Real Estate Investing Full Course – Beginner To Pro (2025)

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welcome to my comprehensive real estate investing course this video is designed for the full gamut from beginner real estate investor all the way to the more seasoned investor who’s looking to scale their portfolio I share my 20 years of real State experience and my process for finding great deals analyzing them charging the highest and best rents financing the deal and then repeating the process over and over so let’s get started guys you want to invest in real estate and it’s a great idea it’s a great way to generate wealth the reason I got started in real estate was my neighbor who was a very wealthy and successful guy said to me one day Paul go find every rich person you know they all own real estate now since then I’ve realized that’s not really true but I get what he was saying and real estate’s a great way to build wealth it’s hard to sell so you don’t sell emotionally as often it’s hard to buy so you’re going to sit there and take more time and make sure you find the right deal and because of those two things the returns tend to be better you have to spend more time and energy working on these deals so therefore the returns are better in fact look at our real estate calculator here on the side it’s telling you our average deal has about a 15.93% irr and that’s what some really crappy ones in there at 15% return that’s what I’m telling you listen you should try to get those kind of returns 15 to 20% if you can’t do that maybe it’s not worth it you’re not here to get 9 or 10% you can get that from a lowcost ETF dollar cost average the market with a lot less H hassle to go have the hassle of real estate you need to make outsize returns 15 to 20% seems very reasonable to me and very attainable my best deal still makes me over 40% Returns on my money now that’s a very rare occurrence but the point is all my deals combined definitely make over 15% and probably close to 20% returns and here is the power of that what I’m trying to teach people to do here is if you do one good deal a year one great deal a year be picky and you’re able to make a mere 15% returns here’s what going to mean after 30 years well guys I’m going to be a nerd here and show you guys the numbers 1.15 to the 30th power minus 1 divided 0.15 this is the equation for investing money every single year at 15% returns now let’s say you’re able to invest $25,000 of your own money each year now that’s not going to get you a property but if you couple that with other people’s money and some more invested money here is how well it can do for you it’s a total of 10.86 million in net worth that’s a huge number and you’d still own the real estate that’s how powerful 15% a year is now what if you’re able to get 20% per year that’s going to be harder but again doing one deal a year this 10.8 68 becomes $29.5 million now couple things here you might sit there and say Paul 30 years I’m 45 years old so this gives you income during retirement and you’d be surprised how easy it is to manage 30 houses it’s easier to manage more apartments and more houses than less plus it gives you something to do in retirement it’s not going to be a full-time job having 30 properties imagine the cash flow you’ll have imagine the wealth you would have built if you in at the age of 75 when you have those 30 properties sell one per year to live off of and keep going down and down sell two per year you will generate so much cash for yourself you’ll never ever run out of money do you know what all this means all this means one thing here freedom and if you’re fortunate enough to be under the age of 30 right now this means freedom before age 60 imagine that kind of life you can live and it’s there it’s absolutely absolutely there the problem is people chase return people chase Deals they fall in love with the deal and do it this whole video is about how you find the one great deal per year guys be picky find one great deal per year don’t just find your first deal and buy it find one great deal per year and this video and my helping you will help you get that so first off there are several different types of real estate investing and it’s important for you to understand which one speak to you the most because that’s the one you will do best in so first off there’s residential now residential is split up between two different types single family and multif family single family is basically anything one or two units at a time multif family is four plus units as time goes on and you get bigger and bigger if you’re one of those people who wants to scale you need to focus here but just like me you’re going to want to start right here in single family single family is a great way to get started with less Capital dip your toe in and learn how to operate these properties here’s a little spoiler for you multif family is actually easier than single family it is much easier to manage 10 plus units in one location than it is to manage one unit in one separate location and this tends to be the most lucrative so if you’re sitting there going like damn I want to get in a multif family don’t worry you’ll get there but just like me I had to start at single family to make sure I understood that I liked it and I could handle it another form of real estate commercial now I’ll often times hear people say that anything over for units and apartments is commercial I consider commercial office retail industrial and some sort of mixed use now mixed use is usually an area where you either have a mixture of office and Retail or office retail and apartments some sort of combin of them now for me I have three commercial properties two Office Buildings and one Warehouse which is considered an industrial kind of way the reason I don’t like commercial real estate is I feel like it’s feast or famine when the economy is going great you’re making a lot of money when the econom is not going great though vacancies are up it’s hard to fill those spots and you have issues the other thing is I love renovating properties when you renovate a bathroom or a kitchen in a apartment building you’re going to get higher rents you’re going to get lower expenses the problem with these is people usually come into a blank slate and they want you to modify and they’re usually trying to save as much money as possible so really doing those modifications isn’t going to drive up your rent a ton now this is the easiest form of real estate my three buildings occupy a total of about 140,000 Square ft and they are so easy to manage so I do get why people like these it’s a lot easier to manage the cash flow is more consistent when the cash flow is there but when you hit a hurdle with the economy slowing down and all of a sudden Banks getting tighter you tend to see a higher vacancy that’s not a good combination to have third type of real estate land and development now guys there are a lot of developers out there because development is sexy but development is risky the reason being is you have to go in there and create something from nothing so when you’re creating it from nothing you’re kind of throwing a little bit of caution to the wind saying hey I hope this works now it can work very well but I have found that developers are the ones who get rich in development on their fees but when things go poorly it is very tough we’ve only developed one property it was 120 units and it was a slam dunk home run deal because we partnered with the right land person we are very cautious about development I look at development as a way for a developer to collect a lot of fees and the deal goes great awesome if it doesn’t whatever they not worried about it but when it comes to development you got to have a lot of knowledge on an area about the rules in zoning have a lot of access to people in the area and you spend a lot of money upfront trying to get a deal done when I buy real estate I like to buy an existing product that I can make better that fits my personality extremely well but a lot of developers out there love what they do they have the money to be able to do it they have the access to investors to be able to do it but again whenever I hear about tough times in real estate I mostly hear about it with developers not with the guys like me who go out there and buy properties and make them better now another piece of real estate that I’m very well versed in is vacation rentals and Airbnb now guys Airbnb has become a very popular thing as of late and that always draws a little bit of questions for me going are cities going to start clamping down they’re already clamping down now whenever I look for a vacation rental I always ask what’s the shortterm rental rules in this area because a lot of neighborhoods a lot of high-end places do not want to have short-term people coming in and out all the time especially gated communities this was not an issue 10 or 12 years ago because Airbnb did not really exist there was vbo but it wasn’t nearly as possible as Airbnb and I also see on Twitter Instagram all these guys talking about ways to make Airbnb Millions by suing properties more power to them I know people who do it very successfully for our business we have a vacation rental business that started basically by accident and we have we own three properties and we sublease another 10 around the world and it’s gone very well for us but as this grows there’s a lot more competition that’s going to drive down prices of rentals and we have seen some bubble-like behavior that has caused some problems in recent years but this is a great way if you personally want to own a vacation rental for your family and rent on the side I love this method because it’s a great way to basically Break Even or make a few dollars on an asset that you probably would have lost money on continually as you did not use it the reason I love this is I personally like owning homes that have great vacation experience on a lake on the ocean in the mountains and allows me to buy something that I want to own and also figure out a way to make money with it this all started with one house in Mexico that I bought and my goal at the time was listen if I can vacation here for free and make four or 5% I’m a happy guy well it crushed that it did so well that now we’re at least well over 4550 weeks a year literally full rental we’ve had to buy two other homes one right next door one in Turks and Kos we’re looking at the other side of Mexico because it has worked very well for us and again the benefit of this is if it’s some lake house that you want to buy for your family personally to use it’s a great way to decrease the cost of hold that asset final type of real estate REITs what does this stand for Real Estate Investment Trust these are basically stocks you buy that own real estate and give you a dividend now the benefit of them is the law states they have to distribute at least 90% of their taxable income every single year so there’s high yields on them the issue with these is you got to understand what asset they’re buying why they’re buying it and the balance sheet on these on these real estate investment trusts have to be understood same with the profit and loss because there’s a thing called depreciation which is a non-cash expense focus on the cash flow of these focus on the assets and there could be a lot of hidden value in these assets because when a piece of real estate’s owned on a balance sheet it doesn’t increase on the balance sheet as the value goes up so there could be a lot of hidden value here now because it’s so readily available to so many investors and so many people can just go in and buy them you’re not going to make as much money on these as owning an operating your own real estate and this video and this course is mainly geared towards people who want to own and operate their own real estate I’m going to walk you through this I’m going to teach you the things that I did wrong to start the first major apartment building that I owned I lost $1 million on and guess what the best thing that happened to me but you’ve got to learn from that so that when you go do more deals you do not lose that money if you have grandiose dreams of owning thousands of Apartments it’s going to be very unlikely that you do it on your own your own money I’m going to teach you that process as well how you raise money from people to go build your real estate portfolio and one of the most important things I teach that not many people say in fact I’ve never heard anybody say this I want you to have the most expensive rent on the street I don’t want you to buy the most expensive rent I want you to buy a property and make it the most expensive on the street here’s a little key that I want everybody understand the higher your rent usually the higher your occupancy the lower your expenses and the better the quality tenant you have higher rents means more more profit and less hassle that’s a very very important thing that I want you to understand in this course before we get any further from that let’s understand some basic Financial metrics to understand about a property first off net operating income now what this does it basically takes your Revenue minus your vacancy minus your expenses and gives you net operating income this is before any debt is paid this is how you’re going to evaluate every real estate deal because the debt in the property should not affect the way you in which you look at the overall real estate deal the debt you put on the property will be after you decided to buy the property at a certain price now don’t get me wrong debt is going to greatly affector your internal rate of return and your Roi and we’ll get into that shortly but for right now we will understand if this property was owned in cash how well would it do you’re going to take your Revenue this is taking all the units multiplying by the monthly rent and multiplying by 12 very simple okay next you’re going to take your vacancy guys you’re not going to be 100% full you might sit there and say well Paul I have a single family home it’ll be full yeah it will be full but there’ll be times when it’s vacant so over a five-year period it might be vacant five or six months that is s or eight% vacancy over those five years you have to factor that in and then finally you take out your expenses well these are important aspects what is what are some of the expenses that are involved in property well first off property taxes insurance and insurance has gone up a ton in recent years management fees now you might say to me well Paul I’m going to manage it myself I get that but any decent bank will tell you we have to underwrite management fees because they’re going to want to have to pay somebody if they take the property over maintenance and repair what are you spending to do turnover of units paying the unit doing normal maintenance that might happen while the tenants living there replacing blinds these things like that do add up and what I see most common that I want you to avoid is a lot of property owners will sit there and say oh it doesn’t matter I do it all myself get that but if you’re trying to build a portfolio then you’re going to have to charge some sort of Labor to yourself why because you’re still spending your time doing it doesn’t have to be a lot but what would you pay a normal maintenance person to do that work just charge it to yourself some other expenses utilities now you might tell me well Paul if it’s occupied the tent’s going to pay the utilities in a lot of areas yes but if you have an apartment building and you have common area lights that’s utility just sit there and charge that the other thing is while the unit’s vacant you have utilities yes it’s not going to be a lot but it’s important to understand these understand who’s responsible for what in that area and if you’re responsible for something how do you build a tenant back for that use we had a property that we paid the water bill for the longest time and it was so expensive because people didn’t care then all of a sudden we found a way to submeter the water bills guys once the tenants started paying the water bill the water usage plummeted guys think about it this way if you’re not charged for electricity if you don’t have to pay yourself how often are you going to turn those lights off you’re going to keep it on all the time I would why not it’s very important you figure out a way to charge every tenant for every utility that goes in that building but you’re still going to have utility costs whether it’s through an apartment building a common area cost or whether it’s through a single family home while it’s vacant and you’re doing maintenance to turn it over and get it ready for a new renter other things landscaping and depending where you live that could be snow removal as well as cutting the grass now if you have a single family home lot people will say well I make my tenants cut the grass make sure you watch them on that because a lot of tenants will not do it you’ve got to make sure they’re cutting the grass and if not figure out a way to find them there’s a city here a suburb of Cleveland where if the landlord is not cutting the grass the city comes in and cuts the grass for you and they charge an exorbitant amount of money what would normally be a 25 or $35 cut they’re charging $145 and I don’t blame them it’s a way of get getting the landlords to say hey I’m going to make sure my tenant cuts the grass or I cut the grass for them now these are not all the expenses but these are the major ones that you have to factor in when buying any sort of property there will be other expenses like permits and things like that that are very reliant on the area you’re in and the type of property you have bought now once you have your net income let’s do some numbers here because I want to make sure that you understand how it’s going to apply to something called a cap rate now cap rate is essentially what’s the cash flow return you’re going to make on the property if you paid cash so what’s the cash flow well you had your Revenue you had your vacancy you had your expenses and you had your net income net operating income that net operating income is a certain number let’s say it’s $10,000 so what is your cap rate in the property it’s very simple it’s your net operating income divided by your purchase or investment amount let’s from now right now let’s just call it your purchase price let’s say your purchase price is $150,000 it’s 10,000 divid $150,000 which is 6.66% this means that if you paid cash for the property your return will be a 6.66 cap rate now what I’m going to explain to you is always confusing it confused the heck out of me so make sure you rewind and watch this over and over the lower the cap rate the higher the price of the property think about it this way if it’s 10,000 over 200,000 instead of being 10, over50 it’d be a 5% cap rate so as the cap rate goes down the purchase price goes up they work in opposite directions you want to buy at a high cap rate you want to sell at a low cap rate right because when you’re buying when the cap rate goes up the price goes down so you want to buy at a lower price that means a higher cap rate when you’re selling you want somebody to pay you more money for the same income which means a lower cap rate would you rather sell at 5% % cap rate which is $200,000 or a 6.6 cap rate at 150 and would you rather buy at $150,000 a 6.6 cap or 5% of $200,000 value that’s the key there higher the cap rate lower the price lower the cap rate higher the price now why does cap rate matter well every area what drives cap rate in cap rates you have earnings which is net income divided by price in PE ratio you price divided by earnings the exact opposite also this is called the earnings yield on stocks so why would you pay a higher PE for a company well a lot of growth potential a moe in the world of real estate a lot of growth potential would be can you renovate the property and make a lot more money is the location so good that demand keeps increasing but Supply cannot keep up and therefore rents will go higher and higher for example a place like Manhattan all they can do is build up they can’t build out and it’s hard to build up so the demand in Manhattan keeps getting higher and higher yet the supply is not keeping up that can drive rents higher but just like in stocks what I find a lot of times is people will overpay for a great location with the justification that earnings are going to go up a lot faster it very well could but remember people tend to chase what’s going on I want you to avoid that I want you to look at every real estate deal like every investment it’s the present value of all your future cash flow I own properties on the water I think water property will appreciate at a faster rate than a normal apartment building in Columbus Ohio why you can’t make more water property but in Columbus they can keep going out and out and out just like in Dallas just like in Atlanta they can keep building more out and out and out but on water property you can’t just go okay I’m going to create more sh Shoreline right here can’t do that that’s why I believe water properties do sell for a premium and should sell for a premium for those of you that are in our real estate classes I want you to remember this cap rate is the reason why we spend a lot of time talking about this because it is important I want you to compare your cap rate to your interest rate that you’re being charged on the loan it’s a good way of understanding you want to you want to try to find deals in which your cap rate is higher than the interest rate why because unless you’re going to J Drive the value of the property through renovation it’s hard to make a lot of money when your interest rate is higher than your cap rate if you’re making 6% but you’re paying 7% That’s very difficult unless there’s a way in which that income can go up higher and higher and higher and faster and faster and faster if you can do that you can make out size returns now this all leads to irr your internal rate of return now the important thing with irr is it factors in when you receive the money let me give you an example let’s say you have two Investments and they’re going to last three years and investment a these are the cash flows by year 0 0300 investment b 300 Z and zero they both made $300 their return on investment is the same but their IR is very different why IR values more money sooner so even though they’re are exactly the same this irr is much higher why because theoretically you can take the $300 and do another deal again do it again and again so you can make $900 in that time period while investment a you have to wait three years to get your 300 bucks so you can only do it every three years that’s the key for irr now guys here’s a little spoiler you can’t calculate irr it’s a complicated guess even Excel has to do a very quick guessing until it figures out the right irr this is one of my Lake Properties this is how it calculates in our software the irr every year it’s calculating a cash flow year zero I have to buy the property I have to put $400,000 down payment year one I lost 540,000 due to my Renovations Furnishings Etc to get the property up and running and then every year I have cash flow going down and in year seven I do a refinance I get a very big cash flow and it goes all the way down to 20 years all these cash flows I sell the property I get a check for 1.48 million for a total irr of 14.59% now if I change some of these assumptions for example if I change the market rent to go higher now it’s increasing my cash flow every year and look at my returns they went higher 17.7% that’s the beauty of this prop of this real estate calculator it allows me to put my assumptions in and then change them and see how the values change along the way the big key here is you need to be able to calculate irr very quickly that’s why this software is so useful it’s going to do it for you like that you don’t have to sit there and put in Excel because Excel can do these as well but you got to manually do it you got to manually put in each Year’s cash flow and have it spit it out for you I use this for one major reason look what I’m doing here I’m going to change the price of the property based on me paying 1. n25 and putting all this money into it I’m going to generate 14. 59% if my price goes lower my C my irr should go higher and it does 17.35% on 1.73 and if I had paid their original asking price of 2.25 my irr would be 10.4% price drives the irr so much because the sooner your cash flow is laid out the lower your returns so you want to make sure your cash as little as possible another thing is debt debt drives this immensely 80% LTV if I put at 80% LTV I’m making 14.59% if I have a lower LTV which means I’m putting more down payment that’s more money up front it should make my my returns lower and it does drops it to 13.25 if I’m able to figure out a way to put less more debt on 85% it goes up to 15.19% because it’s nice to see a higher internal rate of return and they’re driven by so many factors and debt is the easiest way that’s why developers get in so much trouble they take on immense debt into a deal that they haven’t proven yet with the hopes of it working and making a ton of money is the juice worth the squeeze at the end of the day you’ve got to understand your irr because also the harder the property is to manage don’t you want to make more money the easier the property to manage you’re okay making less if you’re going to do a lot of renovation you should make more money it’s more hassle this is all part of the subjectivity and the Art of investing in real estate you’ve got to really understand what you’re buying and what work you’re going to put into it because two deals generating 15% each could be very different based on the work involved 15% and 15% but here you have to renovate you have to release you have maybe it’s a tough area with high vacancy or a lot of bad collections versus this being a class a property in a great suburb that’s brand new I’d rather make 15% here that’s why this one maybe you have to make 20 to 25% because it’s more hassle these are the factors that involved in determining your irr and what’s appropriate for that specific deal now you’ll see here that as time goes on and my cash flow goes up so does the value of my property guys in real estate over long periods of time I will tell you it’s just like stocks the more the property that makes the more the value of the property will be that’s very clear now with a single family home like this there’ll be a separate appraisal that’s done based on Purely what the market dictates because somebody could buy that home for themselves but if you have a five-unit building or a three-unit building or a 20-unit building or 200 unit building it’s going to be driven purely by how much money the property makes that’ll end up being the value not a lot of people will sit there and say well I trust my bank if they hire in a appraiser and the appraiser tells me the property is worth it I I feel comfortable not necessarily guys look at 06 7 every Bank was appraising these properties at absurd amounts of money but it wasn’t Justified what I want to teach you is that you laugh at property appraisals you sit there and say okay fine guys I’ve paid prices for properties or banks are saying Paul you’re overpaying my number one performing property that I make 40% a year on over the last 10 years the bank told me I was overpaying I said sounds good and I wasn’t I was not why because they were focused on what was in place and I knew I could drive those rents a lot higher I want you to be so confident that you laugh at the bankers because guess what that’s what I do I laugh at appraisals I laugh at Bankers we do them because we need to get a property value based on it and we need to get our loan based on it but I don’t ever sit there and look at a bank and think oh man they’re telling me this my property is not worth it I therefore I should pay less no I will use that to my negotiating standpoint with the seller like listen the property didn’t appraise how do we fix this now the great things about real estate are you can generate cash flow and you can watch your property value appreciate and as your property value appreciates when you refinance every so often because of that bigger value you’re going to get a big check and that check is going to be tax-free because loan proceeds are not income I want you to be the kind of investor who focuses on both of these because a lot of investors only focus on value property appreciation they’re like hey I’m fine not making money but let’s look at it this way guys let’s say we make our expenses higher here so our cash flow is zero or negative to start now let’s say you buy this Lake home and it’s awesome it’s a $2 million Lake home the appreciation keeps going up and it’s worth a lot of money and you make your big check in your seven but along the way you’re losing cash flow and guys by the way it’s not a lot of cash flow you’re losing 14,000 11,000 9,000 6,000 if you afford a $2 million home or more you can afford these but guys look at the returns we made the IR before was 14.59% don’t just focus on appreci a property appreciation you got to look at the cash flow along the way that cash flow will allow you to go reinvest at other properties and make more money or reinvest in the market to diversify breaking even or losing just a little bit of money in the first two years really drives down that cash flow let’s make it a little bit better let’s say that it’s basically breaking even day one you’re at 10% not bad but it’s not 15% and that difference over a 20-year period of time is millions and millions and millions of dollars it’s not just a small amount of money so go maximize that I’m here to teach you that this is what’s so useful about this tool right here it allows you to really understand these numbers and how the small differences can make a huge difference let’s do another example let’s say the broker involved in the deal sitting there saying come on just pay a little bit more for the property you’re fine it’ll be okay okay 1. 1925 14.59% pay 100 Grand more you might sit there and say Paul only dropped at 13.32 but guys 1.6% over 30 some years we’ve shown it time and time again is millions of dollars in returns it’s so important that you understand the effect of cash flow on your long-term returns now that we understand these very important aspects to understand ahead of time before you start finding your real estate deals now you got to find these real estate deals and guys I can’t can’t wait to hear till I’m bleue in the face how you got to find a good realtor or a good real estate broker spoiler alert there’s no such thing I’m buying 20 30 40 $50 million properties and every time I hear a real estate broker talk I just think salesman salesman salesmen they don’t understand real estate investment they don’t understand the numbers I showed you before their job is to purely find you deals you are not allowed according to your Uncle Paul right here to ever take their investment advice because once the deal closes they’ receed their commission they will be gone if you think otherwise you’re the sucker at the table I’m sorry to say that but it’s absolutely true my first million dollar loss it was on me because I’m the one that made the decision to invest but it was a real estate broker telling me when I was a very young person you’re getting a phenomenal deal here I said well if he’s saying that and he’s experienced it must be the case guess what a few months after the deal closed he got his commission and he moved to North Carolina and became a car salesman where was he when I lost my million bucks nowhere to be found and guess what if it made money I wouldn’t have commended him because I’m the one that managed the property once you’ve bought the property that price you’ve paid is done you can never change that price you’ve paid that’s why it’s so important to focus on finding the right deal and this is why it’s so important to focus on seeing a lot of deals you need to become immune to finding deals in fact everybody who works up with me in our Mastermind groups I always tell them your first job is to find 10 properties you make offers on become immune to being told no because I don’t want you to fall for the same thing that I fell for which is falling in love with one property and figuring out a way to make that property work I want you to become so immune to looking at deals that you literally say cool move on move on we made an offer they said no great move on your job is to find the right deal that makes the right money not to fall in love with the property these are just numbers to you once you own the property I want you to own and manage that property like it’s the most important thing in the world to you but until then you need to be so laser focused on finding the right deal that every other deal that comes to you you need to say no to very quickly and I will teach you how to do that the first step is don’t fall in love with one property by focusing on one property I literally want you to look for a 100 properties make offers on 10 of them and that way if three or four get get accepted you focus on the one that’s the best deal if you’re able to do that your returns will increase your losses will decrease that’s an absolute fact it’s just supply and demand if you have 10 options and you have to say find the best one you’re going to find the best one if you have two options you have to find the best one you’re limited it’s just logic and I want you to become good at that learn from my mistake I fell in love with the way a building looked I said I want this property because look at how nice it looks and that cost me dearly then I retrained myself into believing find a property that you can see into a certain look that you can change it driving rents higher making expenses lower and making a ton of money so you can go to listings on the MLS with a real by the way use the realterm broker they’re going to help you find deals but I always tell every realterm broker I work with your job is to send me deals and then that’s it after that I take over also make sure everybody around you knows what you’re doing because you never know who might know somebody goes hey you know my aunt has this for family that she’s had in her family for a long time she might be willing to sell it the sooner you can get those deals before hit the hit Market the better a deal you can get now no matter what deal you’re looking at the best way to find undervalued properties is find properties that are charging low rents or are in bad condition that you can turn that around guys we live in the world of the internet now you’ve got Zillow you’ve got apartments.com you’ve got apartment guide.com you have Craigslist you have all these ways of seeing what people in your area are charging go use it to your advantage and here’s another spoiler alert no one’s charging the rent they can you can always charge a higher rent people will always pay for better if you were out looking for a property today would you sort and look for the cheapest property you can find a $400 one-bedroom of course not why it’s probably not the area you want to be in you want to find properties with granite countertops with marble backsplash with nice light fixtures with nice flooring with nice common areas so find the ones that don’t have that and change them into that and we’re going to get into that later it’s called the Burr method and I will break that down for you but it’s a great great way to buy renovate rent refinance and repeat your buying process but I repeat your goal should be to have the nicest and most expensive properties on your street but on your street what matters is what’s going on around you what can your Market support if you’re in an area where the average rent is 4,000 a month it’s a lot different where the average rent is $1,000 a month and there’s a lot of really inexpensive things you can do and upgrade that will make you stand out to the competition that are very very cost negligent 50 $60 here or there but don’t be afraid to look at any deal whether off Market on Market but just remember when someone’s selling you something they have a vested interest in you buying the property they will tell you whatever you need to hear to feel good about it you need to be an independent thinker that is what I’m trying to teach you in this video and in our Mastermind groups you’ve got to be an independent thinker get advice from people who have no vested interest in you buying that property the second they get a commission they will be gone right after oh but Paul they want to do a lot of deals with me okay I thought the same thing when I was younger Guess what at the end of the day they’re going to bring you a deal they know you can close all Brokers care about is can this person close wholesalers are even worse all they’re doing is taking a bunch of lists marking it up a little bit and spreading out to everybody else doesn’t mean you can’t find a good deal but just remember what their goal is their goal is to mass spread to everybody and say buy this deal you’re going to be focused on the numbers in our real estate calculator that’s going to determine the best deal for you and there will be shortcuts that I teach you along the way so you can very quickly say hey what’s the rent what’s the ass price sounds too high I’m out I’m going to get you so good at that that you’ll be able to hear the rent and the ass price and know very quickly if it’s even something you’re going to waste your time with I don’t want you spending your time analyzing every single deal at nauseum I want you to hear rent and ask price and go oh sounds interesting that’s how we do it and we love doing it that way it saves a lot of time and gets us in front of a lot of deals and let me ask you a question if I get into in front of a thousand deals and you get in front of 10 deals who’s more likely to close on one of course I am and that’s the key and also I’m more likely to get a better deal because I’ve looked at a thousand deals I can pick the best of a thousand you’re going to spend your time looking at 10 deals and you have to pick the best of 10 it’s just a numbers game now once youve found your deal it’s time to finance your deal now financing your deal is done one of two ways or both a bank investors when it comes to investors it’s a great way to scale guys we all can sit there and raise 5 or $10,000 on on our own the question is how do you raise 50 or $100,000 to go buy a nice property well best way to do it is find friends and family every great real estate investor I’ve ever heard of started with friends and family that’s how we started and now we’re raising money because we have a track record you and five friends six total people can raise 10 or $15,000 each and go have $100,000 to be able to buy a400 $100,000 property that is a great start first start on your own maybe you take 25 Grand of your own money buy a house learn the ins and out of managing and once you have that track record it’ll be easy to go to a bank and say hey I have this track record guys the first property I actually tried to buy was 117 units the bank rejected me saying Paul you can’t buy this property because you have no experience I was like but I have the money to buy the property I said we don’t care we don’t have the experience I lost that property I was fine with that but it was frustrating at the time going okay I need to figure this out I had to start smaller but when you go to a bank they’re going to give you a conventional loan which is awesome they’re going to require you to put 20 to 30% down they’re going to evaluate the deal evaluate your credit and give you a loan it’s probably going to be fixed for a long period of time now a lot of people like 30-year fixed loans me personally I do not why because as you saw in my example above I like to refinance every so often and suck a lot of equity out so I can do it more and more but your goals may be different you might sit there and say Paul I want to buy one good property year and when I wake up 30 years from now I have X number paid off X number with very low debt worth a lot of money I’m fine with that more power to you if that’s your methodology get a 30-year fixed loan if you want to refinance and do other things you can do what’s called a 10-1 arm where you’re fixed for 10 years you can spend the next 10 years raising rents renovating the property making it better so the value skyrockets and you can refinance easily with much more cash flow now there are also private lenders and hard money lenders guys there’s a going to be really expensive but the good news is they’re fast and they’ll give you a lot of money to go do deals but these rates going to be very high 12 to 18% with points UPF front guys I do not recommend this unless you’re doing a quick sort of flip with some sort of property other than that don’t bury yourself in debt make sure that your property can support reasonable debt levels if you can’t afford that do me a favor save more money to put more money down don’t go to hard money lenders unless it’s the path of Last Resort please don’t do it I’ve seen too many people get buried in it and they sit there and they just try to CH it out it’s too much stress to add to these projects now me personally I don’t need to do private money hard lending because I have cash sitting around but it is a good way to get started if you have a lot of return especially in a flip versus a long-term rental or if you see a lot of value to renovate and increase the value of the property and go a year later to go to a conv loan and pay off the private lender great but you’re going to pay 12 15 18% interest that’s a lot but one of the best ways to finance a property seller financing when a seller wants to sell they’re eager to sell that property you can ask them hey take back a note for a little bit let’s say you buy a property for $200,000 the bank says we’re going to give you 65% we’re going to give you $130,000 loan well maybe you go to the seller and say listen I need you to hold back $40,000 so now you’ve financed 170,000 of the 200 that’s 85% loan to value I recommend this if you have a way of increasing the value of this property very quickly through renovation and increase of rents if you can make this property worth 250 in one year because of increasing rents then all of a sudden you take an 80% mortgage on this 200,000 you pay off the bank at 130 you pay off the seller at 40 and you have 30 grand left over tax free you can go do it again with seller financing is wonderful because a seller is motivated to get the property sold and you’re going to pay them probably a pretty good interest rate not private hard money lending rate but also not the bank rate if the bank’s charging you 6% private hard money is 15 maybe you pay the seller 9 10% 11% it allows you to save a few bucks but allows you to go do the job you need to do and it’s off your credit which is kind of nice so here are some terms when you’re going to take a loan LTV loan to value in that example before you bought you bought a property for 200,000 you finance 130 that 130,000 divided by 200,000 is 65% LTV loan to value very simple now another important aspect of your loan amortization amortization what this is is how long to pay off the loan if it’s a 30-y year amortization you’re going to pay it’s going to be paid off to zero in 30 years if it’s a 15-year it’s going to be paid off in 15 years 20 years you get the idea now one thing guys I like taking the longest amortization I can because I want more cash flow to give me the flexibility to do other things but the longer the amortization the higher the interest rate because it’s more risk for the bank they’re locking up their money for a longer period of time this is all why the real estate calculator is so beneficial because then you can sit there and put the different interest rates based on the amortization and figure out what the best return and best options for you are I like the flexibility of having a lower payment now guys I talked about a little bit earlier but I really want to focus on this now the benefits of debt to real estate real estate values don’t fly up and down like the stock market and as long as you have a locked in rate and you’re covering your debt with the appropriate bank requirements they can’t really foreclose on you so you have a lot of flexibility of thinking about how you raise a value the property but having debt does affect your returns let me show you this example here before the 1. 1925 at 80% loan to value we were at 14.59% return over a 20-year period now you might sit there and say well Paul I want to put more down great let’s put in let’s say you put 50% down payment your return drops at 12.3% not bad but it’s significant now the great news is your cash flow will be higher and a lot of people say well why wouldn’t I want to do this my cash flow is 97,500 here versus 67,000 30 $30,000 difference well you also have to put $876,000 down day one versus 400,000 so if you put 80% down you could have bought two properties instead of the one property and two properties generating 67,000 is 134,000 a year in cash flow versus the one property at 97,000 in cash flow it all depends on your risk tolerance but more debt higher return less debt lower return but it’s not just about getting the most debt for example let’s go to 95% LTV look at your return here 16.77% LTV it’s wonderful to have money to deals in fact I’m not a believer in no money down or low down payments I believe in having 25 30% down payments on as many properties as you can because that can help manage the ups and downs of the real estate market and as you increase your cash flow your loan of value is going lower and lower why because look right here as we showed the example here 2.25 million I increased my cash flow it went up a ton went up $100,000 in one year that’s what’s most important is driving up the value while your while your loans going down but you might have Noti something my loan’s not going down here why I had interest only on this house you might sit there and say Paul interest only you’re not paying down any debt that is true and that is an option for some of these loans and I take them in situations where I’m going to put a lot of money into the property and greatly increase the value remember I bought this property for 1.9.25 in year two after my Renovations it’s worth 2.25 conserv I actually think it’s worth more than this but I’m being conservative here if I actually go to where I think it’s worth I actually think it’s worth this my return goes to 15 a half% but again I’m looking at this from the standpoint of what feels comfortable for me I like to be more conservative I’ll make lower assumptions on my value and my cash flow but I’ll be more aggressive on the interest rate saying listen I have no problem not paying down any mortgage for me that works but for a lot of people who want to buy one property a year for retirement pay down your mortgage especially as rates have been higher lately when rates were 3% why would I ever pay that down but now rates are six to 7% you’re getting a guaranteed return on your money of six or 7% when you pay down that debt that’s a phenomenal return that’s a guarantee into something that you own so guys when it comes to funding a real estate deal you have debt from a bank and you have Equity you can get debt from a seller private money lenders you can raise money from friends and family there are so many amazing amazing ways to do it because I’m sure you’re not the only person who wants to make more money and you’re not the only person you know who wants to invest in real estate get your friends together just make sure that if you do that there are very clear defined lines on what everybody’s role is so when I say clear defined lines it’s really really important that you sit down and tell everybody here’s my plan here’s how I’m going to manage here’s how I’m going to do this and somebody might sit there and say you know what I want to get involved too one person should be in charge of leasing one person in charge of the maintenance group things like that whenever people start to overlap their roles it becomes a mess in my experience clear defined lines do less but obsessed with your task that’s really really important to being successful in anything you do in life but especially when you’re doing a deal with friends now if you’re managing for your for this group also make sure you get paid for that management not an exorbitant amount make it fair make it a reasonable management fee and make sure it’s structured so that as the property does better your investors get paid very very well if the property doesn’t do well don’t make it just about you making a lot of money you’re here taking other people’s money you’re responsible for that make sure they do well before you do well you don’t have the track record yet to be the person who says listen I’m going to do this and here are the fees I’m to charge to make yourself wealthy when you get that track record you can then start charging higher fees but in the meantime as you build that track record and people putting money behind you make sure they get paid first nothing drives me more nuts than when somebody pitches me a real estate deal and I look at it saying if this thing does poorly they’re going to make a lot of money still that is not the right incentives make sure your incentives are aligned with your investors now something I’ve become very well known for in talking about is never ever ever hire third party managers now I know some people are watching this thinking themselves oh come on Paul they’re not all bad they are all bad I absolutely guarantee that if you learn the right way just from this channel you will vastly outperform a third-party manager I have hired and fired 10 or 12 thirdparty managers in my life and 100% of the time when I fire them Revenue goes up expenses go down profit goes up 100% of the time without fail now you might be sitting there saying well you hired the wrong property managers no these are ones that came highly recommended from a lot of experts in the industry they’re all terrible and here’s why their incentives are not aligned with yours they have no equity in your deal all they’re trying to do is collect their management fees and on top of that they’re going to charge you management fees and they’re going to mark up labor costs and they’re going to mark up maintenance supplies they’re going to Mark everything up it’s a fee generation business more power to them but it’s not going to be right for you keep learning on this channel you will far far outperform third party managers now you might sit there and say well Paul I have a job I have all these things I can’t manage property then do me a favor don’t buy real estate I want you to be very successful I don’t want you to just rely on somebody else to just keep things trudging along let me explain why their and thums aren’t aligned they want to be able to tell you look our occupancy level is higher let me tell you one story out of dozens I had a property and I bought it for $3 million in 2009 I put 750,000 into it and it just struggled to do very well it made money and it was fine so one day my partner Andrew and I said let’s just sell the property let’s move on we asked 5 a half million and we got one offer of 5 a half million the problem was the the people buying it weren’t experienced enough so they wouldn’t get approved and I remember meeting with them and they said we said to them well what’s your experience here we don’t have much experience so what’s your point here well you think your rents are too low I’m like we have a third party manager these guys are the experts in the area there’s no way you’re right on this one well guys fast forward to about a year and a half later and we finally realized they were right at the time that these people had seen the property our average rent was 478 per month 478 per month now granted this is 2010 11 12 whatever it was and our third party manager was giving two months for free to get people in we fired them that very same day we got $600 per month in rent and no two months free imagine that is more than a 20% increase in rent because we were giving away two months at first that was just the start of it I remember writing an email and I was such a dick I wrote an email two years later and I showed the numbers versus what they did and I wrote them an email I said guys you need to get out of the property management business they never responded to the email of course that is just one of many many many stories I have about third party managers and if you happen to own a property that has a third party manager you definitely need to get in touch with me because I will show you how they are sucking I will absolutely prove how they suck at management but guess what when occupy levels are higher what about their physical occupancy versus Financial occupancy now you might sit there and say What’s the difference well let me ask you a question if the average rent here is 750 and the average rent here is 900 if you’re 100% full here you’re collecting 750 if you’re 90% full here you’re collecting 810 would you be 90 would you rather be 90% full and collecting 810 or 100% full in 750 property managers want this they want less work they want to just make sure the rents are coming in they’re collecting their management fee they want to make sure that rents are so low that they can rent very quickly when when a vacancy goes in what you want is this because guess what guys higher rents mean better tenants lower maintenance costs and more profit the incentives are not aligned properly might sit there and say well Paul if they’re charging a management fee they’re going to get more from here yes you would think so but they also want to do less work they’re okay making a few less bucks on the management fee because remember they’re marking up supplies they’re marking up labor they’re doing all these things the last thing they care about is this difference if you said to them let’s get 900 they’re going to look at it and go that’s just more work why should I do that I’m going to get paid the same amount of money either way basically cuz guess what if their management mancy is 4% to 6% on a large property how much more are they making here what’s 5% of 150 bucks $7.50 are they really going to try that much harder for $7.50 per unit extra every month no they’re not going to and guess what I don’t blame them I wouldn’t want to either that’s why you need to have your incentives Al aligned together and you’re only going to get that by managing yourself I once had a property management company where they agreed to 3% management fees with proper upside and then I realized a year and a half later when our upside wasn’t increasing when we never paying them bonuses that they were marking up my labor cost so much we had a pipe burst in one of our buildings and I remember the owner of the management company was there at midnight with his crew and he took a picture of it what he didn’t realize was that the picture had all the staff just standing around looking at it and I looked at it going I’m being charged for seven or eight guys to stand there and steer it I was like why are there so many people there well we want to make sure we have it handled but the pipe burst yeah who’ you call the plumbing company they’ll handle it then but at the end of the day I got charged for seven or eight guys on overtime at $20 per hour you do the math if you learn on this channel I can assure you you will be a much better manager than most property management companies I would go so far as to say I would take a property man any property management company in the country head-to-head and guess what another proof is if you ever go to a property management company with a harder property they’ll probably say we’re not going to take it even if you give them the proper incentives why because they just want the easier job more power to them but that doesn’t make you have to be the sucker so the next question should be well Paul how do I find the best rent for my property well guys there are plenty of websites apartments.com is a great one I love going there and Craigslist for smaller properties go find the properties within that area when I say within that area I mean literally within a street or two at most because properties and areas can change very big between streets and then you know I want you to do I want you to add 10 to 20% guys nobody charges what they can actually get everybody is under rented we find this all I always tell my staff right now how are we under rented well we’re really pushing I don’t care about that we’re there’s no way we’re charging enough go do your research go drive by apartment buildings and and do me a favor houses go ask to see the unit hey I’m perspective tenant go sit there and see what that unit has also you want to find properties where your competition is terrible at management you absolutely want to find that because you will absolutely crush it in fact if you’re trying to buy bigger properties you should try to buy the properties where the Management’s terrible because then you can go in and change things up through your ability to learn from us and how to manage no no area no property ever charges enough so go in there find the competition see what finishes they have and then figure out how you can up those finishes and up the price drastically another thing if your property is 100% full it means one thing the damn rent ain’t high enough you need to charge higher rent you want to be in the 90 to 95% range at most the second you start to get above that consistently raise your rent you have to raise the rent this is basically telling you your rent isn’t high enough if everybody’s occupied now guys getting tenants is a fun process I remember the first time I bought a property I Le my first unit I was so excited guys it’s not rocket science but every single month I want you to sit there and say how do I get the phone to ring more Craigslist apartments.com apartment guide all these free Zillow is a a phenomenal Source Zillow is a phenomenal source for renting now with the internet there’s so many ways in which to get renters guys a signup front works very very well back when I started the business the newspaper was still big now Nobody Does It apartment guy was all those booklets now there’s no apartment guide booklets and that’s great everybody’s looking online but it shows that you have to wow them with your pictures online and another thing guys if you have apartments that range from 985 to 1250 I want you to do me a favor never advertise this price always advertise 1250 now you might sit there and go Paul but if I advertise the highest price I’m going to get less people you’re going to get more qualified people and as you get more qualified people when they come in you say by the way our prices are 95 to 1250 let me show you them they came in looking for 1250 now you’re going to show them a wide range and they’re going to be like that’s awesome so you’re going to get the better quality tenant who’s now going to have a Le access to a cheaper property they’re going to be you’re going to be happy and they’re going to be happy never ever advertise you’re starting at 985 always advertise the most guys so far in this video I’ve said many things that are counterintuitive advertise your most expensive price don’t hire third party managers location doesn’t matter I want you to remember this because these are the things that make things different I remember when we had when I first started buying property at average as my lowest price the number of calls I got that were just a waste of freaking time even if it was a qualified person if they were always calling on the lowest price they always wanted to deal I’m not telling you not to give deals 1250 a month advertise that one another thing if you’re in lease up mode only then give one month free and do me a favor never ever ever spread it across the entire lease so the average rent is 12200 don’t decrease your rent by $100 a month because it’s 1,200 divided by 12 and here’s why if they get used to paying $1,100 a month they’re going to forget their rent was 1,200 so when you want to bump them from 1,200 to 12 to 1225 they’re going to say wait my rent went from 1100 to 1225 and you’re going to say no it went from 1,200 to 1225 but they’re only going to remember the check they write every single month take the hit up front take it free month get in get them used to spending the $1200 a month that way when you bump into 1225 or 1250 it’s not going to feel like a big jump from 1100 another counterintuitive thing and the funny part was I learned this because I watched some guy who had 30 years of real estate experience keep splitting up the rent and I bought a property from him and so when I went to go increase the rent so like wait a second my rent’s jumping $100 a month I’m like no it’s not it’s going up $20 a month no I’m paying this low price like whoa whoa whoa you got a deal on that one by signing up for one month free and at that point I said never ever am I ever allowing any property to do that and again we only do this really on leas up because the real thing is never offer one month free make your properties better make it that people want to live there don’t give one month free unless you’re really trying to get rid of some sort of vacancy issue that you have and be very very picky about who you give one month free to in fact we’ve sometimes offered give the one month free at the very end and say if you make your payments on time for 12 months you get the 13-month free we love doing that why it gives Zen incentive to be a good tenant now guys screening tenants is wonderful awesome way to do it is get one of those online services that gives you a rental score but the other thing is if you own a small property like a home offer to bring the application to the tenant’s current home that way you see how they live are they clean are they organized take a peek in there you want to make sure you have a tenant who’s going to take care of your property now of course people say well ask for a b asked for a previous landlord reference I get that but at the end of the day what are they going to give you they’re not going to they’re going to give you their Buddy’s name if they have to I’m not telling you everybody is Shady but if you’re really that worried about it don’t rent to them look at their credit score look how long they live into the property how long they’ve had their job all these things that you want to make sure you understand and go see how they live go offer to bring them the application to their home so you see if they’re organized and clean renters don’t be afraid to charge a good security deposit make sure they know and tell them listen the security deposit is high cuz I want to make sure I get great tenants like you in here I want to make sure that people have the money to live here the cheaper it costs them to move in the more likely they are to bail on you now another big thing maintenance and repair M&R guys if you’re buying one or two properties here and you’re a handy person do it yourself you’re going to save a lot of money and it’s great if you have a big property hire knowledgeable maintenance people and incentivize them on getting more maintenance orders done we were always is very big on that cuz the longer maintenance orderers stay out the more upset your tenants are going to be jump on it make sure they have access to a 24-hour number they can call but don’t be afraid to tell them it’s not an emergency they’re calling after hours after hours is only for unlivable situations and emergencies that’s it if not kindly thank them for their maintenance orders and tell them you’ll get to it the next day you still have a life too and yes it’s their place but if they have a light bulb out which I would just tell them to do it anyhow but if they have something simple like a blindf they can still live in their unit with a blind that fell from the window it’s not an unlivable situation that night tell them on the next business day you will handle it the more boundaries you set up the more they’re going to respect those boundaries second you let them do it cross over that line guess what they’re going to do they’re going to cross over that line over and over and over again now the dreaded eviction process guys I always hear people say oh evicting a tenant such a pain in the butt they can live there for months and months and months no they can’t if a tenant is there long periods of time six seven eight months you either live in a really really crappy state or you were just lazy every time I go to I used to go to Cleveland eviction Court I’d see landlords and’ be like oh yeah my tenant hasn’t paid in 8 months I’m like where were you in week one saying your your rent’s due we filed on people immediately because the government already gave them four six weeks to get out so the longer and longer you’ve waited the more money you’re losing get on it give them the 3-day notice they get 5 days in our lease to pay on the fifth day they get a they get 3-day notice after 3 days they get filed on and they got to pay us those filing costs if they know you’re serious they’re going to make sure they pay there was a property I bought my second property I ever bought big property and I had managed there been there for 20 years I told him before I bought the property make sure everybody knows I don’t mess around he said that first month that I owned was the highest collection rate they ever had and then guess what happened I started be a little LAX and sure enough within 3 or 4 months everybody was paying a little late now late fees are a great source of Revenue but I also have a mortgage that’s do in the first of every month I need to make sure that revenue is in there so make sure you’re strict about it although there’s nothing better than a tenant who consistently pays on the seventh or eighth of the month because they never get evicted and they always pay you a late fee but still I’d rather have tenants who pay on time but don’t be afraid to file eviction you have a business to run you’re not UNICEF you’re not a char you have a business to run the courts will definitely take care of them if they have kids but make sure you file immediately you have to set the tone early and aggressively this is what we’re doing everybody has I remember the first time I got in a real estate a guy told me Paul people are going to take your kindness for weakness now you might be watching my other video saying how is this guy kind you know what that’s what happened I’d believe every story that came in and before you knew it you heard every story Under the Sun and you started to realize people are just lying that’s fine let them lie let them lie to somebody else not to you and guess what there are law firms that will go after their money and and go take money from every paycheck not many but you’ll get something sometimes it’s better than getting zero now one of the most effective ways to really build a lot of wealth is not just to buy a property a turnkey property what that means is a property that’s ready to go you buy it you’re renting it already maybe it’s already rented one of the best ways to make a lot of wealth is to renovate properties it’s called the bur method buy renovate rent refinance repeat okay so what you’re doing here is you’re buying the property then you’re going to put money in it by renovating it what are you renovating kitchens and bathrooms mostly obviously some other things but we want to really drive the rents up then you rent it out for a higher rent that’s really really important when you increase that rent yes you’re increasing your cash flow but you’re also increasing the value of the property that’s the amazing part then you’re going to refinance why you have a new value you’ve increased the rents of the property you’ve increased the value of the property now you refinance it get another mortgage sucking Equity out of it and then you repeat you go back and you buy another one and you keep doing it over and over I have done this since 20072 2008 since the financial crisis hit because I realized back then that in order to really build a lot of value and not wait for the market I want to drive my own property value the idea was simple if I bought a property that was making $100,000 a year and I was able to increase that profit to 200,000 a year what has likely happened to my property value it’s likely doubled because when you buy real estate you’re buying cash flow if the cash flow is doubled the real estate value is likely doubled now besides just believing this let’s bring up two examples in our real estate calculator to show exactly these numbers so I’m pulling up our real estate calculator now I’ve cre this property here it’s literally no Renault 123 Main Street I put in two units 4% appreciation 10% vacancy I’m paying 276,000 when I sell it someday I’m probably going to pay a 7% commission I’m doing a 10-year analysis Etc now I’m do a refinance through year five so my income two units 1,200 sare F feet $1,500 rent per unit very simple expenses I put some expenses in here about $7,100 per unit I’m not going to get really in the breakdown cuz I wanted to sort of achieve a property that I could buy and it was worth what I paid for it and it and it continually went along with 3 and a half 4% increase in value and revenue every year I put my mortgage on here 75% loan to value 6 and half% interest 30-year amortization and I put a refinance after year five with 1% in fees and the same terms there now I go to my recap report very simple here my Revenue by year my Revenue increase my expenses noi mortgage man blah blah blah blah blah okay the value of the property I paid 276 after year one it’s worth 280 makes sense here’s the irr 16.93% okay not bad great deal if somebody came to me right now and they really believe these numbers and I believe these numbers I’d say if you could do this over and over again you’re going to make a lot of money let’s do something a little bit different let’s see what happens if we renovate the property and increase the rents by mere $300 per unit here is my renovated deal everything is the same everything is the same you’ll see right here generals everything’s the same income everything is the same except I put in a market rent of $1,800 per month versus ,500 when renovating expenses all the same here’s my rehab I put in $155,000 per unit that’s quite a bit to put in the unit kitchens bathroom some upgrades Etc that’s a good amount of money and now I’m refinancing again in year five now let’s see the recap report everything’s here but look in year one my rent increas is 24% because I went and renovated it and look at my property value jumped from 280 to 390 after one year 390 and look at my irr from 16.5% to 24.2 7% That’s The Power of renovation That’s The Power of refinancing now let’s say I never refinanced it I just put the money paid cash now I’m going to sit in here and I’m going to get rid of will refinance and I go to the recap report everything’s the same the value the same but now I’m not refinancing it I’m still getting a 20% irr versus 16.4 with never refinancing it just my cash flow goes up and up and up and keeps increasing every single year until I sell the property the property value at that point is 533,000 I owe 175 with cash flow I get back $340,000 that is the power of the bur method buy renovate rent refinance re repeat it can work on any size property just this year alone we bought a t unit property in Louisville Kentucky and we bought a 40 unit property in Northeast Ohio and we do exactly that for both now another option you have is when this property value skyrocketed sell it take your gain go do it again now the benefits to real real estate is holding real estate you have what’s called depreciation it’s a non-cash expense what it says is the government allows you to expense a percentage of the value of the property every single year without laying out any cash this will decrease your taxable income and if you have losses still on your property after that it’ll go against your other income that you make elsewhere from your job from other businesses Etc and the other thing is instead of worrying about paying taxes every single time you do this it allows you just to hold the property and compound for long periods of time now if you choose to do this the government has what’s called a 1031 exchange which allows you to take the taxable gain on your property and roll it into a new like property similar property and not pay taxes on the gain guys not paying taxes on your gains is a great way to compound your wealth if you’re able to do that for a long period of time you can add several percentage points per year to your after tax returns it’s very beneficial but don’t be afraid to pay the taxes instead of overpaying for another property that’s why this real estate calculator is so important it’ll actually show you returns based on these factors you need to consider taxes in your Investments but don’t make an investment purely because of the tax benefits everybody gets depreciation when I hear real estate people talking about they love their depreciation because it gives them a right off their other income my goal for you is that you make so much money on your real estate that you still have taxable gains on your real estate that should be the case we have that almost every year why because our real estate does well you shouldn’t brag about having losses you should brag about having gains even after depreciation that’s the kind of investor I want you to be the one who brags about your properties is doing so well that depreciation doesn’t even cover all the gains now real estate Development I’ve talked about earlier is another popular idea for a lot of investors but the thing is there’s so so many regulations and so many things to consider and the other thing is the people I see do the worst during Financial bad financial times are the developers I think the margins are not as big as they want we have built one property with a partner 120 units and it was a slam dunk home run we did great but we had the right partner who had a great piece of land at a reasonable price it was also in an underserved Market where there was a lot of potential for new properties to come in it wasn’t in a sexy Dallas Atlanta it was in a suburb of Cleveland that most people around the country would say oh that’s not even worth it it is now a year and a half later 100% full at rents 20% higher than we originally thought so for those of you who are looking to get into development just crawl before you walk before you run first start by buying a single family home that you can renovate put money into then maybe build something small 10 15 units I will guide you along the way in that path now another thing I want to discuss about real estate is everyone is so obsessed with doing a market analysis guys don’t bend over backwards doing this make sure you just look at the submarket you’re in and focus on the properties around your area and I want you to specifically focus on how can I be better if your goal is to be the most expensive and best property on your street you will do very well because everyone is willing to pay more for better and someone who’s not is not the kind of tenant you want

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