How Boring, 40%-Down Rental Properties Can Still Make You Rich

Рет қаралды 25,492

Күн бұрын

⭐ Join Rental Property Mastery, my coaching & learning community:
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🎙️ Episode 346 - The person who does boring passive investments four or five times during that decade is going to do, on average, better than the person who's sort of side hustling an active investment. Coach and Erion discuss how traditional rentals, despite larger down payments, can build wealth through capital appreciation and strategic financing.
📄 Show Notes:
www.coachcarson.com/40downren...
▶️ Next Video: How to Make Rentals Cash Flow With 8% Mortgages
• How to Make Rentals Ca...
🎬 Topics Covered:
00:00 - Discussion on Real Estate Investing Strategies
01:23 - Impact of Interest Rates
02:37 - Benefits of Boring Rental Strategies
04:16 - Understanding Capital Appreciation and Cash Flow
06:32 - Leverage in Real Estate Investments
08:52 - Evaluating Assets and Financing
09:47 - Analyzing Above the Line and Below the Line Issues
13:17 - Passive vs. Active Real Estate Investing Strategies
15:05 - Time Constraints and Investing for Financial Freedom
18:09 - Long-Term Wealth Building Strategies
18:29 - Optionality and Flexibility Through Boring Investments
19:54 - How to Make Rentals Cash Flow With 8% Mortgages
🔗 Connect with Erion:
• Twitter: x.com/investarchitect
• Website: www.signaturehouston.com/
• LinkedIn: / erionshehaj
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Пікірлер: 104

@hannahha9225 Ай бұрын

I love the boring but nice property in a great location. We save to put 20-30% down, get a better interest rate because of the higher down, no PMI insurance, get a better property and can get better tenants. I’m doing it slow and steady. Love the stability of this method.

@dropoutandretireearly1781 Ай бұрын

IF YOU PUT 1OO% DOWN YOUR INTEREST RATE IS O % !!!! LOL !!!!

@philipem1000 Ай бұрын

I only would buy places I would like to live in. And yes better properties yield less hassles and better tenants. Warning: be prepared for some huge market shift as happened in 2008 -- I took a huge bath in all my investments but the rentals held up even though the equity evaporated.

@hannahha9225 Ай бұрын

Yes. I only buy places that I would live in when I was single, newly married or with a family. I have passed on multiple purchases because I would not live there myself.

@RicksCafeAmericana Ай бұрын

This is a great strategy for people with money looking to diversify their investments. I know someone who has done this in the pricy Bay Area. She has great cash flow on a home she bought 20 years ago and is breaking even on a property she bought three years ago having put 1/3 down. Ten years from now she will cash flow better and her equity will be through the roof. She did the same for out-of-state properties.

@CoachChadCarson Ай бұрын

Thanks for sharing. Great to hear more real life examples!

@Thomas-vh9th Ай бұрын

I started in 2009 with a $44K home as a long-term rental. Still with same tenant home worth $137K. Those rents paid for down payment on another "boring" home, which led to another, on and on. Seven properties later, I'm closing on another boring rental home in one week. Used "cash out" mortgage on one of them for tax purposes. All others mortgage free. I prefer the boring type of the investing business.

@philipem1000 Ай бұрын

My strategy was to get break even cash flow (tax advantages and appreciation) and my criterion was "Would I like to live here?" because long term I would retire and move in to them one at a time, fix them up if needed and sell them as owner occupied to exempt the equity gains from taxes. I came to that after I realized poorer quality places brought in less money and more trouble to maintain and more problematic tenants. So after my learning experience I went for places about twice as expensive; had vacancies about half as often and made more money with less hassle. Today I live in the last property and love it here.

@et6794 Ай бұрын

Great video! Thank you guys for bringing another perspective on real estate investing with the larger down payments. 😊

@briani812 Ай бұрын

just did this in the bay area. mainly forced to put down more because it was a DSCR loan. but great area and great tenants. makes life a lot easier.

@TheNetwork650 Ай бұрын

Great info Fellas!! You two make a great duo! Just what I needed to confirm my current situation. Ty

@CoachChadCarson Ай бұрын

glad to hear it! Good luck! And thanks for the feedback. I have fun chatting with Erion, so I'm glad to hear it works for you, too.

@AJohnson0325 Ай бұрын

I read a book by a broker that has sold over a billion in real estate to other billionaires and he recommended 40% down payment and have an emergency fund equal to 10% of the purchase price. That helps survive a downturn in the economy so you don’t get foreclosed on.

@CoachChadCarson Ай бұрын

Once you make money you start thinking of preserving it. A lot of real estate strategies taught out there are about maximizing growth but not minimizing risk.

@parisnielsen9276 10 күн бұрын

@CoachChadCarson so you would say that is a good strategy?

@User-mc2mb Ай бұрын

Thank you, Coach! Great video👍

@noampaley Ай бұрын

Great perspective! Appreciation is the best way to take care of your money for long term

@BrooksHarper 18 күн бұрын

The above the line/below the line convo is solid gold. I would add that above the line issues may not only be impacted by the quality of the asset but also by the quality of the management of the asset.

@FinancialFreedomLifestyle Ай бұрын

Great video Chad. Thanks for sharing.

@CoachChadCarson Ай бұрын

thank you for the feedback!

@nancyguzman7887 21 күн бұрын

I watched this video while washing the breakfast dishes but the information is so helpful and dense, I’m re-listening to it and taking notes. Thank you!

@CoachChadCarson 20 күн бұрын

@@nancyguzman7887 thanks Nancy! That's a big compliment.

@joshuakrilov4042 Ай бұрын

This episode is fantastic! I'm gonna give it a second listen. Thank you.

@CoachChadCarson Ай бұрын

Thanks for listening (both times!)

@themultifamilywealthpodcast Ай бұрын

Great content! Real estate financing and asset value are really crucial in investment decisions.

@codycrossrealestate1 Ай бұрын

this has been my battle cry for the last 5 years, love it!

@shelleygreyrealtor Ай бұрын

Exactly, I love being a boring investor😂

@CoachChadCarson Ай бұрын

Boring small and mighty investors for the win!

@burbsboi18 Ай бұрын

Excellent discussion. I've been saying "boring is sexy" in real estate investing for years!

@Investorjerm Ай бұрын

Love the strategy great video!

@CoachChadCarson Ай бұрын

Thanks for watching!

@johnnyb33good21 Ай бұрын

I just purchased a 1 million fourplex in Mesa Arizona using 5% down Fannie Mae conventional loan. I'm going to live in one of the units and rent the other three units. I just closed on the property today June 3rd 2024. 30% 40% down payment is a lot to raise or save up to

@edl8248 Ай бұрын

That’s awesome, congrats. That’s the best play out there right now if one has the life situation where they can live in it.

@johnnyb33good21 Ай бұрын

@edl8248 thank you. I got started getting pre-approved back in September and October 2023 and then it took me awhile to find a fourplex that was all 3bed/2 bath units and then to be a successful in getting my contract accepted.

@tomrmazur Ай бұрын

I’m in Arizona too. I’ve been looking for a nice 4 plex but can’t find. Any tips?

@ReAl-uu8ku Ай бұрын

Thank you Chad, thank you Erion!

@user-bp5uo3lj1n Ай бұрын

Do you suggest applying for an interest-only loan? Less monthly payments and in most cases, the house will be more than enough to repay the loan and get some extra money. The cash flow monthly will be higher so we can be able to afford more houses and increase our cash flow.

@02nupe Ай бұрын

This is actually a good suggestion for ppl to consider

@CoachChadCarson Ай бұрын

thanks for the feedback!

@Sunflowers-Pumpkins Ай бұрын

More quality, less leverage…this should always be the advice. Even in low rate environments

@CoachChadCarson Ай бұрын

Agree. Sure makes it hard to lose following that advice.

@FinancialFIRE-Fighter Ай бұрын

Great message

@CoachChadCarson Ай бұрын

thank you!

@Mariobrown Ай бұрын

Hey Coach, great content! Question, have you done a video yet for the person who has a lot of money saved up (e.g. an Entrepreneur), let's say 2-4 Million, and want to invest in Real Estate but with a focus on income instead of maximum leverage and growth - so that the person can then enjoy financial independence (let's call it semi-retirement), and the rent income match their monthly cost of living. I'm aware that this is a small group of your audience but I was just wondering. Your recent examples all go in that direction, but you mention you usually talk about a person who still has a full-time job with great income and good savings. I wonder about the entrepreneur who hustled for 10-15 years, saved up a solid nest egg, and now wants to spend more time with the kids and be basically semi-retire, have great monthly cash flow from the properties, at least matching monthly cost of living and some extra. Maybe your recent videos are a good fit for that person too and there isn't a big difference between that person and an employed person? Meaning the same thoughts apply: don't focus on maximizing leverage/debt but instead pay off everything in cash for a property or at least 40-60% so that there is enough income?

@CoachChadCarson Ай бұрын

love the question, Mario. Thanks! In wrote about this type of person in my book The Small and Mighty Investor, but I haven't done as many vidoes (yet!). I called it an "Ender" or "Harvester" phase. In short, a person in that situation can just fast forward some of the journey financially and not have to maximize leverage and focus on growth. You can skip straight to the low-leverage, income-focused strategy. So, for example - buying 10 properties at $200,000/property and paying cash (or whatever number makes sense). If those properties produce a 6% unleveraged yield, you'd have $120,000 of income from your $2 million of equity invested. The BIG caveat is to ease your way in. It's tempting to go all in quickly. But I like John Schaub's approach of one property at a time, pause, breathe, learn, and then do the next one. You'll get better and learn a lot along the way. And as you get better, you can accelerate a little faster. Hope that helps! good luck! And if you (or others) find yourself in that particular situation, you'd also be a great fit for my Rental Property Mastery community. It's focused on more advanced investors (i.e. further along in their journey) who are working on situations exactly like this, and I give regular coaching and we have live events and community. coachcarson.com/rpm-yt

@SergioB-MakingMillionaires Ай бұрын

Something to think about

@TropicTrdr Ай бұрын

Like that old Smith Barney commercial; "We make money the old fashioned way, we earn it!"

@MarcelinaMakowski 8 күн бұрын

This year I want to use earning calls to help with my strategy on companies I want to invest in. However, I don't understand them. I am always lost and have no clue what they are discussing I lose interest after 20-30 minutes and not gaining much insight. What things should I be looking to get out of an earnings call to help me invest in a specific company or real estate?

@monkmysterio Ай бұрын

This is such an incredible channel. As an ordained monk, i hereby ordain you an official Bodhisattva of Real Estate. Tremendous value that you and your guest continually give away. If you sold toothpaste I would buy it from you as well. great great channel. So much giving here!

@markstone6263 Ай бұрын

@15:50 I disagree a little bit. bc if you have a w2 job that keeps you busy, you could still have the time to manage a STR, and then it is worth it a lot more if you cost seg it and write off against your W2 income

@RuneValken Ай бұрын

Spelled refinance wrong on the BRRR in the video.

@tommieruiz5122 Ай бұрын

Is buying down the points/interest rates a good option?

@CoachChadCarson Ай бұрын

I've seen several investors buy from builders recently, and the BUILDER bought down the interest rate from about 8% to 5.5%. Great deal for buyer/investor who now cash flows more, and the builder turns inventory fast.

@tyjameson7404 Ай бұрын

Coach and his wife love ❤️ the Latino community. His family with his daughters speak better Spanish (Español) than most chicanos..,🇫🇮👏🏿🇺🇦🇺🇸🇸🇪🇲🇽👍🐐

@TuanTran-eu9gr 4 күн бұрын

Better property requires less maintenance but more importantly sometimes better tenants. Can’t go around with good school district.

@tyjameson7404 Ай бұрын

Coach es muy chingon 👏🏿🔥🇲🇽🇸🇪🇵🇱🇫🇮🙏🙌🏾🇺🇦🇺🇸💰

@SoulInspiredSeller Ай бұрын

It’s me! 🙋🏻‍♀️

@CoachChadCarson Ай бұрын

glad to hear it!!

@Scottwang625 Ай бұрын

Why not do 20% down and keep the additional cash in treasury to get interests? Why tie all the equity in one property?

@CoachChadCarson Ай бұрын

definitely an option that I could see working. Fund the negative cash flow with treasuries interest. But I also like a property to stand on its own with cash flow. I don't want to have to juggle the two. And you'd be saving 8% interest vs investing at 5% today.

@monarch6226 Ай бұрын

Boring is good

@CoachChadCarson Ай бұрын

Agree! With investments that's a good thing!

@tyjameson7404 Ай бұрын

The only problem I have with coach is that he refuses to invest in Moncks corner or North Charleston ? There is so many opportunities in real estate in both markets ? Coach never talk about Moncks corner? 💔🙏🇺🇦🇫🇮🇲🇽🇸🇪🇵🇱👏🏿😥

@poonekar Ай бұрын

I would love to say positive things about this amazing channel and the guests, but I believe there are some critical mistakes made in the arguments against boring rental properties in this video. First off, in Maui they’re not taking away the ability to short term rent all properties as mentioned by the guest, but rather those that are in the residential zone. What do you think would happen if you own a STR in the hotel/ vacation zone (which is where you are supposed to be buying if your goal is to invest in STRs) when a third of your competitors are gone and no new supply will come? Let’s compare cash flow and appreciation to them in 10 years! Secondly comparing leverage in stock market, don’t compare with the dumb margin account model. Talk about leveraged ETFs. For instance SPXL goes up 3x the S&P. So if SPX goes up 8% your leveraged ETF would go up 24%. AND btw, this leverage is interest free and is constant i.e. doesn’t go down with amortization. I believe if you really wanted the highest return as possible with the lowest risk portfolio you should own all 3 types of assets.

@tyjameson7404 Ай бұрын

There is a lot is Latinos or chicanos that in North Charleston that coach never follows up with💔👏🏿🇺🇦🇸🇪🇫🇮🇲🇽

@terryt3281 Ай бұрын

If you plan on selling properties in retirement, great. Otherwise appreciation means nothing. It’s all about cash flow.

@CoachChadCarson Ай бұрын

Thanks for the comment. I would just say that you can trade that appreciated equity for cash flow that lets you retire. For example, you can sell some properties and use that equity to pay off debt on other properties that you keep for cash flow. Or you can 1031 exchange that equity into other properties that do cash flow more. And ... appreciation isn't just on price. It's happens as rent prices grow as well. So, a property that doesn't cash flow today could make a lot of cash flow in 5 to 10 years. I like buying cash flow up front when possible. But I don't think it's the only way to buy a good investment property. But there are a lot of different ways to make it work! Mine isn't the only way.

@ramonibarra8727 Ай бұрын

Putting 40 down, to break even on renting it out, so you are overpaying on the house by 40 percent, it doesn’t make sense unless you trying to keep prices up on homes, I could see put enough down to break even but if value drops your out of all your down payment, this sounds like horrible idea, it works but it’s your choice, I’ll buy boring treasury bills

@gmoney343 Ай бұрын

high interest rates still derail this strategy. The premise is that you start 40 percent. That's a lot. If you've got that kind of money, you'll do well no matter what strategy is chosen.

@CoachChadCarson Ай бұрын

why does it derail this strategy? The larger down payment is because of the higher interest rates. If rates were lower, you could put less down and still cash flow safely.

@gmoney343 Ай бұрын

@@CoachChadCarson They do for the reason you just stated.

@jerrystpierreofficial Ай бұрын

I wonder if that lager down payment may be worth more of it were invested in the S & P ?

@RicksCafeAmericana Ай бұрын

Probably. But if you need to diversify your investments, as those who have successfully invested do, it’s a great supplement with all the tax advantages and cash flow that keeps up with inflation.

@CoachChadCarson Ай бұрын

I like to compare unleveraged returns of real estate to S&P. If I can get 9-10% unleveraged on a low-risk real estate investment, I'm happy. Then any leverage will increase those returns to higher than 9-10%.

@jerrystpierreofficial Ай бұрын

@@CoachChadCarson That's a good model. How are we able to find unleveraged returns these days? I don't find them very often. Thankfully I bought my portfolio when the interest rates dropped. I locked in some really cheap mortgages that's really helping with cash flow today.

@Hardworkandrealestateprofits Ай бұрын

Boring works over time. The issue is most people are impatient and that’s what gets people into trouble. If you want to be rich overnight buy a lottery ticket. If you want to be wealthy be boring and stay the course 👍

@CoachChadCarson Ай бұрын

True! Takes patience and persistence

@toxicthesniper8264 Ай бұрын

People arent excited about it because 1 youre still borrowing money and 2 it wipes all of your security when investing. On top of that its been a questionable market imagine putting 40% down ans then now youre instantly under cause the property is only worth that 40% but you stkll owe 60% more. A bad deal still a bad deal. Im not saying good deals arent out there but majority of people cant see them

@CoachChadCarson Ай бұрын

thanks for the comment. how does putting 40% down wipe out your security when investing?

@toxicthesniper8264 Ай бұрын

@CoachChadCarson when investing in rentals things go wrong all the time. When you put such a large deposit down you won't have that money to replace (insert expensive item) The 40% works good for people who are already rich with millions plus. Even having one million could quickly disappear and put you in a feeling of discomfort. I'm not saying it can't be done and doesn't have a place but for 99% of people it's not applicable esp in this market

@kenwheeler1327 Ай бұрын

@@toxicthesniper8264 Your assumption about needing "millions" to make this work is simply not true. I have done this on two of my four properties to create cash flow and have maintained a comfortable reserve account even with the common challenges that being in this business creates, including one terrible tenant and a very serious mold problem. Both situations cost several thousand dollars to remedy. Did it "hurt" financially? Of course, but I factored those "hurts" into the scenario when I jumped into this arena little over two years ago. Point being, both properties cash flow and will recover the costs in about 6 months. PS...I am not "rich with millions", nor am I even close to that description.

@toxicthesniper8264 Ай бұрын

@kenwheeler1327 if you were able to afford 40% on 2 seperate properties depending on your area that's alot of money. You can see how a simple issue has set you back 6 whole months. Also just bc youre an outlier doesn't mean what I said doesn't have backing. I said for 99% it's not a method they can use. Congrats on being the 1%. Also being the 1% who could've utilized your liquidity better.

@kenwheeler1327 Ай бұрын

@@toxicthesniper8264 The problem with your critique is that it is totally based on assumptions: 1) "only people with millions" can make this work. That is simply not true. 2) 99% is a HUGE assumption based on what objective evidence??? Where do you get 99%? 3) "40% down on two properties is a lot of money". Compared to what? Yes it's more than 10,20, 30% but again, your assumption of a bad deal is just that...assumption. You have NO IDEA what my definition of a good or bad deal is, nor what "a lot of money" is to me. 4) 6 month recoup of costs while continuing a positive cash flow on both properties did not set me back at all. I paid for those expensed out of reserves which were intended for such instances, which I already mentioned but apparently you missed that. 5) "utilized your liquidity better". Better according to who? You? Once again, subjective reasoning based on your 'opinions' of deals you know nothing about except my brief description defending the 40% down example that worked without "millions" of dollars. 6) None of my properties are in my state. THAT is the reason they were possible.

@TheMrPorter Ай бұрын

So, you're increasing the cost of the property to you while paying upfront for negative cash flow? That sounds horrible. How long would it take to make a profit?

@derrickp Ай бұрын

Guess you didn’t watch the video

@CoachChadCarson Ай бұрын

Down payment doesn't increase cost of property. Just increases cash out of pocket. Two different things. And the point of bigger down payment is to avoid negative cashflow. Shouldn't do the deal if there isn't a good expected return or profit.

@jacobyatako Ай бұрын

What? 😆

@TheMrPorter Ай бұрын

@@derrickp I did watch the video and I don't agree.

@TheMrPorter Ай бұрын

@@jacobyatako I had the same thought!

@tyjameson7404 Ай бұрын

Yes! Passive investing should be very !! Boring 👍🇺🇦🇫🇮🇺🇸🇸🇪❤️🐐👏🏿🙌🏾🙏💔🔥💰