Tag Archive for: generational wealth

This is the #1 Roadblock in Real Estate Investing

Categories:

This is the #1 Roadblock in Real Estate Investing

It is incredibly easy to get burnt out as a real estate investor. However, by knowing the roadblocks ahead of time, you can avoid many of the common mistakes. Real estate investing, unlike other businesses, relies heavily on leverage and funding. Almost everything we do from buying and holding rentals, to doing flips, and even dividing land, it is all heavily dependent on funding. Money from banks, private lenders, or even other people’s money, are vital to your success. So what’s the #1 roadblock in real estate investing? The answer is not understanding your cash flow and not knowing the numbers ahead of time.

Rushing to obtain generational wealth

Unfortunately, people go to conferences and get hyped up to make generational wealth in a short period of time. While you need emotions to guide your business, it is important to take a step back and know your numbers before diving in. Generational wealth is difficult to achieve in a three month period, however a three year timeline is feasible. By not rushing into investment opportunities, it allows you to form a game plan for success.

Understanding all of your expenses

This week we had a person contact us who didn’t understand how escrow worked, thus creating further financial strain for the client. Escrow can be very confusing for investors. This is a portion of the loan that a lending company puts aside for repairs to the property. Many people do not fully understand how much money is needed up front in order to start the construction process. In addition, many underestimate how much the interest will be every month for the property. If you have a $400K loan, and you’re at 12%, you will in turn pay $4K a month out of your pocket. Thankfully the title company provides a settlement statement that includes a complete breakdown showing exactly what you are buying, and what you owe to everyone. By fully understanding your budget and planning for expenses, you can avoid spiraling debilitating debt. 

Do your research and plan ahead

Investors who do not know their numbers will soon find themselves in a spiral of financial distress.  Not only that, but by not having enough money to make payments it will result in pure panic and overwhelming desperation. Many investors attempt to resolve this crisis by using personal credit cards, or a HELOC to get back on track. In doing so, they put their whole life into jeopardy. People can make a lot of money at this, and there is a lot of money to be made. It is imperative that you know your numbers, take emotions out, and do your research before diving in. People tend to overestimate what they can do in a few months, and tend to underestimate what they can do in a few years. 

Watch our most recent video to find out more about the #1 Roadblock in Real Estate Investing.

Want more information on real estate investment roadblocks or have any other questions? Contact us today! 

by

How to Create Generational Wealth from High Interest Rates

Categories:

Fun fact: What the Fed is doing now will create more opportunities for generational wealth and income in the very near future.

Interest rates are currently high. This can create a discouraging market for new investors, but it’s important to look at the patterns of those interest rates so we can project where they’ll be over the next few years.

Real estate investing is one of the most accessible ways to create generational wealth. It takes two things to be successful:

  1. Leverage: knowing how to use other people’s money (bank loans, etc.) to turn a profit
  2. Math: know how the numbers work so you can use them to your advantage.

Even though interest rates are currently high, if we understand how to use leverage and math to our benefit, we’ll be creating wealth in no time.

It Comes Down to Numbers (and Interest Rates)

We’re all in real estate investing to create income, wealth, a better life. Interest rates are a significant aspect of that. We need to understand exactly how to leverage high interest rates to help you create the wealth you’re here for.

Here’s the good news: interest rates will likely go down soon.

If you buy a property when rates are high, you can refinance when rates drop to increase both your income and equity. 

For Example…

Let’s say you have a 4-plex that you’re going to purchase with the following figures:

  • 4-Plex (Initial Numbers)
    • Loan Amount: $500,000 
    • Interest Rate: 8.5% 
    • Monthly Payments: $3,800

As we said earlier, rates are likely to decrease soon. We’re heading into a big election year which tends to drop rates, and the Fed is hitting their apex. So what happens when the rates decrease and we look at refinancing?

  • 4-Plex (Refinanced!)
    • Loan Amount: $500,000 
    • Interest Rate: 7.5%
    • Monthly Payments: $3,496 (+ $360 income/month)

Even if interest rates only drop by 1%, you still end up with over $4,000/year more in your pocket.

Similarly, because of the  shifting value, that initial $500,000 now has a value of $550,000 (10% higher than before).

If all you do is refinance when rates drop by 1%, you can easily build income and equity. Imagine the strides you can take when interest rates drop even further.

This same strategy applies to portfolio/multi-family homes. When rates drop, you can look into refinancing any investment property to explore these possibilities and take advantage of this opportunity to build generational wealth.

Falling Interest Rates Generate Generational Wealth… If You’re Prepared.

If you buy when interest rates are high, you’re going to increase your income as rates fall. You’re also going to increase your net worth even if you don’t sell them. It’s a great way to create the income you need to begin a sustainable investment cycle. 

Also, this strategy also naturally lets you diversify lines of credit, cross liens, etc. that allow you to increase your portfolio.

Time to Buy

Here’s the bottom line: rates are going to fall, and if you buy now, you’ll build income without needing to invest in additional investments. 

This is the time to be buying investment properties.

We’re moving into a market where there’s going to be a lot of demand for properties. As rates fall, more people will be looking to buy. Get ahead of that rush, and use the dropping rates to put money in your pocket.

Resources

It’s important to keep your finger on the pulse as a real estate investor — especially if you’re serious about generating wealth. We have a weekly Investor Mortgage Report that keeps you updated on DSCRs, bank rates, private money, and market trends so you can be an informed investor.

Things change rapidly. Rates may rise through the end of 2023, but the moment they start to fall, you want to be prepared.

If you’d like to be put on the Investor Report email list, or if you have questions about how to get started as an investor, reach out to us at Mike@TheCashFlowCompany.com.

You can also check out our YouTube channel for more investment tips and tricks.

by

How BRRRR Properties Create Wealth Immediately

Categories:

What properties make you money as a real estate investor? Here’s how BRRRR properties create wealth instantly.

There’s no contest: BRRRRs create wealth WAY faster than retail properties.

In fact, the right BRRRR property can create a net worth increase of 25% of the value of the property nearly instantaneously.

To show this in action, let’s break down the examples of two houses with the same numbers – but one is a BRRRR property and one is retail.

Retail vs BRRRR: The Numbers

  • Value: We’re comparing two homes with the same value – same neighborhood, same block, same size. Let’s say the value is $400k.
  • Loan: For the BRRRR, our total costs would add up to $300k ($250k purchase price + $50k closing, rehab, etc). Our leverage 100% covers this amount. For the retail home, we could get an 80% LTV, so our remaining loan is $320k. On retail, we have less cash flow because we owe more money.
  • Cash Transfer: With BRRRR, you’re moving $0 of your own money. This is why properties with the BRRRR strategy are so popular for investors. With the retail property in our example, you need to transfer $80k of your money as a down payment. 

There are two problems with the cash transfer requirement in retail properties. 1) You need the cash to get into it. And, 2) The last “R” in BRRRR is repeat, so you’d have to have $80k again for your next property and your next. On under-market BRRRR properties, the zero out-of-pocket costs free you up to repeat the process over and over.

  • Payments: BRRRR payments will be lower than retail payments by about $25-$50/month, simply because the loan amount is lower.
  • WEALTH: The BRRRR strategy property immediately creates $100k. The retail property adds $0. It only has the loan + the $80k that was yours to begin with.

How BRRRR Properties Create Wealth

The wealth in BRRRR comes from the difference between the value of the property and what you owe on it. This usually ends up being 25% of the value of the home.

If you multiply this process by 5-10 properties? You’ve suddenly got half a million to a million dollars in net worth.

Have BRRRR properties create wealth like this isn’t just wishful thinking. In 2010, we helped multiple families buy 10 properties in one year using this method. Many of their properties tripled and quadrupled in value over the last 10+ years.

The 2023 market is shaping up to look a lot like 2010. The time to buy is coming soon.

Read the full article here.

Watch the video here:

https://youtu.be/_tMI_s4vSqA

by

How to 10X Your Net Worth and Cash Flow

Categories:

There really is a secret to 10x your net worth and cash flow…

The true “secret” to generational wealth is buying at the right time, then… letting the market take care of itself.

Let’s map out the possibilities if you buy properties while interest is high and prices low, then wait.

Past Client Success 10x-ing Net Worth

Back in 2010, we helped two families who were particularly successful buy 10 properties each using the BRRRR method.

After 12 years, each of the properties they purchased in 2010 either tripled or quadrupled in value. The rents tripled.

This worked because they bought smart and played the waiting game. They purchased with high rates and low prices, then refinanced once the rates flipped low and values high.

Your Future Success with 10x Net Worth

Let’s say you buy 10 properties in 2023 while rates are high and prices low. Then you hold until the market flips for you – low rates and high values.

You can capture $90k-$100k in equity when the market flips back. Ten properties would add almost $1 million to your net worth.

When you add an extra $500/month in cash flow through a well-timed refinance, that makes for an extra $6,000 in your pocket per year. Multiplied by 10 properties? $60k/year.

All this – just for buying when no one else is buying. Buying when rates are high, values are low, and letting the market correct itself. 

Your Plan to Buy Real Estate in 2023

Buying low with high interest rates, waiting, and pulling in the generational wealth. It’s possible with real estate in 2023.

Want to build a game plan for kickstarting your generational wealth next year? Have a deal now you want us to run the numbers on? Send us an email at Info@TheCashFlowCompany.com.

Read the full article here.

Watch the video here:

https://youtu.be/I5jRjQvHJhk

by

This Is Why You Should Buy Real Estate in 2023

Categories:

Fastest route to generational wealth? Buy real estate in 2023.

2023 will be a great time to buy real estate.

When a recession hits, when interest rates are high… that’s where you create generational wealth.

Let’s look at the math and past examples to prove it.

We’ll go through the market mechanics behind buying in 2023. Plus, we’ll review the success our clients had during the last recession (and show how you can do the same).

The Secret Behind Generational Wealth with Real Estate in 2023

Building generational wealth with real estate depends on interest rates. Let’s run through the math of how it all works.

Interest rates and prices work like a seesaw. When interest rates go up, affordability and buying power go down, so prices go down. When interest rates come down, buyers can afford higher payments, so prices re-inflate.

So, where will we be in 2023, and how will prices play out? Interest rates are projected to be 8% – the highest they’ve been in years. Let’s look at an example of this seesaw effect.

Interest Rate vs Price When Buying Real Estate in 2023

We’ll use 8% as an example, since that’s the projected average for next year. (But this math will work whether your interest rate is 7%, 10%, etc.).

Let’s say our buyer can afford a $250,000 house with an 8% interest rate. We can calculate that their monthly payments would be $1,834.

That monthly payment amount is important. We tend to think of a buyer’s budget as the purchase price they can afford. But really, a buyer’s budget is the monthly payment they can afford.

Even if a buyer is willing to pay a higher purchase price with high interest rates, their lender may stop them. A buyer qualifies for a loan based on the affordability of the monthly payment.

For an interest rate of 8% in 2023, buying power looks like this:

You can plug any numbers you want into this formula to figure out affordability.

For example, let’s say interest rates are 9%. The affordability doesn’t change – our buyer could still only swing a $1,834/month payment. Therefore, this homebuyer’s buying power goes down to $228,000.

Cash Flow with High Interest Rates

As you can see, the higher the interest rate, the lower the price. This is why you should buy while interest rates are high. 

Prices will be lower than they have in a while. The challenge is that high interest rates make generating cash flow on properties more difficult. However, even if your rental property only breaks even every month – that’s fine for right now. 

A little temporary cash flow loss is worth it when you’re on the path to generational wealth. When interest rates come back down, cash flow will accelerate through the roof.

Let’s flash forward our 2023 example a few years in the future.

Building Equity with Real Estate in 2023

Say we bought that $250k house at 8% in 2023. Three or four years later, the market has stabilized. More money is flowing in the economy and in real estate, driving interest rates back down. Inflation has calmed down to normal levels. Now, let’s say the average interest rate is down to 5%.

What’s the affordability of that 5% rate with our buyer who could qualify for a $1,834/month payment? Now, they can qualify for a $341,000 house.

That means the house you bought for $250k in 2023 could be worth $341k by 2027. This one property could create $91,000 in equity.

Of course, this isn’t a guaranteed timeline or number. But we know it’s close. Real estate operates with the seesaw of rates and prices, affordability and payments.

Refinancing Once Rates Fall

So you have $91,000 in extra equity. But here’s where the cash flow starts to kick in: You can now refinance the property from an 8% rate to 5%.

Your original loan will be down to about $245,000 after 4 years of $1,834 monthly payments. Refinancing $245k at the new 5% interest rate makes for monthly payments of $1,315.

This refinance would increase your monthly cash flow by $519.

Multiply that by 12 months in a year. By 10 more properties… And you’re on the track to generational wealth.

Generational Wealth from the Last Recession

The true “secret” to generational wealth is buying at the right time, then… letting the market take care of itself.

Let’s map out the possibilities if you buy properties while interest is high and prices low, then wait.

Past Client Success

Back in 2010, we helped two families who were particularly successful buy 10 properties each using the BRRRR method.

After 12 years, each of the properties they purchased in 2010 either tripled or quadrupled in value. The rents tripled.

This worked because they bought smart and played the waiting game. They purchased with high rates and low prices, then refinanced once the rates flipped low and values high.

Your Future Success

Let’s say you buy 10 properties in 2023 while rates are high and prices low. Then you hold until the market flips for you – low rates and high values.

You can capture $90k-$100k in equity when the market flips back. Ten properties would add almost $1 million to your net worth.

When you add an extra $500/month in cash flow through a well-timed refinance, that makes for an extra $6,000 in your pocket per year. Multiplied by 10 properties? $60k/year.

All this – just for buying when no one else is buying. Buying when rates are high, values are low, and letting the market correct itself. 

Your Plan to Buy Real Estate in 2023

Buying low with high interest rates, waiting, and pulling in the generational wealth. It’s possible with real estate in 2023.

Want to build a game plan for kickstarting your generational wealth next year? Have a deal now you want us to run the numbers on? Send us an email at Info@TheCashFlowCompany.com.

by