Latest / The Jon Sanchez Show / The 5 Ways Rental Properties Can Make You Money
Transcript
- Jon G. Sanchez: Good Tuesday afternoon too. Welcome to the John Sanchez Show on New Stock Seven Eighty K aways. Pleasure to be with you and a pleasure to have the co host joining me today. Everybody's here. Dwight Millard on Q Home Loans. How are you, my friend? Dwight Millard: I'm doing fantastic except for seeing snow on the mountains yesterday, John. Yeah. And one day, one day. Yeah. Doing good. How are you? Jon G. Sanchez: Good. Yeah, I know. Can't be. Can't be. We we go from air conditioner to heater in one day. One day. holy good, buddy. Good, thank Cory Edge: Yeah. Jon G. Sanchez: you. Mr. Cory, big C, how are you? Good, good. Cory Edge: Doing fantastic. How are you? Jon G. Sanchez: Very well, thank you. Very well. How do you boys like today's topic, huh? Pretty interesting. I like it. I like it. There Dwight Millard: It's all about Corey. Yep. Yep. Cory Edge: I like it. Yeah, right. Jon G. Sanchez: you go. All right. Well, let's get down to it. We got a lot of things to talk about. I'm gonna after I should say during the stock market recap, I do want to go into some some news that came out today. back to this whole diesel situation that I've been on my on my soapbox for. I Dwight Millard: Mm-hmm. Jon G. Sanchez: want to kind of bring you the latest on that. Also want to bring you some big news that's going on in the after hour session in regards to to Bank of America. They're they're gonna be writing a big old fat check to the U.S. Treasury for Some well, I was gonna say alleged, that's what you're s you're properly supposed to say, but they've admitted their faults and so I guess we can say you know, it's it's a done deal, but a multi well a billi billion dollars plus, let's just say that. And I'll I'll Dwight Millard: Mm-hmm. Jon G. Sanchez: tell you what the what the stock is doing. But you know, all three of us we we deal in a very regulated world. And Dwight, I don't know about you, Corey, but Dwight, I know you and I are the same when it comes to money laundering rules and All the different rules and things that we have to follow and the continuing ed that we have to do every year, et cetera. Well, Bank of America had a big violation they got caught on in regards to money laundering, not themselves, but for their customers that they quote were supposed to catch, according to the Treasury Department. And like I said, they're gonna they're gonna write some some big checks on this one. But let me tell you about the the real estate side of things that we'll get to probably right at the bottom of the hour according to my time schedule here. We've titled today's show, The Five Ways a Rental Property Can Make You Money. Okay, listen tightly. So, as we all know, most of you believe a rental property makes money only when the rent exceeds the monthly expenses, and of course, with appreciation. But the way I want you to look at it, and the way the boys want you to look at it, is this the cash flow really is just one of five potential profit centers. So today, Corey, Dwight, and myself, we're going to reveal how rental real estate can create income, equity, and retirement wealth. And also, How to recognize a property that will only lose you money, because not every property is gonna make money, right, Mr. Edge? Dwight Millard: One one. Cory Edge: No, unfortunately some of them lose. And again, we'll Jon G. Sanchez: Yeah. Cory Edge: go into it. if it's just the pr if it's just the timing of the market, then you can wait that out. And I've talked about that on the show for years. But there are Jon G. Sanchez: Sure. Yes. Cory Edge: some properties that are just duds for various reasons. I mean, we'll get into Jon G. Sanchez: Right. Cory Edge: them, but Jon G. Sanchez: Right. Cory Edge: conditions the main Jon G. Sanchez: Absolutely. Absolutely. All right. let's get down to the stock market recap, get this this side of it going. So kind of an interesting day today. you talk about an abrupt reversal. My last stock update this morning. Remember, if you're missing my updates, they're at twenty-three and fifty-three after the hour. So my last one before the market opened this morning, of course, right around six twenty-four, six twenty-five by the time Ross gets to me, the Dow features were up about four hundred and thirty points at that point. And the reason being is we had a number of major Wall Street banks report earnings numbers. And on the surface, the numbers look good. Matter of fact, we saw the stocks react positively. I'm talking the likes of Goldman Sachs, JP Morgan, Citigroup, Wells Fargo, so on and so forth, along with some other non-financials. And again, on the surface, most of the numbers look great. I mean, Goldman Sachs just knocked the cover off the ball in all aspects. The earnings per share, the net revenue, trading revenue. They're a little bit light in the fixed income trading side, but you know, everything. Stuff was doing amazing. Up over, I think it was up over 10 bucks at that point. Finished down $2.04. 0.23% lost $8.91.91. JP Morgan, kind of a mixed report. They didn't do too good on the fixed income trading side either. they were up very strongly in the pre market, finished down two dollars and eighty seven cents. Citigroup down five point six percent, seven dollars and thirty nine cents. On and on and on. So we had this abrupt reversal, like I said, up, like I said. About 430 right before the open. NASDAQs were suffering pretty good. We were down about 260 right before the open on the Nasdaq features. and a lot of it stemmed from what's going on in Korea. this was one of those days. And and I'll tell you what, you want to figure out what our chip stocks and eventually the Nasdaq does? Watch what happens in South Korea. We are very tied to them when it comes to memory sticks or memory sticks, memory stocks. the SK Heinex is a major South Korean chip manufacturer. They now trade here in the US. it dropped about six dollars and nineteen cents, three point eight two percent. just about it accounts for about fifty percent of what's we call the Cosby index, which is the the the the South Korean index. And so what had happened is some competition, some over evaluation. Again, we've go through this, it seems like about every couple of weeks we wake up, because of course South Korea they've been trading or they're done trading And then it impacts our market, then it imp as far as our chip stocks, memory specifically, then it impacts the the Nasdaq and so on and so forth. And it was one of those days today. That's the reason the NASDAQ had had the weakness that it did. The bright spot today was oil and also bond yields, as Dwight will allude to here in just a moment. So overall, kind of a mixed story. Let me tell you exactly how we finished up. You'll see what I mean. We finished with a loss of 180 on the Dow. again. Up almost 500 or up 430, excuse me, right before the open and finish the day down 180. So again, massive reversal there. NASDAQ down 42, to close at 27,204. And the SP, boy, she's been a real quiet behaving index. Barely budged yesterday, today down two points. So we'll we'll definitely take that one as a as a victory there. so We get into Dwight, let's let's move right on over to the bond market side and and mortgage rates because you know, we missed you on Thursday, so I didn't Dwight Millard: Mm-hmm. Jon G. Sanchez: get a chance to to obviously talk with you about that. Bond market was closed yesterday. I think that was probably probably one of the one of the best things that could happen. We you know, we we were kind of Dwight Millard: Like Amen. Jon G. Sanchez: flat here, you know, at home yesterday or you know, in the equity markets, because the bond market we didn't have that to trade off of. today, like I said, relatively quiet, down two basis points five twenty two. Bring us up to date since we haven't chatted with you in a week. What's going on in in the world of mortgages. Dwight Millard: Yeah, yeah. So John, we've seen some improvement, which is good. I mean, we we broke through the 7.5 barrier, if that's good news. We're at 7.46 according to Mortgage News Daily on the 30-year fixed. You know, you're still stubbornly above the sevens, the even on the FHAs and VAs, 7.13 and 7.15. So, you know, John, it's it's it's I what I'm seeing out there, John, is everybody's quoting buy downs now. Two one buy downs, three two Jon G. Sanchez: Yes. Dwight Millard: one buy downs that we've talked about. Otherwise, you nobody's even taken Jon G. Sanchez: Can't do it. Mm-hmm. Dwight Millard: anything north of seven. So you gotta do a buy down and get down into the fives, you know. So, you know, that's kind of where you're at. It's hard to get into unless you do a three, two, one buy down, it's hard to get into the fours. So you're in the fives, you know, as a start rate, which seems really, really unconventional to me. Jon G. Sanchez: I I tell ya, I mean, unless, you know, if I was in the in the real estate market, and like you said, we've touched on this a lot, guys. that to me on the surface, if I was in the real estate market, I'd that would be the, you know, what I'd be talking to you about, Dwight is the you know, the three two one and and go Dwight Millard: Yeah. Jon G. Sanchez: with that. because like you said, it it's well Corey, we saw it today. Existing home sales rose about one point five percent month over month, but overall prices were down nationwide, month's inventory north of four percent. And and the reports absolutely said all attributed to what Dwight just mentioned, the the seven you know, basically seven and a half percent mortgage you know, side of things. Cory Edge: Plus the seasonality. So you got the higher interest rates, plus you're going into seasonality. There's been a lot of reports in the last week, and one specifically talking about the new home builders are now going to get pinched because you're seeing softness in the resale market, which means the resellers, the sellers are now starting to get flexible on their pricing, offer some incentives, and the new home sell. New home builders haven't had to compete with the resale lately because they were offering all the incentives. Well, now you're seeing Jon G. Sanchez: Sure. Cory Edge: them on the other side. so it gets a little harder. And we'll talk a little bit about these DSCR loans later in the show because they're specific to investment. But I've heard maybe I'm just catching it now, but I've heard more and more commercials lately, Dwight, on these HELOC loans that they're pushing that are a pick your payment product. They and they haven't yeah. Dwight Millard: Mm-hmm. Yeah, John, those are those negative arms again, remember? Yeah. Yeah. Jon G. Sanchez: Those are back. God. Didn't we did we not learn That's when Cory Edge created the the famous saying, the pendulum swings all the way to one side, all the way Dwight Millard: Yeah. Yep. Yeah. Yeah. Cory Edge: The pendulum swings. Jon G. Sanchez: to the other when that four and one was going on. Yeah. Or pick your payment. Dwight Millard: And that's not the answer to high race, right? We all can agree that's not the Cory Edge: Correct. Dwight Millard: answer. Yeah. Yeah. John, it'll be interest Cory Edge: Yeah. So it's inter Dwight Millard: go ahead. Cory Edge: No, I was just gonna say and I read I I didn't read the whole article. I shouldn't have sent it to you guys. There's not that I trust Gavin Newsom, but there are some some bills being pushed through California to create their own lending company. Do I don't know if you saw that? Like they they would become a lender. They're gonna give I thought it said up to fifteen to or seventeen percent of down payments to buyers. Like they're cr trying to create stuff in the the onus of the article is they're already already so far in debt they can't afford to do any of this, Dwight Millard: Yeah. Cory Edge: but Of course they'll try. Jon G. Sanchez: Huh, it is political season though, isn't it? Amazing how these how Cory Edge: Yes, yeah, yeah, yeah. Jon G. Sanchez: how I we don't hear anything from politicians when all these people are suffering throughout the year, but boy, we get to get to midterm election time and all that, and all these ideas just come out of nowhere. Dwight Millard: Well well John, you go back to like the Nehemiah days. Remember in the five, six, seven you know, Neamaya was that hundred percent financing. I mean there was all these things and you know, it's interesting how states think they can go rogue and say, I can create this and I need Jon G. Sanchez: Yeah. Yeah. Dwight Millard: Fannie Mae to come in and buy it. Well, they're not gonna buy it. I mean you're not you're not Jon G. Sanchez: Right. Cory Edge: Exactly. Dwight Millard: going to their guidelines. So you're gonna end up having to warehouse these loans as the state and like Corey said, in one little hiccup you're gonna have you're gonna be even more in debt. So I guess, you Jon G. Sanchez: Right, right. Dwight Millard: know. Jon G. Sanchez: Yeah, it's Dwight Millard: It's amazing. Jon G. Sanchez: you know, again, it's it's something obviously that that has to be done in some form or fashion. But I you know, guys, I was actually gonna propose this idea of the of the show topic, but I changed my mind at the last minute. So maybe, you know, maybe Thursday or something we can do it. This bond market, Dwight and Corey, there's more to the level of bond yields that we are at than What anybody knows. I I I spent gosh, probably a good hour this morning in between my stock updates and other responsibilities, just kind of researching what's going on behind the scene. This is a complicated mess, guys. It's a complicated mess from the standpoint. These bond yields, yeah, they're going up because of fear of inflation, because of oil, because of this, because of that. But it goes a lot deeper. I mean, I'm talking on the international side of things, we are having a hard time selling our debt. To other countries. Dwight Millard: You won't. Jon G. Sanchez: They are fearful of our $40 trillion deficit. And they're like, Dwight Millard: Mm-hmm. Jon G. Sanchez: we're we don't want any part of the government auctions. Have they been strong recently? Sure. We don't know exactly, you know, what percent, like last week we had the 10-year and the 30-year auction. We don't know what percent was bought by by international investors versus domestic investors. But but the numbers are showing just dramatic drop in that, in that appetite. Then you Dwight Millard: Yeah. Jon G. Sanchez: look at like I said, I could do an entire show on all the other factors. So the point I want to make is, Dwight, you know, you and I have had this discussion many times and you're like, John, do you see any any, you know, light at the end of the tunnel with these yields coming down? And I've said no, and I'm gonna adamantly say no now, Dwight. Unfortunately, I I don't see anything on the horizon based upon what's going on in the economy. you know, now we're starting to see a lot of articles about what what we touched on I think it was last week, which was If these juicy bond yields, you know, 10 year again closing at five twenty two today, becoming a competing asset class to the stock Dwight Millard: Mm-hmm. Mm-hmm. Jon G. Sanchez: market where people are going, I can get, you know, almost five and a quarter percent depending upon the day, guaranteed from the government. Do I really want to take the risk of the stock market? Or do I want to reduce my stock market allocation and put it in the bond market? You know, twenty percent, forty percent of my portfolio. So it's it's it's absolutely fascinating again, what what really is going on under the surface. And there's so much more to it than just than you know, what we Unfortunately, only have the time to get into many times, which is hey, you know, we got rising oil prices. That creates inflation, that creates fear of of you know all kinds of problems, and therefore the traders, you know, sell the bonds because they don't want to own bonds in an inflationary environment, and on and on and on and on. But it it's a tough situation. And, you know, right now there's there's not not a lot of solutions that are out there, unfortunately. So I think, you know, my takeaway is folks get used to seven percent plus mortgages. I I think they're and I think you said this a few weeks ago, Dwight. They're pretty much here to stay right now. I mean, unless something Dwight Millard: Yeah. Jon G. Sanchez: catastrophic happens, that's the only sign that I see. If something catastrophic happens, God help us in the economy. Maybe a rogue AI agent that we keep, you know, getting threats on like we got today. Did you guys real quickly did you see that story about in in Sweden, the rogue AI agents? Did you read Corey, did you read about that? Yes. Yeah, these rogue rogue AI agents Dwight Millard: Mm-hmm. Cory Edge: With with the refrigerators? Yeah, it was amazing. Yeah. Jon G. Sanchez: infiltrated some massive supermarket chains, came in. Controlled the temperature on these refrigerators, shot the temperature up to what was it, Corey, 122 degrees or something Cory Edge: Yep. Jon G. Sanchez: on freezers and refrigerators, and created, you know, millions of dollars of damage, not only to the equipment, but obviously the the goods inside. That's what people think about. That's what people think about. It's like rogue agents. Then you had anthropic. I I I I feel like they're just committing suicide. I really do. They came out today and you know, basically said, Yeah, our biggest risk, which is not far away, is the rogue AI agents multiplying among themselves and coming in and hacking financial systems and shutting down the banking system. Like, you're the one creating this, and you're like, hey, you know, this is this is Dwight Millard: Yeah, yeah, yeah. Jon G. Sanchez: it's kind of like a guy saying, you know, I created the bomb and it can really kill a lot of people, but you know, it is what it is. It's like you just sit Dwight Millard: Yeah. Jon G. Sanchez: there and scratch your head. Welcome back to the John Sanchez Show on New Stock 780 KOH with Corey Edge Vigility, Dwight Millard of OnQ Home Loans. Once again, we finish with a loss of 180 on the Dow 0.35%. NASDAQ a decline of 41 and the SP given up two points. All right, once again, oil modest gain up 29 cents, 9406 a barrel, down $13.70 on gold, $4,176.60 an ounce, and a two basis point decline on the 10-year treasury at a yield close of 5.22%. All right, once again, our real estate topic that we'll get to when we come back from the bottom of the hour: the five ways rental properties can make you money. But in the meantime, I promised you a couple of follow-up stories, and wanted to to go back to this real quick. Back to the to the diesel situation. So all of you read and you hear and you watch, et cetera, you know that both sides of the aisle do not like this major announcement that was made by the president on Friday, that lifting sanctions against Russia in turn for them providing a bunch of diesel. again, I ran the numbers on Friday and I said, according to my calculations, this deal equates to about 3.3 days worth of diesel consumed by US. I told you on the show yesterday, another study came out and said, nope, it's one day's worth of diesel. So it's nothing. But what we're doing, of course, is we're putting whatever the price tag is gonna be, who knows what we're buying this diesel for. let's just say hundreds of millions, if not billions of dollars, into Russia's pocket for them to turn around and use it in their war machine and kill innocent people in Ukraine. That was my soapbox on Friday. the situation is unfolding and getting worse for the president. both sides of the aisle, again, immediately on Friday came out and said they don't like this. Because they remember, Congress just signed two weeks ago a massive sanction bill against Russia. Dwight Millard: Mm. Jon G. Sanchez: You know, they can't do this, they can't do that. Now it's all, you know, the president tore it all up with this deal that he and his buddy Putin signed. so so today you had I think it was 14 senators again on both sides of the aisle. come out and say, you know what, this we we don't want this. You need to rip this thing up. They the their quote is immediately reverse course in a letter signed by again a number of of the different senators. But what is interesting, a reporter asked Trump about this today in regards to, you know, essentially, and I'm paraphrasing, aren't you putting money in Putin's pocket and therefore to, you know, gonna use it in the war machine against Ukraine? And the president said, I didn't Really want that. I didn't think about that. Are you serious? And then and then his final comments today were he said he said of Putin and and Zelensky says, quote, I think they both want it to end, meaning the war. You know, honestly, they both want it to end. And they don't know how to get to that point. Do you really think Russia wants this to end? Russia does not want this Dwight Millard: And Jon G. Sanchez: to end. They they're not gonna it's not gonna end until either they're out of money, out of out of ammunition. or Zelensky in the in Ukraine and give it up and say, here, take all the land that Dwight Millard: Mm. Jon G. Sanchez: you want. We we can't fight you anymore. We're we're too small, but which isn't gonna happen. No, no. So Cory Edge: Which isn't gonna happen. Yep. Dwight Millard: Yeah, right, right. Jon G. Sanchez: I don't know where this optimism comes in. I really don't. all right. the other story I want to finish up or follow up with real quickly, Bank of America. So regular session, the stock was down 62 cents, closed at $53.96, about a 1.14% loss. right now in the after hours, down a dollar twenty-three. To a price of $52.73. So this is what happened in the after hour session. the Treasury Department came out, they hit Bank of America with a $1.2 billion penalty, third largest ever in history assessed by the Treasury over money laundering failures. the Treasury Department said the nation's second largest bank failed to properly monitor trillions of dollars in transactions. And to report more than five billion dollars in suspicious activity, including transactions potentially tied to Chinese money money laundering networks, narcotics trafficking, and fraud. The enforcement action includes a $1.2 billion penalty. the three of us know this name because it's you know things we have to know about. Financial crimes enforcement network, better known as FinCEN, and the third largest find in the Treasury Department history after they find crypto exchange Binance $3.4 billion. And TD Bank $1.3 billion back in 2024. The OCC penalty will be credited against the FinCEN assessment rather than added to it separately. $11.6 million sanctions settlement will bring the total penalties to more than $1.2 billion. Treasury Secretary Bassent said even the biggest financial institutions are not above the law. The bank came out this afternoon and said, let me throw this out there real quick. They report earnings tomorrow, by the way. The bank said they're going to include a Non-tax deductible charge of $1.2 billion. So that tells you they're not fighting this, impacting net income by 17 cents a share in the third quarter results. Dwight Millard: Yeah. Jon G. Sanchez: So that means it should be tomorrow's results. I believe they're just on a calendar quarter, but if not, it'll definitely be the next earnings report. Bank of America said financial crime compliance is serious and we are responsible for getting it right. according to the spokesperson in an email statement. they said they have invested billions of dollars in technology and dedicated thousands of employees to combat financial crimes to resolve the differences so or deficiencies. So this has been obviously going on and for a long time. Again, they failed to report five billion dollars of suspicious transactions, including one billion involving national security related and other priority illicit financial risk. So yeah, that's that's gonna be you know big one if if again I think I would think if they're gonna report that tomorrow, the stock would be down, but we'll we'll see. Don't miss my stock updates tomorrow morning 'cause like I said, they're they are set to report. Dwight Millard: John, do you think that's there's more to come on that? I mean, I don't know about you, but I gotta do I gotta do this all the time. I've gotta and we're not even we're not even that suspicious activity. You know, I get I get a bank statement and Jon G. Sanchez: here's you and me both. You and me both. No, no. And you know, part in and part of me, I feel for Bank of America, to be honest with you, I feel for any financial Dwight Millard: Yeah. Jon G. Sanchez: institution, you know, they're obviously dealing with billions, if not trillions, of dollars of transaction. There's only so much technology you can do. Now, if Dwight Millard: Mm-hmm. Jon G. Sanchez: they if they really failed where you know this was supposed to check that and it didn't, okay. But As fast as money moves nowadays, and is now you're talking crypto, you're talking so many different sources Dwight Millard: Yeah. Jon G. Sanchez: of money. And I I I think it's only gonna get worse. And then like the three of us were chatting during the break. you know, what happens? God help us, if and when a rogue AI agent creates one of these problems. Who's who's who who who's gonna be blamed to that one, right? That's gonna be the interesting Cory Edge: Yep. Dwight Millard: Mm-hmm. Mm-hmm. Yeah. Jon G. Sanchez: one. Corey, real quickly before we go to well, you know what? Not gonna we're pretty much out of time. Let's I'll hold my question. All right, when we come back, we'll move over to real estate. Like I said, a lot of things going on today. Five ways a rental property can make you money. Welcome back to the John Sanchez Show on News Talk 780K which with Corey Edge of Vegrility, Dwight Millard of On Q Home Loans. Once again, we lost 180 on the Dow, NASDAQ down 42, and the SP gave up two. All right, we're switching gears, moving over to the real estate side. Today's topic: the five ways a rental property can make you money. So, you know, again, here's what I want you to kind of open things up with. Here's an example of what we're going to be going over. When someone tells you about a rental property, Corey, what is the first question that they normally would ask? Cory Edge: If we're if they're telling me about it or asking me about it. Jon G. Sanchez: Well, either way, telling or let's say asking you about it, I guess better better term. What Cory Edge: How much money they're going to make and their cash flow usually. Jon G. Sanchez: Okay, so right at the top. Exactly. Corey, important question. Cory Edge: That's the most important question in my mind. I mean, are you setting me up for something? Because I feel like I'm on a jury here. Jon G. Sanchez: Okay. Okay. I would never do such a thing, Corey. I would never do such a thing. man, I gotta change my tactic here. That's okay. We came across way too s Dwight Millard: And it's all recorded. Cory Edge: Is that a leading question? I object to whatever you're talking about. Jon G. Sanchez: way too strong. All right. Well, the reason I'm asking you is not to not to grill you, sir. is You know, again, it's it as you said, I was hoping you're gonna say that that it is an important question, right? What's the cash flow of the property? But the point I'm getting to to our topic is it's not the only question. So potentially, and and we've just kind of narrowed down to five potential ways, money different money-making ways, for a rental property. And again, I'm I'm sure you know, if Corey had, you know, another two hours to talk, you could probably double or triple that five numbers. So we're gonna focus in on really these these five ways to do it because Lot of times, Corey, when when someone, you know, after you run the numbers and we're gonna get into this in a second, and you go, Hey, you'd have a hundred dollar positive a hundred dollar a month positive cash flow, that doesn't give people goosebumps and they're not knocking down your door going, Hey, Corey, we we gotta get that property, right? But that's but if you said thousand dollars a month positive cash flow, now they're knocking down your door. Cory Edge: Sure. And I think some some seasoned, astute investors, depending on the property, if it's going to pay for itself and truly cash flow after all net expenses, not just after the the debt service, then yeah, if it's paying for itself, that might be a good deal, depending on all kinds of factors. Like you mentioned, we could sit here all day, but where the properties located. Is there some upward potential? Is it in the path of progress? Like, there's all different things. But y I don't want to say younger, newer investors Jon G. Sanchez: There you go. Yeah. Cory Edge: with that watch too much T V maybe to them that's not enough money. for whatever reason. Correct. Jon G. Sanchez: Sure, sure. They're missing out on and that's and that's exactly who we're talking to here. All right, so let's get into our our first way of making money. Dwight Millard: Mm-hmm. Mm-hmm. Jon G. Sanchez: Pretty simple, and you've gone over this a million times, Corey. Rent minus the mortgage is not cash flow. Explain to those that think it is. Cory Edge: Great. So, and that's the first thing that like we'll sit down, especially with new investors, and go through here's what we think if if we're looking at a property and let's say it's not currently rented, so we have to figure out what the rent is. Then Dwight Millard: Yeah. Cory Edge: we'll go out and kind of research and figure out what the rents are. So we say, okay, here's the rent. Let's multiply times 12. Here's what your debt service is. Let's multiply that times 12, or we can do it on a monthly basis. And this is your rent minus your hopefully minus your debt service. And we want a positive number. That is the start of it. But that's not the true cash flow, but correct. Jon G. Sanchez: Keyword start. Dwight Millard: Mm-hmm. Cory Edge: Because to your point, the a lot of people end there. Positive cash flow. Let's do the offer and move on. Jon G. Sanchez: Mm-hmm. Cory Edge: Well, wait a minute. We forgot about the sewer and the sometimes, you know, obviously the taxes if they're not included in your payment and the deferred maintenance and the vacancy that's going to pop up. So Jon G. Sanchez: It's always Cory Edge: yeah, you're you're looking at it, what's called an NOI, a net operating income, Jon G. Sanchez: There you go. Cory Edge: which is your rents. minus all your expenses, all your expenses. the same stuff you're going to report to Uncle Sam on your tax return. And if you can get to your net operating expenses and cover all of that and still have some left over, then you'll have some positive cash flow. Jon G. Sanchez: Okay, you notice there's somebody listening right now going, Corey just said sum left over. What's the minimum Dwight Millard: Mm-hmm. Jon G. Sanchez: of that quote sum? Cory Edge: Depends on the person. I mean, it depends. So if you're asking me what is the minimum we look for, again, it depends on the person. It depends on the property. if you and I, if the three of us went out and looked right now and we said, hey, the town is growing, I'm just gonna pick a direction east. In five Jon G. Sanchez: Mm-hmm. Right. Cory Edge: years, this is gonna go bonkers right here. We're gonna pick up every rental we can as long as it's paying for itself by at least a dollar after the NOI is done, Jon G. Sanchez: Mm-hmm. Cory Edge: we're gonna do it because we know the value is gonna double and triple in the next five years. Jon G. Sanchez: There you Cory Edge: We would do that. Now. go ahead. Jon G. Sanchez: No, no, no. Keep it your thoughts. Cory Edge: I was just gonna say in another part of town that I don't think is whatever it's gonna be stagnant for five years, we're not gonna get it, then maybe that, you know, dollar cash flow isn't gonna Dwight Millard: Yeah. Cory Edge: be enough for us. Jon G. Sanchez: What was going to inter rudely interrupt you on is believe it or not, folks, institutional investors, the ones that are going out and buying a whole bunch of homes or multifamilies, et cetera. Corey, correct me if I'm wrong. I've seen it in some of the dealings we've had with some of these institutional investors. That's exactly what they look at. The cash flow is important on an institutional level because that's how they pay the the monthly dividends. Yeah, in the bonds, Cory Edge: Bonds. Yep. Yep. Dwight Millard: Mm-hmm. Jon G. Sanchez: et cetera. But what they're really looking at is Getting in there as the term you've used over the years, Corey, putting the pig on the lipstick, meaning they look at it and go, okay, this let's say it's a 500 unit apartment building. Okay, 60% of the rents are under market value. All right, check check box number one, right? That's a positive. We know we can come in and get an ROI. We can spend whatever, five thousand dollars with some new paints, some new carpet, make the place all pretty. That's the lipstick on the pig, and bump up a rent, bump up rents immediately. They look at also how many. contract, how many rental agreements are out there and when they're coming due, right? They're not gonna come in there and just boot you out because they're a new buyer. Generally they can't do that. But they can come in there and go, you know, Dwight's lease is up in in four months. Okay, we can hang with that. And we know again, the pig on the lipstick scenario. So we can boot Dwight out, you know, that he's paying fifteen hundred and bump it up to twenty two hundred. Boom, there's a nice IR ROI there. So there's a lot of ways to slice that cash flow is what I'm getting to. Cory Edge: Correct, yeah. And so ideally you want the cash flow, you want it to be able to pay for itself and then have a plan behind it and you know, chains of use. And I d you know, it it's a kind of a source subject Jon G. Sanchez: Yeah, good point. Cory Edge: around here, but here in South Reno, somebody came in, bought a bunch of stuff, there were a bunch of rentals on it. They unfortunately kicked everybody out because the highest and best use for that land after they tear everything down will be new commercial development and it'll be worth a lot more than in its current state. So there's all different ways to make money on the stuff. Jon G. Sanchez: Right. Okay. Dwight, were you gonna say so? Okay. Dwight Millard: No, no, I I I h wholeheartedly agree with Corey on all that. It's it's you know, it's complicated. Yeah, absolutely. Yeah, yeah, yeah. Jon G. Sanchez: And as a lender, you're you're you're looking at that. I I mean that's right at the top of the priority list. Yeah. Okay, let's go to our our second way of making money on rental properties. Corey, the mortgage principle reduction theory. Cory Edge: Yeah. And again, let's if we go buy a property, let's say after all expenses at cash flows, use around number, $100 a month. So everything, including vacancy, all that, we're gonna make a steady hundred dollars a month, twelve hundred dollars a year. Doesn't sound super exciting. But every t and let's assume you have debt service on it. So you've got a loan. Every time that payment gets made, you put a hundred bucks in your pocket, but it's also paying down some principal. So Jon G. Sanchez: There you go. Cory Edge: if you can finagle that into a 15 year loan and you're a young person. Fifteen years later, you're gonna have a free and clear property that someone else has completely paid for. Correct. Jon G. Sanchez: That you didn't pay a penny for, basically, other than maybe down payment. Yeah. Cory Edge: You've gotten some great Dwight Millard: Yeah. Cory Edge: right up well, we'll get to that. You've gotten some great tax benefits, you've got all kinds of stuff. So that's where it's kind of the Warren Buffett way of doing things, right? Like, yeah, it's super boring, it takes a while, but at the end of the day, it's gonna pay off. So Jon G. Sanchez: I I'm gonna ask you a real and if you don't wanna answer, fine 'cause you you have no idea, but personal question. Have you ever had that luxury of owning a rental property so long that the tenant paid it off for you? Cory Edge: We usually don't own them that long, but we also don't go into with a lot of debt. So Jon G. Sanchez: Right. Right. Right. Cory Edge: lots of free and clear properties, but not Jon G. Sanchez: Okay. Cory Edge: from the fact of my tenant paying for that amount of time. Jon G. Sanchez: Okay. I was just wondering how did it feel in your mind, in your heart, you know, seeing that happen. I mean I Cory Edge: Yeah, no, but I I do have I have a number of clients that they've kept their first house, right? And now Jon G. Sanchez: Yes. Cory Edge: we're all older. Dwight Millard: Mm-hmm. Cory Edge: So now we're 30 years later. That house Dwight Millard: Mm-hmm. Cory Edge: is completely paid off. They still own it because there's some emotional value to it. Never wanted to be a landlord, never wanted, but that first house is always an emotional thing and Jon G. Sanchez: Sure, sure. Yes, yes. Cory Edge: and they'll keep it and they end up becoming incredible investments for them, even though that wasn't really their main goal. Jon G. Sanchez: That's right. That's right. Exactly. Dwight Millard: Yeah, John, I was gonna add, I like the accelerated payment plan, you know, where you're trying but I do like the 30 Jon G. Sanchez: Mm-hmm, mm hmm. Dwight Millard: year. If you're gonna go get a a loan on it, I do like the 30 year and pay the 15 year payment. I just like the flexibility. I mean, yeah, yeah. Yep. And you can figure that out. It's all on yeah, it's all on the internet. Yeah, yeah, but it just makes there's not enough there's Jon G. Sanchez: Yeah, there you go. That that's what you mean by accelerated. Yeah, add it talk to your lender, find out how much extra you need to add to turn the thirty into a into a fifteen and yeah, all online. Absolutely. Great point, Dwight. Dwight Millard: not enough split between the fifteen and thirty right now Jon G. Sanchez: Yep. Dwight Millard: to Jon G. Sanchez: I love it. I love it. Dwight Millard: Yeah no, yeah. Jon G. Sanchez: All right. Point number three, we were going to come back with on five ways to have your rental property make you money. One's pretty simple, appreciation, but not as easy as you think. Welcome back to the John Sanchez show on News Talk seven eighty KO which all point number three coming up the five ways a rental property can make you money. But first, let's get some phone numbers going so you can contact these fine smart gentlemen. Let's start with you, Dwight. Phone number, please. Dwight Millard: Yes, sir. Two four zero two zero two two. Jon G. Sanchez: Thank you, sir. Mr. Edge? Cory Edge: six seven three six seven zero zero. Jon G. Sanchez: Beautiful. All right, Corey, let's go to our third way of making money. So once again, if if you just joined us, the first way, the monthly cash flow. Don't get stuck on it. It's important, but you could literally have a hundred dollar a month positive cash flow. And Corey, we can even have negative. I mean, just that doesn't mean it's a bad property just because you have negative cash flow if you can afford it, if some of these other factors come into play. We should have thrown that out there. Cory Edge: Correct. Yeah. I the only thing I caution against is you don't want to go into it with a negative if you can pot only because I've seen that work. Again, back in two thousand seven, eight it like, Well, I can afford an extra thousand so I can go up to a thousand negative. Like, well, that thousand equals twelve thousand and then something else I like it ends up eating you alive. So yeah. Jon G. Sanchez: Yeah. Yep. That's right. Good point. Dwight Millard: Mm. Jon G. Sanchez: All right. Number two, mortgage principal reduction. Again, you're having the tenant make your mortgage payment. So even if you had modest cash flow, if they're making that payment every month, they're paying your mortgage, and that's building your wealth. All right, we left off at number three, guys, appreciation. Corey, obviously, you know, that seems real obvious, but maybe not. Cory Edge: This is the one that everybody dreams about. And this is the one that usually happens over time. You're going to go through some pitfalls, but you buy the property today, it pays for itself after you've netted out all your expenses. You let it sit there and then come back to it five years, 10 years, or however much, however long you want to go. And and your biggest gain will have been, hopefully, if everything went right, the appreciation of that property. So it's not uncommon to say we'll use round numbers. You buy it for 200,000. You come back into it 10, 15 years later, maybe shorter, maybe longer, and it's worth 400,000 or 500,000. That's going to be by far the biggest portion of the game. And John, I've seen it. You guys have all seen it. Everybody has seen it. it could be the building because of the the rents, you know, just the cash flow of it. It could be that you lucked out and hit a very prime spot and they're gonna tear the building down and now the land's worth 10 times more than what the building ever was. it could be any number of things, but It's just owning that hard asset. And unfortunately the inflation, you know, comes in and props it up. The Jon G. Sanchez: Yeah. It's kinda Cory Edge: the other side of the appreciation too, where you can get some good stuff, is it, you know, we've talked about if you can get something under market because it needs some work, then maybe you can get some instant appreciation by putting your Jon G. Sanchez: There you go. Cory Edge: own blood, sweat, and tears into it to get it valued up to market. Correct. Jon G. Sanchez: And then hit Dwight up for a cash out refi, right, Dwight? Dwight Millard: Yeah, absolutely. Mm-hmm. Yep, yep. Mm-hmm. Jon G. Sanchez: And then take some of that refi money and multiply it into another property and on and on and on. Corey, real quickly, I think it's worthwhile mentioning if you get involved in in commercial real estate, where you're dealing with commercial real estate loans, not not you know, quote residential loans like like Dwight offers, the way those properties are valued, there's various methods, but one that is used predominantly that I've seen is the cash flow method, right? They don't They don't look at comps like they do in in stick belt homes and things like that. They look at cash flow and they, you know, so that's why having cash flow is important if you're buying commercial real estate, right? You do you get a little bit of appreciation, not like you can or that you normally do in single family. So you have to look at it differently where you really want to get that cash flow positive. If you look to, again, want to sell it down the road. That's what a an astute commercial buyer is gonna be looking at, is to make things really simple is the cash flow set. Cory Edge: Well, you will get appreciation, but it's via the cash flow, right? That's how they quantify. Yeah. And Jon G. Sanchez: Via the cash flow. There you go. I left out the important word via. Thank you. Yeah. Dwight Millard: Mm-hmm. Yeah. Cory Edge: then the other big thing, and I'm not a commercial expert by any means, but the big thing is the strength of the tenant. So if you have a store that has a little mom and pop Jon G. Sanchez: Good point. Cory Edge: in there that's on a lease for five years, and I have a store that has Starbucks for five years, I'm going to get a lot more than you are because of the strength of my tenant. so there's all different factors. Jon G. Sanchez: Corey Music's playing, so that means we just have a thirty seconds or so. Our fourth one, t potential tax benefits. Cory Edge: Depreciation. Look it up. Google it. It's a it's fun. Depreciation, yes. Jon G. Sanchez: Depreciation you said. Yeah. I thought you said appreciation. Dwight Millard: Mm-hmm. Jon G. Sanchez: I'm like, no, depreciation. Depreciate. Yeah, the D Cory Edge: No depreciation. Jon G. Sanchez: word. And lastly, future rent growth. Cory Edge: Absolutely. Just like the house value that the rent's gonna go up with inflation and so you're gonna get a double whammy. even though your payment stays static. So your cash flow will grow over time. Jon G. Sanchez: So just go back and remember what you paid for your first apartment or Dwight Millard: Yeah. Jon G. Sanchez: condo that you rented, right, Dwight? And look and see what that same one rents for now. That's called future rent growth if you were the landlord side of things. Cory Edge: Yes. Exactly. Dwight Millard: Yeah, absolutely. Yeah, I dunno. Mm-hmm. Mm-hmm. Cory Edge: Yeah. Jon G. Sanchez: Fascinating topic, guys. Excellent job as always. I do appreciate both of you so very much and appreciate all of you for listening. We'll do it again tomorrow on the John Sanchez show. God bless. Have a great afternoon.