Welcome. If you're a brand-new real estate investor, today I'm going to share
with you the top 5 tips that will help you get cranking. In fact, I've got
Devin coming in studio today and I'm going to break it all down for him and help
him understand as a brand new investor the 5 most important things he needs
to know. Most importantly not to make sure he makes a million bucks. To make
sure he doesn't screw it up. These 5 things are probably the most important
things I would share with any brand-new student from someone who's done
thousands of deals. Check it out.
Alright. Welcome back. I am joined today by Devin. How you doing brother? -Doing good.
How you doing Kris? -Awesome. Now, Devin is a brand new investor. So, I wanted to
share these tips with them because he's been blowing me up. He's been asking some
fantastic questions. In fact, he's taking action but you're also still at the
stage where.. How much real estate do you own? -I currently do not own any real estate, -Okay.
So, he's at that big fat number of 0 where we all start, right? We're all
created equal in this game. Most of us starting with no money, no nothing and
then figure out how to get really get rocking and rolling. So... Dude, I was there.
And the most important thing you can do right now is get the right tips,
information and help and mentorship so that it can lead to your for several
deals. Because right now, you have a plan, right? -Yeah. -But you have a lot of
questions. -A lot. -Awesome. So, we're going to... What I'm going to do is I'm going to
put some of these things up here on the board. And what I want to do with some of
the questions you've been asking and many of the questions you've been asking.
If you're a beginner investor, there are some basic information that if
you do not know, it could likely kill your ability to actually successfully
get in the game. So, I've got 4 tips specifically today that I think are
really going to make a big difference. First of all, just tell us briefly a
little bit about yourself. Where do you live? -Right now, I'm living in Salt Lake
City. -Okay. And like what's going on in your world with this whole real estate
thing? -I'm just looking around trying to find a good deal. I got a little bit of
money saved up. -Currently renting? -I'm currently renting. I'm living in an
apartment with my wife. Right there in downtown. And we're just looking
to make something happen. -Okay, awesome. Many of you watching that might be
thinking, "Hey, like... If you don't know any real estate, that probably sounds
somewhat familiar to you. That's how it sounded for me Devin when I got started
on my journey of real estate." So, I had to pay a lot of time and money for mentors
to help me get some of the basic information and tips that made a world
of a difference for me. I'm going to share them with you right now. Okay. So, if
you're a beginner in the world of real estate, I'm gonna write these up here. The
first thing that I would focus on if I were you, single-family homes. That's
always abbreviated S-F-H. And the reason why I recommend a single-family home is
because commercial, multi-family, other stuff, they just require a lot more money.
And so often, if you're starting with very few means, which most people are,
real estate can often demand a 20% down payment. So, you know, $300,000
house, I put 20% down... And you know, now I'm parting with 60, 70, 80 thousand
dollars. That's a lot of money for a lot of people. There's got to be a faster way.
And so, single family, entry level. And this was really important, Devin.
Purchasing this home below the median. The median means that the average
home price in an area. And the reason why I care so much about that is because I
want to cater to the largest population of people in the game of real estate. And
the median, if I'm below the median, this is what the bell curve looks like if I
would actually draw this on the screen for you. With this bell curve, if this is
the median right here, this is the average that people will spend on a
house. Over here, I might have mansions. Like, million-dollar homes. That's at the
tail end. There's very few people that can get that. But over here, this meaty
section, this is actually right here, this is where you've got your greatest safety
protection. The most people are looking for homes, so the easiest to rent
and of the most affordable. So, affordability, ease of rent most, people
looking for them. I recommend everyone start there as like the beginner move.
That make sense? -Yeah. -Any questions on any of that?
-I guess where do I look to find a home as below the median? -Yeah. So,
super-important, right? Like, you don't want to get caught in some slum runks
out of the train truck, train tracks. Getting like a really crappy kind of
house. Because some people think, "Oh, that must mean that I'm going to become a slumlord
and buy really crappy real estate for people." That's actually not true. You're
actually looking for the nicest neighborhoods that are priced below the
median. You're looking for the most desirable areas that people want to be
where families want to be. At least when you're doing like a short term buy and
hold which is really the second thing I want to share with you. I don't recommend
when you're brand new flipping real estate. If you do a buy and hold, what
that really means is I'm going to get a piece of real estate. I'm going to put a
family in it. I'm going to rent it out and then I'm going to try to make a positive
cash flow, right? And I think I've met rent it for 1,500 a month but my
mortgage is 1,200 a month. There's $300 left over that
you get to pocket for only in that real estate. As far as where you find those
homes, I think it's important when you're doing backyard real estate to get
familiar with where you live. Literally take a couple hours and drive around
neighborhoods. And start asking, you know... You'll see billboards and price tags and
homes for sale. And you'll start quickly figuring out, "Hey, in my area,
the median is $240,000." So I'm looking for
homes in the 170, 180, 200 range. So, I'm below the median. And where are the
nicest and newest neighborhoods that look like that? That's where I would be
looking. That make sense? -Yeah. It makes far more sense. -The third piece of advice
that I want you and you know to all here is that you've got to be looking for a
good ROI. Owning real estate is not the goal. In fact, we're not even interested
in real estate investment. We should always be most concerned with what is a
really great ROI that produces a service for people. That's what we're going to win.
And if you're a beginner, I think that ROI sounds like math, right? It sounds...
Right? It's like... Okay. I'm going back to school. Fifth grade was a long time ago.
Fortunately you don't need calculus. You don't need geometry. You need like some
basic math. Guys you can do this. This math is simple. There's 3 numbers
that you need to care about when calculating an ROI which stands for?
-Return on invest. -Your doing pretty well if you can't answer that. ROI --return on
investment. It's the equalizer of all investments. It's what tells me apples
and oranges. How can I compare everything to each other? ROI. There's 3 things
that you should be concerned with your ROI. The first one is what's called
a cash-on-cash ROI. That means if I put money in, then how much each year am I
getting back? I'd like to show you simple math, let's just say that I put in
$10,000. But... And so this is what went out. But $2,000 that year is what came back.
Well, 2,000 is 20% of $10,000. So, this would be an example of a 20% cash on
cash. Now, that's a fictitious example to give you like an understanding. In real
estate, a really good cash-on-cash is going to
range between 6 and 10 percent, okay? But that's that's how you do the math.
It's actually not hard. I've put money out. How much of my money I'm putting out
and coming back? Now, if you guys are putting money in the stock market of
401ks or IRAs, your price scratching your heads like, "When he's supposed to come
back?" That's because most people put their money places that it doesn't come
back. Listen, it's speculative if you put it
out and it doesn't go back. It's a real investment if I put it out and it comes
back. Most people aren't real investors. They are just doing what everyone else
is doing. So, part of your ROI is understanding what is the cash on cash
component. The second part of calculating your ROI is just understanding what is
the appreciation in my market? You know, from 1963 to present, the average ROI in
all of America has been 4.58%. So, it's like, imagine if
your bank account was earning 4 and a half percent. Does your bank account? What
does your bank pay you right now in return? -Nothing. -It's a safe place,
right? Maybe they give you a tenth of a percent. -Maybe. -Maybe not. Alright. Like,
we don't put our money in banks because we're growing it. -Yeah. -But imagine a bank
that did this. Well, a home is a bank account of bricks that grows at the rate
of appreciation. If the national average is 4.5% then if I'm
doing 6 to 7 percent on my cash on cash, I'm doing four and a half percent
on my appreciation. I add those 2 together now, it's like, "Wait a second. If
I'm earning 6% cash on cash." And let's say 4% appreciation, 6
plus 4 is? -10. -Okay. Now, I'm earning 10%. But that's not true.
You're actually doing more than that. The third thing that you want to be aware of
is what I call principle reduction. Now, don't get scared by the phrase. It means
that when I have a mortgage and I pay my mortgage, a part of that is going to
interest. In the beginning, most of it. But roughly 5% of that is going to
come back to me in the future as paying down my principal. When I sell the house,
I'm going to get that money back. Or when I refinance, I'm going to get that money back.
So, if principle reduction is also 5%, in our previous example, if I had
a 6% cash on cash a 4% appreciation, that puts me at 10. But
now at 5% of principle reduction. And what am I at? -You're in 15. -10 and 5, 15. A 15%
ROI. Is that bigger than the average 401K return? -Absolutely.
-Many times. Is it bigger than the S&P 500 on the stock exchange.
Hugely bigger, right? This is why people get in the game of real estate. So, this
next step that I want you to understand is just "Can I calculate my ROI?" Now,
the way I'm breaking it down, let me ask you. Could you look at a deal and
actually start thinking through the ROI? -Now, if I sat down and really thought
through it, yeah I can start picking it apart. -Because here's what you'd think:
I'm going to buy this house, how much money am I putting out. And I know what my
mortgage will because the loan officer told me. I know what my cash flow. I'm
guessing is going to be, I can now guess how much money will come back. I can
calculate the cash on cash. Then you can say, "Well, I can Google the appreciation
for this area. And I can also Google the principle reduction." And basically, you
can actually figure out an ROI. Does that make sense? -Yeah, makes a lot of sense. -By the
way dude, I'm telling you right now, if you can calculate... If you can calculate a
simple ROI, you are already significantly more savvy than 95% of real estate
advisors out there. Is that cool? -That's awesome.
-Dude, good for you. Awesome. You guys understand that. I got a couple more
things I want to share with you. The fourth piece of advice that I want to
share with you is that you need to compare when you buy a home, you're going to
hold it, you're going to have this ideal concept of what your cash flow is going
to be. And brand-new investors tend to be overly optimistic. That means they get
high on stuff. That can hurt you. You want to be a realist. I'm an optimist in every
part of my life. Except for the numbers of business. Then I'm a realist and
sometimes even a pessimist. I want to know truth. I want to know reality. So, a
lot of people come up with a cash flow. But here's what they don't really factor
in. They don't factor in the condition of the home. And you might on paper say, "I
can rent this for 1400 a month." Guess what? In that part of town,
everything else is being fixed up with nicer carpet paint. If you don't carpet
the paint and put 6 grand in there, you're not going to be able to demand
that rent. You might get 2 or 3 hundred dollars less a month. Plus waste
months of having a mortgage on paid trying to get them. So, I want you to also
understand that the condition of a home doesn't necessarily drive the value of
the home up. It drives the perceived value. And what we're really controlling
in controlling realist is controlling people's perception. Which means you
shouldn't have the nicest house. And you shouldn't have the ugliest house. Your
house should be fixed up to what everything in the area is fixed up at. So,
by the way... And when the market struggles, people might be putting in granite. When
the markets hot, they might be fine with FORMICA
Those are counter tops by the way. One's cheap, ones expensive. And you're not
trying to be better than anyone. You're literally just trying to be at market so
you can get what the market is giving. If you put in too much money, you want
recuperate that. If you put in too little money, you won't get your house rented.
-Okay. So, make the home average but use your brain to make it as profitable as
possible. -You totally understand. Dude, you're totally getting it. Today, I want to give you a bonus.
Can I do that? -Yes. -I got a gift for you. And for you, I've got a gift as well. I want to
give you my fifth and final tip today which is how do you get the most money?
Like, would you like to know how to make the most? -Absolutely. Don't be a landlord
and do a rental. Because you're either gonna lose some money of the property
manager because you don't want to do it. Or you try to do it you fail at it. When
you're a beginner, it is so easy to screw up getting the wrong tenant and then
being relaxed and lenient when you need to be stiff as a board.
So, what I want to recommend here is a strategy I use for beginners. I think
every beginner should engage in this. And it's called a lease option. My book here,
have you read this? -Yes, I have. -Okay. So, you know about the compassionate financing?
-Yes. -This game is all about how do I get maximum rent but also put maximum
control in the hands of the tenant so that they want to take care of the home
and fix it up and do all of that? It produces a significant ROI. More
importantly, it gives a family an opportunity at ownership when a bank
might not. So, I love the compassionate component of that. For all of you
watching today, this book is free. I've written several books. But this was
really about do-it-yourself. How do you become your own self-made man? Self-made
woman, self-made millionaire. If you click the link below, you can get your hands on
this book. And it will go... It'll take you through the details of what a lease
option is and how you take advantage of that to really
make it work for you. By the way, you've read the book. Have you watched my
lease option series on the YouTube channel? -Yes, I have. -For those... By the way,
was that helpful? -Yes. -Did it really give you the ins and
the outs? -Open my mind. -Yeah. Listen, if they haven't watched it yet, would you
recommend it? -Yes, please watch it. If you want some of this real
estate and get into this. -Guys, listen to Devin. Get yourself a copy of the book
but video coming up next here. I create a little miniseries that will
actually show you exactly how to make the most money doing the lease option
versus flipping, versus renting. I will prove by math, simple math how you can
make the most money in the game of real estate and Devin recommends it? -Yes. -Devin,
should they subscribe? -Subscribe, like. Put your information and get in touch with
Kris's team. It changed my life, will change yours. -Awesome. Thank you so much. Devin
thanks for being here today. And for you guys, you've got some free tools.
I hope you enjoyed today's tips on how you can be a brand new investor and go
out and crush it.