@@JasonWalter1 I want to build a family real estate business that covers all aspects of real estate. I want to build an entity that will not only retire me and my wife but my children and grandchildren as well.
Be sure to let us know when you go belly up due to being over leveraged. You're still buying at prices WAY TOO HIGH to justify the investment. That said, your exuberance is contagious, and that is greatly appreciated because I'm the one waiting with Cash for your foreclosures. Soon my friend, very soon.
I enjoyed the creative financing part to this video but let’s just call it what it is. You had enough credit lines enough to quicklysnap up a good deal. It seems like a good buy on a wedge property. A few questions I have tho: 1) do you buy the property under your personal name or a business name? If you buy under a business then you’re definitely not getting a 30 year mortgage if you refinance. 2) if you’re getting a BLOC and then loaning yourself money, then you have to pay back your business with interest. Do you factor the interest you personally pay back to your business into your cash flow calculations? 3) are the rates on your BLOC fixed or variable?
great questions you posed. He's definitely over-leveraged but he probably had some back up financing or is that confident enough to risk it all. the average person should not do this because they will crash and burn. Scared money makes no money is wrong scared money can make you money just takes longer. He's probably loaning himself the money from his LLC. Outside of America, these loan rules are way stricter and harder to do. would not recommend.
You'd also already have to have a significant amount of wealth to gain access to a bunch of these lines. This video is useless if you're starting out. Just opening a new line of business credit and getting 100k indicates you already have a significant amount of wealth. Average people aren't getting that.
Kevin, if this video bombs, don't sweat it. You very quickly went through a stack of advanced lending and strategy ideas that will be inherently less "entertaining" than a noob vs pro video that's super easy to follow. But a lot of us still appreciate it; I live in a pop increasing area where so many investors here just lament the lack of cash flow and miss out on the real wealth because they'd rather get 17 units that each cash flow $100-200/month but will never be worth much in their lifetimes.
Plot twist: He has a fuckload of debt. No but for real he probably has a fuckload of debt. Is that good or bad I don't know? Some say that is a tool something that is a curse. Either way it's probably true
Very informative video but I would never do that for an investment property. You are over leveraging yourself hard from multiple directions with returns that are not jaw dropping. My advice is to always have the 25% down. Having nothing down is just a NO in my opinion. I hope this works out the way you planned - Best of luck brother.
I would agree with you but Kevin has already consolidated 85 to 90% of the loan in a 30-year fixed mortgage. This deal is very advance for an average person but he's pulling it off fairly easily.
@@Danny... That is what most people do not understand. The level of risk, effort, headache, and overall task is far too much for a $100k wedge. In theory it sounds very good but in reality it is not what most people think. I have done many of these deals for personal and for investment groups. This is not a route i'd advise anyone to take unless you are highly seasoned and have a good reserve to back you up. Even then, you should still double think yourself.
$505k (fully leveraged) on $610k value is roughly 17% down. I'm not going to pass on $100,000 because someone said "always have 25%" :P See, while what you said makes great textbook advice, I helped ordinary people as an agent (not talking about UA-cam or courses here) make this exact thing a very simple reality. It's not that hard -- but hey, more people thinking this way == more deals for me.
Kevin, all of the lenders I use allow 20% down on single family rentals. I am currently under contract on my 6th property and the lender I am using is allowing 15% down with PMI. It may be specific to my market but I thought I would mention it. They do require 25% down for 2-4 unit properties.
I would love if you made a video explaining why flips don’t sell as well or why they sell below market value, pretty much a video on the cons of flipping
Kevin: Right off the bat this is misleading. You said you got in for "zero". If you paid two points on a 275k loan, then how is that ZERO? I am 11:40 minutes in.
T Hyslop depends, some hard money loans allow you to wrap in fees/points into the loan or pay at the end. Not sure if some allow you to use a line of credit to also pay those fees.
@@101realtor Yeah, well aware of that. Use to be pretty heavily involved in Real Estate. In a different business now. He does not mention this here about the points and how they were paid. Suprised he did not mention depreciation.
I just went in to talk to a bank about a business line of credit. During the conversation they pointed out the interest rate that I would pay was based on my credit score and credit history. It fluctuated several points up and Down based on that. Kevin obviously has an exceptional credit score and history
Takla, yes you are correct but you can find owner-occupied rates these days at about 3.4% and the difference between those and non-owner-occupied is minor especially if you have excellent credit so Kevin's 3.75% is fairly common.
@@martylts He has a video on which credit cards to get from bad credit to 700+ in order to build your credit score. I got off a bankruptcy two years ago and have been using his strategies (and others) and I'm at 700 now. I'm not young, but he totally changed my perspective on how to use credit.
Can you make a video on debt to income ratio? If you don't have high enough cash flow to add to your income doesn't your dti get too high and you can't qualify for any more properties? Hmm I think I understand it as long as 75% of the total rent covers the entire payment of principle, interest, taxes, and insurance then the dti should not change.
all good until market crushes and houses price drop 40%, so do renting and now you can't pay the morgage... the current us policy of overdebt is a ticking bomb, see you in two years
Michael Ball how? Kevin buys a home with an ARV of 600k. He only paid $450k. If the value drops 25% (which by the way is extremely unlikely) it will be worth $450k. He only invests $50k for updates/repairs. Why would he have trouble during a refinance? So what if he doesn’t get 100% of his investment back out.
@@OmahaTonyG He paid $450k, but after rehab, it's $500-510k that he has sunk into the project, and is on the hook for. If he can only sell at $500k (excluding selling costs), that's a 20% loss from the current $600 rehab comp value. However, if there's another 2008 (this time, in the corporate debt space, which will affect employment and therefore home purchasing opportunities), you may see larger than 25% losses in housing valuations, especially in Vegas, Phoenix, and Miami (not that such markets apply to Kevin, but it can apply to others). If there's a 30-40% drop in Kevin's hard money flip, uh-oh!
Kevin how is not a poor investment relative to a deal(s) with a 1%+ RV ratio? Every one of your bottom 3 items apply to any wedge deal, the only difference is you have more positive cash flow. You can still get wedge deals with 1%+ RV ratios in the midwest. I have several. Plus none of the CA risk (rent control, sky high price/income ratios, prop 13, pension crisis, FDI dries up etc). And I'm rarely in the US, so management isn't an issue. Lastly, let's remember "net worth" is something that looks great on paper but only matters if/when you sell or refinance, both of which would be extremely difficult in a recession with high unemployment, inflation and or a tightening of the credit mkt. Granted, you have alternate revenue streams to handle vacancies/loss of equity and ride out the storm, but is it wise to suggest others do break even cash flow deals? Personally, I have an investment rule...I will only buy something that pays me to own it, from the very first day I own it. Not necessarily for the ROI but more importantly to limit my downside.
I think he mentioned in his video that even if he does see markets struggling, he can always just essentially flip this before things get too bad. We all know he won't though. He likes to keep and hold. Personally I don't know why he wouldn't just flip it for 50-60K and use that for his next deal. I'm sure the answer is mostly to avoid taxes though. Also, he thinks in terms of net worth rather than cashflow. Renting out the property DOES pay him to own it. It pays down the mortgage with a couple hundred for repairs. If someone offered you a half a million dollars to manage a place for the next 30 years would you do it? By then it will be worth a lot more of course. That is how he thinks from what I have gathered. He's in it for the long game.
@@GeorgeGammon I'm not disagreeing with you. I was simply explaining his thought process. I would NEVER do what he is doing. He is investing in california because he lives there and "knows the market." I doubt there is any other reason.
"both of which would be extremely difficult in a recession with high unemployment, inflation and or a tightening of the credit mkt." this is the same as advising one shouldn't buy a car because the car would be useless when it's being fixed in the shop. this is California not the mid-west. i'd like to see you getting a cash flow deal here. no cash flow but high appreciation. it's not rocket science.
That's a great break down. I'm all for it. Can it be done with 1. 20k salary 2. Family of 3 3. No home equity so no HELOC 4. 750 credit but the yearly salary doesn't get me more than 20k on CC? How will I show documentation proof I can successfully pay the monthly mortgage? More so, wouldnt the banks raise a red flag when they see an immediate 40k investment from a third party?
the honest truth is you could, but you're not in a position to afford the risk. you can start by living in the first property you invest in, however you first need to increase the income.-its not a get rich quick plan, its the long game.
Realtor here... have you tried reaching out to a loan officer yet? If not, I would highly recommend it. It will cost you nothing and they will tell you how much you qualify for a loan.
Yo Kevin. I had renters move out recently, which after management fees etc put me slightly in the red each month when compared to my mortgage. Since they moved out, I asked the management company to do a market analysis regarding new rental prices, which resulted in a $200 rental increase a netted a break even mortgage payment. Per your rent increase video I also requested the management company increase rent based on the market.
That 20min+ mark. One of the big things I've learned from your videos are all the benefits of rental properties that people usually don't acknowledge beyond cashflow.
Great video Kevin! I use M1 Finance so here's a fun fact... M1 Finance has M1 Borrow where you can borrow 35% of your account balance with 3.75% interest.
Kevin, just wanna say that I object to you sharing all this GOLDEN information outside of the Real Estate Investing course! Hahaha! Excellent video man! You REALLY broke it down! I'm saving this one.
Kevin, depending on your location cash flow is king, other areas such as yours, appreciation is king.I live in Syracuse NY my Duplexes are purchased from 60-100k and rent from 1500 to 1900 a month per property - won't appreciate much but when your clearing 750-1000 profit per month that's pretty darn good :)
This is a deal that makes people look brilliant before prices crash...I had to edit this so people would see my reply to the highlighted reply that I'm sure no one would see.. I added this: what happened in 2009? Is everyone here too young to recall? MANY places got haircuts down 50-60% and MORE!!
@@Fj4LiFe23 Sure...what happened in 2009? Is everyone here too young to recall? MANY places got haircuts down 50-60% and MORE!! Sure, that reply gets Highlighted but this wont!
@@Fj4LiFe23 you can't hold the property if you finance it, especially with nothing down. The bank can call the note at any time, and if you have no money, guess what? You're fucked.
Not jaded, more interested in your response, Kevin; Have you ever calculated how much interest you are paying to the banks every year for these properties? I know using the money you will save on monthly payments can be used to gain a higher return being savvy investor like yourself (I have seen you on Ricky's live streams ;) ) It seems like paying off tan investment property as quickly as possible is the best way to do this though. In my perspective (I could be totally wrong here), I would want to convert my liability into actual net-worth ASAP. I know there are many pros like increasing net-worth (even though it's a liability now), the psychology behind saving every month for something that will pay off in the long run (delayed gratification), appreciation, cash flow and many more. I am not arguing any of these amazing pros that I partake in as well. I am just questioning the method of paying so much money to the bank when you could, in fact, be giving away much less of your money to the banks while still growing your net-worth, freeing up more cash in the future for other investments (businesses, stocks, etc). Big fan of yours Kevin! Love the investing course and your mindset :-) Cheers!
It really all depends on the risk. The way you should view it is you're not really paying the interest. Your tenants are paying it. It was money that you wouldn't have had anyway if you didn't buy this property. As long as your rental income can cover all the expenses then you're golden. The reason you would rather use the money to buy more property instead of paying back a loan you have is to scale. For instance, You own one 500k house the market increases 10% now you have a net worth of 550k. If you bought 5 houses with 100k down you would own 2.5m in real estate and have 2m in loans. Now if the market goes up 10% you will own 2.75m in real estate but still only owe 2m. Effectively you get 5x the gains. You're also paying down the principal of 5 houses instead of 1 so you gain equity there as well. This doesn't come without risks though since you can lose more money too.
Ivan Hidalgo All good points. If you look at the Truth In Lending document in your loan packet, it will show the total cost of you loan and on a 30 year note it’s around 2.5X the purchase price! Kevin will pay over $1,000,000.00 for this house.
@@jwb4bb I'm not sure how many points he paid for the loan but say it was 1 point. The closing costs might be around 25k so hes out of pocket 25k. Once he refinances, say his monthly payment is 3k, but his rent is 3k. Once the 30 years is up and the mortgage is paid, did he really pay anything other than the 25k?
Yes he knows this number, but he is seeking a bonafide and genuine leverage which is achieved using loans. When you factor in ROI including principal pay down the leveraged ROI jumps a full point or more. Include appreciation and you can add another point or two. He discussed cash flow a few weeks ago and fully understands the balance of the two concepts, cash flow vs wealth
Kevin, I have bad credit and not enough money in the bank to purchase a house, but I'm conflicted because while I know I need to save to get the funds to get into a position where I can start buying real estate, I don't feel I should wait 2-3 years until I have enough saved to then start following your course and then start buying. I'm sure I'm not the only person who feels that way who is watching your videos. Any suggestions on what can be done now to get into buying real estate now (with only less than a thousand dollars in the bank and a credit score below 500)?
If the market falls and you lose the 100k wedge is it not that bad because you could just hold the property since it cashflows until the market goes back up again?
That's just the recession case though. How about the depression/deflation case that's brewing in Europe, which can end up where Real Estate normally becomes super cheap, businesses can't sell stuff and lays off employees, and employees can't pay their rent?
@@magix2u I don't know what happens with real estate with a deflation. I guess you are just screwed. Ok I just read about it. You really are screwed in real estate with deflation. You just gotta sell and take your losses. I think you just gotta watch the economy and if you see the u.s. highly likely going into an deflationary state for whatever reason to start selling.
@ 5:52 " This is how to get out of poverty right here" classic. Very informative, but that's alot of leverage, pretty risky. Your definetly not risk averse. Keep up the good work though.
Kevin, I love being creative to invest. In fact I have borrowed from my 401k three times to invest, I used a HELOC to invest, and I have done two cash out refinances to invest. There is a reason why you are a multi millionaire, it’s because you do things others consider risky. You learned to use debt to your advantage. You learned the real estate game and you are doing GREAT!!! Kevin, I love these videos.
Tony Gayden , he said he didn’t have cash for the home or in savings so why do you think he’s a multi millionaire? You only get equity money if you sell, and he likes to rent them out long term.
Paradise do you know how wealth is calculated? If you don’t I strongly suggest you read about basic economics. Saying you only get equity money when you sell is 100% wrong.
With this strategy, the time between buying the property and safely securing the 30-year fixed can provide a major uh-oh moment in his finances, if the market valuations drop faster than he can react. See 2008, or the coming banking crisis related to corporate debt and/or Deutsche Bank derivatives. Borrowing from 401k's, lines of credit, and/or some random friend is a recipe for disaster when you go to the well one too many times, and hit the whammy.
Michael Ball There are a lot of people who have scared themselves into permanent inaction due to fear that 2008 will occur again. There are people so scared of debt that they think any form of credit is bad. These people are not billionaires and are rarely extremely wealthy.
@@OmahaTonyG Have you paid attention to the corporate debt market? It's very similar to the excesses of 2008, just in the corporate debt space. Companies took out loads of cheap debt to buy back shares, and may have trouble refinancing at maturity. What will businesses do to shore up their balance sheets? Lay people off. These people have higher consumer (non-mortgage) debt than before 2008, and won't be able to buy houses, resulting in a significant market correction in most places. Most self-made millionaires have a slow and steady approach to investing.
Interest payments alone on $275K at 8% for 3 years is $66K. And that's not counting the points. Wedge not looking so good. Also try getting a BLOC (or any loan) if you have no assets.
With M1 Finance you can borrow at a 3.75% interest rate, up to 35% of your investment balance. Cheaper than wealthfront, but not good options to borrow for longterm.
Vids are getting better man! Have to say, I like it better without the tie. Sometimes it makes me feel like you are selling something. Really enjoyed the video.
Great info Kevin. Just wondering how do you find out if an area is 'known for flipping' or 'known for cashflow' ? I hear rumors from other investors but Id like to be able to confirm that myself. Does the course also cover how to choose a location and the research to find out if its a 'Wedge-able' location?
Location: Pick a plance with good schools and low crime. Wedge-able: Know what the rehab costs are, and what local comps on reno'd houses are, before you buy. Your wedge is the difference between purchase price plus rental-grade rehab costs, and the cost of turnkey comps. The maximum amount of profit and returns is fixed at the buy, and can be minimized by poor and/or overimproved rehabbing.
I am trying to buy a second property and it’s been a nightmare. Banks don’t like to loan money to someone that already has a mortgage on an existing home.
Hey Kevin, love your channelJust wondering about how taxes affect you. I live in Ontario, Canada so I realize that our principal residence rules and capital gains taxes my differ but I was wondering if you could explain tax strategies around flipping a home that you plan to reside in for at least a year vs. renting it out for a few years. Here, you can avoid tax on 100% of capital gains after one year of residence, if you can prove your intention was to live there as your primary residence even if you sell shortly after one year, although they do monitor past patterns of real estate acquisition and sales in an attempt to tax flippers. Are you subject to similar scrutiny? Understanding this would help me in knowing the caveats I need to personally apply when watching your videos, since they assume an American audience. Thanks.
I notice you leave out the fifth leg of profit in rental property investing - Taxes and depreciation. You don’t mention that of your monthly payment a large chunk of that is taxes and insurance along with the annual depreciation. All of which are more or less cash flow, let’s call it “phantom cash flow”, and should make you do your happy dance every year on April 15th.
16:00 Kevin, you're really comfortable with the margin/wedge on the real estate, but not with the margin against your stocks. Why is that? Volatility, perhaps?
You need 25% down on an investment property? I thought you could get under 5% since you aren't doing commercial or am i missing something? time is at 3:00
Prasamsha IPAD great question... the lender would take into account your total debt/income. So long story short: you just need to speak to a lender and get pre-qualified based on your current financial status.
Nice. Thank you for the example. It is doable with some luck in the borrowing IMHO. One can easily underestimate the ARV and the sequence return risk is much higher than presented. Lots of moving parts, specially in the BLOC, HLOC, friend LOC. We always ask the question, Do we need to do it? and Why are we doing it? If you are in a wealth creation phase or making money, not the same, you might be more incline on the sequence risk and methodology. It could be a fun game but I rather spent our time in Tahiti in the over water bungalow drinking voka and Tahitian Fruit Punch. But this is just me and my situation. Someome else in the wealth creation phase of life would be more inclined. Again thank you for sharing. We seen these methods used successfully years back with the "No Money Down" wave back in the 80s. Good luck and thanks again, Alberto
I'm not a fan of borrowing against a 401k, mainly because you have to pay it back in one lump sum. Of course, there are the other downsides (huge penalties if the loan "defaults" due to job loss, stock market drop, etc.). Just leave the 401k alone.
I feel like this is the hardest way to get the deal done. It’s much simpler to get enough loans to put 25% down plus cost of repairs and take out a mortgage.
Kevin, you're able to get a 3.75% 30-year fixed rate mortgage on an investment property? I was looking into refinancing an investment property and was looking at 4.125%+
So glad I bought your investment course!
If anyone needs a hard cash loan to buy a property, let me know. I can lend you some of my money.
Kelly Patterson that’s great to hear! I’m a Realtor and I bet I would learn a ton from his course. What made you decide to buy it?
@@JasonWalter1 I want to build a family real estate business that covers all aspects of real estate. I want to build an entity that will not only retire me and my wife but my children and grandchildren as well.
Be sure to let us know when you go belly up due to being over leveraged.
You're still buying at prices WAY TOO HIGH to justify the investment.
That said, your exuberance is contagious, and that is greatly appreciated because I'm the one waiting with Cash for your foreclosures.
Soon my friend, very soon.
@@JasonWalter1 I want to have a real estate portfolio of my own in Texas.
Grant Cardone ad popped up during the vid, didn’t skip because I like knowing Kevin is indirectly getting paid by Grant 😈
Genius and naughty at the same time! I will watch Grant Cardone's BS vids now. ROFL!
I enjoyed the creative financing part to this video but let’s just call it what it is. You had enough credit lines enough to quicklysnap up a good deal.
It seems like a good buy on a wedge property.
A few questions I have tho:
1) do you buy the property under your personal name or a business name? If you buy under a business then you’re definitely not getting a 30 year mortgage if you refinance.
2) if you’re getting a BLOC and then loaning yourself money, then you have to pay back your business with interest. Do you factor the interest you personally pay back to your business into your cash flow calculations?
3) are the rates on your BLOC fixed or variable?
great questions you posed. He's definitely over-leveraged but he probably had some back up financing or is that confident enough to risk it all. the average person should not do this because they will crash and burn. Scared money makes no money is wrong scared money can make you money just takes longer.
He's probably loaning himself the money from his LLC. Outside of America, these loan rules are way stricter and harder to do. would not recommend.
You'd also already have to have a significant amount of wealth to gain access to a bunch of these lines. This video is useless if you're starting out. Just opening a new line of business credit and getting 100k indicates you already have a significant amount of wealth. Average people aren't getting that.
Kevin, if this video bombs, don't sweat it. You very quickly went through a stack of advanced lending and strategy ideas that will be inherently less "entertaining" than a noob vs pro video that's super easy to follow. But a lot of us still appreciate it; I live in a pop increasing area where so many investors here just lament the lack of cash flow and miss out on the real wealth because they'd rather get 17 units that each cash flow $100-200/month but will never be worth much in their lifetimes.
Plot twist: Bob is Grant Cardone.
Plot twist: He has a fuckload of debt. No but for real he probably has a fuckload of debt. Is that good or bad I don't know? Some say that is a tool something that is a curse. Either way it's probably true
I'm blown away by this video Kevin. Thank you!
Very informative video but I would never do that for an investment property. You are over leveraging yourself hard from multiple directions with returns that are not jaw dropping. My advice is to always have the 25% down. Having nothing down is just a NO in my opinion. I hope this works out the way you planned - Best of luck brother.
I agree with this a lot. I was thinking the same thing.
@@entrepreneurhustler797 Just not my thing running investments like this.
I would agree with you but Kevin has already consolidated 85 to 90% of the loan in a 30-year fixed mortgage. This deal is very advance for an average person but he's pulling it off fairly easily.
@@Danny... That is what most people do not understand. The level of risk, effort, headache, and overall task is far too much for a $100k wedge. In theory it sounds very good but in reality it is not what most people think. I have done many of these deals for personal and for investment groups. This is not a route i'd advise anyone to take unless you are highly seasoned and have a good reserve to back you up. Even then, you should still double think yourself.
$505k (fully leveraged) on $610k value is roughly 17% down. I'm not going to pass on $100,000 because someone said "always have 25%" :P See, while what you said makes great textbook advice, I helped ordinary people as an agent (not talking about UA-cam or courses here) make this exact thing a very simple reality. It's not that hard -- but hey, more people thinking this way == more deals for me.
I had zero interest in this video but Kevin said “I got video!” And i became instantly interested.
Kevin, all of the lenders I use allow 20% down on single family rentals. I am currently under contract on my 6th property and the lender I am using is allowing 15% down with PMI.
It may be specific to my market but I thought I would mention it. They do require 25% down for 2-4 unit properties.
I would love if you made a video explaining why flips don’t sell as well or why they sell below market value, pretty much a video on the cons of flipping
Basically you have to factor selling costs into the profit margin.
Kevin: Right off the bat this is misleading. You said you got in for "zero". If you paid two points on a 275k loan, then how is that ZERO? I am 11:40 minutes in.
T Hyslop depends, some hard money loans allow you to wrap in fees/points into the loan or pay at the end. Not sure if some allow you to use a line of credit to also pay those fees.
@@101realtor Yeah, well aware of that. Use to be pretty heavily involved in Real Estate. In a different business now. He does not mention this here about the points and how they were paid. Suprised he did not mention depreciation.
Thank you T. I was thinking the same thing but other things caught my attention I had to mention...
I said "zero out of pocket" -- the loan fees were borrowed too
@@MeetKevin What about the LTV of the 95% on refi and the underwriter not seeing you as an investor?
Kevin,
How can you finance the property at a low rate after you rent it ? i thought it is going to be a non owner occupied property rate !!!
I just went in to talk to a bank about a business line of credit. During the conversation they pointed out the interest rate that I would pay was based on my credit score and credit history. It fluctuated several points up and Down based on that. Kevin obviously has an exceptional credit score and history
Takla, yes you are correct but you can find owner-occupied rates these days at about 3.4% and the difference between those and non-owner-occupied is minor especially if you have excellent credit so Kevin's 3.75% is fairly common.
@@Danny... Not true. Non owner occupied rates on a 30 year mortgage are closer to 4.5% at best.
They fluctuate like gas prices but honestly .50% here or there doesn't matter
@@martylts He has a video on which credit cards to get from bad credit to 700+ in order to build your credit score. I got off a bankruptcy two years ago and have been using his strategies (and others) and I'm at 700 now. I'm not young, but he totally changed my perspective on how to use credit.
Can you make a video on debt to income ratio? If you don't have high enough cash flow to add to your income doesn't your dti get too high and you can't qualify for any more properties?
Hmm I think I understand it as long as 75% of the total rent covers the entire payment of principle, interest, taxes, and insurance then the dti should not change.
all good until market crushes and houses price drop 40%, so do renting and now you can't pay the morgage... the current us policy of overdebt is a ticking bomb, see you in two years
alfprieto Kevin has actually addressed this issue before in a different video that was quite good.
The main concern in this case is refi-ing when the rehab is done -- even a 20-25% drop could be a huge problem.
Michael Ball how?
Kevin buys a home with an ARV of 600k. He only paid $450k. If the value drops 25% (which by the way is extremely unlikely) it will be worth $450k. He only invests $50k for updates/repairs. Why would he have trouble during a refinance?
So what if he doesn’t get 100% of his investment back out.
@@OmahaTonyG He paid $450k, but after rehab, it's $500-510k that he has sunk into the project, and is on the hook for. If he can only sell at $500k (excluding selling costs), that's a 20% loss from the current $600 rehab comp value. However, if there's another 2008 (this time, in the corporate debt space, which will affect employment and therefore home purchasing opportunities), you may see larger than 25% losses in housing valuations, especially in Vegas, Phoenix, and Miami (not that such markets apply to Kevin, but it can apply to others). If there's a 30-40% drop in Kevin's hard money flip, uh-oh!
@@EMichaelBall that actually give him opportunity, he mentions so in the same video referenced above.
Excellent video! Great energy and information.
Kevin how is not a poor investment relative to a deal(s) with a 1%+ RV ratio? Every one of your bottom 3 items apply to any wedge deal, the only difference is you have more positive cash flow. You can still get wedge deals with 1%+ RV ratios in the midwest. I have several. Plus none of the CA risk (rent control, sky high price/income ratios, prop 13, pension crisis, FDI dries up etc). And I'm rarely in the US, so management isn't an issue.
Lastly, let's remember "net worth" is something that looks great on paper but only matters if/when you sell or refinance, both of which would be extremely difficult in a recession with high unemployment, inflation and or a tightening of the credit mkt. Granted, you have alternate revenue streams to handle vacancies/loss of equity and ride out the storm, but is it wise to suggest others do break even cash flow deals?
Personally, I have an investment rule...I will only buy something that pays me to own it, from the very first day I own it. Not necessarily for the ROI but more importantly to limit my downside.
I think he mentioned in his video that even if he does see markets struggling, he can always just essentially flip this before things get too bad. We all know he won't though. He likes to keep and hold. Personally I don't know why he wouldn't just flip it for 50-60K and use that for his next deal. I'm sure the answer is mostly to avoid taxes though. Also, he thinks in terms of net worth rather than cashflow. Renting out the property DOES pay him to own it. It pays down the mortgage with a couple hundred for repairs. If someone offered you a half a million dollars to manage a place for the next 30 years would you do it? By then it will be worth a lot more of course. That is how he thinks from what I have gathered. He's in it for the long game.
@@wholelottalight You're completely missing the point. Why California? Cash flow is much better elsewhere with none of the tail risk.
@@GeorgeGammon I'm not disagreeing with you. I was simply explaining his thought process. I would NEVER do what he is doing. He is investing in california because he lives there and "knows the market." I doubt there is any other reason.
"both of which would be extremely difficult in a recession with high unemployment, inflation and or a tightening of the credit mkt."
this is the same as advising one shouldn't buy a car because the car would be useless when it's being fixed in the shop.
this is California not the mid-west. i'd like to see you getting a cash flow deal here. no cash flow but high appreciation. it's not rocket science.
@@GeorgeGammon because he can afford it. not everyone wants to be a slumlord for change.
Hey Kevin! Where can an investor get a 30 year fixed mortgage at 3.75%?
That's a great break down.
I'm all for it.
Can it be done with
1. 20k salary
2. Family of 3
3. No home equity so no HELOC
4. 750 credit but the yearly salary doesn't get me more than 20k on CC?
How will I show documentation proof I can successfully pay the monthly mortgage? More so, wouldnt the banks raise a red flag when they see an immediate 40k investment from a third party?
the honest truth is you could, but you're not in a position to afford the risk. you can start by living in the first property you invest in, however you first need to increase the income.-its not a get rich quick plan, its the long game.
Realtor here... have you tried reaching out to a loan officer yet? If not, I would highly recommend it. It will cost you nothing and they will tell you how much you qualify for a loan.
Yo Kevin. I had renters move out recently, which after management fees etc put me slightly in the red each month when compared to my mortgage.
Since they moved out, I asked the management company to do a market analysis regarding new rental prices, which resulted in a $200 rental increase a netted a break even mortgage payment. Per your rent increase video I also requested the management company increase rent based on the market.
That 20min+ mark. One of the big things I've learned from your videos are all the benefits of rental properties that people usually don't acknowledge beyond cashflow.
Great video Kevin! I use M1 Finance so here's a fun fact... M1 Finance has M1 Borrow where you can borrow 35% of your account balance with 3.75% interest.
why would someone buy a house with no roof ?
Because you can put on a roof for like 10 grand.
They like sunlight?
Never Rains in Southern California AskKevin
@@TC_AZ false
@@MrTmenzo no shit
Kevin, just wanna say that I object to you sharing all this GOLDEN information outside of the Real Estate Investing course!
Hahaha! Excellent video man! You REALLY broke it down! I'm saving this one.
I got FISH!!
Kevin, depending on your location cash flow is king, other areas such as yours, appreciation is king.I live in Syracuse NY my Duplexes are purchased from 60-100k and rent from 1500 to 1900 a month per property - won't appreciate much but when your clearing 750-1000 profit per month that's pretty darn good :)
You got $100,000 for free.
That's the beauty of real estate investing - something that basically can't be replicated doing anything else!
Investing Engineered You can sell products online to the world and make a whole lot more. But this is a great way too.
The Analyst hahahaha products online .. did you buy into those courses lil bro ??
No, he worked for it over many years.
Buying the course for my birthday 😁
This is a deal that makes people look brilliant before prices crash...I had to edit this so people would see my reply to the highlighted reply that I'm sure no one would see.. I added this: what happened in 2009? Is everyone here too young to recall? MANY places got haircuts down 50-60% and MORE!!
even a crash of 20% would still be at above break even.
@@Fj4LiFe23 Sure...what happened in 2009? Is everyone here too young to recall? MANY places got haircuts down 50-60% and MORE!! Sure, that reply gets Highlighted but this wont!
@@pdlegend6829 and if you held those properties....how much more are they worth now? these are not properties that anyone plans to sell.
@@Fj4LiFe23 Some barely made it back to where they were... Good luck..hope it works for you.
@@Fj4LiFe23 you can't hold the property if you finance it, especially with nothing down. The bank can call the note at any time, and if you have no money, guess what? You're fucked.
Question what loan did you use? 203k renovation? You mentioned you borrowed all the money so its not a FHA?
he used all of those loans together, he borrowed the cost of and house plus renovation costs.
But how can you put that 100k towards another property if you have paid little to no principal yet as it's a new purchase?
K:i:n:d:l:y :te:x:t:+1:2:2:5: 7:2:6:6:4:1:2: W:h:a:t:s:A:p:p:......
Not jaded, more interested in your response, Kevin; Have you ever calculated how much interest you are paying to the banks every year for these properties? I know using the money you will save on monthly payments can be used to gain a higher return being savvy investor like yourself (I have seen you on Ricky's live streams ;) ) It seems like paying off tan investment property as quickly as possible is the best way to do this though. In my perspective (I could be totally wrong here), I would want to convert my liability into actual net-worth ASAP.
I know there are many pros like increasing net-worth (even though it's a liability now), the psychology behind saving every month for something that will pay off in the long run (delayed gratification), appreciation, cash flow and many more. I am not arguing any of these amazing pros that I partake in as well. I am just questioning the method of paying so much money to the bank when you could, in fact, be giving away much less of your money to the banks while still growing your net-worth, freeing up more cash in the future for other investments (businesses, stocks, etc).
Big fan of yours Kevin! Love the investing course and your mindset :-)
Cheers!
It really all depends on the risk. The way you should view it is you're not really paying the interest. Your tenants are paying it. It was money that you wouldn't have had anyway if you didn't buy this property. As long as your rental income can cover all the expenses then you're golden.
The reason you would rather use the money to buy more property instead of paying back a loan you have is to scale. For instance, You own one 500k house the market increases 10% now you have a net worth of 550k. If you bought 5 houses with 100k down you would own 2.5m in real estate and have 2m in loans. Now if the market goes up 10% you will own 2.75m in real estate but still only owe 2m. Effectively you get 5x the gains. You're also paying down the principal of 5 houses instead of 1 so you gain equity there as well. This doesn't come without risks though since you can lose more money too.
Ivan Hidalgo All good points. If you look at the Truth In Lending document in your loan packet, it will show the total cost of you loan and on a 30 year note it’s around 2.5X the purchase price! Kevin will pay over $1,000,000.00 for this house.
@@jwb4bb I'm not sure how many points he paid for the loan but say it was 1 point. The closing costs might be around 25k so hes out of pocket 25k. Once he refinances, say his monthly payment is 3k, but his rent is 3k. Once the 30 years is up and the mortgage is paid, did he really pay anything other than the 25k?
Yes he knows this number, but he is seeking a bonafide and genuine leverage which is achieved using loans. When you factor in ROI including principal pay down the leveraged ROI jumps a full point or more. Include appreciation and you can add another point or two. He discussed cash flow a few weeks ago and fully understands the balance of the two concepts, cash flow vs wealth
Kevin, the real estate stuff is great, but can you please do a quick tutorial about how you get such amazing lighting in your videos?!
Your videos are creepy
whats the name of the program your using to view the house in 3d? Cheers!
matterport
Then program that does this and camera is matreport. You can hfie freelancers to scans and host the files
Now the question is your bank going to refinance it at ~615k or 450k? I heard refinancing could go wonky depending on who does it. we
Love this video. Thank you so much Kevin.😊
What a deal! Great Job Kevin 👏🏼
How/where did you do that cool 3d render @0:31?
Matterport
Great video Kevin. I enjoy thesr very info intense style videos. Keep them coming man!
I'm hoping to get to your level of experience. Looking at purchasing 2 more properties soon with the principles you are talking about. Awesome advice.
Absolutely brilliant video, I think many people along with myself have been waiting for a video exactly like this. Muy bueno ✌
Thumbs up. Another top notch video. Thanks.
How did you create that model at 0:30 ?? That’s super cool.
I would give an outline of what your course is. All online?
K:i:n:d:l:y :te:x:t:+1:2:2:5: 7:2:6:6:4:1:2: W:h:a:t:s:A:p:p:.......
Great great video Kevin. Thanks. very enlightening.
This video is crystal clear!!! I like
Kevin, I have bad credit and not enough money in the bank to purchase a house, but I'm conflicted because while I know I need to save to get the funds to get into a position where I can start buying real estate, I don't feel I should wait 2-3 years until I have enough saved to then start following your course and then start buying. I'm sure I'm not the only person who feels that way who is watching your videos. Any suggestions on what can be done now to get into buying real estate now (with only less than a thousand dollars in the bank and a credit score below 500)?
K:i:n:d:l:y :te:x:t:+1:2:2:5: 7:2:6:6:4:1:2: W:h:a:t:s:A:p:p:......
You really are a good teacher.
Is a house with no roof still a house or just a large fence?
Great video!
@ Meet Kevin - what camera and softwares you use for the 360 stitching?
m.ua-cam.com/video/SoaL99cbLp0/v-deo.html
Enjoyed this Kevin!
Whats that program you use to look through houses like that?
Plz do a full series on this property plz.
Detailed fixing up
Detailed renting it out
And some updates later in the yesr
Kevin, how were you able to cash out refinance at such a low interest rate if it was not your primary residence?
How do you 3d map your properties
If the market falls and you lose the 100k wedge is it not that bad because you could just hold the property since it cashflows until the market goes back up again?
That's just the recession case though. How about the depression/deflation case that's brewing in Europe, which can end up where Real Estate normally becomes super cheap, businesses can't sell stuff and lays off employees, and employees can't pay their rent?
@@magix2u I don't know what happens with real estate with a deflation. I guess you are just screwed.
Ok I just read about it. You really are screwed in real estate with deflation. You just gotta sell and take your losses. I think you just gotta watch the economy and if you see the u.s. highly likely going into an deflationary state for whatever reason to start selling.
@@theshinythings123 I see. Thanks! In that case, I'd be limiting my RE leverage to reasonable levels to be on the safe side then.
Great appreciation for ur work bro!!
@ 5:52 " This is how to get out of poverty right here" classic. Very informative, but that's alot of leverage, pretty risky. Your definetly not risk averse. Keep up the good work though.
@@faitaccompli5878 yes haha
Kevin, I love being creative to invest. In fact I have borrowed from my 401k three times to invest, I used a HELOC to invest, and I have done two cash out refinances to invest.
There is a reason why you are a multi millionaire, it’s because you do things others consider risky. You learned to use debt to your advantage. You learned the real estate game and you are doing GREAT!!!
Kevin, I love these videos.
Tony Gayden , he said he didn’t have cash for the home or in savings so why do you think he’s a multi millionaire? You only get equity money if you sell, and he likes to rent them out long term.
Paradise do you know how wealth is calculated? If you don’t I strongly suggest you read about basic economics.
Saying you only get equity money when you sell is 100% wrong.
With this strategy, the time between buying the property and safely securing the 30-year fixed can provide a major uh-oh moment in his finances, if the market valuations drop faster than he can react. See 2008, or the coming banking crisis related to corporate debt and/or Deutsche Bank derivatives. Borrowing from 401k's, lines of credit, and/or some random friend is a recipe for disaster when you go to the well one too many times, and hit the whammy.
Michael Ball There are a lot of people who have scared themselves into permanent inaction due to fear that 2008 will occur again. There are people so scared of debt that they think any form of credit is bad. These people are not billionaires and are rarely extremely wealthy.
@@OmahaTonyG Have you paid attention to the corporate debt market? It's very similar to the excesses of 2008, just in the corporate debt space. Companies took out loads of cheap debt to buy back shares, and may have trouble refinancing at maturity. What will businesses do to shore up their balance sheets? Lay people off. These people have higher consumer (non-mortgage) debt than before 2008, and won't be able to buy houses, resulting in a significant market correction in most places.
Most self-made millionaires have a slow and steady approach to investing.
Interest payments alone on $275K at 8% for 3 years is $66K. And that's not counting the points. Wedge not looking so good. Also try getting a BLOC (or any loan) if you have no assets.
K:i:n:d:l:y :te:x:t:+1:2:2:5: 7:2:6:6:4:1:2: W:h:a:t:s:A:p:p:......
With M1 Finance you can borrow at a 3.75% interest rate, up to 35% of your investment balance. Cheaper than wealthfront, but not good options to borrow for longterm.
This was actually really good!! Thanks
Vids are getting better man! Have to say, I like it better without the tie. Sometimes it makes me feel like you are selling something. Really enjoyed the video.
good point
thanks for the sincere advice
I'm impressed. That's pretty good.
Great content
love these videos!!
What's the software use for 3d house layout?
Matterport
What is the position that i have to be in to get a 500k house for no money.? or maybe smaller example
Trevonious11 look up first time home buyer programs in your area. Or if you’re a veteran then look up VA loans.
I’m new at real estate investing. Hopefully, this is not this to dumb of a question. What’s the best way to find the comparable properties?
K:i:n:d:l:y :te:x:t:+1:2:2:5: 7:2:6:6:4:1:2: W:h:a:t:s:A:p:p:......
Great vid!!!
Great info Kevin. Just wondering how do you find out if an area is 'known for flipping' or 'known for cashflow' ? I hear rumors from other investors but Id like to be able to confirm that myself. Does the course also cover how to choose a location and the research to find out if its a 'Wedge-able' location?
Location: Pick a plance with good schools and low crime.
Wedge-able: Know what the rehab costs are, and what local comps on reno'd houses are, before you buy. Your wedge is the difference between purchase price plus rental-grade rehab costs, and the cost of turnkey comps. The maximum amount of profit and returns is fixed at the buy, and can be minimized by poor and/or overimproved rehabbing.
I am trying to buy a second property and it’s been a nightmare. Banks don’t like to loan money to someone that already has a mortgage on an existing home.
Hey Kevin, love your channelJust wondering about how taxes affect you. I live in Ontario, Canada so I realize that our principal residence rules and capital gains taxes my differ but I was wondering if you could explain tax strategies around flipping a home that you plan to reside in for at least a year vs. renting it out for a few years. Here, you can avoid tax on 100% of capital gains after one year of residence, if you can prove your intention was to live there as your primary residence even if you sell shortly after one year, although they do monitor past patterns of real estate acquisition and sales in an attempt to tax flippers. Are you subject to similar scrutiny? Understanding this would help me in knowing the caveats I need to personally apply when watching your videos, since they assume an American audience. Thanks.
I'd rather not sell so we can just exchange rentals instead to avoid
I notice you leave out the fifth leg of profit in rental property investing - Taxes and depreciation. You don’t mention that of your monthly payment a large chunk of that is taxes and insurance along with the annual depreciation. All of which are more or less cash flow, let’s call it “phantom cash flow”, and should make you do your happy dance every year on April 15th.
Where are you getting commercial loans at 3.75%?
16:00 Kevin, you're really comfortable with the margin/wedge on the real estate, but not with the margin against your stocks. Why is that? Volatility, perhaps?
K:i:n:d:l:y :te:x:t:+1:2:2:5: 7:2:6:6:4:1:2: W:h:a:t:s:A:p:p:.....
You’ve been grinding
Great video I learned a ton
You need 25% down on an investment property? I thought you could get under 5% since you aren't doing commercial or am i missing something? time is at 3:00
I believe if it's a primary residence property that's under 5%
7:26 watch that
@@HansMiranda ahh you know what i knew that but i just wasnt thinking thanks for the clarification
@@ChrisTheCentaur thank you
@@dwafieuafoa7272 no problem and also yea what the other guy time stamped
Does replacing the roof on my triplex boost equity?
not really
It’s a 20 year old roof...
Yes ,it's protects your investment.
da ne protects my investment from what exactly?
K:i:n:d:l:y :te:x:t:+1:2:2:5: 7:2:6:6:4:1:2: W:h:a:t:s:A:p:p:......
We all need a "Bob" in our lives...
Really enjoy your insights. Well explained. Wish I could fly you out to MI to my RA!
Can I be defined a HELOC? Any help? Even if there is equity in my home. Either Kevin or community help thanks!
Smart investors use other peoples money to make money. Win win for yourself and the lender. Good job
I got a heloc of only $30k at 5%. Did I get dupped?
K:i:n:d:l:y :te:x:t:+1:2:2:5: 7:2:6:6:4:1:2: W:h:a:t:s:A:p:p:......
Great video, just subscribed, one question how do you qualify for another mortgage if you already have another mortgage for a different property?
Prasamsha IPAD great question... the lender would take into account your total debt/income. So long story short: you just need to speak to a lender and get pre-qualified based on your current financial status.
Notification squad assemble!! 🙌
amzon link for that whiteboard?
3.75% on an investment property? Don't banks in the US charge you more interest if the property is not for yourself to live on?
Kevin, do you normally rely on MLS to find wedge deals or some other channels?
Thank you!
I can’t wait to have a monitor set up like yours
What was the second bloc bank?
Hi kevin, i can’t find your detailed video regarding wedge deal.
Nice. Thank you for the example. It is doable with some luck in the borrowing IMHO.
One can easily underestimate the ARV and the sequence return risk is much higher than presented. Lots of moving parts, specially in the BLOC, HLOC, friend LOC. We always ask the question, Do we need to do it? and Why are we doing it?
If you are in a wealth creation phase or making money, not the same, you might be more incline on the sequence risk and methodology. It could be a fun game but I rather spent our time in Tahiti in the over water bungalow drinking voka and Tahitian Fruit Punch. But this is just me and my situation. Someome else in the wealth creation phase of life would be more inclined.
Again thank you for sharing. We seen these methods used successfully years back with the "No Money Down" wave back in the 80s.
Good luck and thanks again,
Alberto
@Meet Kevin I'm wondering at what time do you refinance? At what point down the road? Thanks, this was an eye opener.
Not everyone has Bob.
get one
Who's ass should we pull Bob out of??
He isn't going to find you bro, create relationships.
does the course offer everything in video format?
yes
Would taking a loan against a 401k be a viable option? Any interested paid would be gained in 401k account.
Bert O
Roll the 401k into a self directed IRA. Then buy the house in the IRA. I have done this few times.
I'm not a fan of borrowing against a 401k, mainly because you have to pay it back in one lump sum. Of course, there are the other downsides (huge penalties if the loan "defaults" due to job loss, stock market drop, etc.). Just leave the 401k alone.
I feel like this is the hardest way to get the deal done. It’s much simpler to get enough loans to put 25% down plus cost of repairs and take out a mortgage.
The client did not want to wait for the loan process
Sterling Sansing True, he did say that. I was to focused on trying to work though that maze of debt lol
Kevin, you're able to get a 3.75% 30-year fixed rate mortgage on an investment property? I was looking into refinancing an investment property and was looking at 4.125%+
Depends on the day you lock -- they fluctuate like gas prices