Make 100 to 300 percent returns on the equity. In this episode, I'm going to address the
question, "How to make money on a rental property when it's vacant. People go, you can do that?"
-Uh, yes. So, get ready. Put on your seatbelt. You're going to be blown away with what I
teach you. So, my name is Doug Andrew. I've been helping people optimize their financial
assets now for 4 ½ decades. But I've helped a lot of people optimize those assets that
are may be on real estate. So, I'm going to start out with an example of a couple in the
San Francisco bay area. This couple built a home like 45 years ago for their family
of 6. And I think the original cost was about $250,000. Well, they've invested in it, remodeling
it through the years. And that 5-bedroom home in Palo Alto... We're talking about San Francisco
again where real estate values in my opinion are way out of whack. Why? Because that 5-bedroom
home, a couple of years ago was appraised for 4.8 million dollars. Now, some people
think "Whoah! I want to buy real estate in San Francisco." Hold your horses. That's not
so smart in my opinion. Because something's out of whack, why? See, they were excited
because they were going to retire and they rented that home for 10 grand a month. Now,
10,000 a month sounds pretty good. Well, in the San Francisco Bay area, the cost of living
is quadrupled what it is all above other areas in the United States. And so, when people
are renting homes for 2,500 or 3,000 elsewhere, if they're working in San Francisco, making
3 or 4 or 5 hundred thousand, the cheapest place to rent a home might be 10 grand a month.
This is common. But people think, "10,000 a month. That's 120,000 a year." And I look
at them and I go, "That's pretty pathetic." And they go, "What?" I go, "Do the math. 10,000
a month is 120,000 a year." -"Yeah". -"Well, divide 120,000 into 4.8 million. That's only
2.5% return annually. You can do far better than that." So, in a nutshell, what this couple
did, they sold it. Now, they didn't want to pay much of the capital gain. But they wanted
to replace the house. They retired in another state and they built a house twice the size,
brand new for 800,000. So, they used 800,000 of the 4.8 million and ended up with a retirement
home twice the size. Brand new. That left them 4 million left over. What did they do
with that? They bought a dozen homes in Memphis and Orlando for 300,000 because 5-bedroom
homes brand new ones in Memphis and Orlando are 300,000. And in Memphis and Orlando where
Federal Expresses are located and so forth, those 5-bedroom homes worth 300,000 rent for
1% a month. 3 grand a month. 1% times 12 months, it's 12% annual return instead of 2.5%. Are
you getting it? They increased their cashflow on rents by at least quadruple what they were
getting in San Francisco. Meaning, that home in San Francisco really isn't worth 4.8 million
and it's going to crash someday. Or if it's really worth 4.8 million and if they were
inline with other areas in America, it ought to be renting for 48,000 a month. They're
not going to do that. Something's out of whack. And so, they've been experiencing 4 times
the cash flow they have a retirement home twice the size. And it's been phenomenal.
But the next thing they did is they actually mortgaged these new homes so they were able
to keep 3 million because they mortgage 75% loan to value. So, they actually have 3 million
of the 4 million. They could've paid cash for those 12 homes in Memphis and Orlando.
No. That's not what I would do. They borrowed 3 million. And they borrowed 4.5% tax-deductible
interest on those mortgages. That's a net cost of 3% in their tax bracket. So, they're
paying for the mortgages on those rentals 3%. Now, again, they're making 12 on the rents.
But where's the other 3 million bucks that they didn't pay cash for the properties? It's
in their Laser Fund, my favorite vehicle. And it's earning 9% or higher. So, they're
making on 3 million, 9%. Now, that's 90 grand times... That's 270,000. And the mortgage
on those is only at 3% after tax. They're making 300% more on that money than if they
paid cash for those properties plus they're making 4 times the rental income. Folks, you
can do this. And so, when we talk about how to make money on a rental property I started
out by saying, "Hmmm, how do you make even if it's vacant?" See, if they had paid cash
for those 12 homes and all of a sudden those properties are vacant, they have no cash flow.
If that was part of their retirement income, they're up to creek. But if they have 3 million
of that 4 million over in their Laser Fund earning 3 times what the mortgage is costing
them, they can peel off a third of the interest they're earning and make the mortgage payments
and they still have a net 6% tax-free giving them cash flow even though all 12 homes might
be vacant. Because their money is earning more than the cost of the mortgage. If they
pay cash, it's not making anything. Maybe it's appreciating. But hello? If it's empty,
it's probably not appreciating. It depreciating. So, this is why I recommend many people dramatically
increase the liquidity, safety and earn rates of return even if their rental properties
don't have any tenants. If their totally vacant, they are still making money on that property
because they're earning interest that's double or triple the cost of the mortgage by having
the use of other people's money. This is how banks make money. Is this making sense? So,
let me connect the dots for you. So, if this is making sense, I've been talking about...
You know, don't take all your money and tie it up in other real estate. If you are going
to have rental properties, I would strongly recommend, instead of sending every bit of
extra rental income money towards paying down the mortgage, that might not be the smartest
thing to do. I take the extra cashflow and I keep accumulating it over here in my tax-free
side fund, my Laser Fund. And so, that money is liquid. I can access it and it's earning
returns that usually double or triple the net cost of the mortgage. That empowers me
so that if things get really bad, if it's vacant, I can't find tenants, I don't have
rental income, it doesn't matter. Because I still have cash flow that is double or triple
what I need to make the mortgage payment. If I paid cash, I don't have any cash flow
at all. It's just trapped in the property. And it's hard to get equity out of a piece
of real estate without selling it. If you need the money and if it's that bad, you're
going to have to sell it at a discount. You're going to have to take a depreciated price
for that. And so, folks, this is what empowers people to be able to make money even if the
real estate market drops down for a period of years. I've had many, many people send
me thank you notes for teaching them this concept. So, what do you need to do with that
money? What's a LASER Fund? Well, I want to empower you and educate you on what it is.
I want to gift you a free copy of my most recent bestselling book titled The LASER Fund.
And you'll see examples of this book of people who use it for real estate management like
I've been talking about. You ready? So, just like these people that I've talked about,
where did they park that money? In a diversified portfolio of LASER Funds. See you can diversify
and create the foundation for tax-free cash flow. The LASER Fund is a max-funded, indexed
universal life insurance contract. Now, people say, "What? I've never seen an insurance policy
that earns rates of returns of 6, 7, 8, 9, 10 percent." Well, then, you haven't seen
one structured this way. I have earned between 6, 8, even 10 percent average for the last
45 years. You can see examples here in this book. So, it's called The LASER Fund because
LASER is an acronym that stands for liquid assets safely earning returns. Serious cash,
money that you don't want to jeopardize, you want to make sure it's safe passes this 4
bars. Liquidity, safety, rate of return and tax benefits. In this book, you'll learn how
to take any investment and pass the LASER test. And why The LASER Fund called that because
it passes those 4 test. Liquidity, safety rate of return and tax benefits with flying
colors. So, it's actually 2 books in one. This side has about 200 pages with all the
charts and graphs and explanations of how you can accumulate, access and transfer your
money totally income tax-free. If you learn more by stories, you flip it over and read
this side. And it contains 12 chapters, 100 pages with 62 actual client stories. And you
can read in here how people who manage real estate like to keep their money part here
where it's liquid and safe. They can access it with an electronic funds transfer or phone
call. If you have money tied up in real estate, you either have to sell it or try to borrow
money on that property. And when you need that money, the worst is the hardest to get
because you can't qualify. This is a far better place to have working capital if you like
to invest in real estate. You'll understand why when you claim your free copy. So, if
you got to laserfund, LASERfund.com, you contribute a nominal amount towards the shipping and
handling. I'll pay for the book and fire this out to you. And then you begin to study. There's
options there to listen and learn, to watch and learn. And I want to see you on the other
side of your brighter future where you understand how you can become like you won banker by
using these superior vehicles and strategies.