Even though I’m about to
tell you something that I don’t think Graham and Kevin talk enough about, I want to start
this video by making it clear that I love what they’re doing.
In fact, if you’re watching this video, it’s because they both gave me the go-ahead
- you see, I sent the rough concept and script to them ahead of time just to be totally sure
I didn’t offend.
And hey, Graham, Kevin, thank you!
I appreciate their vision and the content they tirelessly crank out.
And if you have any interest in real estate and somehow haven’t heard of them, I encourage
you to check them both out - you’ll learn a ton, even with their free stuff here on
YouTube.
And judging from everything else they do, I have no doubt that their paid content is
more than worth the price.
And you bet I’ll put links to their channels and courses in the description - and no, at
least as of this recording, I’m not an affiliate or in any way compensated.
And if I ever am in the future (no plans, I don’t even know if they do that yet),
I’d definitely have to join myself first just to be sure.
I support these two real estate experts so much that in my most popular video to date,
I recommend that anyone interested in real estate should go learn from them - and that’s
the clip that you saw there at the beginning (minus the dramatic ‘exposed’ labels...).
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So, why this video then?
My goal is to add a different perspective and experience to the conversation.
You see, although I find them interesting and educational, I can’t directly relate
to many of the examples Kevin and Graham use - now, I haven’t seen every single one of
their videos, but every time I watch one about a specific investment property, they’re
talking about $400 or $900K homes.
Obviously, that’s what they have to deal with around where they live in California.
And they’re clearly very experienced in that area.
And maybe that’s what most of you are dealing with as well...
But for me, I prefer to work with homes about ten times smaller (at least, that’s where
I’d recommend starting) - where I can realize double-digit and sometimes even essentially
an infinite return on investment from the beginning.
Before we dive into exactly what I’m talking about, if you aren’t asking this question,
you probably should be: Who am I to be talking about this stuff?
Why should you listen?
Well, although my father had his real estate license and I can vividly remember working
on deals with him as a child, and although my sister is the broker of her local Warren
Buffett owned ReeceNichols real estate office, and although I’ve received the training,
I never sat for my real estate exam.
I was slightly more interested in stocks and financial markets in general.
I became a Certified Financial Planner to be able to help people with that broad spectrum
- from stocks to physical real estate - of investment planning.
But before I made that move professionally, I had already started building my real estate
portfolio.
That was more than a decade ago.
Today, I manage my own real estate portfolio along with a several-million-dollar trust,
in which we own apartment buildings, offices, and so on.
So, that’s my experience.
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And for my regular viewers (who are used my videos on investing in the stock market) I
hope you don’t mind this slight deviation.
Obviously, as you can tell from my personal portfolio and from my book, I believe in diversifying
beyond just the stock market and I have a personal interest in and experience with real
estate.
So, I hope you find this helpful and informative as well.
And since I know this won’t apply to everyone, I’ll put this emblem at the bottom of my
thumbnails for videos that have to do with physical real estate investing specifically,
so you don’t ever have to even waste your time (either because you specifically seek
out these videos or because you avoid them…
either way - I hope it helps).
That’s my goal, to help, not to waste time, so I hope everyone watching - whether my normal
viewers or those from Kevin or Graham’s channels or anyone else - will take a moment
at some point during or after this video to let me know in the comments if these type
videos would be helpful for you or not - that’ll help me determine how many I should do in
the future (if at all).
Come to think of it, you could also let me know with a like on your way down there…!
I appreciate it.
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The reason I bring a perspective unique to Graham and Kevin is because I’m not from
a big city or a coastal city where real estate prices are much, much higher - I’m from
the middle of the United States - the dynamics here are pretty different.
Now, that doesn’t mean we don’t have cities that experience high growth, high appreciation.
Northwest Arkansas, for example, where I’m from, is also the headquarters of Walmart.
And because of everything they do here - to attract top talent and just make it a sweet
place to live - we’ve definitely experienced some decent appreciation over this last decade.
My primary residence, for example, has gone up by about 60% since we purchased it eight
years ago.
But, although I could, I don’t buy here.
Other than my house, there’s only one other property (inside that trust that I mentioned)
that we own in this Metropolitan Statistical Area.
There’s a reason for that, and it’s the reason for this video.
Here it is:
I’m afraid, if (back when I was getting started) if I had just listened to what Graham
and Kevin have to say (all great stuff, but I’m afraid) I would have entirely missed
the opportunities that I’ve been able to successfully profit from over this last decade.
You see, when I have money to invest in real estate, at the most basic level, I have a
choice: am I more concerned about appreciation or cash flow.
Now, as those guys’ll tell you, every good real estate deal should have both.
So, it’s a question of which is more important to me.
At least on the front end, in my early years of real estate investing (which I’m still
in), it seems clear to me that cash flow is king and that’s what I want to focus on.
When I first started, I knew if I could build up this base that was spitting out enough
positive free cash flow, that I could just buy more and more properties every single
year - I could create this passive income beast that is not only self-sustaining but
that’s growing at an increasing rate.
After purchasing my first houses, I preferred that to just sitting around waiting to build
up enough money from other income sources (or to ultimately sell my appreciating property…)
before I could buy another one.
I knew if my goal was to significantly grow my real estate portfolio, I’d be able to
accomplish that goal much more efficiently by increasing that source of regular cash
flow.
Both strategies can work - focusing on cash flow or focusing on appreciation - but for
me, I get way more excited about cash flow.
Now, don’t get me wrong: I ultimately want to own more of those nicer appreciating properties,
but I’ll be able to buy more of them later, by focusing on cash flow today.
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Now, I think of the city that I live in today - voted as 5th best place to live in all of
the United States, by the way - I think of this city as well as the three neighboring
cities, as my playground for real estate appreciation opportunities.
But, if cash flow is my main goal, I have to go outside of the city limits - to the
rural communities that aren’t booming quite as much.
And I don’t mean in the middle of nowhere.
My hometown, for example, is about an hour north of here in Missouri.
It has a population of about 15,000 and not really many growth prospects, but it has some
amazing rental potential.
The city above that has a population of about 50,000.
It’s growing more than my hometown, but we’ve still been able to find some amazing
cash flow opportunities there as well.
The reason I mention this is to show you that if you’re interested in these type of cash
flow focused opportunities, if possible (and I get that it won’t be for everyone, but
if possible) you may want to expand your search to some areas perhaps a little further away
that you might have been tempted to ignore before (due to low appreciation potential,
for example).
And I hope that makes sense.
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Now, I want to show you an example of what I’m talking about and why you might want
to at least look for opportunities like this yourself - as opposed to those half-million-dollar
homes that are barely cash flowing.
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Now, this is a property where our tenant just left and we’re in the middle of getting
it fixed up for the next one.
That’s why there are things lying around and you can see that it’s not quite ready
- that’s also why I was just there and filmed this, because I needed to check in on it before
we rent it out again.
So, that’s the example I decided to cover with you today.
Now, she isn’t pretty on the outside by any means, but when you really get to know
her - when you dive into her numbers - she looks WAY more attractive.
Now, I’d love to run through and explain the exact numbers with you - in the same way
that I conduct a detailed stock analysis - but I don’t want to make this video too long
and I can prove the point quicker just telling you rough figures.
I purchased this property just over 4 years ago.
She needed a little work done on the inside before I could rent her out.
So, after a little back and forth with the seller I agreed to buy it for a little under
$40,000 with the seller giving me a check for $5,000 in repairs.
I put 20% down through my bank.
We didn’t contract out those repairs - my team did them instead, so they ended up only
costing us about half the amount given.
In all, I was out of pocket less than $8,000.
My brilliant property manager rented her out for $575 per month, well over the $220 I was
paying monthly for my mortgage.
I also factor an additional $180 (in this case) each month for (what I’ll call) my
“F Fund,” my manager’s commissions, and other smaller expenses.
After factoring out that overestimate for expenses of $400, we realized about $175 per
month, or about $2,100 each year.
That’s a cash on cash return on investment of over 25% - $2,100 per year in positive
cash flow on my less than $8,000 investment.
That’s how this one played out for the last 4 years - so, I’ve already made back my
initial investment.
And I’m not even talking about all the other benefits that come from owning real estate:
the fact that the tenant has now paid down my mortgage, the tax benefits, the appreciation
that did happen (even if it was little).
That tenant just moved out of that one, we’re fixing it back up with the some of that money
set aside in the aforementioned “F Fund,” and we’ll be ready to roll again!
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Think about what you could do with cash flow focused investment real estate like that.
If this was your first home purchase, you probably could have put down less if you wanted
to (like you’ll hear Kevin preach about).
Then after just a few years, you could have easily picked up another one just like it.
A couple of years after that, another.
Then, why not one or two every year!
Now, I didn’t just cherry pick this house.
It’s not the one with the highest ROI in our portfolio.
This is just the house we’re currently working on, that’s why we were there.
It’s just one of many examples like this.
They’re all a little different, but their ROI’s range from double-digit to essentially
infinite (when I’m able to cash out for more than I even put in - something we can
talk more about if you’re interested).
And, I’d love to walk you through the exact numbers associated with this or any property
and take you through the processes we use to find and invest in them - but again, only
if you think that would help.
So, please: let me know in the comments - let me know by hitting that like button.
And if your goal, like mine, is to invest smarter - whether in stocks or real estate
or both - I hope you’ll hit that subscribe button so we can continue to work together.
I look forward to getting to know you better and helping however I can.
Take care!