Hey, what's up? Welcome back. Kris Krohn here. And today, we're talking about real
estate investment made simple. Listen, I own 25 properties by the time I was 26
years old and had a six-figure residual income. Have gone on to do thousands of
properties. And today, I'm making a video all about how you can understand the
most important terms that will help you build your wealth now. And it starts with
basic simple understanding. It's all headed your way next in this video.
I remember how frustrated I felt when I was brand new to the game of investing.
And I love the idea of real estate. I love the idea of becoming financially
free. But the terms were flying at me. And what does equity mean? And what is a
tenant? And is that the same thing as being a landlord? And how is that
different than a mortgage? And these words were unfamiliar. And I remember
feeling like inside like this massive lack of confidence. And it's really hard
to take ownership and to act and execute if you don't really feel comfortable. So,
today is all about making real estate investing super simple. I'm super excited
for making this video today. I think it's definitely going to be one of the more
popular ones. For those of you that are subscribed to the channel. By the way, if
you're committed to financial freedom, then you must be subscribed in this
channel and ring that bell because every day I'll notify you about the next video
that comes out. They're all made based on your questions and research I do about
what you're asking about. So, here we go. Today, I'm going to give you
2 real estate investing scenarios. I'm going to put them here on the board. One of
them is going to have to do with flipping. One of them is going to have to do with
rentals. And that's because when you're brand new to the game, those are usually
the first 2 games that you play. So, I'm going to put this up on the screen for you.
What we're going to do first is we're going to talk about the terminology of a flip. Now,
even though I'm not a fan of flipping, I have friends that make tons of money
flipping real estate. And so, flipping basically means buy low, sell high. In
fact, winning in real estate is all about buy low, sell high. Now, we use different
words for how we do that. And I'm going to teach those to you right now. Let's just
say that I find a home that has a value of $250,000.
That is what the home is worth today. But I have a purchase price where
I can get this home for $150,000. Now, if I can buy
it for 150 and it's worth 250, the
difference between those two, this is the buy low, this is the sell high. And the
money in the middle, a part of that is potential profit. And that's where that
means by turning a property or flipping it. So, let me teach you a little bit
further. If I buy this home for $150,000,
one of the things that I have to do is I have to start now questioning
the value. And I have to ask this question: What is today's value? And I
have to compare that versus the ARV. Write this down. After repair value. So,
when I say as a 250,000-dollar value, we're probably talking about the ARV,
the after repair value. If it's a flip and I'm getting that big of a discount,
there's probably something wrong with the home. So now, I have some repair costs.
Right? So, let's just say that my repairs are $40,000.
So, I buy the home for $150,000, I'm going to put
$40,000 or repairs into it to try to create an after repair
value of $250,000. Today's values what someone's willing to
pay. I got it for $150,000. I probably could have gotten it
for more but I got a good deal on it. Now, when you sell that home, you're thinking,
"Well, Kris. There's 100,000-dollar difference. So, if I have 40,000
and repairs, that means that there's 60,000 left over. I'm going to make that
as a profit." Not so. You also want to be familiar with this term. Selling costs.
Selling costs mean that if you sell a home, you have to pay some money to sell
it. You're going to set 6% of the value aside that you're going to pay the
Realtors. If I sell it for 250, what is 6% of that. Well, 1% is
2,500 bucks. 2% is 5,000. That means
that 6% is going to be $15,000 if the purchase price
is $250,000 when I go to sell it. In addition, I'm also going to
have... Part of my closing costs are also going to be... My selling costs are not
just... The realtor fees is what those are called but I also gonna have the closing
costs. And the closing costs are generally 1 or 2 percent. If it's 2%
in this situation, it's another 5,000. So, I've got 5,000
and 15,000 for my selling costs, 40,000 repairs. That's
60,000. So, if I bought it for 150, I'm going to add the 60,000 on top
that brings me up to 210. The difference between 250 and 210 is $40,000
of potential profit, okay? That's the way that you look at a deal like
this. So, that's the terminology. I hope that helps you out. Now, we're going to
take a look at second deal that's going to give you the
rest of the complicated language that you typically find in real estate. And
this is going to be based on a strategy that I'm more of a fan of called buy and
hold. Buy and hold is where you take a home that you get and the intention is
to buy it and rent it and make money. Here's the language that you want to be
familiar with. I have a purchase price on this particular house of a 150
thousand dollars. This is what I'm buying it for. I have a down payment to
the bank of 20%. So, 20% of 150,000? Get good at your calculator. 150
thousand times 0.2 for 20% is $30,000
I have some closing costs. And some other fees associated with getting
the house set up. $10,000. So, I'm $40,000 in on a
150,000-dollar home. Now, after I put my down payment of
30 grand, I now have a mortgage. And that mortgage is... For 150,000
minus the money that I put down. It's 120,000-
dollar mortgage. My payment on my mortgage every month in this case is
$800. But I lease out the property. And my lease payment on
this property is $1,200 a month.
Now, I lease it for 1200. I rent. My mortgage payment is 800.
That means that I have a positive cash flow of how much? It's the difference
between the lease of 1,200 of what I'm getting versus what I owe of
800 a month. There's $400 a month of positive cash flow. That is the
story of how you talk about real estate in both of these 2 very common
scenarios. There's a lot more that you can learn to get your language lock down
and loaded. But perhaps the most important language that I want you to
learn is this one right here. 3 letters, R-O-I. Do you know what it
stands for? It stands for return on investment. I put money out in a real
estate deal and the ROI tells me how much comes back.
I put money out on a business transaction and the ROI tells me how
much money comes out. I put money out in the stock market and the money that
comes back is going to be the ROI. ROI is basically take apples and oranges and
different kind of fruit and makes them all similar to each other. So, I want you
to be familiar with this one because never ever ever engage in a real estate
deal without first understanding the ROI. If you know the ROI, you're in good hands.
Now, this was just meant to be a start to your entire real estate education. And
if you're watching this and thinking, "Kris, okay. Thank you for teaching me the
basics of real estate. How do I learn more language and how do I get the best
ROI?" You're going to actually find that information in a brand new publication
that I have here. It's called Chrome Consortium. It's the story of the
strategy of how I buy the best deals. How I average at 25% ROI and
4,000 individual homes to prove it. This document is free. I'm circulating
it right now because I want people to have as much knowledge to get in the
game of real estate to know how to play it. If you click the link below, you can
learn more about this document. All I ask is that you cover shipping and then
other than that, we're going to send it out the door for you so that you can
actually get your game on with real estate learning how to play it in the
most intelligent way possible. Other than getting that document, the next video I
recommend for you is coming right up next. It's how to create wealth in your
20s. I became financially independent at the age of 26. And whether you're
starting off in your 20s, 30s or 40s or even late teens. Now, is the perfect time
to get in the game of real estate. This document will 100% give you huge
shortcut. In fact, just flipping through this for about 30 minutes will give you
indispensible knowledge on what you should and should not be doing in the
game of real estate. And proof to back it up.
My friends, thank you for watching today. Make sure that you subscribe. Smash that
like button and I'll see you on tomorrow's video.