Epic Real Estate Investing - Financial Freedom - The Faster Way! | 816

Episode Date: October 25, 2019

Today we are going back to the fundamentals! Matt explains why investing in real estate is the fastest path to wealth creation for an average person. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit REI.

Ace.com. Here's Matt. Hey there, rock stars. Matt Terrio here from the epic real estate investing show. Welcome to the show. If this is your first time here, glad you found us. If it's not, welcome back. I am still on the road, recording on the road.

Hopefully the audio quality is sufficient enough to not be too distracting. I am in St. Louis. We just wrapped up another ground and pound school, another successful ground and pound school. And I'm really looking forward to getting home. For any of you that are road warriors out there and spend a lot of time away from home, this is like the first time I really kind of understood that. Actually, I'm homesick for sure.

And it's not that I travel a lot. It's just a bunch of events all kind of converged into the month of October. And it didn't really make a whole lot of financial sense to go back and forth from home to event to home to event to home to event. So I just kind of stayed out on the road and kind of stringing them all together. but it's almost over. Got a few days left and I'll be back home for pretty much the rest of the year. Anyway, today's show, I've argued that in the past, many times, that owning your primary residence is not a good investment strategy.

But the fact is that you still do have to live somewhere, right? So you've got to decide whether to rent or buy. That's the big decision. You still need a roof over your head. So do I rent that roof or do I buy that roof? or do I buy that roof? And that's going to be a different decision for everyone. So for me to make this a universally applicable episode for everybody,

I'm going to suggest you do the math. Just do the math. I mean, put out a piece of paper and draw a line down the middle. On one side, you're going to do the math for buying your home. And on the other side, you're going to do the math for renting. And then just choose, whichever one takes less money out of your property. pocket each month. And this would be specifically if escaping the rat race and or staying out of the rat race is

important to you. Because for some people it's not. Maybe they don't mind the rat race. Maybe they enjoy what they do and, you know, and that's a secondary thought. It's not the priority. But if you'd like to have the option of being able to quit whatever it is that you do for a living, that you have to do for a living, then. you might want to consider moving, escaping the rat race and what it takes to get there

and moving that up the priorities list a little bit. And so you just have to do the math, though, and whichever one takes less money out of your pocket, that's the one you should probably choose. So when doing the math, though, remember that it's not just simple math. It's like, why don't I have to write this down? I can see very clearly that if I am going to rent, it costs me this, and if I buy it, cost me that a month. But no, it's not like that. See, if you're not really comparing the mortgage versus the rent, as in, you know, it costs me $1,000 to own and it cost me $2,000 to rent. So I'm going to buy because it's cheaper. No, it's not that simple. You see, you're going to have to factor in the property taxes, the insurance, and the maintenance on your

property. And furthermore, and this is a biggie, you're also going to need to calculate the opportunity costs of your down payment when you purchase. You see, for let's say, I don't know, middle of the road property, $250,000 home where you had to put down 20%. That would be $50,000 out of your pocket that you'd have to put down on that property before you even start making those mortgage payments. So yeah, there's a $50,000 additional amount that you're going to have to factor into your math before you factor in those monthly payments and how long is that going to take for you to break even on that $50,000. But I want you to look deeper than that. I want you to look at the opportunity costs of that $50,000. In other words,

what opportunities would you be missing out on by tying up that $50,000? Where could you put that $50,000 to work harder for you than it would be tied up in your home? Fortunately, in most scenarios, you wouldn't have to look any further than just a simple turnkey real estate investment. I mean, that right there would be the answer. It certainly, could be an answer for most people in most situations. But my point here is, is to do the math, all of the math, as you make this decision for yourself. Base your investment decisions on the math.

There's no room for your emotions or your feelings or tradition or time-honored advice in that equation. When it comes down to the finances, it's just pluses and minuses. And that right there, that's math. Here, I'll give you a real world example by, I'll just use my own life. I just moved from Glendale, California. Had a beautiful five-bedroom home that's almost 4,000 square feet with a, had a nice sweeping view over a lush canyon.

It was a very comfortable home for a very long time. And the fair market value of that house when I moved, I was about 1.2 when I moved in, and it was about 1.4 probably when I moved out. Now, if I were to have to purchase that home with 20, percent down, that would have been somewhere in the ballpark of $275,000. And my monthly payment would have been, including property taxes and insurance, right around $7,500 a month. That's what it would have cost me to own that house.

But for the last, I don't know, it was a four or five years, I rented it for almost half, like $3,900 a month, I think is what it was when we moved out. Pretty close to half. So that's a big savings in my monthly expenses, right? About $3,400 a month per savings, doing that quick and dirty math. So I saved that by renting instead of buying that home, right? So I rented that home instead of buying it, and I saved about $3,400 a month. So without even factoring in the upkeep and the maintenance, the taxes, and the insurance,

I mean, just that math alone made my decision to rent a no-brainer. But here's something else to look at. not only was I saving $3,400 a month by renting it, but let's say if I had to take in that $250,000 or so down payment and instead purchased investment properties, you know, I wouldn't even have to get creative or anything to do that. I could have just been my own customer at my own company at Cashflow Savvy. I could have said, hey, Mercedes, I'd like to purchase three turnkey properties outright.

I'm just going to pay cash for them. Instead of buying the home, I'd have bought three turnkey properties. If I would have done that. I would have had no debt. They would generate approximately $1,000 per month each. So in total, $3,000 a month. So you subtract that from my rent of $3,900, and you get $1,000. That's right.

I mean, I spent $1,000 a month to live in a $1.4 million Los Angeles home. And I still got all of the benefits of owning real estate through my rentals. I get the tax deductions, the depreciation, and the appreciation. I get all of that. I get to enjoy a lifestyle that I would otherwise probably have had to made a great sacrifice to support. I mean, it's a nicer house, a nicer lifestyle, and I still get all the benefits of owning real estate. It's just changing your thoughts in the way that you do things. In the sequence that you do things specifically is what I'm going to get to here in a second. You know, I started living this way about 12 years ago or so. And the cash flow for my intolerant.

entire portfolio, it paid for that $1.4 million house. So that's where I was. Now, where am I now? Well, I just moved recently to a different state, and I got a bigger, nicer house for essentially the same monthly expense. It's amazing how easy that is to do when you start in California and you move somewhere else. That's not too much of a difficult task.

And what we did was a generous portion of the house. we would set that up for both Mercedes and I to work out of, which increases our tax benefits and write-offs significantly. And so that's another expense we've got to cut out. There's no longer a need for office space. And in result, the last few months our lifestyle has improved with a bigger and nicer house, not to mention no state tax,

and not to mention a whole lot less traffic. and it gave us a few thousand dollar improvement to our monthly cash flow position. So to the point where there's now a surplus of cash flow coming in from our rentals after all of the living expenses are paid for. And now that surplus is now creating the piles of cash. See, there's nothing wrong with making piles of cash. You know, I have frowned on that for almost the entire length of this podcast. entire life of this real estate investing show.

For so many episodes, I've said, hey, you've got to shift your focus from creating piles of cash to creating streams of cash. Do that one thing, one time, and you are on your way to financial freedom. And I don't hate piles of cash. And a lot of people might have thought that from those comments and hearing that over and over and over again. No, I love piles of cash just like you do. It's just not you that should be working for them.

It's your streams of cash that should be creating them. Your streams of cash should be building your piles of cash. Generate and create and nourish and grow the streams of cash first. Then your streams of cash can build your 401k or your IRA or your retirement plan of choice. retire yourself first with your streams of cash before you retire your money. And yes, that really is an indirect, well, maybe it's a direct strike for all of my 401K and my home as an investment YouTube trolls who really just refuse to give up their romance with 401Ks and homeownership.

The point is, you can enjoy your streams of cash now. and in retirement when you just switch around the priorities a bit. And it's real estate that makes all of that possible. You know, I love what I do. I like real estate. I'm not in love with real estate. I'm not passionate about real estate. But I am passionate about what it can do for you,

what it can do for me, what it can do for us, what it can do for the average person. Here's the irony. When people max out their 401Ks, and they go deep because they are all committed and disciplined and they go for that company match, right? And everyone talks about the company match. You know there's very few companies out there

that do a company match. It's 49% of all companies that have 401K. So first you've got to eliminate all the companies that don't have 401Ks. Then you have to go to the companies that do have 401Ks. Then of those that do, only 49% of them do a company match.

And then a much smaller portion of those do a dollar for dollar match. match. So I know that the employee match sounds great, but that doesn't apply to most people. But anyway, the irony of the whole thing is to max out that 401k or that retirement plan so you can build that pile of cash. So at the point when you hit retirement age, you can then enjoy the streams of cash, the residual income. That's the whole goal anyway. The end game is to get to the streams of cash so you don't have to work. Well, that's a 30.

No, that's a 40. Shoot, I'd say if you look at the stats, it's even closer to a 50-year game plan. We're living longer. We've got to save more so that it lasts longer than our lives do so we don't run out before we die. And so that's the goal. That's the end game, the streams of cash. So why not just flip the priority a little bit.

Focus on the stream of cash first, since that is the ultimate goal. And then once you've achieved that and you've got your streams of cash to get you into a position where you don't have to work anymore, and then you can keep building the streams of cash, and then the surplus that you now create can build your piles of cash. That's what real estate does for us. That's what it can do for just about anybody that gives it a go. and it doesn't take 40 years to do. Think four years, five years, one-tenth the time.

If your name is Corey, if your name is Parker, the name is McKenzie, maybe it's less than two years. Shoot, Corey and Parker are even still in their 20s, I believe. So real estate, it's indeed the final frontier where the average person has got a legitimate shot at creating real wealth. But stop believing.

At the very least, just question the hype. that you have to max out your 401k first and you have to live in the real estate that you own that you got to buy that house and pay it off as fast as possible that's most people's financial plan buy a house pay it off as fast as you can max out that 401k and everything's going to be fine if you look at the stats it ain't panning out for most people i don't know maybe it does make sense for you in your situation if you're happy with your situation i'm not going to tell you to change anything But for most of you, I bet it doesn't. It's not going to work out.

It's not working out for most people. But with that said, just do the math first and make an educational decision based on math as opposed to your feelings. Doing it that way is going to lead you down the path, the path to the financial freedom that you're looking for. All righty? That's it for today. God bless and to your success. I'm Matt Terrio, living the dream. Yeah, yeah, we got the cash flow.

Yeah, yeah, we got the cash flow. You didn't know, home for us, we got the cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.