Epic Real Estate Investing - How to Buy Your Personal Residence with Little to No Money... | 820

Episode Date: October 29, 2019

Mercedes shares a story of her friend who bought a personal residence with little to no money. This is a perfect example of how you can do the same and save tons of money on your home. Tune in and find out more!   Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing Show for Turnkey Tuesdays with your host, Mercedes-Torres. Hello and welcome, welcome to Turnkey Tuesdays brought to you by Epic Real Estate Investing. My name is Mercedes Torres and I am lucky enough to be partners in crime with Mr. Matt Terrio, the gentleman who created the epic real estate empire. This is a real estate investing show for busy people.

Busy people just like you who understand the importance of real estate investing, but just don't have the time to do it all themselves because truly it is a lot of work. So I designed this show specifically for you to give you tips and clues and suggestions on how to create passive income in your life through real estate investing. So this weekend, I was really lucky. I went home to L.A. and I got to spend some quality time with some girlfriends. And I reconnected with a really good friend of mine. We were good friends in college. We lost touch a little bit. But Becky, well, her real name is Rebecca, except she goes now by Rebecca.

I remember we know her as Becky. So in my eyes and in our heart, she will always be Becky. And Becky and I went to school together. And, well, we chatted over a margarita. We caught up. And I was delighted to learn that she took my real estate investment. besting advice many years ago, and she put it to work and just put it to work on such a grand level. And I was really, really happy that she was not only able and open to share her story,

but just what she had done. You see, several years ago, you know, Becky came to me and she wanted to buy a single family residence. She and, you know, her husband, well, now her husband, husband, but she was about to get married. And they had never owned their own home, and they were saving for a single family residence. And they were looking to settle down in a home and stop paying rent, if you will. They wanted to live the American dream. And they showed me a picture of the home. It was beautiful. It was a $359,000 home. It was three bedrooms, two bath. And, you know, they heard that they needed a 20% down payment. And so they were saving for this 20%. And I specifically remember the conversation. And when she told me about it, I was fixing and flipping at the time. And I said, Becky, why don't you

consider instead of buying a single family residence or a fixer-upper, because, you know, that's what $359,000 was going to get you in L.A. I said, why don't you consider buying a, you? a duplex or a triplex or a fourplex for, let's say, $500,000 and then rent out the other units. And if you do it right, your other units could essentially pay for the unit that you and your husband are going to live in, and then you can live virtually rent-free. And Becky's first response was, girl, I can't afford $500,000. And I remember specifically saying to Becky, you don't have to afford it. You're now just aware of it.

And it's important that you know that this concept exists. Because look, with an FHA loan, that's a federal housing administration loan, all you need to do is put down three. if you are going to live in this home, a primary resident, it's referred to. All you need to do is live in one of the units for at least one year, and that's it. You have to have a minimum credit score of 620 at that time. I think it's still the case today. And you can use a portion of the tenant income to help qualify for the loan. Now, my friends, this is called using other people's money to qualify for your loan. And before I know it, Becky did decide to do that. She found a

fourplex and bought it. Now, she got married and they lived in one of the units of the fourplex and rented out the other three units. And as often as it happens when you buy a fourplex, you generally buy a fourplex with the other units being occupied. So Becky moved into the vacant unit and she lived in that fourth unit almost rent free. Now, Becky had to live in the unit for one year to qualify for this FHA loan. And once you do that and you did the math, you get to benefit from buying this property that you are considering your primary residence

for only 3% down. Besides living almost rent-free because the tenant's rental income pretty much offsets your expenses. I mean, those rent payments will pay for the mortgage, the interest, the taxes on the property, the insurance on the property will certainly cover the maintenance on the property, and a lot of the utilities. And besides, Becky is getting the benefit on a monthly basis that she now owns a $500,000 building. Now, real estate appreciates, and in that area,

It appreciates almost 5% historically. So on a $500,000 building, Becky got $25,000 of appreciation that first year. Now, I told you Becky only had to put down 3% on this building because she was buying the building as an owner-occupant with an FHA loan. So she only put down $15,000 and that got her a $25,000 tax benefit at the end of that year. That's a rate of return, my friends, of more than 100%. And that, my friends, is called leverage. Not only did Becky leverage the bank for 97% of the loan,

she leveraged her tenants hard work because they go to work every single day to pay her rent to live in the property that she purchased and that she also lives in. And get this, my friends. she gets to live for free. With a small down payment, Becky was able to not only find a place to live for free, she found a place where her money worked for her instead of her working for her money. Is that cool, my friends? Super cool, in my opinion. that $485,000 that she borrowed for the bank,

this is her mortgage, by the way, $485,000 was what she borrowed for the bank for her mortgage. She got a 5% appreciation on that money, and that amount goes to Becky. That doesn't go to the bank, my friends. that appreciation goes to Becky. So Becky used leverage and other people's money and other people's appreciation and the tenants' money, their hard work and their money to offset her monthly expenses year after year until she moved out.

And all Becky had to do was live in that property and prove that she'd live there for one year. And now she has four units that pay her rent every single month. That is super cool, my friends. So cool. Now, the fourth rent, that income that comes in, put her over the top. That created cash flow for her. And what Becky did is she took my advice. She got really smart. She then used the money of that fourth unit when she was prepping to move out or in this

case moved out. She used the extra income to qualify for her next property. She didn't want to live in that fourplex forever. She wanted to upgrade. Remember, she had just gotten married. They wanted to start a family and she wanted something better. So what did Becky do? She went out and she bought a duplex and did the same thing.

Now, she was able to buy that duplex owner occupied. She wasn't able to qualify for the first time home buyer because she had already had the fourplex and that was her first time home buyer benefit. But she was able to buy it as an owner ofky commit. So, she upgraded and bought a beautiful two unit in Whittier, California, much bigger lot, more square footage, nicer area. And guess what? Becky was able to buy this duplex, owner occupied with 20% down, which got her a lower rate. And she was able to get bonuses back because she was able to negotiate. an amazing, amazing deal, not only because the people that sold the duplex to her were also

upgrading, but because she got really, really smart. Now, she rented the second unit, and while she didn't entirely live rent-free, she was paying pennies for her new home. Now, Becky has the four units and now the duplex. And that money of the four units and the one unit from her duplex is money that is coming into her every single month, whether she goes to work or not. Sure, Becky's taking on debt. We're not disputing that she now has debt. However, the debt in her name is creating the opportunity for her to create wealth. And the best thing of this whole equation is I remember showing Becky years ago that this debt was going to start creating financial freedom for her.

She didn't quite understand the concept. She was going through the motion. She was moving at the speed of instruction, my friends. She was taking the information as it was coming. She was doing her numbers. She was doing the math. It was making financial sense for her. And as she started to go through the motions of, you know, owning these duplex and owning the

quadplex, she started to feel differently about the debt that she was acquiring. She started to see and she started to realize that somebody else was obligated to pay the rent for the house that she was providing, which the turn paid for her mortgage. The tenants were paying her mortgage. See, most people's experience with debt is that it's underneath them. But when tenants start paying rent to you, you are now on top of the debt. It's good debt. It changes your mindset and it changes your perspective to everything because although you do have debt to the bank, it is being paid by your tenant.

And in my opinions, my friends, this is good debt. Now, Becky initially did have issues at first dealing with tenants. When she acquired the four units, she managed the property herself. So she not only had to learn how to find the tenants place them, she not only had to learn that when her toilets back up or her tenant's toilet backed up, she had to call roller, router, to come out and fix the toilets. But you know, my friends, it was a learning curve and she quickly learned how to become a property manager and how to self-manage the property herself.

Not only did she learn how to do it herself, but she learned how to manage tenants and how to deal with bringing on a tenant that she was going to want to be her neighbor. She even had to learn to deal with contractors. You know, she couldn't replace the water heater herself. Her husband, he didn't know how to do that. He was a cop for the love of God. He couldn't replace the water heater if his life depended on it. So they both had to learn how to become a property manager.

And in fact, she quickly learned that managing properties was not her forte. So she experienced how to do it. She learned that she probably wasn't going to be the best property manager. And that experience helped her find a property manager that was going to serve her. You know, I say this every week, my friends, property management is key. And now, because Becky had to experience this on her own when she acquired her first four units, it really helped her on hiring property management for her four units and now her duplex. Now, fast forward, Becky went on and had children and she then bought a single family

residence that she now resides in. However, what she created was passive income. With the four units that she acquired that she originally lived in, then she upgraded to a two units that she lived in as well. She then upgraded to a single family residence and then the four units and the duplex became passive income. That's passive income versus active income. She mastered passive income. And this is the income that shows up in Becky's account every single month, whether Becky goes to work or not. I mean, she could go to the Bahamas for a whole month, and at the end of the month, guess what? Becky still collects $4,200 a month for the rents of her four units of her original four units that she bought. She is on her way to financial freedom.

She's building wealth over time. Now, that $4,200 a month in rents that she collects from her four units, cash flows her about $2,200 a month because that's what's left over after she pays her taxes, her insurance, her property management, and after she's, accounts for vacancies and maintenance. And after two years, that $2,200 a month, that adds up to about $27,000 in two years. Now, you're probably thinking, well, Mercedes, that's not a lot of money. And in the grand scheme of things, it may not be a lot of money. It depends. It's relative to you. But the appreciation on those properties, the loans paid out by the tenants, the tax benefits, and the great inflation hedging, I shared with Becky that rather than choosing to live below your means, focus on expanding your means, my friends.

Focus on expanding your means instead of living below your means. This, my friends, is a mindset shift. In fact, next week, my friends, I will do a podcast on shifting your mindset to make this all possible for you. Notice, my friends, this is not a get rich quick scheme. That doesn't exist in my eyes. But what I've done is I opened Becky's eyes years ago. And now Becky has the chance to build wealth slowly over time and not using a whole lot of her own time. And not working a whole lot to achieve it.

That's not to say that this isn't work. But it's not your nine to five. It doesn't take for you to go to work to make this happen. Here's what's super cool, my friends. Now, I shared with you that Becky had a couple of kids and now she's in her own beautiful home, still in Los Angeles. She has two kids, and her oldest is 21 years old. He's about to turn 21, and he's going to be graduating from college this year. But guess what?

He has seen his mother do this a couple of times. And her son in college has already started a version of doing this exact thing in college. Her son, Kristen, who is now 21 years old, he rented out a single family residence in college. And what he did is he rented out a room. Each room, it was a four-bedroom, three-bath house, and he rented out each room to college students, and he lived there for free. Not to mention, he was making money while he was doing this. He was leveraging his knowledge, his time, and his mother's experience, because he saw his mother do this. I often say this, my friends, what would your life be life if your parents taught you this while you were in school?

Or better yet, what if this was taught in high school? How would your life be different? Had you learned how to do this in your sophomore or senior year of high school, let alone college? What if you were taught this in college? This is not taught in school, my friends. So Kristen learned this because he saw his mother and his father doing this while he was growing up. Becky taught her children and taught them how to think and act abundantly, taught them how to make their money work for them,

how to leverage other people's time and money. Because they came from a mentality. and a financial education that they got to experience firsthand. And the expansion of money is something that is great to teach your little ones so that they could operate out of creating what's possible and not offering out of a mindset of scarcity and constant sacrifice, my friends. not only did Becky and her son use other people's money, they've used other people's time. Think of it.

Every day, Becky's tenants had to go out and work to pay for the rent that they were paying Becky. So she benefited from a piece and fruit of her tenant's labor. Their money, the tenant's money was going to Becky. So at the end of the day, my friends, Becky operated with integrity, and she provided a safe and cozy home for her tenants. And so I often preach that, my friends, with my properties, with my tenants. I do offer them a safe home. I offer them a safe haven.

I offer them a cozy home that if something breaks or goes wrong, I will absolutely make sure that they are taken care of. This is why property management is so important, my friend. So when you do this, when you offer a rental home, whether it's, you know, a duplex or a quad like Becky did, or whether it's a single family residence, my friend, always operate with integrity. Because at the end of the day, your tenant is going to work and going to give you their hard-earned dollars to put a roof over their head. So operate with integrity, my friends. But at the end of the day, start building your wealth and creating financial stability for yourself and your family.

show your children how to do this by setting the example yourself. My friend, I really hope that today's episode opened your eyes to new possibilities. And while my friend Becky, and it was so good to see you, Becky, I cannot wait for another margarita. But I hope you were able to see that Becky's multifamily units had the opportunity to create wealth and financial freedom for herself and her family. And you, my friends, can do the same thing. Whether it's a duplex of four units or whether it's a turnkey single family residence,

all done for you, you can also do this yourself. Don't let the opportunity pass you by, my friends. Now, if you want to learn how to do this, if this podcast and this episode resonated with you and you want to create financial freedom for yourself and provide a legacy for your children or perhaps show your teenage kids what Becky was able to show her kids who are now in college and replicating the system. Feel free to reach out to me, my friends. I am here for you.

Our team is here for you. feel free to go to our website, cashflow savvy.com. That's savvy with 2Vs. Download our frustrated investor guides to passive income where you too can learn how to do this yourself. My friends, until the next week of Turnkey Tuesday, have an epic week. Does your money work for you as hard as you do for it?

If not, no worries. You do not have a money problem. You merely have an idea problem. We're cashflow savvy.com, and we'd like to share a new idea with you around income real estate that can transform your financial future and accelerate its arrival. Go to cashflow savvy.com and download a free investors package. Cashflow savvy.com. You do not have a money problem.

Merely an idea problem. Cashflow savvy.com. More ideas, less worries. Cashflow savvy.com. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com.