You may think that investing in property is like gambling.
But if you are patient, have a sound strategy, and have funds for the initial outlay, you can ride the ups and downs of the market to make money.
In this video, I’m going to show you why it’s so important to invest in property for long term.
Transcript:
Chris Bounds 00:00
I had an eviction before the show. And this is one where we’ve already done an eviction on that house before but it’s in the path of progress. But when you look at the Math, I’m selling Jamie’s like every year just from our single family rentals, excluding the multifamily.
We gain 100 grand in equity a year, based on normal scenario, not COVID-Crazy appreciation scenarios. It just makes it so hard for landlords to want to give that up, because what’s my opportunity cost? I’m like-
Richard Drake 00:30
Yeah, it’s an interesting time. You know, I did an interview for investors corporate because they have their 25th anniversary, right? And one of the things I said was, “If you could go back and be yourself on day one of being an investor, what would you do?”
And it was the easiest answer I’ve ever had hold as much as I could. Because if I look back at all those houses that I flipped, right? Hundreds and hundreds of houses that I sold for 150 that are six or $700,000
Chris Bounds 01:01
Price $50 a square foot.
Richard Drake 01:05
And I was in- I thought I was killing it. For instance, you know, everybody knows South Park, right? I would buy houses over there for 7000, 10,000, 12,000. And selling for 59 nine, and people thought we were ripping people off at 59 nine. That’s too high. I can’t believe you’re selling for that much, 59 nine. You can buy wholesale deal for 75, 80 grand anymore over there, right?
Chris Bounds 01:30
Yeah, that’s what the lots go for now.
Richard Drake 01:33
And I still hold a lot of property over there because they did great. But if I looked at, you know, when you sell a house, you create in current income, ordinary income, because a lot of people say, “Well, selling real estate is capital gains.” Not if it’s your business. If it’s your business, that’s your business, for your real estate professional.
It’s ordinary income to you. So you can sell a house, you create ordinary income. If you hold a house and you rent it, you lose money right on paper. And if you can sell just enough to survive, and do this while you’re young or younger, because that’s not me. You know, heck, you look up and you got generational wealth that you’ve built.
Chris Bounds 02:14
Yeah, you that’s a very, very good point there. So, Jamie and I started realizing that like, “Hey, we’re making 20, 30, 40 on these flips. But these little rentals that we held for years, like every time we sold one, we made 100, 120. So, we come- And tax situations where it’s not ordinary income, it’s long term capital gains, which there are ways to even defer that. But we call it the slow flip strategy.
If you want to flip houses, flip houses, just do it over a 3, 5, 7 year timeline. And then if you can get enough in that Hopper, to feed yourself, you got to feed yourself in the meantime, whether it’s a W two job, or you’re doing, you know, you’re flipping a couple holding one flipping a couple of homes, and then in five years, you just want to sell off the worst one the biggest headache.
You get $100- You got 100, grand pay day, 120 grand pay day, 150 grand pay day, and then if you really wanna accelerate it, you take that 150 grand, and you don’t use it to go buy a Range Rover and go out and buy three more properties. Yep, man.
Richard Drake 03:18
Well, that’s all pretty neat deal is this guy was talking about losing 15 and 15. Have you heard that phrase?
Chris Bounds 03:25
No, no.
Richard Drake 03:27
So what you do is you about 15 houses over 15 years. And you could do one a year, you could do 10 a year. But does this use the example of one a year. You buy a house every year, you rent it out, put it on a 15 year end, and at the end of the 15th year now you have 15 houses, right? And one house pays off, right? Now, you’re not gonna make any money off of these things with a 15 year end, right? You’re just not make a whole lot of cash flow. Because the accelerated payback.
But if you look at that, if you can do that in some multiple of this, let’s say there are $150,000 houses. Well, in 15 years, how much is that $150,000 house worth? Let’s call it 300. Now, at the end of 15 years, you don’t sell that house, you refi it. You get $240,000 out, or 200,000 let’s say, let’s just be conservative, you only get 60% LTV, you get 200 out per house. Let’s say you did five years so that’d be a million, right? If you did five and that’s not income. That’s debt. Now every year you get a million dollars if you did five a year for 15 years you get ish million dollars a year and new debt but not income every year.
Chris Bounds 04:47
Tax free.
Richard Drake 04:49
Maybe you did five a year and now you’re gonna refi three of them or four of them and you just cash flow the other two, right? But the other part of that over these years, all you’ve done is depreciate them and lose money on paper. So you’ve never paid income tax on all these years and 15 years down the road you have all of these houses where you can either let them all pay off if you don’t need the money. And then just keep the rent you may be bringing in $30,000 a month for all you know, buy lit, right? Or you can ride, you know, go get a new loan and cash out and buy rent.