always be educating yourself. If you've ever
come to a point where you're like, I can't learn anymore that probably means you're going to lose
money on the next deal. The savviest investors are always taking more courses, more books,
learning from different people locally, as well as you know internationally in some cases.
And the second way to be a good real estate investor is this. And it sounds very basic
and very simple, but you'd be shocked at how many people still kind of ignore this rule
if you're looking at a property and you're trying to decide whether or not it's a good deal,
we'll pull up the last 10 most similar properties that are active, sold, pending, whatever they are
and see where this property is in terms of prices. And it should be at the bottom of the last 10
comps, or at least very close to the bottom. You don't want to be paying the highest amount for
the properties. And people ask me all the time and I do a quick search of comps, and I look,
this, this might be the highest one sold I don't see where you're getting these numbers from. And
you want to use comps that are similar, you don't want to just use like a brand new construction
house and then some house that's completely different. But that's just my general rule
of thumb when it comes to analyzing the deals. So what I want you to do is watch this video right
here. It has some more information on rental property investing, making passive income,
building wealth through real estate, and I'll see you on the next one. Bye.