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So i’m sure we all have that close friend of ours or that uncle that got rich by investing in real estate but the question i’m looking to answer today is how people actually get rich by investing in real estate now i personally have not invested in any real estate yet it is something i plan on doing in the future so i wanted to invite an expert on to this channel
Somebody who has actually been successful investing in real estate so i’m inviting graham stefan on here he’s gonna talk about how he became a millionaire by the age of 26 simply by investing in real estate and following this one simple strategy so i’m gonna go ahead and pass this video over to graham what’s up brian thank you so much for the introduction and for
Everybody watching who’s not already subscribed to ryan just do it so anyway let’s talk about making money in real estate and why this is my favorite way of building wealth above anything else for those who have not heard of me my name is graham stefan and i started working in real estate in 2008 as a real estate agent i saved up all of my commissions and in 2011-2012
I began investing in real estate as well and then from a combination of working as a real estate agent and also investing my money in real estate i became a millionaire by the time i turned 26 years old now the reason i started investing in real estate in the first place was because they really wanted passive income now working as a real estate agent was something i
Really enjoyed and absolutely loved doing but it was commission only and the income i made was rather sporadic there were some months where i could make an insane amount of money and then other months i could make nothing for months on end and honestly having income be that inconsistent was just incredibly stressful it also relied on me constantly working finding new
Clients and closing deals to make money so if i went out of town or i was not working i was basically not making money and it was because of this inconsistent income that prompted me to really want to make money regardless of what i was doing day to day i really wanted something that made money while i slept where i can wake up and know that i am x amount wealthier
That day or i could go on vacation and think that while i’m on vacation i’m still making money regardless of what i’m doing or how much time i’m spending in something because i was in real estate i felt like it was the best choice for me to then invest in real estate because that was my area of expertise and i bought my first property it was for $60,000 i spent
$12,000 fixing it up and my net income after all of my expenses on that home was thirty dollars of profit every single day and the way that i saw that was that that $30 a day pays my phone bill my car insurance gas from my car food and other miscellaneous expenses for my entire month every single month and it was so good that i bought another property and then i
Bought another property and then i bought another property and then i bought another property and i kept repeating that same process over and over again i found a property that needed some work i go in i fix it up and then i rent it out and then i move on and i do that again and now at this point i’m 28 years old i’m 10 years into the business and the income that
I get from all my rental properties pays for all of my expenses all of my living expenses food car insurance is like basically all the money i spend is replenished every single month by the rent checks that i have coming in this allows me to do whatever i want whenever i want to do it and then everything else that i make from working as a real estate agent which
I still do full-time and youtube and everything else that i do is just pure profit that i could then go and reinvest into buying more real estate and when you get to this point it’s really just like a snowball that tends to get bigger and bigger and bigger but in this case it’s rental income just becomes more more more more and that leads to even more and it’s just
This upward spiral of being able to make more money because you have more money and all of this was really due to just being frugal investing my money as much as i could when i was young and also just buying real estate and the best part about all of this is that with real estate you don’t have to just use your own money you can leverage other people’s money such
As the bank to finance the deal you also end up getting some pretty incredible tax advantages of investing in real estate to the point where i really don’t pay income tax on the rental income i receive make sure to talk to your accountant about that and also by doing this in addition to having rental income come in every single month you’re also paying down the
Loan on that property so that in fifteen to thirty years chances are you will own a completely paid off property so even right now assuming you just break even on the property this means that in thirty years from now you will just own the property outright and everything you make from that point on will be one hundred percent profit or you could just sell the
Home with all the equity or for whatever it’s worth and just cash out and also by investing your money and hopefully you have some extra cash flow coming in every single month this just speeds up the process to then go and buy the next one which speeds up the process then go and buy the next one and so on for instance it took me about four years of saving from
2008 to about 2012 to be able to buy my first properties after that it took me three years to save up enough money to buy the next one after that it took me just one year to save up enough money to buy the next one and at this point i can pretty much save up a new downpayment every eight to ten months and to me this is also the perfect retirement strategy buy a
Few properties now pay them off over 30 years and by the time you’re ready to retire you will have all of this real estate owned free and clear it will be 100% profit that you can then go and just decide at that point that is your retirement money now the strategy that i use when it comes to investing in real estate is also known as the bur method of real estate
Investing so number one buy obviously you buy the property i shouldn’t have to explain that one but it’s really important to have the patience to wait for the deal that actually makes money i would say out of everything i look at probably 99 out of 100 just don’t make sense there’s not enough equity in the deal it’s not making enough money or in most cases it
Doesn’t make any money so it’s going to be up to you to learn how to evaluate these deals to make sure they actually make sense to buy and if you don’t fully understand the deal and feel confident in it walk away never buy something that you’re either unsure of or you don’t really know the ins and outs of the property it’s really important to understand what your
Mortgage payment is going to be what your property taxes are going to be what insurance is going to be like what the vacancy rates are and what sort of repairs you’re gonna need to do all of these are gonna eat into your profit and also in a perfect world you will find a property that you can buy under market value much like buying an undervalued stock yes you can
Absolutely buy an undervalued property it just takes time in patience so number two the our and that is to renovate the property now in my opinion the best homes to get and also the homes that you will make the most money with are usually the ones that you will have to fix up and more so than anything minor cosmetic renovations often have the highest roi of any
Money that you spend for instance maybe you spend $20,000 on a property but that gives you back a $50,000 value in terms of equity because you’re adding on to the property and now it’s worth more than what you put in it and this renovation part is absolutely critical that you evaluate the deal to figure out what you need to do to get the property to be worth more
Money than what you invest in it and also by renovating the property you’re adding instant equity which is essential if you want to refinance to pull your money out of the deal so now we’re on the next are and that is you rent the property now i personally go for long term tenants and i really believe that long term tenants are the best most stable way of earning
A consistent income when it comes to investing in real estate just make sure you screen your tenants very very well and don’t be in a position where you just take the first person that comes by this was a mistake that i made that ended up just it was a nightmare and had to evict a tenant they trashed the property do not do this take your time screen your tenants
Properly and don’t sign a lease until you found a tenant who meets the criteria that you’ve set so the next star after that is then to refinance the property so if you’ve done this correctly and you’ve bought a home that’s under market value and then you fixed it up adding more equity to the property chances are it’s worth now more than what you’ve paid for it so
In this case after about six months you can take out a new hire loan on the property that then pays off your first original lower loan we’ll take my last place for an example i bought a duplex for $600,000 i put 150 thousand dollars of my own money down and i financed four hundred and fifty thousand dollars with a bank i then spent about eighty thousand dollars of
My own money fixing up this property so my total investment in this is the six hundred thousand dollar purchase price of which i put a hundred and fifty thousand dollars down plus the 80 thousand dollars i spent fixing it up so the total value that i put in six hundred and eighty thousand dollars of which two hundred and eighty thousand dollars was coming from
My own money but when i was finished with all of this the property was then worth eight hundred and fifty thousand dollars so now that i have a property worth eight hundred and fifty thousand dollars this means that i can refinance that deal and pull out 80 percent of that which works out to be six hundred and eighty thousand dollars this pays off my loan of four
Hundred and fifty thousand dollars and gives me back my two hundred and thirty thousand dollars that i had invested myself in the property now i basically have a place that i got for free and i have my money back that i can then go and invest in another property and then the last step of this the last are is really just to repeat the process and do the same thing
Over again now this burn method of real estate investing is exactly what i’ve done to get started when investing in real estate and i owe everything so far to this method i really believe that just buying rental properties and keeping them a long-term i don’t like flipping i don’t like wholesaling i just like buying something that produces cash flow every single
Month keeping it and then moving on to buying more of them this way it’s extremely stable you don’t have to worry about if the market goes down or if the market goes up you don’t really care what the home’s value is beyond refinancing it in the short term you really just care that it makes money every single month and that is exactly how you can get rich while owning
And investing in real estate now this is something that does not happen overnight keep in mind i am 10 years into this this is something i believe you can build up over a decade it’s not something you can easily do over a year or two or maybe even three or four years this is probably 7 to 10 years worth of work but this is work that will pay off tremendously in
The future this is work you set up once you get it right once and it produces cash flow for basically the rest of your life so with that said thank you guys for watching if you want to check out my channel the link is in the description and i will give this video back to ryan all right guys it’s gonna wrap up this video i hope you guys enjoyed it if you’d like to
See more collaborations like this on my channel drop me a comment down below and let me know and of course do not forget to subscribe to graham stephan’s channel and thank him for putting this video together but thank you guys so much for watching and i hope you have a great rest of your day if you are interested in learning more about investing in the stock market
I’ve created a free course just for you the link is in the description below here are a few other videos you might enjoy as well
Transcribed from video
How People Get Rich With Real Estate 🏠 By Ryan Scribner
