It’s no surprise that there’s a lot of discussion lately about the real estate market potentially dropping. Here’s why I don’t care if it does, why it shouldn’t matter, and how I invest in real estate. Enjoy! Add me on Snapchat/Instagram: GPStephan
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Now before you think I’m absolutely crazy for saying something like that, since basically 85% of my net worth is in real estate…and I make most of my money as a real estate agent…so I definitely see myself as being pretty reliant on real estate for my income, just hear me out, because I promise this should hopefully make sense.
I think one of the biggest concerns right now for most people is fairly surface level..they don’t want to lose money short term, and they’d rather just wait and see what happens. And I don’t disagree, this is a fair argument. But this ignores some other important aspects.
For me, I don’t flip properties. In fact, I never intend on ever selling them - I keep them on low-interest, fixed rate mortgages for 30 years and I rent them out. Rent covers all my expenses and spits out some extra profit each month. I don’t plan on selling, so the properties value doesn’t really make a big difference. Instead, I care what the home is worth 30 years from now.
Here’s what happens, and it’s happening RIGHT NOW. People are reading about the real estate market softening and because of that, they don’t want to buy now - instead, they want to wait for prices to drop even further, then buy in at the bottom. All those people who are sitting on the sidelines are doing what…they’re RENTING. All those people out priced from the market? They’re RENTING. Those sellers which sell their rental properties? That’s one less property on the market to rent.
The one thing that does historically well in a real estate drop is…rentals. Rentals are making the money. So either way, from the way I see it, I win. I’m either getting a really strong rental market, which means more money in my pocket, or rising values…which means money in my pocket. So why would I care if my place is worth 5% less next year if that just means there are more tenants looking for rentals, which helps drive that market higher?
In the bigger scope of things, unless you’re flipping real estate….which I personally don’t recommend, and I have a video about why I don’t flip real estate…timing the market is a gamble. You might get it right sometimes, you might get it wrong sometimes. I’ve seen more people get it wrong than get it right, however. If you can’t find a good deal, don’t buy…trust me, you can over pay for a property in a really bad market, and you can under pay for a property in a great market. Your individual skillset will prove much more profitable than the market dictates.
Invest what you can afford, live below your means, buy properties that cash flow, buy them on a fixed rate long term loan so there are no surprises about your payments fluctuating, and wait. If you find a deal, go for it…if you don’t, then wait. Simple as that. No sense over complicating anything.
For business inquiries or paid 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
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
Get $50 OFF + FREE Coaching Call FOR A LIMITED TIME: Code THANKYOU50 - The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c
Now before you think I’m absolutely crazy for saying something like that, since basically 85% of my net worth is in real estate…and I make most of my money as a real estate agent…so I definitely see myself as being pretty reliant on real estate for my income, just hear me out, because I promise this should hopefully make sense.
I think one of the biggest concerns right now for most people is fairly surface level..they don’t want to lose money short term, and they’d rather just wait and see what happens. And I don’t disagree, this is a fair argument. But this ignores some other important aspects.
For me, I don’t flip properties. In fact, I never intend on ever selling them - I keep them on low-interest, fixed rate mortgages for 30 years and I rent them out. Rent covers all my expenses and spits out some extra profit each month. I don’t plan on selling, so the properties value doesn’t really make a big difference. Instead, I care what the home is worth 30 years from now.
Here’s what happens, and it’s happening RIGHT NOW. People are reading about the real estate market softening and because of that, they don’t want to buy now - instead, they want to wait for prices to drop even further, then buy in at the bottom. All those people who are sitting on the sidelines are doing what…they’re RENTING. All those people out priced from the market? They’re RENTING. Those sellers which sell their rental properties? That’s one less property on the market to rent.
The one thing that does historically well in a real estate drop is…rentals. Rentals are making the money. So either way, from the way I see it, I win. I’m either getting a really strong rental market, which means more money in my pocket, or rising values…which means money in my pocket. So why would I care if my place is worth 5% less next year if that just means there are more tenants looking for rentals, which helps drive that market higher?
In the bigger scope of things, unless you’re flipping real estate….which I personally don’t recommend, and I have a video about why I don’t flip real estate…timing the market is a gamble. You might get it right sometimes, you might get it wrong sometimes. I’ve seen more people get it wrong than get it right, however. If you can’t find a good deal, don’t buy…trust me, you can over pay for a property in a really bad market, and you can under pay for a property in a great market. Your individual skillset will prove much more profitable than the market dictates.
Invest what you can afford, live below your means, buy properties that cash flow, buy them on a fixed rate long term loan so there are no surprises about your payments fluctuating, and wait. If you find a deal, go for it…if you don’t, then wait. Simple as that. No sense over complicating anything.
For business inquiries or paid 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
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
coming back to this video, here during the pandemic…
I bought my 🏠 on perfect timing. I bought my house right outside D.C. for $65,000 in 2011. Today my house is worth $275,000.
I was in real estate when you were getting in. I went into insurance when it crashed. I did keep my license. I don't regret getting my insurance license. As a thought you may want to consider getting your license and sell Inurance as you sell real estate. They need it to close.
I mean no disrespect, I'm trying to understand, so please hear me through. There are a few people in my life trying to persuade me into this type of real estate investing you are talking about in this video, but I am skeptical. Lets assume I buy a home at 30 year fixed, and total monthly cost to me is $1500, with the intention of renting it at 10% margins, so $1,650 rental cost. Over 30 years, the house if paid for, plus I have earned $54,000 from the rental. Great! BUT then I assume replacing appliances every 5 years at a cost of around $3,000 for a total of roughly $20,000. Then assume Ill have to do $5,000 in roof repairs during that period. Then of course $200 plumber fee per year for a total of $6,000. Then replace the carpet every 10 years at a $8/ft for 1500sqft each time for a total cost of $36,000. Then of course do I need to pay a groundskeeper/lawncare? What about paint? The cost of cleaning between tenants…it seems the expenses of a home are never ending! Then the time it takes me to manage the property, or pay someone else 10% to do it for me. Despite the cash flow, it appears to me that at 10% rental margin, rentals of single family homes costs more than the cash flow it provides. The only gains would be the sale price I could get at that point minus the costs I've put into it. if I sell for $500,000, that equates to $16,000/year earnings, and that is not impressive to me. What am I missing, because I know some people are successful with this method. Thank you!
i love you!!!
Market is 20 percent from an unsustainable top. Just do the math.
Give me 1 reason not to live like a modern day nomad? No feels, thats not a reason. If population rates stabilize you real estate chuckle f@#$s are screwed.
You don't lose money when your home values goes down unless you sell at a depressed price
Market downturns are only bad for people who are bad with money and poor people which those two usually go hand-in-hand people who have saved their money it's the best thing in the world because they go buy assets for pennies on the dollar
Graham thanks for the perspective between owning and renting in different economic market times.
king of all nerd douches. just nauseating, good luck with getting high rents when the recession hits and the fed cant boost the market. you think you’re a wizard cause you were around during 08? that was an amazing opportunity to come in because it was all up from there. try living through a real bear market like the 70s. thats whats we’re in for. my dads friend killed himself because he had the same mindset as this douche and lost everything.
Graham. How would you recommend a brand new agent with no real database or clientele build their business as an agent during a shifting or possibly even crashing market?
I dont know much… but i think the only thing thats going to happen is instrest rate increase…
Good, let it crash. 😄😄😄
4 ways to make money with real investing in Canada.
1. Cash flow
2. Principal Reduction
3. Appreciation
4. Tax Depreciation
1. Cash flow – Money collected from rents pays the bills for the property and what is left over is your Cash flow
2. Principal Reduction – Money collected from rents pays principal balance, reducing it, and creating equity even if the market flat lines forever.
3. Appreciation – Money collected from property values increasing, whether through refinancing with a lender after appraisal showing an increase or leveraging this equity in some other way.
4. Tax Depreciation – Electing Tax Depreciation at tax time for the purpose of investment. A dollar today is worth more today than when you have to realize the recapture of that same dollar in 20 years from now.
While agree with your video that cash flow is the most important and probably the safest strategy. The other 3 should not be overlooked . Aiming for all 4 can yield returns like no other investment in my opinion.
In Oakville, Ontario, where I have my single family rental units, its extremely difficult to cash flow unless you have a large down payment. It was ultimately the rapid appreciation (unforeseen here in Greater Toronto Area) that assisted me in buying more investment properties.
"Cash flow is like your air, Net worth is like your lungs"
lol wasn't getting started in real estate in 2008 like.. literally one of the best time in history to get started in real estate? How well do you think you would've done if you would've instead started in 2004 and leveraged your way up to 2008? Honest question.
This guy is too young and has very little experience. He has no idea how markets work.
Real estate does not do good in a recession; never has.
Here's what happens in a recession.
Companies start laying off workers. The high salary workers who moved into a former lower income area drove up the rents and real estate prices while driving out the lower income people. These people whose high salaries, along with super low interest rates that inflated housing, will lose their jobs. When this happens, the renters who now don't have the ability to pay rent or mortgages will move out, driving rents down, along with real estate prices. People who bought houses to rent there are going to experience a negative cash flow as they'll be fighting for the few renters who still have jobs in the area. Most will not be able to stay above water and default. This real estate bubble is just the same bubble as 2008, only it was re-inflated by even lower mortgage rates; which is why the bubble is bigger than 2006.
This guy thinks because he has a fixed rate mortgage he is safe, but I know a lot of people just like him personally that were holding more than $10M in real estate and lost everything due to negative cash flow, including their primary residence when the market collapsed in 2008.
Graham do you have any videos about being an investor vs a dealer? Thanks bro
A real estate crash means buying opportunities. I really wish the stock market would crash so accumulating shares will have better value.
I cant wait to see this guy become a billionaire
Crashing prices means you can pick properties up as a discount. They'll be back up in 4-5 years.
Nice video, thanks for sharing.
Don't people call those who have renters, but haven't paid off the building, slum lords? If the rent is under market, how does it pay off the mortgage payments and give you a little profit? Is it the low interest rates and mortgage payments?
What? I only get like 0.5% interest on my savings account.
Graham do a tour of your home for the next video.
Happy to have found your channel, we both seem be on the Airbnb fan train. Pop over to my channel if you ever have some free time 😀
Guy who has been doing real estate for like 10 years sitting in front of his sports car. Douche 101.
"Hi I'm Jillian, and this is your money minute" Oh fuck off Jillian!
Good video
My stock went way down but house prices are still high in Dallas.
Awesome video Graham! I've been watching and following you since 12 months ago when you were relatively new. Thanks for making all these informational videos I've learned lots from you! Do you have any thoughts on the Canadian markets more specifically Vancouver? In Canada the banks mostly do short mortgage loans, 2, 3, 5 year… and the longest I believe is a 10 yr. I recently locked in a 5 year fixed loan but definitely am concerned about the rates rising to 5% or even 6%+ after my term ends… 🙁
Whats your formula on finding deals that cashflow X% above the break even point? What I mean is you said even if your rental income took a 30% hit, youd still be break even. So how do you look at a deal and say "yeah that will work because my PITI is far enough below and rental rates are so high I can afford to take a 30% hit"
hang on guys it’s going to be pretty
Excellent advice. Thanks!
Graham, do you have mortgages on most of your properties and do you try to pay them off at all? Thanks
Great advice 😁😁🔥🔥