Real Estate Investing Made Simple

Hey, what’s up? Welcome back. Kris Krohn
here. And today, we’re talking about real estate investment made simple. Listen, I
own 25 properties by the time I was 26 years old and had a six-figure residual
income. Have gone on to do thousands of properties. And today, I’m making a video
all about how you can understand the most important terms that will help you
build your wealth now. And it starts with basic simple understanding. It’s all
headed your way next in this video. I remember how frustrated I felt when I
was brand new to the game of investing. And I love the idea of real estate. I
love the idea of becoming financially free. But the terms were flying at me. And
what does equity mean? And what is a tenant? And is that the same thing as
being a landlord? And how is that different than a mortgage? And these
words were unfamiliar. And I remember feeling like inside like this massive
lack of confidence. And it’s really hard to take ownership and to act and execute
if you don’t really feel comfortable. So, today is all about making real estate
investing super simple. I’m super excited for making this video today. I think it’s
definitely going to be one of the more popular ones. For those of you that are
subscribed to the channel. By the way, if you’re committed to financial freedom,
then you must be subscribed in this channel and ring that bell because every
day I’ll notify you about the next video that comes out. They’re all made based on
your questions and research I do about what you’re asking about.
So, here we go. Today, I’m going to give you 2 real estate investing scenarios. I’m
going to put them here on the board. One of them is going to have to do with flipping.
One of them is going to have to do with rentals. And that’s because when you’re
brand new to the game, those are usually the first 2 games that you play. So, I’m
going to put this up on the screen for you. What we’re going to do first is we’re going to
talk about the terminology of a flip. Now, even though I’m not a fan of flipping, I
have friends that make tons of money flipping real estate. And so, flipping
basically means buy low, sell high. In fact, winning in real estate is all about
buy low, sell high. Now, we use different words for how we do that. And I’m going to
teach those to you right now. Let’s just say that I find a home that has a value
of $250,000. That is what the home is worth
today. But I have a purchase price where I can get this home for $150,000. Now, if I can buy it for 150 and it’s
worth 250, the difference between those two, this is the
buy low, this is the sell high. And the money in the middle, a part of that is
potential profit. And that’s where that means by turning a property or flipping
it. So, let me teach you a little bit further. If I buy this home for $150,000, one of the things that I have to
do is I have to start now questioning the value. And I have to ask this
question: What is today’s value? And I have to compare that versus the ARV.
Write this down. After repair value. So, when I say as a 250,000-dollar value,
we’re probably talking about the ARV, the after repair value. If it’s a flip
and I’m getting that big of a discount, there’s probably something wrong with
the home. So now, I have some repair costs. Right? So, let’s just say that my repairs
are $40,000. So, I buy the home for $150,000, I’m going to put $40,000 or repairs into
it to try to create an after repair value of $250,000.
Today’s values what someone’s willing to pay. I got it for $150,000. I probably could have gotten it for more but I got a good deal on it. Now,
when you sell that home, you’re thinking, “Well, Kris. There’s 100,000-dollar difference. So, if I have 40,000 and repairs, that means that there’s 60,000 left over. I’m going to make that as a profit.” Not so. You also want to be
familiar with this term. Selling costs. Selling costs mean that if you sell a
home, you have to pay some money to sell it. You’re going to set 6% of the
value aside that you’re going to pay the Realtors. If I sell it for 250, what is
6% of that. Well, 1% is 2,500 bucks.
2% is 5,000. That means that 6% is going to be $15,000 if the purchase price is $250,000 when I
go to sell it. In addition, I’m also going to have… Part of my closing costs are also
going to be… My selling costs are not just… The realtor fees is what those are
called but I also gonna have the closing costs. And the closing costs are
generally 1 or 2 percent. If it’s 2% in this situation, it’s another
5,000. So, I’ve got 5,000 and 15,000 for my selling
costs, 40,000 repairs. That’s 60,000. So, if I bought it for 150,
I’m going to add the 60,000 on top that brings me up to 210. The difference
between 250 and 210 is $40,000 of potential profit, okay? That’s
the way that you look at a deal like this. So, that’s the terminology. I hope
that helps you out. Now, we’re going to take a look at
second deal that’s going to give you the rest of the complicated language that
you typically find in real estate. And this is going to be based on a strategy
that I’m more of a fan of called buy and hold. Buy and hold is where you take a
home that you get and the intention is to buy it and rent it and make money.
Here’s the language that you want to be familiar with. I have a purchase price on
this particular house of a 150 thousand dollars. This is what I’m
buying it for. I have a down payment to the bank of 20%. So, 20% of 150,000? Get
good at your calculator. 150 thousand times 0.2 for
20% is $30,000 I have some closing costs. And
some other fees associated with getting the house set up. $10,000. So,
I’m $40,000 in on a 150,000-dollar home.
Now, after I put my down payment of 30 grand, I now have a mortgage. And
that mortgage is… For 150,000 minus the money that I put down.
It’s 120,000- dollar mortgage. My payment on my
mortgage every month in this case is $800. But I lease out
the property. And my lease payment on this property is $1,200
a month. Now, I lease it for 1200. I rent.
My mortgage payment is 800. That means that I have a positive cash
flow of how much? It’s the difference between the lease of 1,200 of
what I’m getting versus what I owe of 800 a month. There’s $400 a
month of positive cash flow. That is the story of how you talk about real estate
in both of these 2 very common scenarios. There’s a lot more that you
can learn to get your language lock down and loaded. But perhaps the most
important language that I want you to learn is this one right here. 3
letters, R-O-I. Do you know what it stands for? It stands for return on
investment. I put money out in a real estate deal and the ROI tells me how
much comes back. I put money out on a business
transaction and the ROI tells me how much money comes out. I put money out in
the stock market and the money that comes back is going to be the ROI. ROI is
basically take apples and oranges and different kind of fruit and makes them
all similar to each other. So, I want you to be familiar with this one because
never ever ever engage in a real estate deal without first understanding the ROI.
If you know the ROI, you’re in good hands. Now, this was just meant to be a start
to your entire real estate education. And if you’re watching this and thinking,
“Kris, okay. Thank you for teaching me the basics of real estate. How do I learn
more language and how do I get the best ROI?” You’re going to actually find that
information in a brand new publication that I have here. It’s called Chrome
Consortium. It’s the story of the strategy of how I buy the best deals. How
I average at 25% ROI and 4,000 individual homes to prove
it. This document is free. I’m circulating it right now because I want people to
have as much knowledge to get in the game of real estate to know how to play
it. If you click the link below, you can learn more about this document. All I ask
is that you cover shipping and then other than that, we’re going to send it out
the door for you so that you can actually get your game on with real
estate learning how to play it in the most intelligent way possible. Other than
getting that document, the next video I recommend for you is coming right up
next. It’s how to create wealth in your 20s. I became financially independent at
the age of 26. And whether you’re starting off in your 20s, 30s or 40s or
even late teens. Now, is the perfect time to get in the game of real estate. This
document will 100% give you huge shortcut. In fact, just flipping through
this for about 30 minutes will give you indispensible knowledge on what you
should and should not be doing in the game of real estate. And proof to back it
up. My friends, thank you for watching today.
Make sure that you subscribe. Smash that like button and I’ll see you on
tomorrow’s video.


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