Phil: I SWAN (sleep well at night). I own many SFH and Duplexes. Have for over 25 years. I am retired with a net rental income in the six figure range. I am a multimillionaire. The times I have been to eviction court I can count on one hand (eviction court boils down to how well you do screening of prospective tenants). I use property management companies to run the operation. Headaches are non existent. My wife and I travel to Europe on a yearly basis (trips paid for by tenants). My children will inherit a money making operation that will produce a comfortable lifestyle for them. My buy and hold strategy has worked very well for us. Flipping is a job. A tread mill I care not to get on. Just my two cents. PS: I do enjoy your channel.
I appreciate your comment. Thanks for sharing. But while that sounds good, one could argue that it proves my point. After having owned those properties for 25 years, you only are generating in the six figure range with yearly net cashflow? It could be concluded that your extremely low net cashflow (in relation to the real estate you own) is the result of not owning high return on investment properties. They are paying your bills, but not ultra-high octane money making machines. You're losing all kinds of economies of scale too; whereas if you were to renovate and resell each one of those, especially if you could do them in clumps and 1031 exchange the money into some higher return on investment deals, you could easily be at seven figures income with the same "SWAN" experience. to each his own, but it sounds to me like you have sold yourself a little short by having so many single family home traditional rentals.
if you need the money you don't need to get a cash out refi. you can get a revolving line of credit at 5% currently an buy another property with 20% down. cash flow will keep coming. separate the taxes an insurance from principal an interest. So all your income an rent money is going to pay down the line of credit an when taxes an insurance are do just pay them with the line of credit. that's how money works for me an its not sitting in escrow. I have 5 properties an has work out for me at a young age. @@freedom_mentor
for people that don't know what a revolving line of credit is, even do the rate is higher you pay less because is simple interest. you pay much more with your 30 year Amortization schedule.
You are right Phil, Wally Johnson could do it your way and have a seven figures annual income. But why do all that flipping and have all the headaches and all the work? I think I prefer to do it Wally Johnson's way because six figures is plenty of income for the way I want to live. I don't need a 7 figure income.
Exactly! I never could understand wanting to deal with tenants and constant upkeep to make in a decade what a house flipper could make in a single transaction. I see comments about flipping being more work. I guess I just don't understand the hyperphobic terror over a little sweat and effort. I actually enjoy fixing up houses, and would much rather make $100 actively than $20 passively.
I screamed when you said "If you bought a house in 2012, you bought at literally the perfect time in American history". I bought my house in February 2012. My house is worth DOUBLE in just 7 years. WISH I would have bought more. You have a new subscriber!
I honestly love this guy... hes literally my mentor.. all his videos are so helpful... i rent out 2 houses.. and Phil your videos help me learn so much i I appreciate it
Phil taught me everything I know about REI. I met him in person and he is a genuine guy. He's one of the smartest people in general I've ever met plus he has integrity which is extremely rare these days. Either way it's possible to make a good income it just depends if you want a high paying job through active Investing or passive income. Both are profitable options.
Eh, I think it depends. If you're talking D class neighborhoods, I'm with you. But it's hard to argue an A, B, or even C grade single family rental is just as much work as a flip.
I agree. Especially when you have a property management company who takes care of everything including the repairs. I do that and it's made my real estate investing truly passive. If flipping was your full-time job then that's great, but if you have a full-time job, a family, and invest in real estate on the side then flipping houses regularly would be too overwhelming.
Thank you Phil! I own 8 properties that total 29 units... you are correct! My monthly income is much higher than my local counterparts that only buy/rent out single family homes. All mine are multi unit properties. My expenses are lower on average as well for the exact reasons you outlined in this video. For me, it’s always been about the math. When looking at the potential properties to buy, I look at how can I keep my expenses low while obtaining the highest potential income without costing ME too much money. I never want to be out of pocket on any property if I have a unit empty. Thus far, it’s been very successful using this formula. I will say, however, lots of increases in property taxes, income taxes, insurance etc. so while we have raised rent to accommodate these increases, our monthly income % has remained the same.
What about the argument that I've seen being made on other channels that multi-unit properties have a higher level of churn compared with single family homes -- where tenants tend to stay put longer. Have you experienced this?
Me and some good friends are looking into the flipping/renting business. We’re looking to start out with flipping several houses to build capital in the company, and then starting to get some rental properties to have long term investments so we can make money while we sleep. But hadn’t considered multi-family homes. Glad I watched this video and got your advice on not renting single family homes.
I like how simply you break down this with just a marker and a whiteboard. Don't need to have great editing and fancy stuff to put out great content. Well done! New sub. 👍🏼
We STR our single family homes that used to be our primary residence on Airbnb and VRBO and make double to triple what we would make compared to Long Term Renting. Have been doing it for 2+ years and have had one not so good guest. And the equity in our property is insane because its now considered an investment property on 9 acres is through the roof being close to the Bay Area. We have also put a ton of sweat equity into it and we bought in 2011ish. Short Term Renting I think is the new game with high turnover so you are able to get into your listing often so no huge repairs, it increases the value of your property (people are buying Bnb properties for 50k+ just because its a rental), and we are making at least 2x more than we would if we long term rented.
Problem with these numbers you are comparing is your 28k profit on the flip is the equity you have in the house. When you sell you receive it. But the "200 per month" can't be compared to the 28000 because the 200 per month is profit. The 28 k is still sitting there. So after your 100+ months , yes you have made that 28k but the equity is still in that house which at that point is much more than 28k because the rent also paid your principal down as you pocketed the 200 per month
I bought a duplex in 2017 for 10k which was in good condition. I rented each unit at $550/month and I did the attic and rent it for 500/month. Thats $1600/month gross without mortgage on a 10k investment. Thats unheard of. I also have good tenants who pay on time. My next move is to make a 2 br apartment rental in the basement.
What about the principal pay of the mortgage you get from the rental payments over time? Equity over time Doesn't that go into the profit? So 200/Mon plus say 400-500 in principal on the loan that when you sell you make as well?
Looks like to me the answer is do the math. I love the idea of vacation rentals. Especially in places I want to go. Thats like a win win win if you have a management company that handles cleaning and all that.
Just sold an apartment in Hong Kong bought in 1988 for HK$425k. Sold in 2017 for HK$4.4m. Self occupied for that 29 years. That's a long wait - 29 years. No capital gain tax. So, is flipping over a couple of years worth it?
That's an average of about 32% return on the original investment per year for those 29 years. Excellent R.O.I.! We flip houses as fast as humanly possible. Well less than 6 months. With the Rent to Own technique, that can be a 1-2 year resell period. Then there are those investors that buy multi-family properties, renovate each unit over time, up the rents, and then resell after it is at peak performance. But I don't recommend that because if it is performing so well, why sell?
Also, Rents go up over time, in some cases, every year. That wasn't factored into the comparison. However, I love your channel and have learned a lot on here!
See your point but just left out equity paydown, leverage, deflation, reverse inflation on renting out SFHs. Can you really can't build wealth on flip profits vs owning SFH rentals for 20 years. I have 4 SFHs worth over 1M and should be very nice in 20 years?
I have a great playlist on the subject of owning rental property: th-cam.com/play/PLcPfCvShc59vmdxOSDKLeDgxHYq-xze9X.html I own more than $20MM in rental property so I certainly am pro-rental property and deeply understand the benefits. But you have to be strategic with the rental property that you own.
Is flipping via contract for deed advantageous? With a contract for deed you get regular cash flow without paying property tax or maintenance. You get a down payment up front and even though you sell to the strongest prospect there's the possibility of default. Also selling a house is much faster/easier via contract for deed as I understand it? Selling at a somewhat higher price also? Thanks Phil. You're the BEST real estate instructor on YooToob. ..
We oftentimes sell on a Rent to Own (not a contract for Deed) because when (not "if") the occupant is late or stops making monthly payments, with a Rent to Own, you can evict them in a month or two. With a contract for Deed, it requires foreclosure which can take a year or more. This video explains more: th-cam.com/video/hg4K12a4WZo/w-d-xo.html
I agree with everything in this video but for a fair comparison you need to include equity buildup. The cash flow is not the only positive number I think it should also included the mortgage loan principal payoff. Flipping should still come up ahead but it won’t take the 10+ years like you say in the video. Overall house renting is less upside, lower risk, less work but the aim should be to move into multi family homes like you said. I own a single family rental planning on doing a 1031 exchange to move into a multi family investment. Both strategies work doing any is better than sitting on the sidelines and doing nothing. Have a short term (flipping) and a long term goal (rentals).
Yes but you have to understand the concept of liquid Capitol and how it can accelerate wealth compared to it being tied up in a rental. I'm flipping 7 or 8 a year. That generates way more money than my rentals. Hes not saying rentals are bad, just 4 plexs and up have better ROI
Now what’s happening is investors are buying the new build $250 - $350,000 homes and putting them into section 8. The ROI is insanely good but I have very mixed feelings about it.
Flipping allows you to create some quick cash, however this creates a taxable event. Make sure you are planning for this. If a rental is only cash flowing $200, then don't buy it. You can't pay retail price for a rental and expect it to cash flow positive.
Wesley C. I mean I don’t have any properties and just getting into this and can tell you location is key in airbnb . If your in Cali and got a location let’s say close to staples center or just la In general . Of course Airbnb will get you a lot of more cash flow then renting . You could make a few hundreds to a few thousand off of one guest for a few days . Vs 2-300 hundreds monthly
Phil - Clift's notes opinion on investing in vacation rentals/condos in the Celebration, FL area? Do they have zoning issues there? I'm from out of state (MI).
Is there a point where it does make sense to hold the property? Like what is the trigger point for payoff (e.g. 24 months, 36 months...)? I've got a property I am in escrow on and already have someone willing to pay above what I paid without lifting a finger. IMO it is a steal either way I just don't know if there is a rule of thumb to refer to.
Phil, I’m getting to the point I think I need to utilize a property management group. I’ve heard a lot of nightmare stories from some investors. If I’m gonna grow any further I know I’m finna need one. My husband won’t be able to retire for another 2-3 years. Im currently mostly managing 8 properties/ 29 units on my own. It’s soooo overwhelming! Paperwork, maintenance, showings, leases, phone calls, etc...I’ve tried hiring help on the side, some are a total flop day one, others start out doing well... they get comfortable then start not doing quality work, Lieing about their hours, stealing off of us, etc... HELP! Thoughts?!?!
Try finding a good property management company to help with the lease agreements tenant background and credit checks. We have a company that we work with with our rentals and they do a fantastic job of weeding out the bad actors and all it costs us is on months rental.
Hire and train your own property manager. You know exactly what to do. You now need to document and systematize what you are currently doing and hire someone else to run that system. Read the book, "The E-Myth" to understand what I mean by "System".
How do you benefit from appreciation? It's called doing a cash out refi. Taking your proceeds and then buying more rentals with it. That's exactly what I did! Bought in 2012, in TN, and got $26K+ out and still cashflow each month on the new mortgage. Gonna use that to get another rental soon (financed of course).
No. If the Cap rate and the ROI was the same, it would be all cash deals. If the ROI is double the cap rate, you know that there was a loan involved. @@teacherhomieg
Seems similar to the old saying, "The only people who really got rich during the Gold Rush were those who sold the pickaxes and shovels." There will always be buyers. In a market downturn, the over leveraged and inefficient landlords are wiped out and a new wave of opportunists pick up the pieces for pennies on the dollar. Perhaps as Phil is saying, it is safer to wholesale and wholetail to the perennial buyer class than it is to join their ranks. I'm not sure what the answer is, but at least it's food for thought.
Phil your friend who purchased that property in PA for 25K, was that a foreclosure ? Also do you happen to know the average net rental income is on a 2 family or a multi family ?
Duplex. As for the average net rental income per unit on a multi family; it depends on the area. A really good NOI per unit on a national level is $200 per month per unit.
They still matter on that specific property; which is why the single unit, single tenant, traditional single family home is not nearly as productive as flipping homes and then buying multi-family units for long term rental.
I’m doing that now. I call it a “slow flip” and it works great ROI is infinite because I have no money in the deal after cash out refi. Average profit is $30K.
"High" is relative. For me, the cash on cash returns must exceed 40% and the cap rates must be above 20% for me to consider it "high". Most people would jump for joy to have a 1/4th of those figures.
Phil, thank you for your videos. There is plenty of real life real estate expertise in there. I'm wondering if you have a video on dos and don'ts of tax sales. The term could be different but basically I'm referring to forced sales by municipalities due to propery tax defaults. Such properties are usually cheaper but come with risks. The key one being issues with possession (municipalities dont guarantee vacant possession) and no access to the property before bidding. Any advice will be appreciated.
Makes a lot of sense, Phil. Renting single family homes always seemed like a losing strategy to me. If you lose a tenant and have vacancy it can wipe out your profit for the entire year.
I disagree. I bought a home in 2008. I rented it to a family who lived in it over 5 years. The rent cover the purchase price of the home. Im out of pocket for about $40,000 in renovations since i bought it but i now have a nice home to live in. I purchased another home in 2009. I just moved out of it last year. Before i moved in it, tenants would stay 2-3 years. There were only 2 families since 2009. Rent to older couples with great incomes. Young couples don't stay in these multi-units very long. They break up and move home with mom. They get ideas for new adventures and move on. They have kids destroying the property. They have parties and disturb the "good tenants".
How do you save money on flip money? I was gonna do a flip in California then realized it’s ordinary income on the profits. And cali has 10+% state tax Profit. so it’s about 45% -55% taxes!!!!!!
@@freedom_mentor Well for this flip I'm going to potentially be making $35k (I'm in escrow selling now) so I'm not sure at his point how to write off the $35k... eek
@@MetalBum You've still got over two months to spend those funds on "business expenses" like a car, etc. There are many ways to spend that money wisely so that you get future benefit without it showing as taxable income.
@@freedom_mentor thanks phil I'm actually looking into that. I actually have a property management company... so i'm going to pay my property management company a 'project manager fee' I think and then write that off some more on office expenses. I saw your other videos on writing off more would that make sense?
Interesting. I have two rental properties (condos), and am in the midst of refinancing one to take out cash and look for a single family rental. This makes me rethink that. I've been afraid that having a yard and roof at a rental property will make things more expensive. Now I'm thinking maybe I should save for longer (or try a flip or two) and use that money plus the refinance to get a multi-unit.
Condos rarely cash flow very well because of the association fees, etc. Selling those and 1031 exchanging into much higher R.O.I. property would be very wise.
"A" class content! I've been educating myself a lot about RE investments, and the more I read and watch, my questions gets more and more complicated. This content answered a lot which I couldn't figure out. Thanks Phil! Can you do a content that explains "how to invest RE rental property with $500k cash". After watching this vid i now understand it's best to invest multi family than traditional single family. But with 500k how can I invest more properly, further and safer? Thanks.
Bought a house for $400k. Renovate it for $50k. Selling it for $550k (negotiable). Renting out $2000 per month. However I made a special tenancy agreement that is "Rent to Buy" with a period of 5/10 years. Every 2 years I will increase the rental of the property at a fix price of $100.
For a landlord appreciation is totally unhelpful since the property taxes will more than likely reflect any increase in market value. You won't benefit at all from appreciation unless you sell. All it can do is hurt you. ..
It all depends on the property's net cash flow...some states have very high property taxes and high insurance rates yet low rental incomes (aka New Jersey Shore)
I have a different outlook on rentals. In fact I dont believe they are profitable with single family homes. You have your loan or mortgage to pay along with insurance and taxes, hopefully you are making over what you owe in rent, and assuming you always have a tenant, you still have maintenance cost monthly, heating and air units are not cheap, appliances, flooring, plumbing, it adds up. Why not take that same single family home, owner finance it to a tenant buyer or stretch out a lease option for 3 to 5 years. You get down payment up front, charge the tenant buyer a little more month to month, and there's NO MAINTENANCE for you because you basically become the bank and the tenant BUYER who is purchasing the property assumes the maintenance. Depending on the deal u made you could be killing it in the end on the purchase option as well so that's 3 profit periods on 1 deal, in the beginning you are getting a down payment anywhere from 3 to 10 percent, then you get a cashflow monthly all while saving on monthly expenses, and when they buy the profit in order with the deal you made could be a home run depending on the purchase price you negotiated and the sales price you negotiated with the tenant buyer.
Thanks Phil!!! Lol, i have the right mindset, now just time to nail down my first deal..Cool to know you actually reply on youtube, not many ppl with real estate investment channels do! I was wondering, assuming you are a man who's can see things coming in the finance world..I'd love to pick ur brain on what u r doing to prepare for a tank like it looks like we r screaming towards.
@@JuancoPRoFlow No, the price of the house is 43,500, probably could get it for 40,000. Currently has a tenant paying 1,050. Payment would be around 300.
@@b2dary890 ooh okay, but like Phil mentioned in the video, houses at that price point could turn into maintenance hell. I wish you the best though, nothing but positive vibes for you.
Disagree! I think there is a major wrong assumption made here! When it considers the national average for appreciation is 2-3% YY then how could an argument be made that flipping the house income $28000 makes any sense for all range of property value! Yes, I agree if the property investment value we are taking about would be less than $200K.)
Phil I’m 18 interested in real estate and I’m planning on going to college. However, just recently I met a man who is successful in real estate and it seems to be a very profitable business. Do you recommend I get a degree into anything? How should I start if I don’t have any capital? I only have $1500. Should I email you?
Every successful real estate investor has a mentor. Get your mentor here: www.freedommentor.com/apprentice
Phil: I SWAN (sleep well at night). I own many SFH and Duplexes. Have for over 25 years. I am retired with a net rental income in the six figure range. I am a multimillionaire. The times I have been to eviction court I can count on one hand (eviction court boils down to how well you do screening of prospective tenants). I use property management companies to run the operation. Headaches are non existent. My wife and I travel to Europe on a yearly basis (trips paid for by tenants). My children will inherit a money making operation that will produce a comfortable lifestyle for them. My buy and hold strategy has worked very well for us. Flipping is a job. A tread mill I care not to get on. Just my two cents. PS: I do enjoy your channel.
I appreciate your comment. Thanks for sharing. But while that sounds good, one could argue that it proves my point. After having owned those properties for 25 years, you only are generating in the six figure range with yearly net cashflow? It could be concluded that your extremely low net cashflow (in relation to the real estate you own) is the result of not owning high return on investment properties. They are paying your bills, but not ultra-high octane money making machines. You're losing all kinds of economies of scale too; whereas if you were to renovate and resell each one of those, especially if you could do them in clumps and 1031 exchange the money into some higher return on investment deals, you could easily be at seven figures income with the same "SWAN" experience. to each his own, but it sounds to me like you have sold yourself a little short by having so many single family home traditional rentals.
if you need the money you don't need to get a cash out refi. you can get a revolving line of credit at 5% currently an buy another property with 20% down. cash flow will keep coming. separate the taxes an insurance from principal an interest. So all your income an rent money is going to pay down the line of credit an when taxes an insurance are do just pay them with the line of credit. that's how money works for me an its not sitting in escrow. I have 5 properties an has work out for me at a young age. @@freedom_mentor
for people that don't know what a revolving line of credit is, even do the rate is higher you pay less because is simple interest. you pay much more with your 30 year Amortization schedule.
Heriberto Iribe Mind blown.
You are right Phil, Wally Johnson could do it your way and have a seven figures annual income. But why do all that flipping and have all the headaches and all the work? I think I prefer to do it Wally Johnson's way because six figures is plenty of income for the way I want to live. I don't need a 7 figure income.
Exactly! I never could understand wanting to deal with tenants and constant upkeep to make in a decade what a house flipper could make in a single transaction. I see comments about flipping being more work. I guess I just don't understand the hyperphobic terror over a little sweat and effort. I actually enjoy fixing up houses, and would much rather make $100 actively than $20 passively.
dude.... you are so freaking good at talking. i cant explain it but ive never heard anyone speak the way you do, its awesome.
I screamed when you said "If you bought a house in 2012, you bought at literally the perfect time in American history".
I bought my house in February 2012. My house is worth DOUBLE in just 7 years. WISH I would have bought more.
You have a new subscriber!
Congratulations! You may not see that ever again in your lifetime.
Phil you have the best real estate channel on TH-cam, without a doubt. Thanks for posting!!!!
I honestly love this guy... hes literally my mentor.. all his videos are so helpful... i rent out 2 houses.. and Phil your videos help me learn so much i I appreciate it
Phil taught me everything I know about REI. I met him in person and he is a genuine guy. He's one of the smartest people in general I've ever met plus he has integrity which is extremely rare these days.
Either way it's possible to make a good income it just depends if you want a high paying job through active Investing or passive income. Both are profitable options.
Dud 2000 I think Phil is the real deal-not a fake like some of the others guys 👍😀
I have to say I prefer rentals. Minimal stress, minimal work, and taxed better. There's nothing quite like passive income!
Some rentals are just as much, if not, more work and stress than flipping...they're called traditional single family home rentals :)
Eh, I think it depends. If you're talking D class neighborhoods, I'm with you. But it's hard to argue an A, B, or even C grade single family rental is just as much work as a flip.
I agree. Especially when you have a property management company who takes care of everything including the repairs. I do that and it's made my real estate investing truly passive. If flipping was your full-time job then that's great, but if you have a full-time job, a family, and invest in real estate on the side then flipping houses regularly would be too overwhelming.
Exactly!
I'll put together a video soon that shows how much automation one can do with house flipping and how little work it can be. @@jamesallenrealestate
Thank you Phil! I own 8 properties that total 29 units... you are correct! My monthly income is much higher than my local counterparts that only buy/rent out single family homes. All mine are multi unit properties. My expenses are lower on average as well for the exact reasons you outlined in this video. For me, it’s always been about the math. When looking at the potential properties to buy, I look at how can I keep my expenses low while obtaining the highest potential income without costing ME too much money. I never want to be out of pocket on any property if I have a unit empty. Thus far, it’s been very successful using this formula. I will say, however, lots of increases in property taxes, income taxes, insurance etc. so while we have raised rent to accommodate these increases, our monthly income % has remained the same.
Your magic formula is basic sense though, right?
Ron yes sir! 😉
What about the argument that I've seen being made on other channels that multi-unit properties have a higher level of churn compared with single family homes -- where tenants tend to stay put longer. Have you experienced this?
Me and some good friends are looking into the flipping/renting business. We’re looking to start out with flipping several houses to build capital in the company, and then starting to get some rental properties to have long term investments so we can make money while we sleep. But hadn’t considered multi-family homes. Glad I watched this video and got your advice on not renting single family homes.
Phil I simply want to say God bless you and keep you healthy and wealthy. You focus on number and number doesn't lie.
Thank you Murr from impractical jokers for teaching me Real Estate
Thank GOD I watched this before buying a sing family rental as my first investment !!! Thank you Phil!!!
I like how simply you break down this with just a marker and a whiteboard. Don't need to have great editing and fancy stuff to put out great content.
Well done! New sub. 👍🏼
I loved this video. Really filled in some blanks I had with renting vs flipping. Thank You Phil!!!!
It also depends on one’s goals. Great video Phil!
great video! I had to come back and watch again
Thank you Phil! You and your team have truely changed me & my family's life.
We STR our single family homes that used to be our primary residence on Airbnb and VRBO and make double to triple what we would make compared to Long Term Renting.
Have been doing it for 2+ years and have had one not so good guest. And the equity in our property is insane because its now considered an investment property on 9 acres is through the roof being close to the Bay Area. We have also put a ton of sweat equity into it and we bought in 2011ish.
Short Term Renting I think is the new game with high turnover so you are able to get into your listing often so no huge repairs, it increases the value of your property (people are buying Bnb properties for 50k+ just because its a rental), and we are making at least 2x more than we would if we long term rented.
I moved completely over to short term vacation rentals about 6 years and have never looked back. It's a cash flowing dream.
Problem with these numbers you are comparing is your 28k profit on the flip is the equity you have in the house. When you sell you receive it. But the "200 per month" can't be compared to the 28000 because the 200 per month is profit. The 28 k is still sitting there. So after your 100+ months , yes you have made that 28k but the equity is still in that house which at that point is much more than 28k because the rent also paid your principal down as you pocketed the 200 per month
You've done it again Phil. Thank you.Great video.
I bought a duplex in 2017 for 10k which was in good condition. I rented each unit at $550/month and I did the attic and rent it for 500/month. Thats $1600/month gross without mortgage on a 10k investment. Thats unheard of. I also have good tenants who pay on time.
My next move is to make a 2 br apartment rental in the basement.
I love those rentals. Well done!
How did you find a duplex for 10k?? Where do you live?
@@mammothorbust CT
@@jeanlenor1858 CT is not landlord friendly. Have you had any evictions yet? If so, what has it cost you?
@@mikeandkathyaillon6749 I didn't say I invest in CT, I said I live there. You can't buy an empty lot for 10k in CT.
Im watching this from Poland. Great advice. Amazing content
I have watched a lot of TH-cam videos that state the obvious. This video however is different. I have actually learnt from it.
What about the principal pay of the mortgage you get from the rental payments over time? Equity over time Doesn't that go into the profit? So 200/Mon plus say 400-500 in principal on the loan that when you sell you make as well?
This deserves an update for the appreciation point.
I'm glad you reiterated because I was going to ask does this include multi-units & vacation rentals. Thanks! Your videos are awesome
I love your point of view
I'm in the learning process, and I really appreciate the other side of the argument points you bring out.
Thanks.
Looks like to me the answer is do the math. I love the idea of vacation rentals. Especially in places I want to go. Thats like a win win win if you have a management company that handles cleaning and all that.
Just sold an apartment in Hong Kong bought in 1988 for HK$425k. Sold in 2017 for HK$4.4m. Self occupied for that 29 years. That's a long wait - 29 years. No capital gain tax. So, is flipping over a couple of years worth it?
That's an average of about 32% return on the original investment per year for those 29 years. Excellent R.O.I.! We flip houses as fast as humanly possible. Well less than 6 months. With the Rent to Own technique, that can be a 1-2 year resell period. Then there are those investors that buy multi-family properties, renovate each unit over time, up the rents, and then resell after it is at peak performance. But I don't recommend that because if it is performing so well, why sell?
Thank you
I love your videos. I wish I'd had these in the 70's.
Also, Rents go up over time, in some cases, every year. That wasn't factored into the comparison. However, I love your channel and have learned a lot on here!
That was factored in! Property tax and insurance increases tend to cancel out any rental increases.
See your point but just left out equity paydown, leverage, deflation, reverse inflation on renting out SFHs. Can you really can't build wealth on flip profits vs owning SFH rentals for 20 years. I have 4 SFHs worth over 1M and should be very nice in 20 years?
I have a great playlist on the subject of owning rental property: th-cam.com/play/PLcPfCvShc59vmdxOSDKLeDgxHYq-xze9X.html
I own more than $20MM in rental property so I certainly am pro-rental property and deeply understand the benefits. But you have to be strategic with the rental property that you own.
Is flipping via contract for deed advantageous? With a contract for deed you get regular cash flow without paying property tax or maintenance. You get a down payment up front and even though you sell to the strongest prospect there's the possibility of default.
Also selling a house is much faster/easier via contract for deed as I understand it? Selling at a somewhat higher price also?
Thanks Phil. You're the BEST real estate instructor on YooToob.
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We oftentimes sell on a Rent to Own (not a contract for Deed) because when (not "if") the occupant is late or stops making monthly payments, with a Rent to Own, you can evict them in a month or two. With a contract for Deed, it requires foreclosure which can take a year or more. This video explains more: th-cam.com/video/hg4K12a4WZo/w-d-xo.html
I am so thankful for this channel. I had really expanded my mindset
I feel like for your first few deal you should flip so you can get a good chunk of money quicker then with that money buy rentals.
I always had a feeling this was the case, thanks for the knowledge!
Happy Friday! Thanks for the wisdom nuggets!
I agree with everything in this video but for a fair comparison you need to include equity buildup. The cash flow is not the only positive number I think it should also included the mortgage loan principal payoff. Flipping should still come up ahead but it won’t take the 10+ years like you say in the video. Overall house renting is less upside, lower risk, less work but the aim should be to move into multi family homes like you said. I own a single family rental planning on doing a 1031 exchange to move into a multi family investment. Both strategies work doing any is better than sitting on the sidelines and doing nothing. Have a short term (flipping) and a long term goal (rentals).
Yes but you have to understand the concept of liquid Capitol and how it can accelerate wealth compared to it being tied up in a rental. I'm flipping 7 or 8 a year. That generates way more money than my rentals. Hes not saying rentals are bad, just 4 plexs and up have better ROI
Great video, Phil. I would love to get a copy of your book.
Get one here: www.freedommentor.com/free-book
Renting. Especially short term rentals. Airbnb is the best way to make a lot of money.
Ah wow 🔥 dope breakdown! Do more like this
Phil, your videos are awesome! Thanks!
Now what’s happening is investors are buying the new build $250 - $350,000 homes and putting them into section 8. The ROI is insanely good but I have very mixed feelings about it.
Flipping allows you to create some quick cash, however this creates a taxable event. Make sure you are planning for this. If a rental is only cash flowing $200, then don't buy it. You can't pay retail price for a rental and expect it to cash flow positive.
Most single family homes in most areas will not cash flow positive paying retail.
Phil, how about renting vs. Airbnb's? Which is a better investment?
Wesley C. I mean I don’t have any properties and just getting into this and can tell you location is key in airbnb . If your in Cali and got a location let’s say close to staples center or just la In general . Of course Airbnb will get you a lot of more cash flow then renting . You could make a few hundreds to a few thousand off of one guest for a few days . Vs 2-300 hundreds monthly
Phil - Clift's notes opinion on investing in vacation rentals/condos in the Celebration, FL area? Do they have zoning issues there? I'm from out of state (MI).
I don't know off the top of my head. You'll need to research it by calling the city of Celebration as well as Osceola County zoning departments.
Very real and knowledgeable. Thanks Phil
Nice thanks haha that ending was good
You da man Phill!
Is there a point where it does make sense to hold the property? Like what is the trigger point for payoff (e.g. 24 months, 36 months...)?
I've got a property I am in escrow on and already have someone willing to pay above what I paid without lifting a finger. IMO it is a steal either way I just don't know if there is a rule of thumb to refer to.
It depends on so many factors.
Can you put home warranties on rental property?
Absolutely phenomenal video. Thank you Phil
What do you think about short term/executive rentals that are fully furnished and equipped?
If the NOI is huge, I love them!
Phil 2020!!
another great wisdom. Thanks for sharing.
Awesome! Excellent presentation, TY
I like to flip....never tried renting but I don't really want to. Possibly if the area was right.
Love fixing and flipping!
Phil, I’m getting to the point I think I need to utilize a property management group. I’ve heard a lot of nightmare stories from some investors. If I’m gonna grow any further I know I’m finna need one. My husband won’t be able to retire for another 2-3 years. Im currently mostly managing 8 properties/ 29 units on my own. It’s soooo overwhelming! Paperwork, maintenance, showings, leases, phone calls, etc...I’ve tried hiring help on the side, some are a total flop day one, others start out doing well... they get comfortable then start not doing quality work, Lieing about their hours, stealing off of us, etc... HELP! Thoughts?!?!
Try finding a good property management company to help with the lease agreements tenant background and credit checks. We have a company that we work with with our rentals and they do a fantastic job of weeding out the bad actors and all it costs us is on months rental.
Hire and train your own property manager. You know exactly what to do. You now need to document and systematize what you are currently doing and hire someone else to run that system. Read the book, "The E-Myth" to understand what I mean by "System".
This is amazing keep it up Phil!
How do you benefit from appreciation? It's called doing a cash out refi. Taking your proceeds and then buying more rentals with it. That's exactly what I did! Bought in 2012, in TN, and got $26K+ out and still cashflow each month on the new mortgage. Gonna use that to get another rental soon (financed of course).
Do that model with high return on investment rentals, not traditional single family home rentals.
Phil Pustejovsky what do you consider high ROI on a duplex? I’m seeing some of them have ROIs lower than single family rentals in some cases.
At least a 20% CAP rate and 40+% roi @@teacherhomieg
Phil Pustejovsky 20% Cap rate and 40% ROI!!!??? Wow that’s high. Must be all cash deals.
No. If the Cap rate and the ROI was the same, it would be all cash deals. If the ROI is double the cap rate, you know that there was a loan involved. @@teacherhomieg
What about a vacation rental property?
Seems similar to the old saying, "The only people who really got rich during the Gold Rush were those who sold the pickaxes and shovels." There will always be buyers. In a market downturn, the over leveraged and inefficient landlords are wiped out and a new wave of opportunists pick up the pieces for pennies on the dollar. Perhaps as Phil is saying, it is safer to wholesale and wholetail to the perennial buyer class than it is to join their ranks. I'm not sure what the answer is, but at least it's food for thought.
Phil your friend who purchased that property in PA for 25K, was that a foreclosure ?
Also do you happen to know the average net rental income is on a 2 family or a multi family ?
Duplex. As for the average net rental income per unit on a multi family; it depends on the area. A really good NOI per unit on a national level is $200 per month per unit.
Hey Phil great video thanks for sharing!
Good video.I am building a duplex close to Sarasota downtown ,my controversy is "vacation rental or regular rental" What would you do.
Vacation will bring more, if you can convert to corporate lodging in off season
You should have already had your exit plan dialed in before you started building. You may not be able to legally do a short term vacation rental.
@@freedom_mentor good point there Phil.
Vacancy could be a problem if you only own one or two rentals, however if you have more scale, a few vacancies don't even matter.
They still matter on that specific property; which is why the single unit, single tenant, traditional single family home is not nearly as productive as flipping homes and then buying multi-family units for long term rental.
Hey Phil, is it a good idea to refi one rental to buy another? I Cant keep my capital up so I sold my last rental.
Hey Phil what do you think about fix cash out refi then sell rent to own on single family homes?
If the return on investment is large enough, then go for it. But I doubt it will be after all that.
I’m doing that now. I call it a “slow flip” and it works great ROI is infinite because I have no money in the deal after cash out refi. Average profit is $30K.
Excellent analysis! Thank you!
What type of properties are considered High ROI rentals?
"High" is relative. For me, the cash on cash returns must exceed 40% and the cap rates must be above 20% for me to consider it "high". Most people would jump for joy to have a 1/4th of those figures.
Phil, thank you for your videos. There is plenty of real life real estate expertise in there. I'm wondering if you have a video on dos and don'ts of tax sales. The term could be different but basically I'm referring to forced sales by municipalities due to propery tax defaults. Such properties are usually cheaper but come with risks. The key one being issues with possession (municipalities dont guarantee vacant possession) and no access to the property before bidding. Any advice will be appreciated.
I sure do! Watch this video: th-cam.com/video/rD656rQWvxQ/w-d-xo.html and check out this video too: th-cam.com/video/WClDPY_948A/w-d-xo.html
Makes a lot of sense, Phil. Renting single family homes always seemed like a losing strategy to me. If you lose a tenant and have vacancy it can wipe out your profit for the entire year.
I disagree. I bought a home in 2008. I rented it to a family who lived in it over 5 years. The rent cover the purchase price of the home. Im out of pocket for about $40,000 in renovations since i bought it but i now have a nice home to live in.
I purchased another home in 2009. I just moved out of it last year. Before i moved in it, tenants would stay 2-3 years. There were only 2 families since 2009.
Rent to older couples with great incomes. Young couples don't stay in these multi-units very long. They break up and move home with mom. They get ideas for new adventures and move on. They have kids destroying the property. They have parties and disturb the "good tenants".
How do you save money on flip money? I was gonna do a flip in California then realized it’s ordinary income on the profits. And cali has 10+% state tax
Profit. so it’s about 45% -55% taxes!!!!!!
Use those funds to cover business expenses so your net taxable income is $0 on your flipping operations.
@@freedom_mentor Well for this flip I'm going to potentially be making $35k (I'm in escrow selling now) so I'm not sure at his point how to write off the $35k... eek
@@MetalBum You've still got over two months to spend those funds on "business expenses" like a car, etc. There are many ways to spend that money wisely so that you get future benefit without it showing as taxable income.
@@freedom_mentor thanks phil I'm actually looking into that. I actually have a property management company... so i'm going to pay my property management company a 'project manager fee' I think and then write that off some more on office expenses. I saw your other videos on writing off more would that make sense?
Interesting. I have two rental properties (condos), and am in the midst of refinancing one to take out cash and look for a single family rental. This makes me rethink that. I've been afraid that having a yard and roof at a rental property will make things more expensive. Now I'm thinking maybe I should save for longer (or try a flip or two) and use that money plus the refinance to get a multi-unit.
Condos rarely cash flow very well because of the association fees, etc. Selling those and 1031 exchanging into much higher R.O.I. property would be very wise.
Just asking is it best to do duplexs
No 4 plex. Or bigger.
"A" class content!
I've been educating myself a lot about RE investments, and the more I read and watch, my questions gets more and more complicated. This content answered a lot which I couldn't figure out. Thanks Phil!
Can you do a content that explains "how to invest RE rental property with $500k cash".
After watching this vid i now understand it's best to invest multi family than traditional single family. But with 500k how can I invest more properly, further and safer? Thanks.
Use the $500,000 for the down payment (along with a reserve amount) on a larger multi-family property, if not more than one.
With 500 k you should invest in multiple properties
Where do I get this book?
www.freedommentor.com/free-book
Phil could you be more specific as to what type of real estate would be considered High ROI?
"High" is a relative term. To me, "high" is more than 40% cash on cash return. Most people think more than 10% cash on cash return is "high".
@@freedom_mentor Is it fair to say that "high" roi on rental properties is most commonly attained through short term vacation rentals?
@@dhpitcher There are many ways to get there. I prefer short term vacation rentals but there are several other ways to pull it off.
@@dhpitcher people are killing it in big bear with rentals. i would love to flip for a rental there.
im just gonna ask what if your rental property will be rent to own property?
That could be an exception to this rule, as I mention that it is one of the 3 ways to turn a house into a cash flowing machine.
Amazing video thanks!
Here in Åland/Finland best ROI I get from studio appartments
Great info..BUT..its easier to find great deals on single family homes and theres alot more available compared to multi family.
Bought a house for $400k. Renovate it for $50k. Selling it for $550k (negotiable). Renting out $2000 per month. However I made a special tenancy agreement that is "Rent to Buy" with a period of 5/10 years. Every 2 years I will increase the rental of the property at a fix price of $100.
What is your net positive cashflow, per month, after paying all expenses including debt service?
I live in Detroit man I can milk the rental market there’s thousands of good performing multi-families here
Same here. This "wisdom" is all dependent on the area. I'm cash flowing 500+ on each of my properties
K. Hall nice profits! Are you in Detroit too?
K. Hall Exactly fam, what city are you in?
Same here.. Bought a 8 unit apartment building for 25k in 2018 and im currently renovating it. Cant wait to start cash flow 4k/month on it.
jean lenor much luck to you! What city are you in?
Great vid thank you for sharing
For a landlord appreciation is totally unhelpful since the property taxes will more than likely reflect any increase in market value. You won't benefit at all from appreciation unless you sell. All it can do is hurt you.
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GREAT LESSON (AS ALWAYS!!!) PHIL. How can one reach out to you directly?
Miss you Phil, haven’t seen a video in a couple years, but do you have students in the Los Angeles market???
We've done very well throughout California.
I see a lot of mentions about BRRRR and how people are loving it.
High Octane ROI, that was funny.
So which will these high octane roi investments be? Thanks
Yes, that was totally unclear. Put the money in "high ROI" rental properties. What does that mean???
Im deaf, Please add subtitles because many deaf people often leave this because lack of subtitles, can you update it?
TH-cam already has a Closed Captioning setting for any video you ever watch.
If you buy a foreclosed single family at below market value i dont see why there wouldnt be a good ROI even on a rental proerty.
It all depends on the property's net cash flow...some states have very high property taxes and high insurance rates yet low rental incomes (aka New Jersey Shore)
I have a different outlook on rentals. In fact I dont believe they are profitable with single family homes. You have your loan or mortgage to pay along with insurance and taxes, hopefully you are making over what you owe in rent, and assuming you always have a tenant, you still have maintenance cost monthly, heating and air units are not cheap, appliances, flooring, plumbing, it adds up. Why not take that same single family home, owner finance it to a tenant buyer or stretch out a lease option for 3 to 5 years. You get down payment up front, charge the tenant buyer a little more month to month, and there's NO MAINTENANCE for you because you basically become the bank and the tenant BUYER who is purchasing the property assumes the maintenance. Depending on the deal u made you could be killing it in the end on the purchase option as well so that's 3 profit periods on 1 deal, in the beginning you are getting a down payment anywhere from 3 to 10 percent, then you get a cashflow monthly all while saving on monthly expenses, and when they buy the profit in order with the deal you made could be a home run depending on the purchase price you negotiated and the sales price you negotiated with the tenant buyer.
You have the exact same outlook on Single Family Homes as me.
Thanks Phil!!! Lol, i have the right mindset, now just time to nail down my first deal..Cool to know you actually reply on youtube, not many ppl with real estate investment channels do! I was wondering, assuming you are a man who's can see things coming in the finance world..I'd love to pick ur brain on what u r doing to prepare for a tank like it looks like we r screaming towards.
Why do you think we are "screaming towards a tank"? @@kevinrichardson8591
What if a completely renovated single family generates 750 net every month?
It depends on how much money you have in that deal and the maintain, management, vacancy challenges / headaches.
@@JuancoPRoFlow No, the price of the house is 43,500, probably could get it for 40,000. Currently has a tenant paying 1,050. Payment would be around 300.
@@b2dary890 ooh okay, but like Phil mentioned in the video, houses at that price point could turn into maintenance hell. I wish you the best though, nothing but positive vibes for you.
@@JuancoPRoFlow yeah thanks. The house is completely renovated.
Disagree! I think there is a major wrong assumption made here! When it considers the national average for appreciation is 2-3% YY then how could an argument be made that flipping the house income $28000 makes any sense for all range of property value! Yes, I agree if the property investment value we are taking about would be less than $200K.)
Phil I’m 18 interested in real estate and I’m planning on going to college. However, just recently I met a man who is successful in real estate and it seems to be a very profitable business. Do you recommend I get a degree into anything? How should I start if I don’t have any capital? I only have $1500. Should I email you?
Get started now in real estate investing.
Phil Pustejovsky what should I invest to? I really want to I just don’t know what to invest into.
@@capcap7456 Take this free video course: courses.freedommentor.com