Kris Krohn here with Limitless TV and today we're discussing real estate and
whether renting a home is a good idea or not
So is renting a house a good investment?
It depends. I'm going to share with you
in this video when you should rent and when you absolutely should sell because
there's a difference but first step most important, is to have a winning mindset
and real estate to make sure that you start right and win which means starting
with the end in mind.
And what does that really mean? it means that anytime you
ever buy a house you need to view it as an investment. This is either something
I'm going to sell to make money on or this is something that I'm going to rent
and make money on.
Because if I buy it with the discount and I buy it right I
can rent it out and I'm going to capture a cash flow. That's a residual income
That's automatic money. That's mailbox money. It comes in every single month
whether I work or not.
Or it's a house that I'm going to sell and I'm going to
make an equity margin play on it. Which means if I bought it with $40,000 of
equity than what I sell it I'm going to get what? well I'm going to get some of
that money out. Maybe all of it, maybe more. And so how do you know whether you
should rent or not? First of all understand this, renting is a brilliant
idea with the right kind of investments because when you have enough homes that
are rented out making you a cash flow, you got that automatic mailbox money
coming in.
You just need to know the difference of when to rent and when to
sell. When to rent, when to sell. Let's put these up on the board. Let me give you
some examples of both of these scenarios and I'm going to see if you can tell me
when to rent and when to sell. But before I do, I need to give you context. I'm all
about velocitising my money don't look up that word velocitising I think I made
it up.
I make up lots of words but what it means is it, means to create velocity
with your money. Once your, if money is sitting in a bank account earning 1%
then what kind of velocity do you have? boring velocity! but if I take it out
and I put it in the investment earning 20% that's more exciting.
But maybe I'm
sitting it in a long term investment if I have a chance to pull it out sooner
and put it to work again then what I'm doing is I have my money earning in
multiple places at the same time.
This is an important factor when deciding
to rent and when to sell.
So I've got a property and let me give you the
scenario on it and then you get to be the judge of whether we should rent or
sell.
the house has a value of one hundred thousand dollars for simplicity
what I owe
is
fifty thousand dollars
and if I were to rent it
it would have a cash flow
of one hundred dollars a month.
Now let's just pause for a second.
Every year this property's rented out,
you could get, you could make twelve hundred
dollars a year. But remember you're gonna have some repairs this is not a strong
cash flow and yet you're sitting on how much equity?
you're sitting on $50,000
$50,000 could buy you two homes. And if you buy them right with cash flows of
three hundred dollars a month, what we're talking about is my opportunity cost.
Two homes producing a total of six hundred a month or one home making me a hundred
a month. Which one's bigger?
What do you think I would do?
In that scenario, I would sell absolutely. If you guessed correctly give yourself a high five.
Like that.
Awesome. Okay let me give you another scenario. You have a house
that is valued at
magically one hundred thousand dollars.
You owe
$90,000 which
meant that when you bought this house you really probably weren't thinking a
lot about equity or buying the house with some pirate booty in it.
But you can
rent the house and this house has a cash flow
$300 a month
should you rent or
should you sell?
Well,
if I were to sell it
am I going to get my 10 grand out of
it? Well if I'm selling it on the open market with the realtor and then I've
got closing fees, I might sell this and actually break even. I might even make
$2,000 or I might lose a few thousand dollars. So is there money to get out of
the home?
No there's not. But guess what there is?
there's three hundred dollars a
month cash flow, thirty six hundred dollars a year. That's 300 less dollars
you need to produce every single month for
building up your residual income.
Guess what I would do on this house?
correct.
I would rent this house.
Alright let me give you one more scenario and see what
you do. Let's say that I have a house that is valued at
oh my goodness how'd
that happen again?
$100,000
Let's say that I owe $50,000 on
it is starting to look familiar.
But
I have a cash flow
of $400 a month.
Why?
well let's say I'm using one of my aggressive strategies like a lease
option. You can watch a video on that. here on limitless TV. It's awesome.
So I've got a $400 cash flow but I have equity. Man, what should I do?
We're going to velocitize our money. How are we going to do that? we're going to
do both. We're going to keep the house, we're going to refinance or do a home
equity line of credit. You can also watch a video on how to do that. And I'm going
to pull out let's say
$30,000
but I'm going to keep the house.
My $30,000 is
going to cost me $100 a month.
So now, my cash flow goes from 400 down to 300 but
the $30,000 is used to buy what?
a second house.
And on this house, I'm going to not
only just putting $30,000 now but I let's say I bought it with $20,000 of
equity. So guess what?
On this house it's valued at a hundred thousand
I owe,
fifty thousand because I put thirty down and bought it with twenty thousand of
equity.
And let's say this house cash flows
four hundred dollars a month.
Well,
on this house and now owe eighty thousand but I'm making three hundred here, I'm
making four hundred here, guess how much I'm making? seven hundred dollars a month
and let's check out where my net worth is gone.
My net worth increased by a net twenty thousand dollars now I got fifty sitting
here, I got twenty thousand here. Now I have a $70,000 net worth and a seven
hundred dollar month cash flow.
So renting and selling sometimes you get a
beautiful in-between option
the overarching principle of, should you rent
your house is, how am I velocitizing my money?
Is my money invested correctly?
What's the ROI that it's producing?
and right now should you rent? it really
comes down to this principle and economics called, "opportunity costs"
What are you trading the equity or money in that home for? and is it moving you up
or is it moving you back or is it moving you sideways?
when I buy real estate I
always want to level up my financial life. And if you make that your rule too,
watch some of the videos here, subscribe on Limitless TV and learn all about that,
you'll learn when to rent, you'll learn when to sell and how to grow your
finances.
If you need some help click the link below, reach out to my team.
Because you know what? it's time to do something about that property you gotta figure out
whether you should be renting it we're selling it. Thank you so much for
watching Limitless TV. Don't forget to subscribe. I'll see you soon.