These are the 5 Golden Rules of Real Estate Investing that I have lived by, which has helped grow my portfolio from $0 to several million invested in Real Estate since 2011. Enjoy! Add me on Snapchat/Instagram: GPStephan
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1. Make money when you buy.
This is absolutely crucial when you invest in real estate – you either need to buy into cash flow, buy into equity, or buy into a combination of the two. Do not do what everyone else does and buy something at market rate for market rent without allowing yourself some room to improve those numbers, and your investment
2. Never fall in love with an investment
This is one I see too many people fall victim to. They go out to look for an investment, then see a home they “fall in love” with, despite it being a terrible money-sucking investment. But hey…maybe it’s just really charming, or reminded them of their childhood house, or whatever…point being, if it’s an investment, it’s a BUSINESS. Not a romantic-comedy. You cannot get emotionally attached to a property you’re investing in.
3. Big picture, laster focus
While the bigger picture is fine to pay attention to, local markets are much more important. Don’t get too caught up in headlines and following trends because real estate is such a micro-economy. Each property and city is its own individual investment opportunity. While they can trail overall economics, every single property is like its own stock – some are undervalued, some are overvalued, some are going up in value, some are going down…the specifics are what make this type of investment really, really unique. Your market will have its own opportunities outside of everything else that’s going on.
4. Think long term – get a fixed rate loan
This is one that I’m a firm believer in. Some people might disagree with this, they might want to take a riskier approach, but my philosophy is simple: buy once and hold. Even though you might be able to get a cheaper loan by going for a 5-10 year Adjustable Rate Mortgage, which means that your interest rate will only be locked in for so many years before it’s adjusted to market rate, it’s much safer to lock in a one-time rate NOW and then hold it. You know your holding cost will at least remain consistent throughout the life of the loan, until you either refinance, pay it off entirely, or sell.
5. Finally, make sure it cash flows.
You should focus primarily on your cash flow – how much money are you investing into the deal and how much will that make you every single month. Do NOT barely operate on a thin margin of cash flow unless you’re making a significant amount of equity and have the cash reserves to pay out of pocket if and when something goes wrong. The biggest problem I see happening is when people cash flow a few hundred dollars on their investment, barely scraping by, and then something comes up and wipes out a years worth of profit…even if they made a ton of money by paying down the loan, they need some type of cash flow for it to really make sense. Focus on cash flow, while still taking everything else into consideration. Cash flow first…everything else second, then evaluate the deal from there.
6. Bonus tip…don’t be your tenants best friend.
I’m a really, really nice landlord…sometimes too nice. When I first started, I really wanted to be buddy-buddy with my tenants and be the “cool” landlord. No. Bad idea. This is often when you get taken advantage of, even if its not even intended…this is when they start calling for personal favors, extended time on rent, or fixing things that aren’t your responsibility to fix. This often puts you in a difficult position between being a friend and being a business person. And once you’ve opened the friendship floodgates, it’s difficult to shift into the mindset that you’re running a business and that this is your investment. My biggest piece of advice is to treat it strictly as a business – be friendly to your tenants, but do not be friends. Stick to the contract and enforce it. It’ll end up saving you in the long run.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness@gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Thanks Graham for the tips as always!
Thanks so much for watching!
Graham, key question here that my friends and I all have:
What Cash on Cash return % would you recommend as a BARE MINIMUM to consider a property in low/moderate appreciation market?
Good question. At least 10%, minimum. If it’s an area without much appreciation, probably more like 15% cash on cash with 80% leverage/loan.
Thanks for the straightforward answer! I’ve been running the math on some properties and rule #1 quickly becomes apparent. Even a 5% CoC return is unlikely if you just buy a house at market price and turn around and try to rent it out without adding significant value.
Keep up the great videos! I’m planning to buy my first investment property in the next 18 months and I’m learning a lot from your videos.
These opportunities are nearly impossible in Oahu, Hawaii but great concept. Thank you.
Daily dose of Graham 😂✊📈
Hey Graham, I was wondering if you can buy a property with less than 20% down and rent it out to tenants?
Generally not. I haven’t seen any loans with low down payments on an investment property.
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Can you explain equity in real estate for me please
Equity = the money you have tied up in the home. It’s the amount of home you actually own.
Thanks man!
I like how Graham takes the time to respectfully reply to even the most basic queries.
You’re the man, G!
do you ever buy from wholesalers?
I haven’t. I wouldn’t be opposed to it, though.
Is there a online place where you can search different properties?
Zillow, Trulia, Redfin, etc
Here 🙂
Why can’t I blink while I’m watching your vids? LOL
I think it’s because he doesnt really take a breath break 😂😂😂
Question: I am cash-flow positive on a rental house with a 30 year mortgage, but I am currently putting that money back on principle to save on interest payments in the long term (about 70k savings and shortening the loan term by 12 years) should I instead be taking this income and saving for a down payment on another house?
Depends. How old are you? If you are older just use it for what you need. If you are younger put the cashflow in another account and then you can decide what to do.
You shouldn’t be paying it off so quick – always want to reinvest off your equity- especially after you refinance. If you are trying to get into real estate investments . That extra cash flow could also be going towards other investments like stocks that earn you higher interest over 30 years than the “paying principal “ off your mortgage.
Id say the best way to look at it would be asking the right question, which is if i reinvest this money into somthing els would i make more than 70k over that time frame which is 18 years i asume in your case.
Shocked he didn’t answer this either. Great question! Depends on opportunity costs and if you plan to load money into other investments. (Do you need 10k on hand for the recent stock dip, do you need a down payment for the immediate future, are you older or are you your decided age for retirement In which it’s time to accept what comes in from investments and move to an island 🏝️?) Like anything you have to evaluate all of the above options and pick the ones that suit your lifestyle and your numbers.
What I’ve found out since I asked this question is that you should not pay down the loan any faster since the rent is covering the mortgage and is still cash flowing. The leveraging of the money needs to be stretched for as long as possible and the interest is a write off anyway, reducing your taxable income. Even if you’re older and retired, the money that you could have spent paying off the house would be better off in the market than paying off a house at a 4% interest rate.
On a different note, many people don’t know that many banks offer an appraisal or BPO (even cheaper) to get rid of mortgage insurance without refinancing. They take into account improvements and current estimated market value. This is a much better option than paying down the loan to get mortgage insurance off. This could save you thousands as well.
I fell in love with a deal (buying a restaurant), what I didn’t know is how bad the landlord of the building my restaurant is at and how hard it is to “keep the same staffs with a new owner”. A big lesson.
Landlord doesn’t have cash reserve to fix HAC for a commercial building. Nightmare.
Hey Graham, what do you think about roofstock? They pretty much do everything for you as far as real estate investing goes. Yey, nay, and why?
Damm u looked good 10 years earlier
LOL
This is my first video that I saw from graham and he knows what’s up
LOL BATES MOTEL!!
😜
One of the smartest guys I know of. And you know what? He didn’t go to college. Thumbs up to you Graham for doing your own thing and educating yourself!
Thanks so much Peter!
I am having a hard time finding properties under value or at least below market price… any tips?
It’s tough. Lots and lots of searching. It took me 6 months to find a deal and that’s as a real estate agent!
Graham Stephan thank you for your responce. When you say location is important what do you mean by that? What is consider a good location and an ok location. Also if you have to choose 5 things that you look when inspecting the property what it would be? Thank you again!
Graham I’m thinking of getting a property I have about 12k saved in a pension but I have 20k in debt and only make like 27k a year. Would u recommend investing or paying off debt
I’d knock away the debt first!
Graham
Is 1 badasss business man 👏🏾👏🏾👏🏾
Hey graham do you have a class or course that you teach or sell?
I have a real estate agent class, but not yet an investing class
May the golden showers of prosperity rain upon you!
I made that mistake by being their friend it doesn’t work
Nat Clean Yes, my sister and her husband rented to peopel they knew for over for a long time, yet still lost their triplex. They changed once become tenant.
What’s with the winky face at 2:24?
You said it’s impossible to find a property in LA that cash flows (true) then you said it’s imperative to cash flow (also true), then what does someone in LA do? I’m in the Culver City area and I want to buy a long term rental.
You have to wait and find something that needs work, fix it up, and by that point you can force some cash flow and appreciation.
Graham Stephan Yes, thanks for taking the time to reply. Do you work with new clients these days? How does one get in touch? I would like to work with an agent with an investor mindset.
your crazy do a 15 year Fixed mortgage rate and pay that thing off ASAP.
15 years ago I took the advice from someone like you I wanted to do 15 year mortgages he talked me into 30. ive got 15 more years to go to pay them off. I could be one rich guy right now if I stayed with what I wanted to do. you must work for the banks there the only ones who make money on 30 year mortgages
Why didn’t you just double up your payments then? You could have just as easily paid off a 30-year mortgage in 15 years if that’s what you wanted to do.
with the 30 year mortgages and a partner there was no extra money he didnt want to pay extra so the first mistake was doing this with another person. the last 6 I have bought I pay cash no banks at all free and clear and I have sold all but 3 of the ones with him and there on the market to sell
Im lucky the home im in I bought it for $3500 with all repairs ive got $18k into it and it will rent out for $700 a month you cant beat a return like that with 30 year mortgages I guess I like freedom. mortgage is french for life I think:-)
from Old French mort gage (“death pledge”),So called because the deal dies either when the debt is paid or when payment fails.
Bates motel lol!
You’re Great 🙂
As far as I’m aware, in Australia, without a substantial downpayment, cash-flow out of a rental property isn’t even possible.
Michael Thomas you are not in this business deep enough
@KDD SEW wrong. Australian market is not possible to cashflow without a huge deposit. Period. Even apartments need to have 20-40% in to cashflow even a tiny amount.
Can you please make a step by step video dealing with the process of refinancing . Most people explain things on a advanced level , but for someone like me who isn’t 💯 % conversant with the North American banking system , certain things tend to go right above my head. I get the general concept but how does the bank determine how much to give the home owner. What are their reasons and calculations. Thanks Graham. Still waiting for my lucky subscriber fee.
I’m 17 turn 18 in January how would I pursue buying properties for rental income and have 30 properties by 25? I need help I don’t wanna just jump
In with no help or navigation I have family that fixes homes like drywall foundation all that good stuff so a fixer upper wouldn’t be problem for me to get done but please someone help me who has experience
Another great video! Keep up the great work Graham!
Step 1: smash that like button
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Hey Graham what’s your take on doing a rent to own on a house.? Are you currently doing that.? Wouldn’t it be better to do that since they are responsible for all the damages since they are technically the owners?
Lmao “burn it”?
Burn it!
What does ‘closing cost’ means?
What’s rebabbing?
Michael L rebabbing is rehabbing
Not many deals lately, guess its REITs or just cash in online savings at 2% until something changes.
Bro you’re a fucking beast man.
what softwares do you use to look at real estate
What’s the difference between cash flow and equity?
Cash flow is after expenses. Equity is your value in the property.
U r just brilliant! I always ẹnjoy & learn a lot from ur videos! 👏👏👏
I m so grateful to u! I m gona try to watch all ur videos & try to absorb all ur teaching n i ll start investing on a house within a year. 😊
Thanks so much!! 🙂
Every point that you make, Im like “duh,” which I guess is a good thing. I must be thinking the right way.
What is buying into equity ?or cash flow ?
Is 40k equity enough or? Looking at buying my first rental and not sure what equity range im looking for
Absolutely, depends on the price range though!
I am actually like binge watching these videos their so informative. 400k subscribers now congrats.
thank you!! 🙂
What would be an acceptable cash on cash return ? What would be an acceptable monthly cash flow % wise?
If you don’t know what he say than you don’t know need to buy rental properties at all! Buy tax properties for sale!
Damn thats good advice
Your investment shouldn’t be any kind of comedy, much less a romantic one.
So hyped…
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Land owners are community builders. I disagree.
Thanks for the advice and nice presentation very useful information thanks again
Don’t date your tenants! Lots of drama can ensue 😭😢
😬
You need to do a video on buying or building a house
wtf…. did you even age from 2008????
Always follow the 3 Fs. Firm, Fair and Friendly.
your videos are so helpful. thanks!
Right like trying to evict your Tennant’s for not paying rent.
Graham lets partner up and do businesses!
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Comment for YouTube Gods
I like a lot your videos. Thanks for your important advice and life philosophy. 🙂
👍
Is anyone watching this from GERMANY? Everything is quite different here isn´t it, or do you find most of Graham´s advice apply? Liebe Grüße
Interest rates still going lower crazy… 0% interest rate here we come
Im moving to China. This country sucks.This is so wrong.
You guys are screwing up people lives. Youre not helping!!!!!!
We cant be brave if we arent free.
Love the channel but my guess is at 1.27M Subscribers and having early success in real estate then you know the truth like the rest of us and thats why your putting your attention into youtube! Like many other swings the best opportunity in 2019 is selling yourself on media teaching people how to sell/ make money! It pays better then the people your teaching! This will dry up very soon its in a bubble of its own.
So when I go out and get a bank loan, dont I need to bring in my business plan?
Is there one video that actually explains the terms he talks about ex.( cash flow , stocks….
Do you have any tips for real estate investing specifically in LA? The more I learn about real estate investing the more it seems to be unviable anywhere near LA. It seems like I would have to bank on appreciation instead of cashflow, like you alluded to in the video.
How to know what area is growing Lol?
can’t lock in loans that long in Canada :/
Graham out here saving lives as usual.
Very cool man, thank you
Take it for what it’s worth….
really?! an exotic car after 5 rentals.
Thank you so much for this, Graham! I’ve only been watching your videos for a short period but I’ve learned a tremendous amount from you not only on real estate, but credit, mortgage,etc. Again, thank you! Also what kind of leather jacket is it you’re wearing in this video?
Can you daily drive a Lotus,well snow excluded?
I think your channel would be better if you gave specific examples of some of the projects you have done , however I realize that might be too much giving away your personal information….
Regarding the cash flow point, what if there is a $10k-$12k duplex and you can get $250 from each unit. That would be $500/month before costs. Percentage-wise (compared to it’s total cost) it sounds great, but in terms of absolute dollars it’s not a whole lot (only a “few hundred dollars” as you say). Which matters more? Percentages or absolute dollars?
Good speech
Thanks for valuable information
I have investment related channel and I made video on real estate business.i am sure it will increase your knowledge.best wishes
What are some good ways to learn about how to estimate/calculate the value of the properties?
Graham, how do you feel about home warranties?
How do you run them after you bought them? Do you hire or rent consultants for the costs, taxes and maintance?
What was your ROI on the first 2 rentals?
GREAT ADVICE AND TIPS, AWESOME VIDEO WITH GREAT INFORMATION- PIERCING INSTINCTS PROPERTY MANAGEMENT #FOLLOWUS
What are thoughts on Turnkey rentals. Smartland? Etc
50k investment property on my channel !!
How do you learn about your area of real estate
Question:
What is the best way to go about regarding mortgage loans-
15 year fixed or 30 yrs ?
The younger picture of Graham looks a bit like Justin Bieber. Awesome content btw!
3:15 red flags 😂
I have a question… Is it better to buy a land then build a house on….. Or to buy the an already built house?
Are you from UK?
Hit it on the button with the interest rate shooting up!!