if you ever wanted to invest in real
estate you know but there's a lot of
confusion about which strategies
actually work and which ones don't but
don't worry because this video is gonna
clear all of that when I first started
learning about real estate
I was definitely overwhelmed by the
sheer number of strategies and all of
the Guru's who are telling me that their
strategy was the best then I watched the
video that said something like the best
strategy is the one you choose and stick
with and while it's obviously not quite
that simple I do think there's some
merit to the idea because running around
like a chicken with your head cut off
chasing one strategy this week and
another one next week means that you'll
never actually lock in and be successful
at one of them I don't want that to
happen to you guys and so this video is
going in-depth on ten different
strategies and hopefully it will help
you determine which one you should get
laser focused on by the way my name is
Lili if you're new here the best way to
support the channel is to turn that like
button blue or subscribe if you haven't
already and with that said let's get
started
we're gonna break our ten investment
strategies down between five tiers the
first one is easy entry point second it
takes hustle third we've got if you've
got the money go for it fourth is low
risk low return and fifth is high risk
high return with that said let's head to
the whiteboard and start breaking these
down we're gonna take a look at 10
different investing strategies and in
order to compare them we're gonna use
the same example property so when we
evaluate these deals we're gonna talk
about a $200,000 house at a four percent
interest rate on a 30-year loan we're
also going to assume that the property
taxes are gonna be about two thousand
dollars and the home insurance is gonna
be about a thousand dollars and then we
can rent this property out for $2,000 a
month these numbers may be lower or
higher where you live but I think it's a
good idea for us to have a baseline work
with the same numbers from strategy to
strategy so we can really get an honest
comparison the reason that I'm using
$2,000 for rent for this $200,000
property is because of something called
the 1% rule which basically says that if
your rent is 1 percent of your purchase
price you have a high likelihood of that
being a good cash flowing deal if you
want to figure out what the rental
amounts are in your area for a
particular property you can check out
the website called rent ometer I've got
a link to it in the description it's
really easy to use all you have to do is
put in the address of the property you
want to evaluate the number of bedrooms
and bathrooms and it will do a search
and figure out what the average rent for
that property is in your area we're
going to start off with comparing the
traditional strategy of just a buy and
hold rental property with the all-cash
purchase if you're purchasing a property
as an investment you're usually gonna
have to put down 20% as your down
payment and for a $200,000 house that
would be 40k if you're purchasing a
property all-cash that means you're
putting down 100% is the down payment
and you would therefore need 200k now
whether you have this amount of money in
the bank or not it's a good idea to
understand the ins and outs of each of
these strategies so stick with me
remember we're assuming that this house
can rent out for $2,000 so that's going
to be the same between both of these but
here's the first big difference
when you put down 20% that means that
you're taking out a loan for 80% and
with our assumptions about the interest
rate the home insurance property taxes
this payment is it going to be around
one thousand and thirteen dollars a
month but if you're putting down one
hundred percent that means you don't
have any loans all you have to pay is
your property taxes and your insurance
and our estimates would say that that's
gonna be about two hundred and fifty
dollars a month so that's a huge
difference that means that this property
here you're gonna have nine hundred and
eighty-seven dollars whereas the
all-cash rental is going to be able to
keep 1750 something that we have to
remember is you should always be setting
aside extra money every single month and
so for both of these properties we're
gonna set aside $400 that means this
traditional rental is going to cash flow
five hundred and eighty seven dollars a
month while this all-cash rental is
going to cash flow one thousand three
hundred and fifty dollars a month it's a
really big difference but while it may
look like the all-cash rental is
obviously winning there is one really
really big thing that we have to
consider between these two strategies
and that's the return on investment you
calculate that by taking your monthly
cash flow and multiplying it by twelve
so for this property you would get seven
thousand forty four dollars a year and
when you do the same thing over here
multiply this thirteen fifty by twelve
you're gonna get sixteen thousand two
hundred dollars a year to calculate your
return you're gonna divide that by the
amount of money that you put in your
initial investment and I understand
there's gonna be closing costs and all
over the types of fees but for
simplicity's sake we're going to say
this one you put in 40k and this
property you put in the full two
okay now here's where things get really
really interesting because the return on
investment for this traditional rental
property is 17.6% and for the all-cash
purchase it's only eight point one
percent and to take it even a step
further when you reverse this math so
when you take the 40k that you put in
and divide it by your monthly amount
that tells you how long it's going to
take for you to get your money back and
so in order to make that 40k back on
this property it would take five point
seven years when you do the same thing
and take this 200k divided by how much
you make a year you discover that it's
going to take twelve point three years
and so these are the two most important
numbers I would look at if I was trying
to decide should I put 20% down and have
a mortgage payment or should I put all
cash down on this property have no
mortgage payment and only pay my
property taxes in my insurance every
month these are the things that make a
difference and think about this with
that $200,000 you can buy one all-cash
property or you can buy five traditional
rental properties and put 20% down each
that way you're gonna get a much higher
return on your money and for those
reasons I put the traditional buy and
hold strategy in the if you've got the
money category meaning if you've got 20%
to put down in a property that's gonna
get you a pretty good return on your
money on the other hand I put the
all-cash strategy in the low risk low
return category if you have the money to
purchase a property all cash it's gonna
be pretty low risk because all you have
to worry about are your insurance and
your property taxes every month but
because you chose that low-risk
investment rather than taking on debt it
doesn't mean that your return is also
going to be lower
next up house hacking now what if you
have money for either of those
strategies to put down 20% or a hundred
percent on a rental property
that's where house hacking comes into
play this is how I started my investing
journey by house hacking a duplex and
this is how it works when you're
purchasing a property one to four units
that you plan to live in you don't have
to put down 20% you can put down 3.5%
because you plan to live there so rather
than putting 40k down on a $200,000
house you would only have to put 7k down
but the thing about house hacking though
is that you've got to be willing to
share your space so let's
this is a single-family three-bedroom
two-bathroom house you're gonna live in
one room and if the whole house would
rent out for $2,000 let's imagine that
you can rent those rooms out for $750
each 750 times 2 means that you're
bringing in $1,500 a month in rent and
your monthly mortgage payment would be
around one thousand three hundred and
forty dollars and you can see it's much
higher on the house hack and then it was
in the traditional rental because you
only put down three and a half percent
the higher your down payment is the less
money you need to borrow from the bank
and therefore the lower your monthly
payment will be so with this house hack
you'll profit one hundred and sixty
dollars a month remember we always want
to take out money for things like
repairs they can see you never know what
costs are gonna come up that you're
gonna have to take care of as the
homeowner and so this property actually
has what I call a house hackers return
every month you're gonna have to pay
yourself two hundred forty dollars to
live there now I don't know where you
live but I don't know if anywhere you
can live for two hundred and forty
dollars a month while owning an asset
that is increasing in value plus an
underappreciated value of house hacking
is that you only have to live there for
one year and so let's imagine you pay
two hundred forty dollars for a year to
live there in one year later you decide
to move out and go ahead and rent out
that entire property for two thousand
dollars now we've got basically the same
scenario as over here we're gonna bring
in 2k a month we still have a slightly
higher note we still owe thirteen forty
which leaves us six sixty we take out
our four hundred and now our property is
bringing us two hundred sixty dollars a
month when you multiply that by 12 you
get three thousand one hundred and
twenty dollars a year and remember you
only put 7k into this deal therefore
you've got insane return of forty four
point six percent and when you flip that
math it lets you know that you're making
your money back in two point six years
but you got to remember that you did
live there for one year so I would say
three point six years back to start
making profit and get your seven
thousand dollars back this is the power
house hacking you put a low downpayment
extremely reduce your car
of living move out one year later rent
out the entire property and you have an
insane return and that is why house
hacking is going into the easy entry
point category but the thing is you can
only house hack one property per year so
maybe you've already done this or you're
already living where you want to be
another strategy for you might be burn
vesting burn is an acronym and this
strategy changes the traditional way
that you might buy a property it stands
for buy rehab rent refinance and repeat
it can get a little complicated but
we're going to do our best to simplify
these numbers so just stick with me when
you're looking to do the birth strategy
you're searching for a property that's
not really in livable condition
traditional buyers aren't interested in
this property and most banks won't loan
on it because it needs a lot of work
because of that the first step in using
this property is getting a loan and
oftentimes it's going to be something
called a hard money loan so you're not
going to the bank to get a 30-year
mortgage but instead you're going to a
hard money lender who will give you the
money you need but it's usually for a
term of 12 to 18 months and at a much
higher interest rate there are a lot of
different ways to qualify for these
loans but when I was doing my research
to get started with the birth strategy I
was told among other things that I
needed to have 50k in liquid assets
meaning cash stocks bonds things of that
nature so that is a hurdle but if you
can qualify for a bear loan either by
yourself or with a partner here's how it
would work that same property if it was
nice and fixed up would be $200,000 but
because it's not we're gonna say that
you can get it for a hundred and ten K
and we'll estimate that in order to get
it fixed up you're gonna need about 30 K
and so while the ARV or what's called
the after repair value is 200 K but in
order to get it there you're gonna need
to spend 140 K to purchase it and fix it
up I also found in my research that this
particular company was willing to give
me 90 percent of the money I needed for
this property and so in this example
they would loan me 126 K and I would
need to come up with a down payment for
the rest of 14 K that 126 plus the 14
will get me to the 140 I need to
purchase and fix up this property there
are two main differences when
using a hard money loan versus a
traditional mortgage and that comes in
the interest rate in the way that you
pay it back on our house hack we
estimated that we got about a 4%
interest rate but hard money loans the
interest rates are much higher
oftentimes upwards of 10% the second
difference is that with a traditional
mortgage we pay the same amount every
single month for 30 years or until we
sell the property but with a hard money
loan we have a period of 12 to 18 months
where you're only paying interest and
then when that period is up you pay back
the entire loan amount and so for this
loan that might be around $1,200 a month
in your interest-only payments and when
we add in the property taxes and
insurance that we're gonna have to pay
as well we're going to be looking at
about fifteen hundred and fifty dollars
a month so this time to get to work use
that thirty thousand dollars to start
fixing up this home and rehabbing it and
once it's all nice and pretty
you can now rinse it out just like the
other ones for two thousand dollars when
you take out your fifteen fifty and
we'll still say that you can take out
four hundred dollars a month but one of
the great things about burning a
property is you know you just fixed
everything up in that home and so you're
less likely to need that $400 a month
for repairs
so you might be able to lower that
number but for the purposes of our
example we'll just say you're gonna be
super safe
you're still gonna take out $400 a month
and that's gonna leave you with just $50
all right that does not seem like a good
return at all but remember you've only
got this loan for 12 to 18 months and
then you've got to pay it back
this is when the buy rehab Brent
refinance part of the birth strategy
comes into play it all hinges on you
doing what is called a cash out
refinance when you do a cash out
refinance the bank will look at the
property you own and determine how much
it's worth and remember we said that
this property had an after repair value
of $200,000 they will then give you up
to 70% of that value in cash what's 70
percent of $200,000 that's gonna equal a
hundred and forty K so once you get that
140k back from the cash out refinance
you can pay back the 126
that you owe to the hard money lender
and you can pay back that 14 K down
payment either to yourself or to a
partner that you loaned it from either
way you've gotten back
all of the money that you use to
purchase and Rehab this property now
this is pretty much the same as the
traditional rental example right you've
got a $200,000 house four percent
interest rate 30-year loan that's gonna
rent for two thousand dollars you're
gonna have a payment of about ten
thirteen after you take out your four
hundred dollars per month that's gonna
leave you with the same 587 a month or
744 a year but here's the kicker you
don't have any money left in this deal
right we would normally divide this
number by the amount that you put in but
remember you got a loan for this
property took all the money that you put
in got it back out with the cash out
refinance and you've got zero dollars
left in the deal you can't divide by
zero and so that is an infinite return
now you can go back and show your
partners I got a loan for a hundred and
forty thousand dollars I purchased the
property I fixed it up I got all of that
money back let's go ahead and do that
last our repeat it this is not a simple
strategy and for that reason is going
into the it takes hustle category you've
got to be able to convince a hard money
lender to lend you this money find a
property that it will work with
correctly estimate the after repair
value go through the process of getting
the cash out refinance but if you can
pull all of that off you'll be making
some crazy returns on your investment
all of the strategies that we've talked
about so far have needed at least a
little bit of money but there is a way
that you can get started and real estate
for zero dollars and that's called
wholesaling there are a lot of different
ways to wholesale but the concept is
simple you're gonna find a property that
for some reason needs to be sold below
market value those reasons could be that
the property is abandoned that there's
some type of damage that the owners
can't pay to fix or that the owners are
behind on payments and the property is
about to be foreclosed on whatever it is
there's some type of problem that the
owner is running into that they cannot
use the traditional means to sell their
home right purposes let's imagine that
the property's been completely abandoned
and no one has lived there for years
it's pretty much just a wreck because of
that you're gonna talk with the owner
and figure out what they would be
willing to sell it for now again if it
was a
perfect condition it might sell for
$200,000 but let's imagine that the
property owner is willing to get rid of
it for a hundred and fifty you don't
have 150 K but that's alright you're
gonna get the property under contract
and set to close in 30 days in that 30
days it's up to you to find an investor
that does have 150 K and wants to
purchase this property usually so they
can do something like the birth strategy
with it in the meantime there might be
things that you have to do to this
property it might be all overgrown
because it's been abandoned so you've
gotta mow the lawn take care of the
landscaping there may be furniture and
all other types of things inside the
house that were just left there so you
may have to clean those out that's
between you and the owner and you and
the investor that you're gonna pass this
property along to but you're basically
going in between the two to figure out
what needs to be done to sell this
property for the work that you do you're
gonna charge the investor what is called
an assignment fee and let's just imagine
you charge them ten thousand dollars so
the owner gets one hundred and fifty K
you get ten K and the investor purchases
the property for 160 K so basically you
were the middleman between the owner and
the investor in this deal doing whatever
work needs to be done to make it happen
and for that work
you got an assignment fee you may not
need money to wholesale but I'm gonna
put it in that it takes hustle category
because it does take a lot of work for
you to find property owners figure out
what they're willing to sell their
property for find investors and get
everybody to be okay with your
assignment fee in the middle our next
investment strategy is something that
we've all seen on HGTV fix and flipping
are similar to some of our other
strategies when you're looking to fix
and flip you're not looking for the
nicest prettiest house on the block
you're actually probably looking for the
worst house that you can find this house
is so bad that there's no way anyone can
live in it and there's no way a bank
would give you a loan for it so you're
either gonna have to get a hard money
loan or possibly have the money between
yourself and your partners let's imagine
that this house which could be worth
$200,000 is in such bad state that you
can get it for 75 K but it's going to
take a lot to fix up and so you're gonna
need another 50 K in order to rehab it
that's your purchase this means you need
one hundred and twenty five thousand
dollars in cash or in the form of a hard
money loan in order to make this work
but once it's all said and done the
houses fixed up you're not gonna rent it
out you're then gonna sell it for the
full two hundred thousand dollars
depending how quickly you can fix up
this property and get it sold that could
be a pretty quick seventy five thousand
dollar profit but there are two big
downsides to fixing and flipping the
first is that there's high risk I'm
depending that this home will sell for
two hundred thousand dollars you never
know when the market is going to crash
and when housing prices are going to
tank and if you get caught during one of
those downturns you can spend a hundred
and twenty-five to fix up this property
but then possibly not even be able to
sell it for that much depending on how
much the market goes down the second big
risk for house flipping comes in the
form of taxes when you buy a property
fix it up and sell it like this you're
subject to taxes that can be anywhere
from ten to thirty seven percent so
you're not getting that full seventy
five thousand dollars because of that
fix and flipping goes in be high-risk
high-return category but there is
another lower risk way to flip a house
and it's called the live in flip this
strategy is where you find a house that
isn't really the nicest but it's
definitely in livable condition maybe
it's just really outdated with like
paint and cabinets from the 80s or
something like that
but you can definitely live there and
while you live there you're gonna flip
the house this strategy works best for
people who are willing to DIY and do a
lot of the work themselves rather than
paying for contractors so if we imagine
that house that would be worth two
hundred thousand dollars if it was fixed
up and nice but it's really outdated so
let's say you pick it up for 150 if you
plan on living there you can put three
point five percent down which is going
to be just five thousand two hundred and
fifty dollars that would put your
monthly payment at around one thousand
sixty-five dollars
that's your piti principal interest
taxes and insurance and we'll say that
over the next two years while you live
there you're gonna spend twenty thousand
dollars to fix it up once you made it
nice and beautiful you're gonna go to
sell it but because it's been two years
hopefully the property has appreciated
from that two hundred thousand dollars
and is now worth two hundred and twenty
five K so when you sell it you've got to
pay back the loan that you got for a
hundred and fifty K to purchase it as
well as recoup the money you use to
rehab it and your
down payment which would leave you to
profit about forty nine thousand seven
hundred and fifty dollars well there is
the same risk as fixing flipping that
the property won't appreciate that risk
is mitigated because you live in the
house you fix up yourself you're
comfortable there if the market crashes
you don't have to sell you can just stay
where you are
and continue making your monthly payment
but if the market does go up that's the
time when you can sell and collect this
money the other really big benefit
that's different from fixing flipping is
that when you live in a house for two of
the last five years you do not have to
pay capital gains taxes if you're a
single person and you sell that house
for anything less than two hundred and
fifty and if you're a couple and you
sell the house for anything less than
five hundred all of the profit is yours
you don't have to pay taxes on it
because of that we're putting live in
flips in the easy entry point category
next up we've got another strategy that
is great if you're not swimming in cash
[Music]
there are a lot of ways to invest in
mobile homes including buying entire
mobile home parks but for this video
we're going to talk about buying
individual mobile homes I recently
watched an interview on the trailer cash
Academy YouTube page of this woman named
Holly Holly was looking to purchase her
first mobile home fix it up and
basically flip it after doing her
research she was able to find a man who
was looking to get rid of an old mobile
home that he had it was not in the best
shape and he was behind on the lot rent
by seven hundred and seventy five
dollars while Holly was talking with him
he told her that if she took the mobile
home off of his hands paid the lot rent
and he could just be done with it
he would give it to her for free and so
obviously Holly said yes she paid seven
hundred and seventy five dollars to the
mobile home park so that the mobile home
could stay where it was and then she
paid about another two hundred dollars
in materials and fixed up the mobile
home as well as she could herself once
those things were taken care of she
started advertising the home for sale
and was able to sell it for five
thousand dollars
so Holly made just over four thousand
twenty-five dollars by solving a problem
for the owner paying a lot rent taking
it off his hands and then going ahead
doing what she could purchasing the
materials for just two hundred dollars
fixing it up as well she could herself
and then putting it on the market well I
did take a little bit of work that is a
nice work
turn and it goes into that it takes
hustle category next up we're going to
get to related strategies furnishing
your long term rentals or using them for
short term like on Airbnb
[Music]
listening back to our house hacking
example where we are renting out two
bedrooms in our house for seven hundred
and fifty dollars each now let's imagine
that you furnish those rooms with beds
and other furniture everything that
somebody would need to live there then
maybe we'll need to pay more and so
let's say you can rent out both of those
rooms for $850 each that would mean
you're bringing in $1700 and in that
house hacking example we said that our
monthly payment was around thirteen
hundred and forty dollars that means we
make 360 a month before we take out our
four hundred for vacancy in repairs and
therefore we're coming out of pocket
every month $40 now remember when we
didn't have those rooms furnished we
were coming out of pocket every month
two hundred and forty dollars and
regardless what the numbers are on your
own deal maybe investing in some
furniture up front in order to get a
higher rental rate would make it so that
you have to come out of pocket less or
even can break even and get some cash
flow so while this costs a little more
to invest in the furniture as well as a
down payment to get the property I think
this is still a really good strategy and
it's gonna go in the it takes hustle
category now let's talk about Airbnb
arbitrage this is a kind of
controversial strategy that some people
have done really really well with or
some people have done really really
really badly with the idea is that you
don't need to actually go out and buy a
property in order to do this you look
for local properties that are already
for rent call up the landlord and ask if
you can furnish the property and put it
on Airbnb you tell them that you'll pay
whatever they're asking for rent and
you'll take care of all of the Airbnb
guests for parody damages etc it may
sound pretty far-fetched but I spent an
entire afternoon calling up landlords
and seeing what they would think about
this and about 50% of them said yes the
idea is that while they might be
charging two thousand dollars in rent
we know that Airbnb when it goes well
can be pretty profitable so let's
imagine you could make $4,000 a month on
Airbnb you're still gonna have to pay
the utilities and it's probably a good
idea to still set aside money in case
you have to fix anything so we'll do
that same $400 at the end of the day you
can be
home upwards of like $1,600 in this
example but obviously there's a big
issue of not making enough money to
cover the rent and the utility payments
if that happens you could be coming out
of pocket to pay that rent and in the
recent months there have been a ton of
stories of people who are doing this
with upwards of 50 60 70 properties just
lost it all in old landlords a ton of
money and so like with any of these
strategies I'm not telling you whether
you should or shouldn't do it I'm just
breaking down the numbers but Airbnb
arbitrage is definitely going in the
high-risk high-return category so those
were nine of our strategies and they all
involve to some extent being hands on
with a physical property but the tenth
one I want to give you guys are the
option for is something that is really
hands-off and these are real estate
investment trusts or syndication these
two are similar to each other because
they both involve a large group of
investors who buy in in order to
purchase properties that none of them
would be able to buy on their own we're
talking hundreds of thousands
multi-million dollar properties and when
you pay in these almost behave like
stocks where you then own a certain
percentage of the real estate that the
company itself owns the terms between
these trusts and syndications differ so
it makes you read them closely but
basically at the end of the year they're
gonna pay you a certain percentage of
the cash flow based on the percentage
that you put into the deals just like
investing in the stock market investing
in real estate trust source indications
are super super hands-off you're not
gonna have day-to-day involvement with
the decisions that are made in the
property and you pretty much sit back
hope that your asset raises in value and
collect the dividend that you get at the
end of the year it's just like the stock
market the value of the real estate in
the trust or the syndication could go up
over time or go down although from 1975
to 2014 real estate trust returned
around 14% while the S&P 500 returned
about 12 and a half percent because it's
so hands off and really depends on how
the housing market does as a whole we're
putting this one in the low risk low
return category I've done other videos
that go in-depth into some of the
strategies we've talked about today and
if you want to check them out you can
find them in this playlist right here I
post videos most Tuesdays Fridays and
Sundays and until next time
thanks for watching