This Is Why You Need To Start Buying Rentals NOW
On this video we’re going to be talking about how you need to start buying rentals now and why and exactly how they make money for you. besides just the rental income, check it out.
𝐉𝐨𝐢𝐧 𝐎𝐮𝐫 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐅𝐚𝐜𝐞𝐛𝐨𝐨𝐤 𝐆𝐫𝐨𝐮𝐩
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𝐒𝐮𝐛𝐬𝐜𝐫𝐢𝐛𝐞 ➜ https://www.youtube.com/justincolby
𝐁𝐨𝐨𝐤 𝐚 𝐂𝐚𝐥𝐥 ➜ https://www.thescienceofflipping.com/learn-more
What’s up everybody welcome back to my YouTube channel. I am Justin Colby and I am sitting here at one of my favorite places to record these videos, which is incredible five star resorts here in Scottsdale, Arizona. And so as often as I can when the heat is not crippling, I tried to come here because it’s just awesome and very peaceful. With that being said, this video is going to be about why you need to be buying rental properties, I’m going to give you a personal breakdown of three of my rental properties and why you need to start doing this even if it’s one at a time. Because quite literally, it makes you money while you sleep. And I’m not just talking to the rents. Now if you like this channel, I would really love for you to like this video if you liked the topic. If you have not subscribed, make sure you subscribe the YouTube Gods really favorite channels that have good level of subscribers and make sure you get notified, I dropped three videos a week, all about business real estate in entrepreneurship. So let’s just jump into some of my rentals that I actually bought. And I’m gonna review three for you to give you some math to under help you understand why this really just makes sense. Even if you can’t go out and buy a bunch of rentals because cash is tight. There are ways to buy rentals without having your own cash. But ultimately, I want you guys to learn the importance of this because it makes you money while you sleep. And again, I’m not necessarily talking about the rental income. First of all, I’m going to show you an actual document that came from my lender to give you a breakdown of how this is actually making money. So as you see here on the side, this is one of my rental properties. And what’s really cool about this is I actually bought this property, estimating roughly an 80 to $85,000 value was you see here at the top, the lender actually went out, they did their own appraisal and they gave the value of $90,000. So that’s one of the points I want to bring up to you guys is I bought this right. And part of the the secret to buying rentals and getting in capitalizing on the money that it can make you is making sure you’re buying right now I’ll talk a little bit more about that here, a little further down into the video. But I already came in to $5,000 more equity than I thought I was going to by simply buying it right. So out of the gates, I just made $5,000.
So with that said, that’s just one component. Now let’s talk about how I bought it. I bought it low, right. And then I remodeled it, it’s called the burn method for those that don’t know, but I’m buying it, remodeling it, rent it, and then I refinance. So this document is about refinancing. So as you see the breakdown here, if you take a look at everything, my interest rate is 5%, which is not as great as a bank. But what I’m doing is I’m using a hard money lender that maybe has a higher interest rate than you would if you went to Bank of America, Wells Fargo or any of the larger banks. But I’m okay with that because it actually doesn’t go against my Frank Dodd Act, which would say I can only have 10 rental properties under my name, etc. So this allows me to have loans in my LLC. And then I start to get point number two, which would be tax write offs. This is another incredible way that rental properties are actually helping me make money while I actually sleep. So as I have here, you see that there’s an interest rate and there’s an interest payment. And at the very bottom, you see that my payment to this lender is p i t II, that means principal interest, taxes and insurance. And it comes into roughly $400. Now, roughly 25 to 30% of that will be going towards the interest and taxes and insurance. And so that leaves the remainder paying down my principal, and I’ll get there here in a second. So this point number two here is the tax write offs. First and foremost, I’m not an accountant. I’m not here to give you tax advice, but I would talk to your accountant about how you can take advantage of depreciation. If you just simply google real estate depreciation on rental properties, any one of those words, you’ll be able to realize that they do a 27 year 27 and a half year depreciation against your purchase. And rehab investment. So out of the gates, I’m getting a massive tax write off on the depreciation of the purchase price and my renovations that I made on these homes, so that will last for some time because the amount of income this property’s making, relative to 27 and a half years of depreciation, that type of tax write off will last me for some time. On top of that, I am actually getting a tax write off for the interest paid even after the depreciation has been taken out. That’s another great tax write off. So again, I’m making money because I don’t have to pay as much in taxes. And I’m making money because I bought the property right and walked immediately into more equity than I even thought of. That’s just two ways. Now let’s talk about the third and one of the most important, this is the principal pay down. This is really, this probably should be number one. And the reason being is I don’t have to pay the bank, I’m not paying the interest, I’m not paying the principal, it’s getting paid by my tenants. So every month that my tenant pays their $850 a month, which is what we’ve rented this specific property out to $400 or so goes to the bank, it is paying principal it is paying interest, taxes and insurance. And roughly 7570 to 75% of that is going directly towards the principal. So let’s just use the example of $300 a month is going towards the principal, what $300 times 12 is 30 $600 a year is being bought down. And I’m actually gaining more and more equity, that means I just made 30 $600 that given year. Now multiply that times 10. In 10 years, I made an extra 36,000. Now I have two other rental properties that I’m not going to give you another document for right now because we have not yet refinanced it, I actually bought it in cash and remodeled it in cash, and we will refinance it and so I don’t have their document yet. However, that being said, I did buy right again, I did remodel it, and we’re going to rent it for give or take 850 or $900 a month. The reason is, I now all three properties are roughly in the same neighborhood just very close to each other. So I know my first home was valued at 90,000. So I’m estimating now these other two are valued at 90,000. And by the way, I estimated them the same way I estimated this anywhere from 80 to 85. So all three properties, I just gained $5,000 each on all three. Again, I just made money by buying this. Now. Also, if I take my 30 $600 a year on one rental property, and I do that times three, I’m now actually making $10,800 a year for doing nothing. Now again, you multiply that times 10. And you’re talking six figures for doing nothing but buying it remodeling and putting a tenant in now. I don’t mean nothing guys, yes, being a landlord has its headaches, but you build it out over time. This isn’t the fast game, this isn’t a get rich quick this is make money for the long term. And ultimately, guys, what we are all in it for is building wealth. Now I just gave you three points of why buying rentals is so important to how it can make you money first appreciation or buying it right. If you buy it low enough, you’re gonna walk into a decent amount of equity that you didn’t even know. So buy, right? Second, depreciation, tax savings, interest tax savings. Third, they’re buying your principal down is principal pay down. And lastly, guys, I don’t need to talk about it. But you actually make money as you see on this document, I’m going to be making roughly $450 a month give or take, that does actually go into my pocket if I still want. Here’s the secret that I’ll give you a tip on how I’m actually going to continue to buy more. I keep the money in the LLC. And I use that money to buy more and more and more. If you’re liking this, make sure you smash the like button and hit the subscribe button here. Make sure you are putting in the comments, any questions or thoughts you have. And by the way, I would love if you share my videos, when these things go viral. It’s just awesome. And I can impact way more people. So here’s my last tip for you guys. Take it slow, but you don’t need to go fast by one a year by two a year, five, three a year and just do it consistently. In 10 years, you’re going to be able to look back and look at all the money you made by depreciation by the tax write offs by buying it right by getting the principal paid down and you’re gonna have so many more options. You can quit your job, you can really you know, sell those off 1030 1031 exchange them into a much larger building. There’s so many great options, but you need to get started. Right now And on top of all that you have the actual income that comes in from the rent if you so choose to take it. So hopefully this video finds you well make sure you’re liking and make sure you subscribe share this video with those that want to see it that need to see it. And I’ll see you guys on the next YouTube video. Peace
