ilmscore | Prediction Details
"The way the YouTube algorithm works if you do not smash that Thumbs Up Button then uh YouTube is much less likely to show you and other people our financial news and education videos to do this kind of house hacking you have to find a loophole in the system what's considered a home before you give me a Sentimental answer like home is where the heart is we're talking strictly Financial right now okay when most people think of a home here's what they're thinking they're thinking of this building with a roof on it with a door with a couple Windows actually maybe more windows and then a driveway this is what most people think of when they think of a home but technically speaking that's not the only definition of a home I mean you can own a condo which is one unit which is attached to a lot of different units your home can be an apartment but now you're renting this one unit inside of a building with a bunch of different units your home can also be a mobile home so there's a lot of different types of homes out there and if you wanted to buy a home this takes a lot of cash and most people don't just have a ton of cash sitting in the bank account where they can just go and buy their own home completely with cash so what do you do you go over to the bank and then the bank is going to loan you some money that way you have the cash to buy a home so now the bank gives you this mortgage that way you have the cash to buy this home and then every month for the next 30 years after that you're going to be paying your bank back this mortgage plus a little bit of Interest so this is what people want to avoid they don't want to have this big monthly payment because it is expensive and for the majority people when they think of being this housing payment free they have to wait 30 years until they can pay off their mortgage but there's a little loophole that you can use which will allow you to no longer have this money come out of your personal bank account you could have someone else pay this loan let me show you what I mean so you have this really nice 4unit multif family building on sale for a million dollar and each one of these units rent for $2,000 a piece they're pretty nice units they're spacious they're nice when most people think of buying this four unit multi family building here's what they think I'm going to buy this multi family building for a million dollars but I don't have a million dollar in the bank so now I got to go to the bank and get this commercial real estate loan that way I have the cash to buy this investment property so you go to the bank the bank's going to say hey you want to buy this property great put down $200,000 and then we the bank are going to loan you $800,000 and because it's is the commercial real estate loan we're going to charge you something around 6% a year in interest if you're getting a commercial real estate loan a business loan it's going to cost cost you a whole lot more than a regular mortgage which is why at this time it might be something around 6% interest which means this $800,000 that you're borrowing is going to cost you as the investor $48 a month this is how much money you're going to be paying the bank every single month to own this four unit building that you're renting out at first glance you might think wow that's a great deal you're making $2,000 $2,000 $2,000 $2,000 that's $88,000 a month in rent and you're only paying $4,800 to your bank that's thousands of dollars of margin except you forgot property taxes and property insurance and maintenance fees and management fees and property vacancies those five fees that I just mentioned are probably going to cost you something around $2500 a month this is in addition to your mortgage payment that you have to make every single month your loan payment so when your property is full you'll be making $88,000 a month in revenue and then you have to subtract your cost which 4800 plus 2500 something around $7300 a month which leaves you with a few $100 of margin every single month to put in your pocket and this can cover your vacancies that might come up and put some money in your pocket but in this particular situation you don't have a place to live so now you're going to have to go out and find another home to live in yourself and you're going to have to make a rent payment or a mortgage payment and chances are this money that's left over after paying off whatever vacancies come up is not going to be enough to cover your entire mortgage payment and your entire rent payment so now let's reanalyze this deal but this time you're going to do something different this time instead of renting this property out to four different families you're going to rent it out to three different families and you are going to live in this unit right here for yourself remember when I asked you in the beginning of this video what is a home well from a legal perspective as an attorney who is not your attorney I can tell you that your home which is called your primary residence it can be a one unit a two Unit A 3unit or a 4unit property so now if you go out and you buy this 4 unit multi M family building and you don't rent out all four units you live in one of the units and you rent out the other three now this is a 4unit building that you are using as your primary residence your home when you use this house hacking loophole there are four things that happen for you first you get a much cheaper loan because now you're buying a home and you can get a primary Home Mortgage instead of going out and getting a commercial business loan at the time of me recording this video this might only cost you 3% a year in interest compare that to what you would have to pay if you got the commercial loan like I talked about earlier so now if you wanted to buy the same $1 million property and you put down $200,000 now your monthly mortgage payments are going to drop from $4,800 a month to $3373 a month that's quite a big drop $3,400 a month might sound steep depending on your income but you have to remember one more thing your neighbors your people attached to your building are all going to be paying you $2,000 a month to live in your your building each all right now check this out so $2,000 $2,000 $2,000 every single month your neighbors are going to be sending you $6,000 a month when your property is full but you got some cost you have to pay right first thing you're going to do is you have to pay your bank you're paying your bank $3373 a month and then you also have your regular building expenses right your property taxes your maintenance your management fees your vacancy cost whatever this is right you have your regular cost to have a building have a home and this is going to cost you from the previous example $2500 a month this leaves you with $127 every single month that you have all your tenants in there after paying your mortgage after paying all of your housing payments your taxes your maintenance everything for your home you still have another $127 in your month because your neighbors are so generous that they decided to pay your mortgage for you you get to live mortgage free cuz you don't have a housing payment anymore your neighbors are paying it for you you're putting an extra $125 in your pocket every single month and your neighbors are helping you build equity in this million property every single month and none of this Equity is being built by you it's being paid for by your neighbors but now what if you don't want to pay that $200,000 down payment or what if you don't have that $200,000 down payment well that brings me to the second advantage of this loophole this is where alternative types of Finance to come into play like FHA Loans if you go the FHA loan route now you might only have to put down 3 and a half% on your loan but the issue with FHA Loans is there's a limit to how big of a home that you can buy but the interesting thing here is if you buy a multi-unit property like a 4 unit home like I talked about because four units count as a home then the FHA limit increases but before I get into that let me also remind you that more debt comes with more risk if you're only putting 3 and a half% down you don't have as much skin in the deal and you have bigger mully mortgage payment and so just understand that more debt comes and more risk and if you don't have a big enough equity in your property then you're also going to have to pay PMI but it is an option for some people who want to get into this house hacking game in certain areas you would be allowed to buy this 4unit property with is 3 and half% down with an FHA loan which means you only have to put down $335,000 and now you have this 4unit property that you're renting out to three other people now in this situation your mortgage payments are going to jump to $4,000 a month okay let's through the math 2,000 2,000 2,000 you have $6,000 coming into your pocket every month from your tenants and then the first thing you got to do is you got to pay the bank $4,000 so you pay in the bank $44,000 then you have to pay the additional $2,500 a month to live manage the property you know property taxes and everything else that means every single month out of your pocket you're going to have to pay $500 to live here but you also have a million doll property that you're building equity in each and every month and most of that is being paid by your tenant and in this situation you only had to pay $35,000 down to buy this million doll property the third benefit remember I said there's four the third benefit is that now you can sell this property for a profit and not pay any taxes if I just believe saying the real estate investor come in and I buy this property to rent out so now I'm not living here I'm renting out all four units and I rent it out for a year and a year goes by and I realize ooh I can sell this property for $1.2 million and now I sell this property for $1.2 million hey I made $200,000 in a year which is great but I got to pay taxes on that $200,000 of profits these $200,000 of profits of selling this investment property are called long-term capital gains and so I'm going to have to pay taxes on $200,000 and so I'm only going to keep a fraction of that but when this is your home remember this is your personal residence which means this is your home you can do that if you have four units so if this is your home home you have a special tax exemption which says you can sell your home for a up to $250,000 profit and you don't have to pay any taxes and if you own the home as a married couple then you can sell your home for up to a $500,000 profit which means you could sell this home for 1.5 million doll and then you wouldn't have to pay a penny in profit but sticking with the example if you buy this home and you live here and then you can have your tenants your neighbors pay you rent every single month and now your neighbors are paying for your mortgage they're building you equity in your home and now if you sell this property your home for $1.2 million you lived in this home free you built Equity free thanks to your neighbors and now you can sell this property and walk away with a couple $100,000 cash in your pocket and yes that's taxfree and then the fourth benefit is you can do something that I like to call multi-level house hacking at the time we recording this video most lenders have a rule that you are not allowed to rent out your primary residence unit so if you buy this property you can buy it as a home your own personal residents but you're not allowed to rent out your unit for at least 12 months but after 12 months you typically have the right to turn this unit into a rental unit as well so now you move out and now you just got this new rental unit remember if I bought this property initially as an investment property I'd be paying 6% interest I'd have to put $200,000 down and my monthly payments would be $4,800 a month but if I buy this property at my own home and I live here for a year remember I can get this at a 3% mortgage I can still put down $200,000 but now my monthly payments are going to be something like what was it $3,400 something like that a month and now I can live here for a year not have to pay any housing payments because my neighbors are paying for everything put $100 into my pocket every month and then a year later I can move out and then put an additional $2,000 into my pocket every month because these three tenants are paying the mortgage they're paying all the house housing bills they're paying for everything else this tenant is just profit after I move out so now this new property where I just moved out of can keep paying me that $2,000 a month every single month because now your interest rate doesn't change your bank is going to let you keep this 3% interest rate which you're not allowed to get if you're buying it as an investment property but here's the Dilemma if you move out of this property you still need a place to live right so you lived in this property for a year you didn't have to make any housing payments because your neighbors paid it for you you built equity in this property and then a year and a day later you move out you're bring in a new tenant and so you're putting another couple thousand in your pocket but you need a place to live so here's what you can do now you find another property like this another 4unit property and guess what you start this process all over again let me just finish drawing the windows I drew the door knob before the door All Right Now you have four new units and now guess what you move here you rent out these three units to your neighbors each of these neighbors are paying you $2,000 a month and you start this process again there's no limit to how many times you do this and every single year you can buy a new property you can let your neighbors pay your mortgage and you can continue building equity in more and more investment properties do this system five times and now you have five different investment properties with very low interest rate debt that are making you a profit every single month that you're building equity on every single month that your neighbors are paying for you to live there for every single month oh and after five of them you also have $10,000 coming into your pocket as profit every single month through passive income I know it's a lot easy to said than done but this process is possible and it's a very accessible way for you to go and get involved in real estate because now you are having your own property where you're living in but you're also building these rental streams and when you're ready you can move out and do it again"
By Minority Mindset | January 7, 2024 | Pending
From video
This LOOPHOLE Lets You (Almost) NEVER Pay a Mortgage Bill Again 00:00:50 - 01:39:30
Interpreted Prediction
The speaker outlines a 'house hacking' strategy, specifically using multi-unit properties (like a 4-unit building) as a primary residence. This allows owners to live in one unit while renting out the others. Key benefits predicted include: obtaining a significantly lower mortgage interest rate (3% vs. 6% commercial), having tenants cover the mortgage payments, building equity without personal payment, benefiting from tax exemptions on the sale of a primary residence (up to $250k profit for individuals, $500k for couples), and the potential for 'multi-level house hacking' by repeating the process annually to acquire multiple income-generating properties. The strategy also leverages FHA loans for lower down payments (3.5%).

Prediction Details

Topic
Real Estate Investment

Comments

0 comments

Be the first to share your thoughts.

Like this prediction?

Join to make your opinion count.