Make Your First Million In Real Estate
Published: 2023-12-03
Status:
Available
|
Analyzed
Published: 2023-12-03
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
The speaker invested in real estate during the 2008 crash when prices were at their lowest.
"now now I was very fortunate that I started investing in real estate at the bottom of the 2008 crash so I was very lucky with timing so real estate was at rock bottom prices"
Pending
The speaker aims for a 7% cash-on-cash return on real estate investments, meaning $0.07 profit per dollar invested annually.
"when I invest in real estate I am looking for a 7% cash on cash return on my money meaning that for every dollar that I invest I want s cents of cash flow profit hitting my bank account every year"
Pending
Investors can claim depreciation as a tax write-off by stating their property is older and has wear and tear.
"you get the value of depreciation which means you get to tell the IRS hey my property is a year older it has wear and tear and because of that I deserve a tax write off on my taxes"
Pending
Residential real estate, including single-family homes and duplexes, qualifies for 27.5-year straight-line depreciation.
"Well in residential real estate so this is Homes single family homes or duplexes in this type of residential real estate you get a 272 year straight line depreciation"
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A $400,000 building value, when divided by 27.5 years, allows for a $14,500 annual tax write-off due to depreciation.
"so now you take this $400,000 and you're going to divide it by 27.5 which equals about $14,500 This is how much you can write off in your taxes every year just because your property is one year older"
Pending
Certain individuals may be able to deduct real estate losses against their ordinary income, subject to qualifications.
"now what you could potentially do if you qualify with your income this is not for everybody but some people are then going to be able to take this loss and deduct it against their own income"
Pending
To deduct real estate losses against ordinary income, income must be under $100,000. The deduction phases out between $100,000 and $150,000, with a maximum annual deduction of $25,000.
"at the time I'll be recording this video in order for you to be able to deduct this loss against your ordinary income your income from your job you have to to be making under $100,000 a year and after $100,000 a year this deduction gets faded out up until $150,000 a year and the maximum that you can deduct is $25,000 in one year"
Pending
A 1031 exchange allows investors to defer paying taxes on real estate profits by reinvesting the proceeds into another property.
"you can sell your real estate for a profit and not have to pay any money and taxes if you take your profits and buy another property"
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Real estate is considered a hard asset, unlike cash or stocks, as it is a physical and tangible possession.
"a hard asset is a real physical asset as opposed to is saving your money cash because cash is just pieces of paper and potentially saving your money in the stock market because the stock market is also liquid and a paper asset which means that you really don't own anything physical anything tangible when you own real estate the actual property"
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The value of the dollar decreases over the long term due to the printing of more money without a corresponding increase in wealth.
"over the long term our dollar is losing value because we keep printing more money and as you print more money without producing more wealth the value of the dollar drops"
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FDIC insurance covers only up to $250,000 per person, meaning larger sums in a bank are at risk if the bank fails.
"most banks are only FDIC insured up to $250,000 per person which means if you have millions of dollars sitting in a bank and that bank were to go under well now that cash that you have sitting in the bank is also also at risk"
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The speaker aims for a 7% cash-on-cash return on real estate investments, meaning 7 cents of profit for every dollar invested annually.
"I am looking for a 7% cash on cash return on my money meaning that for every dollar that I invest I want 7 cents of cash flow profit hitting my bank account every year"
Pending
The speaker's goal with real estate is to achieve a 7% cash-on-cash return, equating to $7,000 in annual cash flow profit for every $100,000 invested cash.
"my goal would be to get a 7% cash on cash return am my money meaning if I bought this property cash with no debt that means I want to get $7,000 worth of profit cash flow every single year"
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A good property manager is essential for handling tenant acquisition and property repairs, making real estate investment more passive.
"you're going to have to find the right team who is a good property manager a property manager is somebody that you hire whose sole job is to manage your property they're going to find a tenant they're going to handle the repairs"
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Investors can claim tax write-offs for property depreciation, regardless of actual physical wear and tear, by telling the IRS the property is older.
"you get to tell the IRS hey my property is a year older it has wear and tear and because of that I deserve a tax write off on my taxes even if your property is more valuable even if you have no real physical wear and tear you still get to write off this depreciation against your taxes"
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No-money-down real estate deals can be risky; when they fail due to mismanagement or market downturns, the properties are often sold at a loss, presenting opportunities for experienced investors.
"these no money down deals are good sometimes yes they have made some people rich but do you want to know something else these no money deals have also made me a lot of money because when this person buys this property with no money down and then something goes wrong and then the bank has to take the property away from you and they sell it to an investor for a below market price that's when I come in and I buy the property"
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A $400,000 building value can yield a $14,500 annual tax write-off through depreciation over 27.5 years.
"you take this $400,000 and you're going to divide it by 27.5 which equals about $14,500 this is how much you can write off in your taxes every year just because your property is one year older"
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Trading with high margins (e.g., 10x) magnifies gains during market upturns but leads to significant losses and debt when the market declines.
"you're trading with 10x margins so you invest $1,000 and then you borrow $10,000 from your broker and now you can invest with so much more money than you actually have and when things are going up and the market is growing it's no problem but as soon as things slowed down and things start going down now you're going to be the first person to lose everything"
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Equity provides a margin of error in investments; lacking equity increases the risk of financial loss when unexpected issues arise.
"if you have no equity in what you're doing then you have no margin of error and if things go wrong and you have no equity now you're going to be the one paying the price and you're going to be the first person to lose your shirt"
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Individuals earning under $100,000 can deduct real estate losses against ordinary income, with the deduction phasing out between $100,000 and $150,000, capped at $25,000 annually.
"in order for you to be able to deduct this loss against your ordinary income your income from your job you have to to be making under $100,000 a year and after $100,000 a year this deduction gets faded out up until $150,000 a year and the maximum that you can deduct is $25,000 in one year"
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Investors must define their strategy, whether long-term (10-30 years) or short-term (12 months), and adhere to it consistently.
"you have to understand what are you doing in the stock market what are you doing with your money are you looking to make money over the next 10 to 30 years or are you looking to make money in the next 12 months and so you have have a strategy and when you go in you have to be willing to stick with it"
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The 1031 exchange allows for tax-deferred capital gains on real estate sales by reinvesting profits into another property.
"you can sell your real estate for a profit and not have to pay any money and taxes if you take your profits and buy another property"
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Choosing a real estate location where people desire to be in the future, not just the present, is crucial as location cannot be changed.
"you cannot change the location of your property so you want to make sure that you're investing where people want to be in the future not just where they want to be today"
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The speaker targets a 7% cash-on-cash return on real estate investments, aiming for $7,000 annual profit on a $100,000 all-cash property.
"My goal is 7% cash on cash return meaning if I bought this property cash with no debt that means I want to get $7,000 worth of profit cash flow every single year"
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A stable or upward population trend in a city or neighborhood indicates a desirable long-term real estate investment location.
"you want to see some sort of upward Trend or at the very least a stable trend for this city or neighborhood because if you're seeing populations go down that's probably not a place where you want to be investing your money for the long term"
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The speaker targets a minimum 7% cash-on-cash return on real estate investments, aiming for $7,000 annual profit from a $100,000 investment after all expenses.
"My goal is to make a minimum 7% cash on cash return on my money meaning if I go out and I invest say $100,000 of my own cash I want to make sure that after paying all of these expenses this property is putting $7,000 of profit into my pocket every single year as profit"
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Inquiring with a city's building department about future developments can provide legal insider information on upcoming projects before they are publicly announced.
"talk to the building department what new developments are in the works or potentially could be coming in the future this is a little known secret of a way that you can get real Insider information of what's happening before it even becomes public and this is actually legal in real estate"
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Residential real estate qualifies for 27.5-year straight-line depreciation for tax purposes.
"for residential real estate you get a 27 and a half year straight line depreciation"
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Observing the presence of well-researched name-brand businesses opening in an area can signal a worthwhile real estate investment opportunity in a neighborhood that is beginning to grow.
"if you start to see these name brands popping up in an area well chances are these name brands have already spent the time and the money doing the research in the neighborhood and they think that it's a worthwhile investment for them and if you're just starting to see it pop up well then this could be an opportunity for you to move and invest your money into an area that is starting to come up even more"
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The speaker's primary real estate investment strategy is to generate cash flow, not necessarily to profit from appreciation.
"when I'm investing in real estate I'm Investing For Cash Flow I'm not Investing For appreciation"
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Real estate investment returns are calculated by subtracting expenses (taxes, insurance, maintenance, management fees, vacancy costs) from rental income. Hiring a property manager is recommended for passive income.
"you take your rental income and then you subtract your taxes your insurance cost cost your maintenance cost because every real estate property is going to have maintenance issues taxes Insurance maintenance your management fees because I don't want you to be in the business of unclogging toilets I want you to be an investor and have somebody managing the property so this can be passive cash flow for you so you can focus your time on finding more investment deals and doing other things that you love instead of spending all your time trying to manage this property and then you can factor in a vacancy cost"
Pending
A good real estate investment location is identified by population desirability and business influx, indicating money flow.
"you want to look for a place where people want to be and where businesses are moving because that's where the money is flowing"
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To analyze a real estate deal, one must subtract taxes, insurance, maintenance, management fees, and vacancy costs from rental income.
"the way you analyze a real estate investment deal is you take your rental income and then you subtract your taxes your insurance cost cost your maintenance cost your management fees and then you can factor in a vacancy cost"
Pending
A 7% cash-on-cash return means an investor receives $7,000 in profit annually for every $100,000 invested in real estate.
"if I invest $100,000 on the property my goal is 7% cash on cash return meaning for every dollar that I invest 7 cents come back into my pocket every single year as profit if I invest $100,000 that's $7,000 a year in positive cash flow"
Pending
Real estate investments provide some of the most significant tax breaks available within the tax code.
"real estate offers some of the biggest and best tax breaks that a tax code has to offer"
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Investing $30,000 (20% down) in a $150,000 property with a $575 monthly mortgage payment leaves $375 monthly profit after expenses.
"If you don't have all $150,000 in your bank account to buy this property and you want to use some debt now what you're going to do is you're going to be putting down a minimum 20% which in this case would be $30,000 and now you put in $30,000 and then right here after you got this $950 you're going to have to send some of this money to the bank... assuming you can get a good interest rate that means you're going to be sending the bank about $575 a month which will leave you with about $375 extra a month after paying all of your expenses and after paying the bank"
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Having around $50,000 in savings is generally necessary to begin real estate investing, unless one engages in syndication deals or possesses strong sales and hustling skills to acquire capital.
"you do need some cash if you don't have $50,000 saved up it's going to be very hard for you to start investing in real estate unless you are involved in these type of syndication deals or unless you are a developer you're a hustler you're a salesperson and you can go out and get the cash to invest in these properties"
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Financing a $150,000 property with $30,000 down and $120,000 debt results in $4,500 annual cash flow, a 15% cash-on-cash return on the initial investment.
"in this situation you invested $150,000 of your own cash... In this you only put in $30,000 cash and the other $120,000 was provided by the bank so now you're going to be making right around $4,500 a year in in passive income cash flow from this property and now if you take this $4,500 and you divide it by the $30,000 in cash you put in now this property is actually paying you right around 15% a year cash on cash"
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The speaker's initial real estate investment strategy involved reinvesting all earnings into purchasing more properties to generate cash flow, prioritizing it over personal spending.
"my goal especially when I started investing in real estate was anytime I made money was I took this cash and I bought a property I made cash and I bought a property I made some money I bought a property that was it I wasn't spending any money on myself the only thing that I was buying was real estate because I knew that the real estate would pay me with cash flow"
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To achieve passive income, one should act as an investor (finding and owning assets) rather than a manager (handling day-to-day tasks), typically by hiring a property management company.
"You have to remember that your goal is to be a real estate investor not a real estate manager a real USA manager's job is to work on all the day-to-day stuff... The investor's job is to find the asset and own the asset What you want to do is be the investor because the investor is the person that's getting the cash flow"
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Buying one property per year can lead to accumulating cash flow, which can then be used to purchase additional properties, creating a snowball effect for wealth building.
"if you can buy one property a year you can save up to do that well each year you're going to be adding on more and more cash flow and every year it's going to become a little be easier for you to buy another property because you can save up the cash flow that you're making from one property and use it to buy a second one use the two to help you buy a third one"
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For residential real estate, the value of the property divided by 27.5 yields an annual tax depreciation break of approximately $4,700 for 27.5 years.
"you take the value of the property you divide it by 27 and a half so that's just what it is for single family homes if you're investing in residential real estate you take the value of the property you divide it by 27 and a half and then this was right around $4,700 and this is how big of a tax break that you get every single year for 27 and a half years"
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A significant portion of the speaker's stock market portfolio consists of high-dividend-paying Exchange Traded Funds (ETFs).
"in this ETF portfolio the largest chunk of that is a dividend pie a dividend slice of ETFs where I have multiple different dividend paying ETFs High dividend paying ETFs that I invest my money into"
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A 1031 exchange allows investors to sell a property for a significant profit and defer taxes by reinvesting the entire amount into a larger property.
"you can sell your real estate for a huge profit and pay no money in taxes today and you can flip this into a bigger property"
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Dividends are regular cash payments made by companies to shareholders, usually quarterly, without requiring the sale of stock.
"Dividends are regular cash payouts that companies pay out to their shareholders typically every quarter meaning every 3 months and this is cash that you get without having to sell your stock"
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A 4% annual dividend yield on a $150,000 investment would generate $6,000 annually, or $500 per month.
"if I can find an investment that's paying me say a 4% annual dividend yield it's going to cost me $150,000 today to get this 4% return which is going to pay me $500 a month or $6,000 a year"
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ETFs offer exposure to multiple companies, and specific ETFs are designed to invest in high-dividend-paying companies, providing a diversified approach to dividend income.
"you can also invest into ETFs ETFs are funds that give you exposure to a lot of companies and there are some ETFs out there that have the sole purpose of investing into high dividend paying companies"
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Reinvesting dividends can accelerate cash flow generation by using earnings to acquire more cash-flow-producing assets.
"if you want to get even more aggressive you can automatically reinvest the cash flow that you're getting you can reinvest the dividends so not only are you working to invest more money but now every time you get paid you can buy more of this machine that's paying you with cash flow"
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Properly managed real estate can generate passive income by covering all expenses and providing monthly profits after building the right team.
"if you do it correctly this rent is going to cover all of your expenses and put some money in your pocket every single month and if you know how to do it the right way well it can be completely passive on your end after you buy the property and after you build the right team"
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The speaker made significant personal sacrifices for ten years, foregoing discretionary spending to invest in real estate and generate rental income.
"For 10 years of my life I spent no money at all on myself I drove a beat down car I didn't eat at restaurants I didn't go on vacations I wasn't going out my friends I wasn't spending money so I could do one thing buy real estate and create rentable income"
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The speaker's goal for real estate investments is a 7% cash-on-cash return, equating to 7 cents of profit per dollar invested annually.
"My goal is 7% cash on cash return, meaning if I spend $100,000 on the property, my goal is 7% cash on cash return, meaning for every dollar that I invest 7 cents come back into my pocket every single year as profit."
Pending
Real estate syndication involves investing money into deals presented at investor meetings, where developers seek capital to purchase and manage properties.
"the old way to do this was to invest your money into a real estate Syndicate deal the way that worked was if you go to any real estate investor meeting they happen around the country there's always people there always who are looking for cash they're looking for investors that way can raise money that way they can go on and buy a property"
Pending
The speaker prioritizes cash flow over appreciation when investing in real estate, meaning market price fluctuations have minimal impact on their investment strategy.
"when I'm investing in real estate I don't care what's going on with housing prices or real estate prices if real estate prices go up that's great if real estate prices go down down oh well because when I'm investing in real estate I'm Investing For Cash Flow I'm not Investing For appreciation"
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Acquiring one property annually builds cash flow, making it easier to purchase subsequent properties by leveraging existing cash flow to fund new acquisitions.
"if you can buy one property a year you can save up to do that well each year you're going to be adding on more and more cash flow and every year it's going to become a little be easier for you to buy another property because you can save up the cash flow that you're making from one property and use it to buy a second one"
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Rich individuals favor real estate as a store of value because cash is perceived as depreciating paper money, whereas real estate is tangible and tends to hold value better over time.
"wealthy people love investing their money in real estate because real estate is a store of money because as we all know if you've been subscribed to our YouTube channel our cash is essentially just paper"
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Analyzing a real estate deal involves subtracting all expenses, including taxes, insurance, maintenance, management fees, and vacancy costs, from rental income.
"the way you analyze a real estate investment deal is you take your rental income and then you subtract your taxes your insurance cost cost your maintenance cost because every real estate property is going to have maintenance issues taxes Insurance maintenance your management fees ... and then you can factor in a vacancy cost"
Pending
Identifying good real estate investment locations involves observing where businesses and people are moving, with a simple method being to check for new business openings in neighborhoods.
"you want to look for where businesses are moving to where do people want to live and this doesn't always have to be done through super formal analysis some simple things that you can do is just drive around different neighborhoods where do you see new businesses popping up"
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The presence of prominent brand names opening in an area suggests they've conducted research, indicating a potentially good investment opportunity for real estate buyers.
"if you start to see these name brands popping up in an area well chances are these name brands have already spent the time and the money doing the research in the neighborhood and they think that it's a worthwhile investment for them and if you're just starting to see it pop up well then this could be an opportunity for you to move and invest your money into an area that is starting to come up even more"
Pending
Analyzing real estate deals involves subtracting taxes, insurance, maintenance, management fees, and vacancy costs from rental income to determine net profit and ensure the property provides passive cash flow for investors.
"The way you analyze a real estate investment deal is you take your rental income and then you subtract your taxes your insurance cost cost your maintenance cost your management fees because I don't want you to be in the business of unclogging toilets I want you to be an investor and have somebody managing the property so this can be passive cash flow for you so you can focus your time on finding more investment deals and doing other things that you love instead of spending all your time trying to manage this property and then you can factor in a vacancy cost because there doesn't be a time where tenants move out"
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The speaker learned about real estate investing from the book 'Rich Dad Poor Dad' and realized the potential for passive income through property ownership and rental.
"I'm confident it will reach $130,000 by 2025."
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The speaker considers themselves fortunate to have started investing in real estate during the 2008 crash when prices were at their lowest.
"now I was very fortunate that I started investing in real estate at the bottom of the 2008 crash so I was very lucky with timing so real estate was at rock bottom prices"
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The speaker's target return for real estate investments is a 7% cash-on-cash return, meaning 7 cents of profit for every dollar invested annually.
"when I invest in real estate I am looking for a 7% cash on cash return on my money meaning that for every dollar that I invest I want s cents of cash flow profit hitting my bank account every year"
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The speaker distinguishes between real estate investing (focused on cash flow) and real estate flipping or developing (focused on profit from sale or construction).
"now remember I'm talking about real estate investing I'm not talking about real estate flipping or real estate developing real estate flipping is now where I come in and I buy this property I'm going to add in some Renovations I'm going to put money into the property to make it even nicer that way I can sell it for $700,000 that's not investing that's flipping it's like trading I'm not a flipper I'm an investor real estate developing is now where I'm going to buy the land and I'm going to build a property on top of it that way I can sell it for a big profit or I'm going to come in buy this property demolish it and build something else on top of it that is not real estate investing that's real estate developing"
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The speaker believes it's nearly impossible for 99% of people to become rich solely through real estate investing.
"it is pretty much impossible for 99% of people to get rich by investing in real estate and the reason why I say 99% of people is because there's always that one person"
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High leverage, such as 100% financing, in real estate investing significantly increases risk and the likelihood of foreclosure for most people.
"that means now you're going to have to make much riskier decisions that means now you're going to have to go in and you're going to have to do a lot higher leverage maybe you're doing 100% finance deals and again this will work for a small percentage of people but for the vast majority of people that means way more risk and way more chances of you being foreclosed on"
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Real estate offers some of the most significant tax deductions and write-offs available within the U.S. tax code.
"number one is because of the tax breaks this right here is the federal income tax code this is over 2,000 pages long and what it says is this is what income is these are what your deductions are these are what your writeoffs are and I can tell you I have this because I went through law school and what I can tell you as an attorney who's not your attorney is at real estate and some of the biggest and most powerful tax indu C and writeoffs that our tax code has to offer"
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Depreciation allows real estate investors to claim a tax deduction based on the property's age and wear and tear, reducing taxable income even if the property's value increases.
"then after your deductions you also get the value of depreciation which means you get to tell the IRS hey my property is a year older it has wear and tear and because of that I deserve a tax write off on my taxes even if your property is more valuable even if you have no real physical wear and tear you still get to write off this depreciation against your taxes which means you get more money in your pocket while paying less money in taxes"
Pending
For a $400,000 building, a 27.5-year depreciation schedule results in approximately $14,500 in annual tax write-offs.
"so now you take this $400,000 and you're going to divide it by 27.5 which equals about $14,500 this is how much you can write off in your taxes every year just because your property is one year older"
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Individuals earning under $100,000 per year may be able to deduct real estate losses against their ordinary income.
"now what you could potentially do if you qualify with your income this is not for everybody but some people are then going to be able to take this loss and deduct it against their own income now at the time I'll be recording this video in order for you to be able to deduct this loss against your ordinary income your income from your job you have to to be making under $100,000 a year"
Pending
The 1031 exchange allows investors to defer capital gains taxes by reinvesting profits from a property sale into another like-kind property.
"the third big tax break that you get is something called the 1031 exchange which says that you can sell your real estate for a profit and not have to pay any money and taxes if you take your profits and buy another property"
Pending
Real estate is a tangible, physical asset, unlike cash or stocks, offering a sense of ownership of something concrete.
"a hard asset is a real physical asset as opposed to is saving your money cash because cash is just pieces of paper and potentially saving your money in the stock market because the stock market is also liquid and a paper asset which means that you really don't own anything physical anything tangible when you own real estate the actual property not only you own the land you own the building you own the bricks you own the windows you own the doors you own the fixtures you own the carpets you own something physical something that you can see feel and touch"
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Over the long term, cash loses value due to inflation and increased money printing, making tangible assets like real estate potentially more valuable.
"cash because if you look at historically our cash has been losing value for decades now because of inflation now sure in the short term you can see swings up and down with the dollar but over the long term our dollar is losing value because we keep printing more money and as you print more money without producing more wealth the value of the dollar drops"
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Large cash deposits in banks are subject to risk if the bank fails, as FDIC insurance is typically limited to $250,000 per person.
"now of course you're going to have short-term swings up and down on this but over the long term that's what inflation is and So when you buy real estate the second reason why especially rich people like the idea of owning real estate is because most banks are only FDIC insured up to $250,000 per person which means if you have millions of dollars sitting in a bank and that bank were to go under well now that cash that you have sitting in the bank is also also at risk"
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Real estate, like any asset, carries the risk of value decline, as demonstrated by the over 90% drop in prices in some areas during the 2008 crash.
"now of course real estate has risks too because the value of real estate can drop when the 2008 real estate crash happened real estate prices in Michigan fell by more than 90% you had some properties Fallen by 92% and so you do have your own risks with real estate but there is a benefit to owning real estate because you also own this hard asset"
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Holding onto good real estate investments through market downturns can allow for recovery of losses over time.
"and the nice thing with real estate what we've seen throughout time is that if you own good real estate really any good investment and you hold on to it through the bad times then you should be able to recover your losses"
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Investing in real estate does not necessarily require $250,000; one can start with significantly less capital.
"now of course you don't need $250,000 to go out and start investing in real estate you can start investing real estate with significantly less but what I'm trying to say is if you have excess cash now you can start generating a return from this cash"
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The speaker aims for a 7% cash-on-cash return, translating to $7,000 in annual profit for every $100,000 invested in cash.
"my goal would be to get a 7% cash on cash return am my money meaning if I bought this property cash with no debt that means I want to get $7,000 worth of profit cash flow every single year"
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Successful and passive real estate investing requires building a strong team, including a property manager, attorney, accountant, broker, and inspector.
"you're going to have to find the right team who is a good property manager a property manager is somebody that you hire whose sole job is to manage your property they're going to find a tenant they're going to handle the repairs so if the toilet breaks in the middle of the night they call your property manager they don't call you you got to have a good attorney you got to have a good accountant you got to have a good real estate broker you got to have a good real estate inspector to walk through the deal before you actually buy the property and you have to make sure that all these people are working together"
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The initial phase of real estate investing involves a steep learning curve and can be overwhelming, but overcoming this hurdle leads to a more passive investment experience.
"this is going to seems super overwhelming in the beginning because when you get started there are so many things that you don't know and the more you learn the more you realize you don't know but once you get started you'll see that one person will help you find the next person and the next person will help you find the next person it is a process and it's a part of the game you have to go through this initial learning hurdle which is very difficult it's time consuming but once you do that then real estate investing can be much more passive"
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Even with extensive learning, real estate investors will inevitably encounter unique problems and make mistakes, which are crucial learning experiences.
"no matter how many real estate books that you read no matter how many real estate videos that you watch you can watch my videos where I go through my worst real estate deal ever but you're going to learn a lot from that things that you won't read in books but no matter how much you learn I can guarantee this is one of the few things that I can actually guarantee on this channel you're going to run into new problems that you never heard of anybody else dealing with and it's going to teach you a new lesson"
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To build wealth, it's essential to convert savings (dollars) into assets that generate more money, as cash loses value due to inflation and money printing.
"so anytime I go to India to visit my family the first thing I do is I go and I convert some of my dollars to rupees because in India people do transactions with rupees not dollars when it comes to you building your wealth you have to convert your money your dollars into something that is going to make you more money because the reality is the dollars that you have the dollars that you work so hard to earn and the the dollars that you save in your bank account are losing value to inflation because as more and more money is printed the value of each dollar that you have gets deluded"
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Wealthy individuals prioritize converting earned income into passive income investments, as a salary alone is insufficient for building true wealth because it stops when work stops.
"you make your EI your earned income this the money you make from your job or the money you make from your business and you want to take as much of this money as possible and put it here towards your Pi your passive income Investments because this is the thing that will make you wealthy what wealthy people do and financially educated people do is they take as much of this money here and they put as much of it as possible here because this is what is going to make you wealthy not this doesn't matter how much money you make I don't care if you're a doctor you will never become wealthy just with the salary you make from your job because as soon as you stop working you stop getting paid so what you need to start doing is as soon as you get paid you need to start transferring this money here towards your passive Income Investments"
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To build wealth, one must move money from savings (which lose value to inflation) into investments that generate passive income, allowing money to work for you without active labor.
"you have to convert as much of this here as possible because this money even if you just save it is losing value and it's making you poorer each and every day because the value of your dollar is dropping while the price of everything else keeps going up that's why you want to move this money here because this is going to make you wealthier this is going to make you more money and this will happen on the side without you having to physically go to work or do something to get paid because you're putting your money in the right places that's going to pay you for owning it"
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The speaker's first real estate investment, a condo, generated $250 per month in passive income through a property management company, demonstrating the potential for income without active work.
"the first investment that I made here ever and this condo after paying all my expenses was putting like $250 a month into my pocket every single month and I didn't have to do any work I had a property management company handling all the day-to-day stuff and every month $250 was being deposited into my bank account and I didn't have to do anything to earn that money"
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Having equity in investments provides a crucial margin of error, as things are bound to go wrong in markets (economy, stocks, real estate), and without equity, there's no buffer to absorb these setbacks.
"if you don't have any equity in your Investments and things go wrong which of course they will happen the thing is about stock market investing and real estate investing things will go wrong sometimes the economy will go down sometimes the stock market will crash sometimes the real estate market will crash and sometimes your ten is not going to pay you or the company that you're invested in is going to struggle and so you got to understand that things will go wrong and if you have no equity in what you're doing then you have no margin of error"
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No-money-down real estate deals can lead to significant financial distress and foreclosure for the investor when things go wrong, creating opportunities for more experienced investors to acquire properties at a discount.
"these no money down deals are good sometimes yes they have made some people rich but do you want to know something else these no money deals have also made me a lot of money because when this person buys this property with no money down and then something goes wrong and then the bank has to take the property away from you and they sell it to an investor for a below market price that's when I come in and I buy the property because you were not able to take care of your investment property"
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Trading with high margins (e.g., 10x) in the stock market amplifies gains during uptrends but leads to catastrophic losses and debt during downturns, as borrowed funds must be repaid.
"you'll see people offering these classes on how you can get rich trading options and doing day trading and doing this other short-term trading where now you're trading with 10x margins so you invest $1,000 and then you borrow $10,000 from your broker and now you can invest with so much more money than you actually have and when things are going up and the market is growing it's no problem because everybody's making money and now you're making money hand over fist but as soon as things slowed down and things start going down now you're going to be the first person to lose everything because now not only did you lose everything that you have but now you owe your broker money that you don't have"
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Having equity in investments provides a financial cushion, acting as protection when market conditions decline.
"if you have no equity in the deals meaning some of your own money in the deals so you're taking some of your earned income put it into your passive income here with real estate or stock market that way when things do go down you have Equity to protect you"
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The true measure of an investor's skill is revealed during market downturns, emphasizing the importance of continuous learning and understanding market dynamics for long-term wealth building.
"the real test of who's a good investor and who's not is what happens when things turn around and so this is where you got to understand the game and you got to keep learning because this education is what's going to help you build wealth over the long term"
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Real estate investing is typically associated with generating cash flow, while stock market investing is often focused on appreciation of asset value.
"when we're talking about real estate people are talking about cash flow when we're talking about the stock market people are talking about appreciation"
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The speaker differentiates trading (short-term buying and selling for quick profit) from investing (long-term ownership), applying this distinction to both real estate and stock markets.
"this is not investing it's a way of flipping you see the same thing in the stock market so in the stock market you can buy a stock and you own it for 20 minutes you own it for 2 days you own it for 2 months and so you're buying the stock with the hope that it's going to go up quickly that way you can sell it for a quick profit this is trading this is not investing"
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A defined strategy and understanding the 'game' are crucial for investing; simply hoping to make money is not a strategy, and frequent changes in strategy should be avoided.
"and so you got to have your strategy in place you got to understand the game I put game on the inside of this which is supposed to be the outside but you got to understand the game how are you looking to make money and even within this there are so many strategies to trade there's day trading there's swing trading there's momentum trading so you got to understand what are you looking for and you can't just be flip-flopping strategies because most people's strategies when it comes to investing money especially in the stock market is I'm going to put my money in what I like and hope that I make money hopeing you make money is not a strategy you got to understand what your strategy is before you put your money in"
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For long-term real estate success, focus on areas with business growth and where people want to live, prioritizing properties that yield a minimum 7% cash flow rather than solely relying on future appreciation.
"when you're investing in real estate especially here you got to know what your goals are for me I got to make a minimum 7% return and so when I look to invest in properties I'm looking for an area where money is Flowing too so I can talk to the city I'll do whatever other research I got to do to see where businesses are going if I find an area that I like that I think is going to be more valuable in the future then I'm going to look for properties that's going to make me a 7% return if it doesn't make me the 7% return I'm not interested I don't care what the property could be worth in the future because I'm not Investing For appreciation I'm Investing For Cash Flow"
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Analyzing population trends on Google is a key step in identifying good real estate locations, looking for upward or stable growth patterns.
"the first thing that you can do is just go on to Google and enter in the city or the neighborhood that you want to invest in and just type in the word population and what you'll see is you'll get a chart of what the population is and has been for this particular neighborhood or this particular City and you want to see some sort of upward Trend or at the very least a stable trend for this city or neighborhood because if you're seeing populations go down that's probably not a place where you want to be investing your money for the long term"
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Visiting city halls to inquire about future developments can provide legal 'insider' information about real estate market potential, which is not permissible in the stock market.
"the second thing that you can do to dissect the location is is go to the City Hall of the area that you want to invest and ask the building department what new developments are in the works or potentially could be coming in the future this is a little known secret of a way that you can get real Insider information of what's happening before it even becomes public and this is actually legal in real estate but it's illegal in the stock market"
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The arrival of major businesses like Walmart in an area can stimulate local economic growth, leading to increased demand for retail, restaurants, and consequently, real estate.
"now this wasn't public information or at least I hadn't heard about it until I went to the City Hall but this was great news for me because now I knew Walmart was going to bring a lot of money into this particular area because if Walmart comes here then you're going to see a bunch of other smaller retail stores also pop up because now Walmart's going to bring a whole bunch of traffic to this particular area people are going to want to be here because you're going to see more shops open up you'll see more restaurants open up because this is going to drive up demand for this particular area"
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Geographical barriers like highways or rivers can divide cities into distinct good and bad parts, influencing property values and desirability, which is crucial to consider when analyzing locations.
"you also really want to pay attention to barriers and boundaries because what you'll see happen is many cities will have some sort of boundary or barrier that will divide a good part and a bad part of a city sometimes it'll be a highway sometimes it'll be a bridge maybe it's a lake maybe it's something a railroad track in the middle that divides a good part of a city from a bad part of a city and this can make a huge difference because you might see a city as a whole and the city will be growing and people like the city however what you might not see from that data is that people are moving from this part of the city to this part of the city"
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A sound real estate strategy involves acquiring the worst property in a prime location, as the location is unchangeable, while the property itself can be improved.
"find the worst property and the best location because you can't change the location but you can improve the property so if you have a good location it's worth paying a premium to be in a good location even if the property isn't as good because then you can upgrade the property make the property better but you can't change the location"
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The speaker prefers residential real estate (apartments, single-family homes) due to its consistent demand (everyone needs housing) and easier understanding compared to commercial or retail properties, which are more susceptible to economic shifts.
"I personally prefer residential I like apartment complexes I like single family homes I did invest in one mixed use building which had some commercial and some residential but I only did one of those deals but I like residential because for me that is the easiest thing for me to understand because everybody is always going to need a roof over their head so I can easily understand the demand side of a residential building versus something like an office well that's a little bit more difficult because as we can see around us the office environment changes with the economy and the demand for office is going to change with that and so the requirements of an office are very different than the requirements of a residential property and then same with retail retail always changes"
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Turnkey real estate deals are fully operational and rented, offering passive income but at a premium price, while distressed properties require physical work and renovation but offer a larger discount.
"some investment deals are going to be completely TurnKey in that it's a property that's already rented out and you don't have to do anything except just buy the property and now it's already producing cash flow so there's nothing you got to do the other side is you're going to find distressed properties where not only does this building or house or whatever not have a tenant it's not even fully functional like it's got ugly carpets it needs to be renovated it smells nasty so you have to put in physical work now you have to figure out where you want to be but the advantage is if you buy this more distressed property you're going to get a bigger discount than if you buy a fully TurnKey property"
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An investor's role is to acquire and own assets, while a manager handles the day-to-day operations, allowing the investor to focus on growth and acquiring more deals.
"your goal is to be a real estate investor not a real estate manager a real USA manager's job is to work on all the day-to-day stuff that is a job their job is to make sure that the tenant is paying the bills their job is to find the tenant their job is to pay the taxes so a manager's job is to do the day-to-day work the Investor's job is to find the asset and own the asset"
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Real estate investors benefit from significant tax breaks, and having a tax planner, rather than just a tax filer, is crucial for optimizing tax liability.
"real estate has some of the biggest and best tax breaks that a tax code has to offer now I am a licensed attorney although I'm not your attorney and I'm telling you this from experience because you need to have somebody professional who's guiding you now one thing that I've learned is that there's a difference between a tax filer and a tax planner"
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Tax advisors can help depreciate various components of a property (building, land, appliances, etc.) differently, leading to varied tax breaks each year.
"and you'll learn how much is the building worth how much is the land worth and then within the building how much is the carpet worth how much are the appliances worth how much are the different things within the property worth because then they can depreciate the value of each one of these things differently on your taxes and this will provide you different levels of tax breaks each year that you own the property"
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Factoring in a management fee when purchasing a property is essential to ensure its profitability and accurate valuation for future sale, even if self-managing initially.
"if there's no management fee for when you buy it you might be overpaying for something that you can't sell for the same price so make sure you factor in a management fee when you're looking to buy a property that way you know that it's going to be profitable for you"
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The speaker's target for real estate investment is a minimum 7% cash-on-cash return, generating $7,000 annually in actual cash flow for every $100,000 invested.
"my goal when I invest in real estate is to make a minimum 7% cash on cash return on my money meaning if I go out and I invest say $100,000 of my own cash I want to make sure that after paying all of these expenses this property is putting $7,000 of profit into my pocket every single month from cash flow not from invisible appreciation of the property value but from actual cash flow from the property"
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Early in their real estate investing journey, the speaker prioritized reinvesting all earnings into purchasing properties to build cash flow, making significant personal sacrifices.
"my goal especially when I started investing in real estate was anytime I made money was I took this cash and I bought a property I made cash and I bought a property I made some money I bought a property that was it I wasn't spending any money on myself the only thing that I was buying was real estate because I knew that the real estate would pay me with cash flow and I could spend that cash flow and not have to worry too much because I knew the cash flow was going to come back next month"
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A strategy of buying one property per year can lead to a compounding effect, where the cash flow from existing properties helps finance the acquisition of new ones, effectively 'stacking' cash flow.
"if you can buy one property a year you can save up to do that well each year you're going to be adding on more and more cash flow and every year it's going to become a little be easier for you to buy another property because you can save up the cash flow that you're making from one property and use it to buy a second one use the two to help you buy a third one use the three to help you buy a fourth one so it's all about stacking cash flow"
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Dividends are regular cash payments distributed by companies to their shareholders, typically quarterly, which are received passively without needing to sell the stock.
"Dividends are regular cash payouts that companies pay out to their shareholders typ Ally every quarter meaning every 3 months and this is cash that you get without having to sell your stock and you don't have to do anything you just get this cash deposited into your investment brokerage account"
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The speaker prioritizes cash flow-producing investments, particularly dividend-paying stocks and ETFs, as 'cash flow is king' for their portfolio.
"for me I like cash flow I do have some companies that I invest in for more of the growth side but a larger piece of my portfolio is for cash flow because cash flow is King"
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Reinvesting dividends and cash flow from investments can accelerate wealth building by purchasing more income-generating assets, creating a cyclical growth process.
"if you want to get even more aggressive you can automatically reinvest the cash flow that you're getting you can reinvest the dividends so not only are you working to invest more money but now every time you get paid you can buy more of this machine that's paying you with cash flow it's like a whole cycle where you just keep buying more of the cash flow and using your cash flow to buy more cash flow"
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To analyze a real estate deal, subtract all expenses (taxes, insurance, maintenance, management fees, vacancy costs) from rental income to determine net income.
"the way you analyze a real estate investment deal is you take your rental income and then you subtract your taxes your insurance cost cost your maintenance cost because every real estate property is going to have maintenance issues taxes Insurance maintenance your management fees because I don't want you to be in the business of unclogging toilets I want you to be an investor and have somebody managing the property so this can be passive cash flow for you so you can focus your time on finding more investment deals and doing other things that you love instead of spending all your time trying to manage this property and then you can factor in a vacancy cost because there doesn't be a time where tenants move out and so you got to fact factor in that cost because there's going to be times where a tenant is not paying you rent once you add all these things up this is going to leave you with your net income"
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Annual return on a real estate investment is calculated by dividing the annual profit by the total cash invested in the property.
"all you got to do is take this number how much you're making every single year divided by the amount of money you paid for this property the amount of cash you put in and that's a 7.5% return a year you as the investor now have to decide what is a good return for you"
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Financing real estate with debt typically requires a minimum 20% down payment, and a portion of the monthly net income will be allocated to debt payments.
"now if you don't have all $150,000 in your bank account to buy this property and you want to use some debt now what you're going to do is you're going to be putting down a minimum 20% which in this case would be $30,000 and now you put in $30,000 and then right here after you got this $950 you're going to have to send some of this money to the bank"
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Using debt financing for real estate can increase the cash-on-cash return (e.g., 15% from $4,500 profit on a $30,000 investment) compared to an all-cash purchase, but it also increases risk.
"so now you're going to be making right around $4,500 a year in in passive income cash flow from this property and now if you take this $4,500 and you divide it by the $30,000 in cash you put in now this property is actually paying you right around 15% a year cash on cash because now you're making $4,500 based off of the $30,000 cash that you put in"
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The discouragement around investing for cash flow, due to perceived high capital requirements, can be overcome by starting small and consistently investing over time, even with small weekly amounts.
"the reason why so many people get discouraged when they look at investing their money for this type of cash flow is because they run the numbers and then they get very discouraged they say if I can find an investment that's paying me say a 4% annual dividend yield it's going to cost me $150,000 today to get this 4% return which is going to pay me $500 a month or $6,000 a year I don't have $150,000 so it's not even worth it for me to start but what you're missing is you don't have to invest all $150,000 today if you create a passive investing system you could invest $100 a week $50 a week $10 a week"
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Consistency is key in building a cash flow portfolio; start investing with whatever capital is available and maintain regular contributions over time.
"start with $100 start with $1,000 start with $10,000 start wherever you are just consistently keep investing your money that way you can build up your cash flow portfolio"
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Royalties are generated by creating something (like a book) and receiving payments for its continued sales over time, distinct from business profits.
"royalties are now where you create something and then you get paid for the thing that you created for years into the future because of that one thing that you created so one way to do this is the royalties another example of a physical version of these types of royalties will be writing a book authors who write a book if you can get it into stores if you can get it onto Amazon if you can get it into places where people keep selling and buying your book well now you create royalties where now every month or every quarter every year you're going to get a check from your publisher because of all the sales that your book is bringing in"
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Content creation, like YouTube videos, offers pseudo-passive income; while old content can generate revenue, continued new content production is necessary to maintain viewership and income streams.
"the way that it works in the content game is there are a lot of people that are trying to create more content so unless you keep creating more content and unless you keep creating good content your old content stops getting views and your old content stops driving revenue so the whole idea people think is if you make a video now and this video goes viral you're going to get paid for that video for years into the future but the reality is if you want to keep getting paid for that video that you made years ago you have to keep producing good new content so it's kind of a pseudo passive income in the sense that yeah you can still generate revenue from old content but in order for the old content to keep generating you new Revenue you have to keep producing good new content"
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Cash flow can be generated by either buying it (e.g., dividend stocks, real estate) with money and no time, or building it (own business, royalties) with time and no money.
"the general consensus is there's two different ways to create cash flow one is you can buy it the second is if you can build it if you have money but you don't have time then you can go out and buy the cash flow we talked about some of the passive ways you can do it through dividend investing in the stock market you can pick your own strategy there you can do it through real estate creating royalties is going to be a lot harder for you to do much more passively but if you have cash you can go out and create this type of cash flow by buying the cash flow if you have time but no money and the next thing is you can build the cash flow you can build your own business you can build something that czy with royalties that is now something you build with your time"
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Building a consistent cash flow is crucial for a sustainable lifestyle and financial freedom, as opposed to sporadic income which can lead to lifestyle inflation and financial instability when market conditions change.
"you need to have cash flow coming in that allows you to live your life and the issue that a lot of people have is they work to build more of a sporadic cash flow and then they start living this very nice lifestyle you see a lot of sales people do this I am a licensed real estate salesperson I have worked with a lot of sales people and this is one of the biggest problems with salespeople you go through these big months or these big years the economy is booming and you make a ton of money and now you start driving a nice car you start wearing expensive clothes you start going to nice restaurants and go to these expensive vacations and then a couple years later the economy takes a turn now that cash flow starts to go away and now you don't have the same ability to live the same lifestyle"
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The common belief that buying real estate directly makes one rich is a myth; the speaker states that one does not get rich simply by purchasing real estate.
"most people think that the way you get rich is by buying real estate you've probably heard the phrase more millionaires are made in real estate than anything else but that's not true you don't get rich by buying real estate"
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The video aims to reveal the actual strategies employed by wealthy individuals in real estate investment and how others can adopt them.
"and in this video I'm going to show you the real reasons why rich people buy real estate and why you can use the same strategies that they do"
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Starting real estate investments during the 2008 crash was considered fortunate timing due to rock-bottom prices.
"now I was very fortunate that I started investing in real estate at the bottom of the 2008 crash so I was very lucky with timing so real estate was at rock bottom prices"
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The speaker's target return for real estate investments is 7% cash-on-cash, aiming for $0.07 profit per dollar invested annually.
"I am looking for a 7% cash on cash return on my money meaning that for every dollar that I invest I want s cents of cash flow profit hitting my bank account every year"
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It is difficult for 99% of Americans to achieve wealth solely through buying and investing in real estate.
"it's very difficult for 99% of America to become rich by buying and investing in real estate"
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Real estate investing is defined as purchasing property with the intention of generating cash flow through rentals.
"real estate investing is when you buy a property for the purposes of generating Cash Flow by renting out this property"
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There is a risk of a slowdown in real estate prices, as they do not perpetually increase.
"what happens if you see a slowdown in real estate prices because real estate prices don't always go up"
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Real estate flipping, involving renovations and resale for profit, is distinguished from real estate investing, which focuses on cash flow from rentals.
"real estate flipping is now where I come in and I buy this property I'm going to add in some Renovations I'm going to put money into the property to make it even nicer that way I can sell it for $700,000 that's not investing that's flipping it's like trading I'm not a flipper I'm an investor"
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Starting real estate investing requires capital to generate cash flow, obtain tax breaks, and secure assets; attempting to do so with no capital necessitates riskier decisions.
"real estate investing is something that you do when you have money that way you can start generating the cash flow that way you can start getting the tax breaks and that way then you can actually save your money into a hard asset when you try to go and get rich by investing in real estate without talking about flipping without talking about developing now you have to start with nothing and if you have nothing to go out and buy a property that means now you have to make much riskier decisions"
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100% financing in real estate deals significantly increases risk and the likelihood of foreclosure for most investors.
"maybe you're doing 100% finance deals and again this will work for a small percentage of people but for the vast majority of people that means way more risk and way more chances of you being foreclosed on"
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The speaker has purchased properties from foreclosures resulting from investors over-leveraging, mismanaging finances, and failing to cover expenses, often after acquiring properties with minimal down payments.
"I have come in and bought multiple deals from Banks and from lenders who foreclosed upon buyers and investors who bought properties with little to nothing down on the hopes of getting rich by investing in real estate and now what happens they're overl they don't know how to manage their properties they don't know how to manage the deals they don't know how to manage the finances and then they got so over levered they couldn't keep making their expenses the bank took the property back"
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Real estate investing is a viable way to invest money, provided one understands the correct methods and expected returns.
"real estate investing is a great way for you to invest your money period but you have to know how to invest your money the right way and you have to know what type of returns to expect on your money"
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Wealthy individuals invest in rental and cash flow-producing real estate for three primary reasons, distinct from buying a personal residence.
"there are three main reasons why rich people invest their money in real estate and when I say invest my money in real estate I'm not saying to buy a big home home to live in themselves I'm saying they go out and invest in rental properties they invest in cash flow producing real estate"
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A primary reason wealthy individuals invest in real estate is the availability of deductions, also known as write-offs.
"number one is because of the deductions you get AKA writeoffs"
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Real estate investors can deduct various business expenses, such as car usage, gas, cell phone bills, and meals, which reduce their taxable income.
"you were essentially stting starting a business and your business is investing in real estate and businesses get to write off some of their business expenses what can some of these business expenses include well if you're investing in real estate you need a car to get to and from work you can potentially write off a piece of your car or the car value or your lease or your car payment you need gas you can write off some of your gas you need a cell phone to operate your business you can write off some of your cell phone you might need meals you can write off some of these meals so there are many writeoffs that you can use deductions because now you are investing in real estate which lower your taxable income"
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Business and real estate investors pay expenses before taxes, resulting in lower taxable income, a lower tax bracket, and reduced tax rates, unlike employees who pay taxes before expenses.
"but when you own a business or if you own real estate Investments now it's kind of flipped now what you do is you make money and then you pay for your expenses now of course you can't write off things that aren't related to your business but you have to be smart here and your accountant is going to work with you to see how you can write off the most things possible legally that way now you can file more expenses legally no you pay these expenses and then you pay taxes on whatever's left that means now you have a lower taxable income if you have a lower taxable income that's a lower tax bracket meaning lower tax rates not only are you paying less dollars in taxes but you're also paying a lower tax rate"
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Depreciation provides a tax write-off that increases an investor's cash in hand and reduces tax liability, irrespective of the property's actual physical condition or market value.
"even if your property is more valuable even if you have no real physical wear and tear you still get to write off this depreciation against your taxes which means you get more money in your pocket while paying less money in taxes"
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Residential real estate typically qualifies for 27.5-year straight-line depreciation, while commercial buildings have a 39-year schedule.
"well in residential real estate so this is Homes single family homes or duplexes in this type of residential real estate you get a 272 year straight line depreciation I'll explain what that means that's what it is at the time when we recording and for commercial buildings is 39e straight line depreciation"
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A building valued at $400,000, depreciated over 27.5 years, yields an annual tax write-off of approximately $14,500.
"so now you take this $400,000 and you're going to divide it by 27.5 which equals about $14,500 this is how much you can write off in your taxes every year just because your property is one year older"
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Individuals earning under $100,000 annually can deduct real estate losses against ordinary income, with a phase-out between $100,000-$150,000 and a maximum annual deduction of $25,000.
"now what you could potentially do if you qualify with your income this is not for everybody but some people are then going to be able to take this loss and deduct it against their own income now at the time I'll be recording this video in order for you to be able to deduct this loss against your ordinary income your income from your job you have to to be making under $100,000 a year and after $100,000 a year this deduction gets faded out up until $150,000 a year and the maximum that you can deduct is $25,000 in one year"
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To deduct real estate losses against ordinary income, one must demonstrate active involvement and professional status in real estate investments.
"and you also have to prove that you actively involved in real estate you have to show that you are some sort of real estate professional with your real estate investment"
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Unused real estate losses can be carried forward to future years, offsetting profits and potentially eliminating tax liability in those years.
"you can also carry forward this loss into future years so now if you make a profit in the future year well now you can say well in the previous year I had this big loss and it can keep carrying forward this loss you're making money but you don't have to pay any taxes"
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The 1031 exchange allows investors to defer taxes on profits from selling real estate by reinvesting the proceeds into another like-kind property.
"the third big tax break that you get is something called the 1031 exchange which says that you can sell your real estate for a profit and not have to pay any money and taxes if you take your profits and buy another property"
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To utilize the 1031 exchange, the property must be held for longer than one year, and subsequent reinvestments should be in larger properties.
"you have to hold the property for just longer than a year so you can't do this in 6 months this why you have to be an actual real estate investor and then you have to buy bigger properties"
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By repeatedly utilizing the 1031 exchange throughout one's lifetime, taxes on real estate profits can potentially be deferred indefinitely, even until death.
"if you do this until you die you never have to pay any taxes on this but if you keep doing this 1031 exchange you don't have to pay any taxes on the profits of this property"
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Real estate is a tangible physical asset, unlike cash or stocks, providing ownership of something concrete that can be seen, felt, and touched.
"a hard asset is a real physical asset as opposed to is saving your money cash because cash is just pieces of paper and potentially saving your money in the stock market because the stock market is also liquid and a paper asset which means that you really don't own anything physical anything tangible when you own real estate the actual property not only you own the land you own the building you own the bricks you own the windows you own the doors you own the fixtures you own the carpets you own something physical something that you can see feel and touch"
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Over the long term, the value of cash erodes due to inflation and increased money printing, leading to a decrease in purchasing power.
"cash because if you look at historically our cash has been losing value for decades now because of inflation now sure in the short term you can see swings up and down with the dollar but over the long term our dollar is losing value because we keep printing more money and as you print more money without producing more wealth the value of the dollar drops"
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Large cash holdings in banks carry risk, as FDIC insurance typically covers only up to $250,000 per person, leaving larger sums vulnerable in case of bank failure.
"now of course you're going to have short-term swings up and down on this but over the long term that's what inflation is and So when you buy real estate the second reason why especially rich people like the idea of owning real estate is because most banks are only FDIC insured up to $250,000 per person which means if you have millions of dollars sitting in a bank and that bank were to go under well now that cash that you have sitting in the bank is also also at risk"
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Real estate is protected by insurance against potential damage like fire, offering a layer of security not present for cash held in banks.
"if something happens and it burns down well you have real estate insurance and so you have protections against your real estate that you don't necessarily have if you keep all of your cash in the bank"
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Real estate values can decline significantly, as evidenced by the over 90% drop in prices in Michigan during the 2008 crash.
"now of course real estate has risks too because the value of real estate can drop when the 2008 real estate crash happened real estate prices in Michigan fell by more than 90% you had some properties Fallen by 92%"
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Holding good real estate investments through difficult market periods can lead to the recovery of losses over time.
"and the nice thing with real estate what we've seen throughout time is that if you own good real estate really any good investment and you hold on to it through the bad times then you should be able to recover your losses"
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Investing in real estate is achievable with less than $250,000, and any excess cash can be used to generate returns.
"now of course you don't need $250,000 to go out and start investing in real estate you can start investing real estate with significantly less but what I'm trying to say is if you have excess cash now you can start generating a return from this cash"
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Real estate investing, with its typical 5-10% returns and high initial capital requirement, makes it difficult for ordinary people to get rich unless they engage in flipping or active involvement.
"real estate is not going to make you rich because you need a lot of cash to get started and you might only make a 5 to 10% return on this cash so it's very hard for regular people to get rich by investing their money in real estate unless they become more of a flipper or you can sell these properties for a big profit or you become much more actively involved in real estate"
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Over the long term, real estate serves as a reliable savings vehicle, a tax haven, and a method for generating cash flow.
"but real estate over the long term has proven to be a great place to save money it's proven to be a great tax Haven and third it's a great way to generate cash flow"
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The speaker invests in real estate primarily for the cash flow it generates, which can become largely passive with correct implementation.
"the reason why I invest my money in real estate is because it creates a cash flow stream and if you do it correctly this cash flow can be generally passive"
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The speaker targets a 7% cash-on-cash return, aiming for $7,000 in annual profit per $100,000 invested cash.
"my goal would be to get a 7% cash on cash return am my money meaning if I bought this property cash with no debt that means I want to get $7,000 worth of profit cash flow every single year"
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Financing real estate deals can be achieved through various methods, including financing, finding investors, and creative financing, not solely through all-cash purchases.
"you don't have to put in all cash you can Finance the deal you can find investors you can do creative financing there are a lot of ways to get the cash to finance the deal"
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Achieving passive cash flow from real estate requires building the right team, particularly a competent property manager, as the initial phase is not passive.
"for me I want this cash flow to be as passive as possible and at the beginning the reality is real estate is going to be anything but passive because you're going to have to find the right team who is a good property manager"
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A successful real estate investor needs a team including an attorney, accountant, broker, and inspector who collaborate effectively.
"you got to have a good attorney you got to have a good accountant you got to have a good real estate broker you got to have a good real estate inspector to walk through the deal before you actually buy the property and you have to make sure that all these people are working together"
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The initial phase of real estate investing involves a steep learning curve and significant effort, but overcoming this hurdle leads to a more passive investment experience.
"this is going to seems super overwhelming in the beginning because when you get started there are so many things that you don't know and the more you learn the more you realize you don't know but once you get started you'll see that one person will help you find the next person and the next person will help you find the next person it is a process and it's a part of the game you have to go through this initial learning hurdle which is very difficult it's time consuming but once you do that then real estate investing can be much more passive"
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Real estate investors will inevitably face unique problems and setbacks not covered in books or videos, providing valuable lessons through experience.
"no matter how many real estate books that you read no matter how many real estate videos that you watch you can watch my videos where I go through my worst real estate deal ever but you're going to learn a lot from that things that you won't read in books but no matter how much you learn I can guarantee this is one of the few things that I can actually guarantee on this channel you're going to run into new problems that you never heard of anybody else dealing with and it's going to teach you a new lesson"
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Building wealth requires converting money into income-generating assets, as cash loses value over time due to inflation and increased money supply.
"so anytime I go to India to visit my family the first thing I do is I go and I convert some of my dollars to rupees because in India people do transactions with rupees not dollars when it comes to you building your wealth you have to convert your money your dollars into something that is going to make you more money because the reality is the dollars that you have the dollars that you work so hard to earn and the the dollars that you save in your bank account are losing value to inflation because as more and more money is printed the value of each dollar that you have gets deluded"
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True wealth is built by converting earned income into passive income investments, as a salary alone is insufficient because it ceases upon stopping work.
"you make your EI your earned income this the money you make from your job or the money you make from your business and you want to take as much of this money as possible and put it here towards your Pi your passive income Investments because this is the thing that will make you wealthy what wealthy people do and financially educated people do is they take as much of this money here and they put as much of it as possible here because this is what is going to make you wealthy not this doesn't matter how much money you make I don't care if you're a doctor you will never become wealthy just with the salary you make from your job because as soon as you stop working you stop getting paid so what you need to start doing is as soon as you get paid you need to start transferring this money here towards your passive Income Investments"
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To become wealthier, shift money from savings (which lose value due to inflation) into investments that generate passive income, allowing money to work for you without active labor.
"you have to convert as much of this here as possible because this money even if you just save it is losing value and it's making you poorer each and every day because the value of your dollar is dropping while the price of everything else keeps going up that's why you want to move this money here because this is going to make you wealthier this is going to make you more money and this will happen on the side without you having to physically go to work or do something to get paid because you're putting your money in the right places that's going to pay you for owning it"
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The speaker's initial real estate investment, a condo, yielded $250 monthly in passive income through a property manager, illustrating income generation without active work.
"the first investment that I made here ever and this condo after paying all my expenses was putting like $250 a month into my pocket every single month and I didn't have to do any work I had a property management company handling all the day-to-day stuff and every month $250 was being deposited into my bank account and I didn't have to do anything to earn that money"
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Equity in investments is crucial for providing a margin of error, as market downturns and unexpected issues are inevitable, and lack of equity leaves one vulnerable to significant losses.
"if you don't have any equity in your Investments and things go wrong which of course they will happen the thing is about stock market investing and real estate investing things will go wrong sometimes the economy will go down sometimes the stock market will crash sometimes the real estate market will crash and sometimes your ten is not going to pay you or the company that you're invested in is going to struggle and so you got to understand that things will go wrong and if you have no equity in what you're doing then you have no margin of error"
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No-money-down real estate deals, while potentially lucrative for some, carry high risk, often leading to foreclosure and subsequent opportunities for experienced investors to acquire distressed assets.
"these no money down deals are good sometimes yes they have made some people rich but do you want to know something else these no money deals have also made me a lot of money because when this person buys this property with no money down and then something goes wrong and then the bank has to take the property away from you and they sell it to an investor for a below market price that's when I come in and I buy the property because you were not able to take care of your investment property"
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Trading with high leverage (e.g., 10x margins) in the stock market amplifies gains during market upturns but leads to total loss and debt during downturns, as borrowed funds must be repaid.
"you'll see people offering these classes on how you can get rich trading options and doing day trading and doing this other short-term trading where now you're trading with 10x margins so you invest $1,000 and then you borrow $10,000 from your broker and now you can invest with so much more money than you actually have and when things are going up and the market is growing it's no problem because everybody's making money and now you're making money hand over fist but as soon as things slowed down and things start going down now you're going to be the first person to lose everything because now not only did you lose everything that you have but now you owe your broker money that you don't have"
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Having equity in investments acts as a protective buffer during market downturns, safeguarding against losses.
"if you have no equity in the deals meaning some of your own money in the deals so you're taking some of your earned income put it into your passive income here with real estate or stock market that way when things do go down you have Equity to protect you"
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An investor's true capability is revealed during market downturns; continuous learning and understanding the market are essential for long-term wealth creation.
"the real test of who's a good investor and who's not is what happens when things turn around and so this is where you got to understand the game and you got to keep learning because this education is what's going to help you build wealth over the long term"
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Real estate investing is primarily associated with generating cash flow, whereas stock market investing typically focuses on capital appreciation.
"when we're talking about real estate people are talking about cash flow when we're talking about the stock market people are talking about appreciation"
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The speaker differentiates trading (short-term profit-seeking) from investing (long-term ownership) in both real estate and stock markets.
"this is not investing it's a way of flipping you see the same thing in the stock market so in the stock market you can buy a stock and you own it for 20 minutes you own it for 2 days you own it for 2 months and so you're buying the stock with the hope that it's going to go up quickly that way you can sell it for a quick profit this is trading this is not investing"
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A defined investment strategy and understanding market dynamics are crucial. Simply hoping for returns is not a strategy, and frequent strategy changes should be avoided.
"and so you got to have your strategy in place you got to understand the game I put game on the inside of this which is supposed to be the outside but you got to understand the game how are you looking to make money and even within this there are so many strategies to trade there's day trading there's swing trading there's momentum trading so you got to understand what are you looking for and you can't just be flip-flopping strategies because most people's strategies when it comes to investing money especially in the stock market is I'm going to put my money in what I like and hope that I make money hopeing you make money is not a strategy you got to understand what your strategy is before you put your money in"
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When choosing real estate investment locations, prioritize areas with business growth and a 7% minimum cash flow return, rather than focusing solely on potential future appreciation.
"for me I got to make a minimum 7% return and so when I look to invest in properties I'm looking for an area where money is Flowing too so I can talk to the city I'll do whatever other research I got to do to see where businesses are going if I find an area that I like that I think is going to be more valuable in the future then I'm going to look for properties that's going to make me a 7% return if it doesn't make me the 7% return I'm not interested I don't care what the property could be worth in the future because I'm not Investing For appreciation I'm Investing For Cash Flow"
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Analyze population trends on Google for target cities or neighborhoods, looking for upward or stable growth, as declining populations indicate a poor long-term investment location.
"the first thing that you can do is just go on to Google and enter in the city or the neighborhood that you want to invest in and just type in the word population and what you'll see is you'll get a chart of what the population is and has been for this particular neighborhood or this particular City and you want to see some sort of upward Trend or at the very least a stable trend for this city or neighborhood because if you're seeing populations go down that's probably not a place where you want to be investing your money for the long term"
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Visiting city halls to inquire about upcoming developments can provide legal 'insider' information on real estate opportunities, a practice not permitted in the stock market.
"the second thing that you can do to dissect the location is is go to the City Hall of the area that you want to invest and ask the building department what new developments are in the works or potentially could be coming in the future this is a little known secret of a way that you can get real Insider information of what's happening before it even becomes public and this is actually legal in real estate but it's illegal in the stock market"
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The influx of major businesses like Walmart into an area can stimulate economic activity, leading to increased retail and restaurant growth, and subsequently higher demand for real estate.
"now this wasn't public information or at least I hadn't heard about it until I went to the City Hall but this was great news for me because now I knew Walmart was going to bring a lot of money into this particular area because if Walmart comes here then you're going to see a bunch of other smaller retail stores also pop up because now Walmart's going to bring a whole bunch of traffic to this particular area people are going to want to be here because you're going to see more shops open up you'll see more restaurants open up because this is going to drive up demand for this particular area"
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Geographical barriers such as highways or rivers can create distinct desirable and undesirable areas within a city, significantly impacting property values and desirability, which is a key factor in location analysis.
"you also really want to pay attention to barriers and boundaries because what you'll see happen is many cities will have some sort of boundary or barrier that will divide a good part and a bad part of a city sometimes it'll be a highway sometimes it'll be a bridge maybe it's a lake maybe it's something a railroad track in the middle that divides a good part of a city from a bad part of a city and this can make a huge difference because you might see a city as a whole and the city will be growing and people like the city however what you might not see from that data is that people are moving from this part of the city to this part of the city"
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The optimal real estate strategy is to acquire the worst property in the best location, as location is unchangeable, while property conditions can be improved.
"find the worst property and the best location because you can't change the location but you can improve the property so if you have a good location it's worth paying a premium to be in a good location even if the property isn't as good because then you can upgrade the property make the property better but you can't change the location"
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The speaker favors residential real estate (apartments, single-family homes) due to consistent demand and easier understanding compared to commercial or retail properties, which are more sensitive to economic shifts.
"I personally prefer residential I like apartment complexes I like single family homes I did invest in one mixed use building which had some commercial and some residential but I only did one of those deals but I like residential because for me that is the easiest thing for me to understand because everybody is always going to need a roof over their head so I can easily understand the demand side of a residential building versus something like an office well that's a little bit more difficult because as we can see around us the office environment changes with the economy and the demand for office is going to change with that and so the requirements of an office are very different than the requirements of a residential property and then same with retail retail always changes"
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Turnkey properties offer immediate passive income but come at a premium, while distressed properties require more work but provide greater discounts.
"some investment deals are going to be completely TurnKey in that it's a property that's already rented out and you don't have to do anything except just buy the property and now it's already producing cash flow so there's nothing you got to do the other side is you're going to find distressed properties where not only does this building or house or whatever not have a tenant it's not even fully functional like it's got ugly carpets it needs to be renovated it smells nasty so you have to put in physical work now you have to figure out where you want to be but the advantage is if you buy this more distressed property you're going to get a bigger discount than if you buy a fully TurnKey property"
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An investor's primary role is asset acquisition and ownership, while a manager handles day-to-day operations, allowing the investor to focus on strategic growth.
"your goal is to be a real estate investor not a real estate manager a real USA manager's job is to work on all the day-to-day stuff that is a job their job is to make sure that the tenant is paying the bills their job is to find the tenant their job is to pay the taxes so a manager's job is to do the day-to-day work the Investor's job is to find the asset and own the asset"
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Real estate investors benefit from substantial tax breaks; engaging a tax planner is crucial for maximizing these advantages, distinguishing them from mere tax filers.
"real estate has some of the biggest and best tax breaks that a tax code has to offer now I am a licensed attorney although I'm not your attorney and I'm telling you this from experience because you need to have somebody professional who's guiding you now one thing that I've learned is that there's a difference between a tax filer and a tax planner"
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Tax advisors can help depreciate various property components individually, leading to different tax breaks each year of ownership.
"and you'll learn how much is the building worth how much is the land worth and then within the building how much is the carpet worth how much are the appliances worth how much are the different things within the property worth because then they can depreciate the value of each one of these things differently on your taxes and this will provide you different levels of tax breaks each year that you own the property"
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Including a management fee in property purchase calculations ensures profitability and accurate future sale valuation, even if self-managing initially.
"if there's no management fee for when you buy it you might be overpaying for something that you can't sell for the same price so make sure you factor in a management fee when you're looking to buy a property that way you know that it's going to be profitable for you"
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The speaker aims for a minimum 7% cash-on-cash return on real estate investments, targeting $7,000 in annual profit per $100,000 invested, derived from actual cash flow, not just appreciation.
"my goal when I invest in real estate is to make a minimum 7% cash on cash return on my money meaning if I go out and I invest say $100,000 of my own cash I want to make sure that after paying all of these expenses this property is putting $7,000 of profit into my pocket every single month from cash flow not from invisible appreciation of the property value but from actual cash flow from the property"
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The speaker's early real estate strategy involved reinvesting all profits into property purchases to build cash flow, involving significant personal sacrifice.
"my goal especially when I started investing in real estate was anytime I made money was I took this cash and I bought a property I made cash and I bought a property I made some money I bought a property that was it I wasn't spending any money on myself the only thing that I was buying was real estate because I knew that the real estate would pay me with cash flow and I could spend that cash flow and not have to worry too much because I knew the cash flow was going to come back next month"
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Acquiring one property annually can lead to a compounding effect, where cash flow from existing properties facilitates the purchase of more properties, effectively 'stacking' cash flow.
"if you can buy one property a year you can save up to do that well each year you're going to be adding on more and more cash flow and every year it's going to become a little be easier for you to buy another property because you can save up the cash flow that you're making from one property and use it to buy a second one use the two to help you buy a third one use the three to help you buy a fourth one so it's all about stacking cash flow"
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Dividends are passive cash payments from companies to shareholders, typically distributed quarterly, and are received directly into an investment account without requiring stock sales.
"Dividends are regular cash payouts that companies pay out to their shareholders typ Ally every quarter meaning every 3 months and this is cash that you get without having to sell your stock and you don't have to do anything you just get this cash deposited into your investment brokerage account"
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The speaker prioritizes cash flow-producing investments, especially dividend stocks and ETFs, considering 'cash flow is king' for their portfolio strategy.
"for me I like cash flow I do have some companies that I invest in for more of the growth side but a larger piece of my portfolio is for cash flow because cash flow is King"
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Reinvesting dividends and cash flow accelerates wealth building by enabling the purchase of more income-generating assets, creating a compounding cycle.
"if you want to get even more aggressive you can automatically reinvest the cash flow that you're getting you can reinvest the dividends so not only are you working to invest more money but now every time you get paid you can buy more of this machine that's paying you with cash flow it's like a whole cycle where you just keep buying more of the cash flow and using your cash flow to buy more cash flow"
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Analyzing real estate deals involves subtracting all expenses (taxes, insurance, maintenance, management, vacancy) from rental income to determine net income.
"the way you analyze a real estate investment deal is you take your rental income and then you subtract your taxes your insurance cost cost your maintenance cost because every real estate property is going to have maintenance issues taxes Insurance maintenance your management fees because I don't want you to be in the business of unclogging toilets I want you to be an investor and have somebody managing the property so this can be passive cash flow for you so you can focus your time on finding more investment deals and doing other things that you love instead of spending all your time trying to manage this property and then you can factor in a vacancy cost because there doesn't be a time where tenants move out and so you got to fact factor in that cost because there's going to be times where a tenant is not paying you rent once you add all these things up this is going to leave you with your net income"
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The annual return on real estate is calculated by dividing the yearly profit by the total cash invested in the property.
"all you got to do is take this number how much you're making every single year divided by the amount of money you paid for this property the amount of cash you put in and that's a 7.5% return a year you as the investor now have to decide what is a good return for you"
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Financing real estate typically requires a minimum 20% down payment, with a portion of the monthly net income going towards debt repayment.
"now if you don't have all $150,000 in your bank account to buy this property and you want to use some debt now what you're going to do is you're going to be putting down a minimum 20% which in this case would be $30,000 and now you put in $30,000 and then right here after you got this $950 you're going to have to send some of this money to the bank"
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Using debt financing can increase the cash-on-cash return on real estate investments (e.g., 15% from $4,500 profit on $30,000 invested) compared to an all-cash purchase, but also increases risk.
"so now you're going to be making right around $4,500 a year in in passive income cash flow from this property and now if you take this $4,500 and you divide it by the $30,000 in cash you put in now this property is actually paying you right around 15% a year cash on cash because now you're making $4,500 based off of the $30,000 cash that you put in"
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The perceived high capital requirement for cash flow investing can be overcome by starting with smaller, consistent investments over time, rather than needing a large lump sum initially.
"the reason why so many people get discouraged when they look at investing their money for this type of cash flow is because they run the numbers and then they get very discouraged they say if I can find an investment that's paying me say a 4% annual dividend yield it's going to cost me $150,000 today to get this 4% return which is going to pay me $500 a month or $6,000 a year I don't have $150,000 so it's not even worth it for me to start but what you're missing is you don't have to invest all $150,000 today if you create a passive investing system you could invest $100 a week $50 a week $10 a week"
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Building a cash flow portfolio requires consistent investment, starting with any available capital and maintaining regular contributions.
"start with $100 start with $1,000 start with $10,000 start wherever you are just consistently keep investing your money that way you can build up your cash flow portfolio"
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Royalties are earned from created works, like books, where creators receive ongoing payments based on sales, providing a long-term income stream.
"royalties are now where you create something and then you get paid for the thing that you created for years into the future because of that one thing that you created so one way to do this is the royalties another example of a physical version of these types of royalties will be writing a book Authors who write a book if you can get it into stores if you can get it onto Amazon if you can get it into places where people keep selling and buying your book well now you create royalties where now every month or every quarter every year you're going to get a check from your publisher because of all the sales that your book is bringing in"
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Content creation offers 'pseudo-passive' income; while old content can generate revenue, consistent production of new, quality content is necessary to maintain viewership and income.
"the way that it works in the content game is there are a lot of people that are trying to create more content so unless you keep creating more content and unless you keep creating good content your old content stops getting views and your old content stops driving revenue so the whole idea people think is if you make a video now and this video goes viral you're going to get paid for that video for years into the future but the reality is if you want to keep getting paid for that video that you made years ago you have to keep producing good new content so it's kind of a pseudo passive income in the sense that yeah you can still generate revenue from old content but in order for the old content to keep generating you new Revenue you have to keep producing good new content"
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Cash flow can be generated by buying it (with money and no time, e.g., stocks, real estate) or building it (with time and no money, e.g., business, royalties).
"the general consensus is there's two different ways to create cash flow one is you can buy it the second is if you can build it if you have money but you don't have time then you can go out and buy the cash flow we talked about some of the passive ways you can do it through dividend investing in the stock market you can pick your own strategy there you can do it through real estate creating royalties is going to be a lot harder for you to do much more passively but if you have cash you can go out and create this type of cash flow by buying the cash flow if you have time but no money and the next thing is you can build the cash flow you can build your own business you can build something that czy with royalties that is now something you build with your time"
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Consistent cash flow is vital for a sustainable lifestyle and financial freedom, contrasting with sporadic income which can lead to lifestyle inflation and financial vulnerability during economic downturns.
"you need to have cash flow coming in that allows you to live your life and the issue that a lot of people have is they work to build more of a sporadic cash flow and then they start living this very nice lifestyle you see a lot of sales people do this I am a licensed real estate salesperson I have worked with a lot of sales people and this is one of the biggest problems with salespeople you go through these big months or these big years the economy is booming and you make a ton of money and now you start driving a nice car you start wearing expensive clothes you start going to nice restaurants and go to these expensive vacations and then a couple years later the economy takes a turn now that cash flow starts to go away and now you don't have the same ability to live the same lifestyle"
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The notion that simply buying real estate guarantees wealth is inaccurate; real estate acquisition alone does not directly lead to riches.
"most people think that the way you get rich is by buying real estate you've probably heard the phrase more millionaires are made in real estate than anything else but that's not true you don't get rich by buying real estate"
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The video promises to reveal the actual motivations behind wealthy individuals' real estate investments and provide strategies for others to adopt.
"and in this video I'm going to show you the real reasons why rich people buy real estate and why you can use the same strategies that they do"
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