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#67 Buying Your First Investment Property: 10 Questions New Investors Ask · Own More Doors

• 0:00
  SPEAKER_01: Hey, if you've been thinking about house hacking or buying your first investment property, I want you to tune into today's video while we cover the top 10 frequently asked questions on buying your first investment property.
• 0:09
  SPEAKER_01: Hi, I'm Juan Weezar.
• 0:10
  SPEAKER_01: And I'm Cody Charnell.
• 0:12
  SPEAKER_01: And we're going to do a deep dive into the top 10 questions.
• 0:14
  SPEAKER_01: So make sure you tune in.
• 0:15
  SPEAKER_01: So, Cody, so let's start off with the top 10 questions.
• 0:17
  SPEAKER_01: You know, our channel's been dedicated to teaching people how to build wealth through apartment ownership.
• 0:22
  SPEAKER_01: And so let's get it going.
• 0:23
  SPEAKER_00: Yeah, so we're brokers here in Long Beach.
• 0:25
  SPEAKER_00: We help people buy investment properties all the time.
• 0:27
  SPEAKER_00: So this is stuff that we hear from people who are getting going, even trying to scale up small portfolios.
• 0:32
  SPEAKER_00: So one, uh first question should I start with a single family home or a multifamily property?
• 0:38
  SPEAKER_01: So we get that question asked all the time.
• 0:41
  SPEAKER_01: Okay.
• 0:42
  SPEAKER_01: And that's going to be, we don't necessarily know like we're not going to have the answer because a lot of times what I'm going to ask a client is, well, what are your goals?
• 0:52
  SPEAKER_01: And so a lot of the way that I'm going to guide someone is what they tell me.
• 0:56
  SPEAKER_01: Now, if someone says, hey, my goals is that I want to end up with apartment buildings, and or I've had someone in my family do really well with uh building a portfolio and have multiple assets.
• 1:09
  SPEAKER_01: I'm that might tell me, you know what, you're probably ready for your first multifamily.
• 1:13
  SPEAKER_01: Sometimes people tell us, like, well, I really want to buy some units, but my wife wants her own house with the picket fence, and not every fourplex has that type of setup.
• 1:23
  SPEAKER_01: How do you give advice when someone asks that question?
• 1:26
  SPEAKER_00: Um, I do the same thing.
• 1:28
  SPEAKER_00: Just on a personal level, this is a question that uh I had to answer for myself.
• 1:32
  SPEAKER_00: And what I found when I was kind of analyzing the difference is it's much easier to start with a small multifamily, so two to four units, and move from that into a single family home.
• 1:44
  SPEAKER_00: And the reason for that is the the two to four unit property, if you ever decide to move out of it, it's gonna be much easier to make that at least break even, or if not cash flow, once you do leave.
• 1:56
  SPEAKER_00: So if you look at a single family home, um, if you you know buy a starter home and you're wanting to then buy a multifamily property, you you also limit yourself on what type of financing you can use on the multifamily property.
• 2:10
  SPEAKER_00: Um you have you know the the payment for the house that kind of works against you when you're qualifying for the loan for the multifamily property.
• 2:18
  SPEAKER_00: So um, in my opinion, if you know a house isn't a necessity, start with the multifamily.
• 2:24
  SPEAKER_01: Perfect.
• 2:24
  SPEAKER_01: No, I think that's a great answer.
• 2:25
  SPEAKER_01: So let's go into question number two.
• 2:27
  SPEAKER_01: Uh now this question here, I do have to preface it, is uh we're in Southern California.
• 2:32
  SPEAKER_01: California, Southern California is a very expensive place to invest, like compared to most other states.
• 2:37
  SPEAKER_01: And so the question that we get, should I buy in-state or out of state?
• 2:41
  SPEAKER_01: Cody, we get that question all the time.
• 2:44
  SPEAKER_01: And uh I roll my eyes because I'm like, oh, here we go again with this question, but it's a it's a legit question.
• 2:50
  SPEAKER_01: I know why you're asking.
• 2:51
  SPEAKER_01: And you're asking because your friend who lives in Indiana could buy four units for, I don't know,$87,000 versus what it is here in Southern California.
• 3:01
  SPEAKER_01: And so how do you guide someone through that that question?
• 3:05
  SPEAKER_00: Yeah, um, it's a good question to be asking, you know.
• 3:08
  SPEAKER_00: One thing uh that I always kind of go back to is I like being close to my investment properties so I can go look at them, check on them.
• 3:16
  SPEAKER_00: It just makes you know owning them much easier.
• 3:19
  SPEAKER_00: Uh, for some people, that that isn't you know something that they care so much about.
• 3:24
  SPEAKER_00: Um I always try to point out to people that not all markets act like Southern California.
• 3:30
  SPEAKER_00: So if you're from Southern California, you're used to seeing properties appreciate over time.
• 3:35
  SPEAKER_00: That doesn't happen everywhere in the country.
• 3:37
  SPEAKER_00: We have really um unique economic factors here in Southern California, so not a lot of land to build on.
• 3:44
  SPEAKER_00: It's very difficult to add additional supply.
• 3:46
  SPEAKER_00: A lot of people want to live here, so there's a lot of pressure on the real estate that causes values to go up over time.
• 3:52
  SPEAKER_00: And if you go, you know, to the Midwest or the South, um it's cheaper, but it's cheaper for a reason.
• 3:59
  SPEAKER_00: It's cheaper because it's much easier to build.
• 4:01
  SPEAKER_00: Um, properties don't appreciate as quickly there.
• 4:04
  SPEAKER_00: So you can still buy it there and do do okay.
• 4:08
  SPEAKER_00: Um, it's just a different strategy that you'll be utilizing.
• 4:11
  SPEAKER_00: I don't know.
• 4:11
  SPEAKER_00: What do you think, Juan?
• 4:13
  SPEAKER_01: Personally, I've never gone out of state.
• 4:15
  SPEAKER_01: And so I was I was fortunate enough to have the right mentors early on, where they they they allowed me to believe that I could do it, which is the purpose of our video is is is to is to pass along the kind of the mentorship that Cody and I received.
• 4:29
  SPEAKER_01: Someone told us you guys could do it, all right?
• 4:31
  SPEAKER_01: And we we were young and we took the risk, and you know, Cody first bought, I think his first property was uh a triplex.
• 4:36
  SPEAKER_01: Mine was also a triplex, and so we did it.
• 4:40
  SPEAKER_01: So my advice to you is um, and I've said this in past videos, there's there's two reasons why we're investing cash flow or appreciation.
• 4:48
  SPEAKER_01: If you need cash flow and this is your first investment, then you probably shouldn't come to Southern California.
• 4:54
  SPEAKER_01: It's expensive.
• 4:54
  SPEAKER_01: Now, if you happen to have inherited tons of money and you're gonna buy a property cash, then that's a different scenario.
• 5:00
  SPEAKER_01: But let's just say you're you're uh a traditional investor who maybe has had five to 10% down that you've been saving.
• 5:07
  SPEAKER_01: Congratulations.
• 5:08
  SPEAKER_01: And if you're depending where you're at in life, if you plan to uh to to invest and hold on to a property for um, say 10, 15, 20 years, I would think that appreciation should be more important to you.
• 5:23
  SPEAKER_01: So, what does that mean?
• 5:24
  SPEAKER_01: That means that you're not depending on the cash flow from the investment, you're not depending on the cash flow just yet.
• 5:28
  SPEAKER_01: Because I think it's a part one and a part two strategy.
• 5:31
  SPEAKER_01: Part one, in my opinion, you should chase appreciation.
• 5:34
  SPEAKER_01: Again, this depends on where you're at in life.
• 5:36
  SPEAKER_01: How old are you?
• 5:37
  SPEAKER_01: Where you're at in your career is first go after appreciation.
• 5:40
  SPEAKER_01: Appreciation, we've seen this.
• 5:42
  SPEAKER_01: So this is not like we're throwing out numbers, but it's very typical for people to make a half million dollars, a million dollars on some of their first investments.
• 5:50
  SPEAKER_01: Um and so, but that doesn't happen in every state.
• 5:54
  SPEAKER_01: We have some of our clients have gone to Texas, we've had clients who they go to New Orleans, they go to Indiana, Michigan, and they're buying units, but they get the cash flow, they don't get the appreciation.
• 6:06
  SPEAKER_01: And I believe that we're that we should be focusing focusing in on wealth building.
• 6:12
  SPEAKER_01: So wealth building means you're you're gonna create a significant amount of wealth, wealth that otherwise you probably would not be able to save for.
• 6:19
  SPEAKER_01: Okay.
• 6:20
  SPEAKER_01: So step one, wealth.
• 6:22
  SPEAKER_01: Step two, once you've created the wealth, then we go up to cash flow.
• 6:27
  SPEAKER_01: So I have never concerned myself with it's so expensive in California that I should not buy here.
• 6:33
  SPEAKER_01: Not once.
• 6:34
  SPEAKER_01: I'm buying now.
• 6:35
  SPEAKER_01: Cody's buying now.
• 6:37
  SPEAKER_01: Uh every other broker in our office is buying now because we're buying mostly for appreciation, cash flow second.
• 6:44
  SPEAKER_01: Now, for someone to say, I want both, I'm gonna say it's gonna be unrealistic in Southern California to get it.
• 6:50
  SPEAKER_01: Can we every now and then get really close to it?
• 6:52
  SPEAKER_01: We can.
• 6:53
  SPEAKER_01: It's just I can't promise you both from day one.
• 6:55
  SPEAKER_01: Okay, so what's more important?
• 6:57
  SPEAKER_01: Cash flow appreciation.
• 6:58
  SPEAKER_01: That's the question I'm gonna ask you.
• 7:00
  SPEAKER_01: Uh, comment below and certainly reach out to us if you need help.
• 7:04
  SPEAKER_01: Let's go to question three.
• 7:05
  SPEAKER_00: So, question number three is how many units should I buy for my first deal?
• 7:10
  SPEAKER_01: That's a great question.
• 7:11
  SPEAKER_01: So that takes me to question number one.
• 7:12
  SPEAKER_01: Once you've realized, hey, based on the advice I got from Cody, we realize that we're we don't necessarily have to have a house.
• 7:20
  SPEAKER_01: So the question is, should we look at two, three, or four?
• 7:23
  SPEAKER_01: This could be a financing question.
• 7:25
  SPEAKER_01: Okay, the reason why I like two units is that you could get a uh an FHA loan without having to meet the self-sufficiency test.
• 7:33
  SPEAKER_01: So I don't want that to go over your head or anything like that, but we do have other videos where we talk about this.
• 7:38
  SPEAKER_01: So what I'm saying is you could buy a duplex um without meeting this certain lender requirement that really holds up the deal.
• 7:45
  SPEAKER_01: And so, for a duplex perspective, I think it's easy.
• 7:48
  SPEAKER_01: It's easy to wrap your mind around.
• 7:50
  SPEAKER_01: If you're comparing a single family home, uh, just for just for instance, if you're considering a single family home in Southern California that's 900,000, you're probably the the duplex is not going to be double that.
• 8:03
  SPEAKER_01: It's not, it's gonna be slightly more than that.
• 8:05
  SPEAKER_01: So just from a basic comparison, it makes sense.
• 8:08
  SPEAKER_01: And so the duplex to me is a great starter situation.
• 8:13
  SPEAKER_01: Now, if you want a property, if you want more income to help offset the mortgage of the uh say the unit that you're living in, then let's look at threes, let's look at fours.
• 8:24
  SPEAKER_01: I will tell you in Southern California, there are less three triplexes.
• 8:28
  SPEAKER_01: There are a lot of duplexes in Long Beach.
• 8:31
  SPEAKER_01: We have more duplexes than anything else.
• 8:33
  SPEAKER_01: So there's a lot of inventory, a lot of options for duplexes.
• 8:36
  SPEAKER_01: So that's good.
• 8:36
  SPEAKER_01: I think if someone came to me and they said, I'm looking at two, threes, or fours, and I would say try to max out the units.
• 8:45
  SPEAKER_01: That's gonna be my professional opinion, max out the units and try to get four.
• 8:49
  SPEAKER_01: Now, a lot of that, um, a lot of the advice that I'm gonna give you is based on what you're giving me back.
• 8:56
  SPEAKER_01: If you don't want to be dealing with a lot of tenants, then I might say, well, let's go with two, a detached house.
• 9:01
  SPEAKER_01: If you're okay with it, um, in a perfect world, if you're like Juan, you tell me what I should buy, I'm gonna say, let's go for for a fourplex to get started.
• 9:09
  SPEAKER_01: What would you say?
• 9:10
  SPEAKER_00: Yeah, I guess you hit on a lot of great points.
• 9:13
  SPEAKER_00: The thing that I always go back to is the numbers.
• 9:15
  SPEAKER_00: So it's gonna be the most difficult to rent a house and get it to cash flow.
• 9:19
  SPEAKER_00: A duplex is a little bit easier, and then threes and fours are a little bit easier still.
• 9:24
  SPEAKER_00: So uh if you can get into a three, that's gonna be the cheapest option with the best cash flow.
• 9:30
  SPEAKER_00: If you can get into a four, uh, that's great as well.
• 9:33
  SPEAKER_00: And one thing that I always point out to people is that rents increase over time.
• 9:38
  SPEAKER_00: So if you have more tenants, more units, um, it's gonna accelerate, you know, how fast you get to that point where you're starting to cash flow.
• 9:47
  SPEAKER_00: Uh, one other consideration, this is more of a like a new development, is you know, ADUs are big now in California.
• 9:56
  SPEAKER_00: And if you're wanting to add an ADU to something, I would say a triplex is probably the best option because you can add one ADU and you're still under that four-unit cap.
• 10:06
  SPEAKER_00: So you can still qualify for residential financing.
• 10:08
  SPEAKER_00: If uh you buy a four-unit and you add one ADU, that takes you into a whole different financing realm.
• 10:14
  SPEAKER_00: Anything with five units and up is now considered commercial.
• 10:18
  SPEAKER_00: The the way you value that property changes, the way the you finance it changes as well.
• 10:22
  SPEAKER_00: So just something to caution people on there.
• 10:25
  SPEAKER_01: Awesome.
• 10:26
  SPEAKER_01: Okay, moving on to question number four.
• 10:28
  SPEAKER_01: Should I manage this property myself or hire a property manager?
• 10:32
  SPEAKER_00: It's a great question.
• 10:33
  SPEAKER_00: Um, it it depends, right?
• 10:36
  SPEAKER_00: So managing properties, you're basically just dealing with headaches all the time.
• 10:41
  SPEAKER_00: So uh if you're okay doing that, you're gonna save yourself a lot of money.
• 10:45
  SPEAKER_00: And at the beginning, I think it's good for people to do that and learn how the building operates and kind of take that on.
• 10:51
  SPEAKER_00: Um, it helps you become a more sophisticated investor.
• 10:55
  SPEAKER_00: Some people just don't have the time and they're willing to pay a property manager, and that's fine too.
• 10:59
  SPEAKER_00: Um, here in our local market, uh, for a three to four unit property, or I guess two to four unit property, you're looking at you know, management rate between let's say six and seven percent, and that's charged on whatever rent they collect.
• 11:15
  SPEAKER_00: They also charge leasing fees, and some companies have other fees that they'll charge.
• 11:19
  SPEAKER_00: Um, but just in general, that's what you're looking at.
• 11:22
  SPEAKER_00: So having that expense, it's you know, it's gonna cost you some money, it'll save you a ton of time.
• 11:28
  SPEAKER_00: Um, and if you're planning to live in one of the units, uh I would say almost 100% of the time, it's better to manage it yourself rather than relying on someone else who's off site.
• 11:38
  SPEAKER_00: Um right now I'm managing um almost all of my units, and it it does take time.
• 11:45
  SPEAKER_00: I was at a property this morning dealing with uh pest control issue.
• 11:49
  SPEAKER_00: Um, I have to go to another property this afternoon to um deal with a minor fix.
• 11:54
  SPEAKER_00: So, you know, uh as you scale up, it becomes harder and harder to manage everything yourself.
• 12:00
  SPEAKER_00: So um, yeah, that's my opinion.
• 12:03
  SPEAKER_00: What do you think?
• 12:04
  SPEAKER_01: Um I think if it's your first property, manage it yourself.
• 12:07
  SPEAKER_01: You need to understand, you need to understand what it's like.
• 12:10
  SPEAKER_01: Um, I'm gonna say a couple things.
• 12:12
  SPEAKER_01: Um, I don't think it takes that much time.
• 12:14
  SPEAKER_01: Um understand this.
• 12:16
  SPEAKER_01: When you buy your first fourplex, triplex, duplex, you are buying a business.
• 12:21
  SPEAKER_01: There's a there's there's revenue, there's expenses, there's profits, there's a lot.
• 12:26
  SPEAKER_01: You have a business.
• 12:27
  SPEAKER_01: Congratulations.
• 12:28
  SPEAKER_01: It's a full-on business, but it's a business you don't have to go to every day.
• 12:31
  SPEAKER_01: That's why I love it.
• 12:31
  SPEAKER_01: So where Cody says it takes time, calls come in.
• 12:36
  SPEAKER_01: Hey, the sink is backing up.
• 12:38
  SPEAKER_01: There's a leak underneath the bathroom sink.
• 12:40
  SPEAKER_01: Those are the questions that come in.
• 12:41
  SPEAKER_01: Now, if you're handy, that's another story.
• 12:44
  SPEAKER_01: This question specifically is who's going to manage it?
• 12:46
  SPEAKER_01: And I think you could manage it yourself.
• 12:48
  SPEAKER_01: Everyone can manage it.
• 12:49
  SPEAKER_01: No one's that busy that you can't take a call here or there because it's not every month, it might be a call or two, right?
• 12:55
  SPEAKER_01: Uh per month.
• 12:56
  SPEAKER_01: And so if you're handy, you might be the one fixing it.
• 12:59
  SPEAKER_01: Cody's super handy, so he knows how to do this stuff.
• 13:02
  SPEAKER_01: Um, I have also, when I first got started, over 20 years ago now, when I first got started, I took the calls.
• 13:09
  SPEAKER_01: Now, when something needed to be fixed, I didn't know how to fix it.
• 13:13
  SPEAKER_01: Now, I I got some basic stuff.
• 13:14
  SPEAKER_01: Like if it's a garbage disposal and it's jammed, there's a button underneath.
• 13:18
  SPEAKER_01: So there's some like little basic things you could do where like I felt good about myself, like ah, I could fix it myself, but there's other things that I can't.
• 13:24
  SPEAKER_01: And so a call comes in, then all I do is contact our plumber, and the plumber's going to schedule with the tenant and get that done.
• 13:31
  SPEAKER_01: So I don't think it's that much work.
• 13:32
  SPEAKER_01: I think in order to learn this business and to really understand it, um, do some of the leasing, do some of the property management, make some of the calls, and you'll realize this is not that hard.
• 13:42
  SPEAKER_01: In fact, you realize there's a lot of demand for rental properties, and then you realize a couple things.
• 13:49
  SPEAKER_01: There's a lot of quality applicants out there, and then you realize I should own more units.
• 13:54
  SPEAKER_01: And so, my advice for your first ones, absolutely, if you have the time, do it.
• 13:58
  SPEAKER_01: I don't think it takes that much time.
• 14:00
  SPEAKER_01: Um, so we'll move on to question number five.
• 14:03
  SPEAKER_01: What type of financing is available for multifamily properties?
• 14:06
  SPEAKER_00: So we talked about this a little bit already.
• 14:08
  SPEAKER_00: Um, I'll kind of go from lowest money down to you know more conventional financing.
• 14:14
  SPEAKER_00: So Juan mentioned earlier FHA financing.
• 14:17
  SPEAKER_00: Um, you can buy with as little as 3.5% down.
• 14:21
  SPEAKER_00: Um, this works for single-family homes, condos, and duplexes.
• 14:25
  SPEAKER_00: Once you get into three and four unit properties, there is that self-sufficiency test.
• 14:29
  SPEAKER_00: And from experience, I can tell you it kills 99% of you know three and four unit deals.
• 14:35
  SPEAKER_00: Um, there's another loan program, it's 5% down conventional.
• 14:40
  SPEAKER_00: That works great for two, three, four unit properties.
• 14:44
  SPEAKER_00: Um, that one, it's a conventional loan.
• 14:47
  SPEAKER_00: You still do have mortgage insurance.
• 14:49
  SPEAKER_00: Same FHA also has mortgage insurance, um, but the the mortgage insurance rate is a little bit better.
• 14:57
  SPEAKER_00: Um, but anyway, it opens up the three and four unit properties to you with low money down.
• 15:02
  SPEAKER_00: Next would be uh 20% down conventional.
• 15:06
  SPEAKER_00: Um that's for owner-occupant.
• 15:08
  SPEAKER_00: So it's a conventional loan, no mortgage insurance.
• 15:11
  SPEAKER_00: You can buy you know one through four unit properties.
• 15:14
  SPEAKER_00: The FHA, 5% down conventional, 20% down conventional, those are all owner-occupied loans.
• 15:20
  SPEAKER_00: And then if you don't plan to live there, um the next best option is 25% down conventional.
• 15:27
  SPEAKER_00: Um, that's you know, conventional loan, great interest rate, um, but they make you put a little bit more down since you're not going to be living there.
• 15:34
  SPEAKER_00: And then there are some kind of funky loan programs that um you can use in certain situations called non-QM loans.
• 15:41
  SPEAKER_00: So these are loans where you can do like 15% down, 10% down.
• 15:46
  SPEAKER_00: They have interest-only options.
• 15:48
  SPEAKER_00: Um, these are lower money down loans designed for investors.
• 15:52
  SPEAKER_00: Um, they will charge you higher interest rates.
• 15:55
  SPEAKER_00: So um maybe not the best loans to hold on to long term, but I actually just used a non-QM loan so I could buy a four-unit building with 15% down.
• 16:05
  SPEAKER_00: It allowed me to keep some cash in my pocket.
• 16:07
  SPEAKER_00: I knew that I was buying the building at a discount.
• 16:10
  SPEAKER_00: So my plan is to fix it up a little bit, refinance it to 25% down conventional.
• 16:15
  SPEAKER_00: Um, did I miss anything?
• 16:16
  SPEAKER_00: Or you want to add anything?
• 16:17
  SPEAKER_01: Yeah, I just want to add a couple things.
• 16:19
  SPEAKER_01: There's also VA loans.
• 16:20
  SPEAKER_01: So for someone who's served in the military, we've been, uh and it just makes me so um happy that we've been able to really spread the word that as a veteran, you've been told, hey, you have access um to getting a certain type of loan to buy a single family home.
• 16:36
  SPEAKER_01: But one thing they didn't tell you or didn't talk about is that you could actually go up to four units.
• 16:40
  SPEAKER_01: And so we've been able to help a lot of investors buy the first fourplex with zero percent down.
• 16:44
  SPEAKER_01: So if you if you're currently serving or if you've served in the past, then you have access to this.
• 16:49
  SPEAKER_01: Um, if you've already used it, like we'll have to refinance out in some situations so that you could reuse it again.
• 16:55
  SPEAKER_01: But it's it is amazing.
• 16:57
  SPEAKER_01: If you could buy a fourplex with zero percent down, that's as good as it gets.
• 17:00
  SPEAKER_01: You know, is it gonna cash flow?
• 17:02
  SPEAKER_01: No, everything has a cash, but let us walk you through how, from a business perspective, what the business model is when you don't cash flow and how we bring rents up.
• 17:11
  SPEAKER_01: It's like anything else.
• 17:12
  SPEAKER_01: You're buying a business, the income's not sufficient.
• 17:14
  SPEAKER_01: Let's get it to the point where it is sufficient, right?
• 17:17
  SPEAKER_01: And so there's a process to that.
• 17:18
  SPEAKER_01: And so VA loans would be really good.
• 17:20
  SPEAKER_01: Um, some people might look at like hard money loans, would be another option that'll allow you to get in.
• 17:27
  SPEAKER_01: Listen, when I first got started, I partnered up with friends, two friends.
• 17:31
  SPEAKER_01: And uh either we were all on the loan together or one of us were on the loan together.
• 17:35
  SPEAKER_01: We've been able to help uh siblings who partnered up.
• 17:38
  SPEAKER_01: Sometimes they didn't qualify, so dad had to step in and help.
• 17:41
  SPEAKER_01: And so if you can't do it alone, bring someone in.
• 17:46
  SPEAKER_01: You know, I always tell people I'd rather own 33% of a deal, 25% than a deal, than 100% of nothing, right?
• 17:52
  SPEAKER_01: So if you need help, partner up.
• 17:55
  SPEAKER_01: Um, there are options out there, and there's a lot of great financing options.
• 17:59
  SPEAKER_01: In fact, we've covered we've done a lot of videos on buying your first investment properties, and so make sure you check those out.
• 18:05
  SPEAKER_01: All right.
• 18:05
  SPEAKER_01: Let's go to the next question.
• 18:06
  SPEAKER_00: So, next question is should I buy in an LLC or in my personal name?
• 18:13
  SPEAKER_01: At first, I'm gonna recommend.
• 18:15
  SPEAKER_01: So, like at first, you're gonna be stretched.
• 18:18
  SPEAKER_01: So, I'm gonna recommend you don't do property management fee.
• 18:20
  SPEAKER_01: I'm also gonna recommend that you just keep it in your personal name at first, um, because there are fees to having uh a property in an LLC.
• 18:28
  SPEAKER_01: It's it's not a hundred percent protection, although some people might tell you to do that.
• 18:32
  SPEAKER_01: I we represent super high net worth individuals, people that have been buying for over 40, 50 years and they have large portfolios.
• 18:39
  SPEAKER_01: And guess what?
• 18:40
  SPEAKER_01: They own them in their names.
• 18:41
  SPEAKER_01: They own them in their names and they know, and I'm like, hey, why don't you have them in LLCs?
• 18:45
  SPEAKER_01: They're like, look, if someone wants to sue you, they're gonna be able to sue you.
• 18:48
  SPEAKER_01: It's not a hundred percent protection because you're in an LLC.
• 18:51
  SPEAKER_01: I think when you're first getting started, I wouldn't get wrapped up on like, oh my gosh, if I don't have it in an LLC, I'm I'm unprotected.
• 18:58
  SPEAKER_01: I don't look at it that way.
• 18:59
  SPEAKER_01: Cody might give a different response, but at first, I say, let's keep the expenses low, let's learn to work the business.
• 19:06
  SPEAKER_01: And then once you get bigger, okay, let's move some stuff around.
• 19:09
  SPEAKER_01: At this point, I wouldn't worry so much about it.
• 19:12
  SPEAKER_00: Yeah.
• 19:12
  SPEAKER_00: Uh one other important thing to point out is uh when you're buying with a residential loan, so we're not talking about the non-QM loans, but we're talking about FHA, VA, um, the conventional loan products.
• 19:25
  SPEAKER_00: They're not gonna allow you to close escrow in an LLC.
• 19:29
  SPEAKER_00: They're gonna want you to close in your personal name.
• 19:31
  SPEAKER_00: What a lot of people will do is they'll deed the property into an LLC after close.
• 19:36
  SPEAKER_00: Um, lenders sometimes don't like this.
• 19:39
  SPEAKER_00: You're supposed to get permission.
• 19:41
  SPEAKER_00: Uh, most people don't get permission and then just hope that nothing ever comes of it.
• 19:45
  SPEAKER_00: It's very rare in my experience that anything ever does come of it, but just something to caution you on there.
• 19:52
  SPEAKER_00: And um on the LLC protection aspect of it, um, if if you're worried about liability, another option that you could look into is umbrella insurance.
• 20:03
  SPEAKER_00: So basically you have insurance on your property and then umbrella sits on top of that.
• 20:07
  SPEAKER_00: So if you know you do get sued, um, the low-hanging fruit for any attorney is going to be your insurance policy, and then you have this extra layer on top that gives you even more protection, something else for them to go after.
• 20:19
  SPEAKER_00: So um, personally, you know, I I prefer the umbrella versus the LLC, but you know, we're not legal experts, we're not allowed to give legal advice.
• 20:27
  SPEAKER_00: So do your own research on that and just um hopefully we gave you some things you can ask uh your attorney when you do get to that point.
• 20:34
  SPEAKER_01: Cool.
• 20:35
  SPEAKER_01: Uh, question number seven.
• 20:37
  SPEAKER_01: When I buy a multifamily, do all the tenants leave or do they stay?
• 20:41
  SPEAKER_00: Yeah.
• 20:42
  SPEAKER_00: So this is something that that comes up occasionally.
• 20:45
  SPEAKER_00: It's very rare for a building to sell fully vacant.
• 20:49
  SPEAKER_00: It does happen on rare occasions, but uh in most cases when you're buying a multifamily property, you might get one vacant, but the majority of the units will be filled.
• 20:58
  SPEAKER_00: Um, so you'll have usually leases in place.
• 21:01
  SPEAKER_00: Um, a lot of a lot of the time the tenants will be month to month, so you'll have some flexibility after closing to either you know change rent, um, give notice if you want to move into one of those units, give notice to the tenant if you want to renovate a unit.
• 21:15
  SPEAKER_00: Um, but it's just something that we deal with uh that scares a lot of people, especially when they're just getting started.
• 21:22
  SPEAKER_00: They've never dealt with um, you know, taking on tenants or having to vacate units that are currently occupied.
• 21:29
  SPEAKER_00: Um, and I think it's good and bad.
• 21:31
  SPEAKER_00: I think that friction scares off some people and it creates opportunity for those who are willing to learn and figure out how to deal with that stuff.
• 21:39
  SPEAKER_00: Uh it's something that we've both dealt with on I guess every property we've bought.
• 21:43
  SPEAKER_00: So it doesn't scare me personally.
• 21:45
  SPEAKER_00: It's gonna be rare to buy something fully vacant.
• 21:49
  SPEAKER_00: So um just when you're out there looking for multifamily properties, don't don't expect that.
• 21:56
  SPEAKER_01: And and I would just add, uh, whether you're working with with us or anybody else, um Obviously, expect the tenants to stay, review the leases, the tenant estoppels, which is just additional paperwork to reconfirm that what's on the lease is actual, and so it's fine.
• 22:10
  SPEAKER_01: You're buying a business, revenue's coming in.
• 22:12
  SPEAKER_01: Now we want revenue to be coming in.
• 22:14
  SPEAKER_01: So are the tenants paying on time?
• 22:16
  SPEAKER_01: Yeah, we want to verify that.
• 22:17
  SPEAKER_01: So the fact that tenants are staying is perfectly fine.
• 22:21
  SPEAKER_01: Buying a all-vacant building is perfectly fine, also, right?
• 22:25
  SPEAKER_01: But um, in in most cases, you're gonna buy in with tenants, and listen, sometimes we um when we sell a building or when we're listing a building, sometimes tenants move out on their own.
• 22:35
  SPEAKER_01: And part of the reason that um that happens is that not because we told them to move, it's just that they know that change is coming.
• 22:43
  SPEAKER_01: They don't know whether the change is gonna be good or it's gonna get bad, but the change is coming, people are afraid of change.
• 22:48
  SPEAKER_01: A lot of times we're in the middle of selling a building and the tenants say, here's our 30-day notice, we're leaving.
• 22:53
  SPEAKER_01: Um, and that's perfectly fine too.
• 22:54
  SPEAKER_01: It's not the end of the world if a tenant leaves.
• 22:57
  SPEAKER_01: So um, if you if you're buying a building, and and listen, if you're in the world of uh investing in multifamily, then you got to get used to dealing with tenants.
• 23:07
  SPEAKER_01: And I think that's perfectly fine.
• 23:08
  SPEAKER_01: Uh, let's go to the next question.
• 23:10
  SPEAKER_01: So, how long should I plan to hold my property?
• 23:13
  SPEAKER_01: One of my favorite sayings came uh came from my mentor, Mark Milan, and he said, um, it's not get rich quick, it's get rich guaranteed.
• 23:19
  SPEAKER_01: Okay, so it's not get rich quick.
• 23:22
  SPEAKER_01: So we're not gonna hold it for a year, although you can.
• 23:24
  SPEAKER_01: But the goal is that we're gonna hold this a little longer term.
• 23:27
  SPEAKER_01: Now, the strategies might change because a lot of people, you know, we do have these meetups where we let people come, do a meet and greet, we do a presentation, we answer questions on the spot.
• 23:36
  SPEAKER_01: And a lot of times people are like, hey, I, you know, you sold me a triplex three years ago, what do I do now?
• 23:40
  SPEAKER_01: And so here's my advice: every single year, um, with the broker or the agent that you worked with, have um do a equity analysis report.
• 23:52
  SPEAKER_01: Like, how much money did my building go up uh since I bought it?
• 23:55
  SPEAKER_01: And the reason you want to do that is every 12 months you want to know is do I continue owning it, do I refinance, or do I sell it?
• 24:03
  SPEAKER_01: And if if you had a situation where you just by luck or by the fact that you work with the right team, you bought at the right time at the right price, and it and it goes up three years later, like say$300,000, and that is like a real number.
• 24:15
  SPEAKER_01: Like that's not like I'm making it up or trying to convince someone to buy.
• 24:18
  SPEAKER_01: I'm just saying, like that really does happen.
• 24:19
  SPEAKER_01: Well, all of a sudden you have$300,000 that you didn't have when you first bought it.
• 24:23
  SPEAKER_01: All of a sudden you talk to someone like us and you say, What do I do now?
• 24:28
  SPEAKER_01: Well, now you have options.
• 24:29
  SPEAKER_01: Because at first the option was like, hey, I'm just gonna buy and hold, which is a perfectly good scenario.
• 24:34
  SPEAKER_01: Buy and hold and pay it down.
• 24:36
  SPEAKER_01: There's gonna be different strategies.
• 24:38
  SPEAKER_01: Cody and I are we're we're a little more um, I'm gonna say aggressive.
• 24:44
  SPEAKER_01: We're gonna go and if we have 300,000, we might decide to pull some of that money out so we could buy the next property.
• 24:51
  SPEAKER_01: We're in the business of acquiring apartment buildings.
• 24:54
  SPEAKER_01: And so for us, we're gonna do that.
• 24:56
  SPEAKER_01: For someone who says, you know what, I'm not gonna touch it, I'm just gonna pay it down.
• 25:00
  SPEAKER_01: That's perfectly fine.
• 25:01
  SPEAKER_01: If someone wants to grow, um, then that that equity report is important every single year because you want to see, well, did I get equity?
• 25:09
  SPEAKER_01: Maybe you didn't get enough this year.
• 25:10
  SPEAKER_01: That's fine, then we just stay put.
• 25:12
  SPEAKER_01: Or maybe, maybe you've lived in the front house and now um you're expecting your your second child, or or now you're getting married, or whatever it is, and now, and now the pressure is now the necessity of having a house is there.
• 25:26
  SPEAKER_01: Now, all of a sudden, now we have options.
• 25:28
  SPEAKER_01: Do we lease out that front unit that you're gonna vacate, or do we put the property in the market and we trade up?
• 25:33
  SPEAKER_01: And so again, it just it's gonna depend on your motivation.
• 25:36
  SPEAKER_01: A lot of the advice that I'm gonna give people is where do you see yourself five years from now?
• 25:40
  SPEAKER_01: And based on your answer, is how I'm gonna best advise you because there's a lot of options.
• 25:44
  SPEAKER_01: But the beauty, the beauty of having units is you have options, profitable options.
• 25:50
  SPEAKER_01: What would you say, Cody?
• 25:52
  SPEAKER_00: Uh yeah, I I think the big thing is managing your return on equity, like Juan said.
• 25:58
  SPEAKER_00: As you continue to hold a piece of real estate and your portion of ownership grows from the property appreciating and from you paying down the loan, you have more money tied up in that building, your money becomes lazy.
• 26:09
  SPEAKER_00: Um, it doesn't return as much as it was when you first bought it.
• 26:13
  SPEAKER_00: So personally, what I what I'm looking at each year is, you know, how much money do I have here?
• 26:18
  SPEAKER_00: What's my return on equity?
• 26:19
  SPEAKER_00: And I want to manage that return very closely because um, you know, over time, the compounding effect and you know, maintaining a high return on equity, it makes a huge difference in your your net worth, your portfolio value.
• 26:35
  SPEAKER_00: So um, you know, I I just sold a triplex that I had owned for five years.
• 26:41
  SPEAKER_00: Um, I sold it um middle of this year, and I exchanged that into a four-unit, nicer location, a little bit bigger property.
• 26:48
  SPEAKER_00: So, how long?
• 26:49
  SPEAKER_00: It sort of just depends on market factors, how much you put down initially.
• 26:53
  SPEAKER_00: But um, the big key is just managing your return on equity.
• 26:58
  SPEAKER_01: Perfect.
• 26:58
  SPEAKER_01: Um, let's go to the next question.
• 27:00
  SPEAKER_01: What exit strategies should I consider?
• 27:03
  SPEAKER_00: So it really depends on what your goals are.
• 27:06
  SPEAKER_00: Um, a lot of people don't have an exit strategy.
• 27:09
  SPEAKER_00: They they do something called swap till you drop.
• 27:11
  SPEAKER_00: So they they buy real estate and they continue to trade it into more and more real estate.
• 27:16
  SPEAKER_00: Eventually they get to a point where they've built all this wealth.
• 27:19
  SPEAKER_00: Um, their cash flow is now at a point where they you know have financial freedom and they just hold on to the properties until they pass, and then they pass those properties on to their heirs, and the heirs get a step up on basis.
• 27:31
  SPEAKER_00: They can sell if they want, they continue to hold the properties for cash flow.
• 27:36
  SPEAKER_00: Um, so yeah, it really just depends on what your goals are.
• 27:39
  SPEAKER_00: A lot of people will build up you know an investment portfolio with the goal of selling and doing something with the money.
• 27:46
  SPEAKER_00: Uh, other people will build up a portfolio of value so that they can refinance, take out a big chunk of cash, and use that for lifestyle.
• 27:54
  SPEAKER_00: Maybe they want a boat um or you know, a nice vacation home or something like that.
• 28:00
  SPEAKER_00: Uh so really it just comes down to planning.
• 28:03
  SPEAKER_00: But what would you say?
• 28:04
  SPEAKER_01: So when when um when I first started uh our this YouTube channel, I wanted to make, I wanted to break things down so it was simple.
• 28:13
  SPEAKER_01: So we came up with um uh our six, two, one formula.
• 28:16
  SPEAKER_01: So six stood for six different ways to come up with valuation for a piece of property.
• 28:21
  SPEAKER_01: So we call those like benchmarks, okay?
• 28:23
  SPEAKER_01: Cap rate, price per unit, return on equity, those kind of things, okay?
• 28:26
  SPEAKER_01: Then two was are we buying for appreciation or cash flow?
• 28:29
  SPEAKER_01: Okay, so that's two.
• 28:29
  SPEAKER_01: So six, two.
• 28:30
  SPEAKER_01: One was exit strategy, because I wanted you to think about exit strategy on day one before we submitted the offer.
• 28:37
  SPEAKER_01: How long are you gonna own this?
• 28:38
  SPEAKER_01: Now, going back to the previous question, that's gonna change.
• 28:41
  SPEAKER_01: Every year it's gonna change.
• 28:42
  SPEAKER_01: But going into it, and the reason I thought that was important is that early on when I started buying property, I didn't have enough money.
• 28:50
  SPEAKER_01: Okay.
• 28:50
  SPEAKER_01: I didn't have enough money, and so I needed to partner up with another friend.
• 28:54
  SPEAKER_01: And so um I realized that when I bought something with a friend, it was great because we split responsibilities, we were both on the loan.
• 29:01
  SPEAKER_01: Sometimes I'd go on vacation, he would take over property management and vice versa.
• 29:04
  SPEAKER_01: So, but I did several of these, right?
• 29:06
  SPEAKER_01: And so I realized that I needed an extra strategy because, you know, as year five was rolling around, one of my partners wanted to sell, desperately wanted out for whatever reason.
• 29:16
  SPEAKER_01: I mean, the property had gone up in value.
• 29:17
  SPEAKER_01: And I realized, man, we're selling at a time that I didn't think was the best time to sell.
• 29:22
  SPEAKER_01: And so that's why when I created the 621 formula, the one was exit strategy.
• 29:27
  SPEAKER_01: So I do want to think about the exit strategy from the beginning, especially if you're buying with somebody, like what's the goal?
• 29:33
  SPEAKER_01: Like, if the goal is, hey, we're gonna make$100,000 and then we're gonna sell it and each take$50, okay, now you have a goal.
• 29:40
  SPEAKER_01: That is your exit strategy.
• 29:42
  SPEAKER_01: I'm not saying that the goal can't change, but there is some perspective like, how long are we gonna own this?
• 29:46
  SPEAKER_01: And if you're buying something with a spouse, that's fine.
• 29:49
  SPEAKER_01: But even if you're buying something by yourself, what is the goal?
• 29:52
  SPEAKER_01: If if the goal is to pay it down, perfectly fine.
• 29:56
  SPEAKER_01: There's like no wrong way to do it because everyone's gonna have a different goal.
• 30:00
  SPEAKER_01: But I do want you to think, what's the exit strategy?
• 30:03
  SPEAKER_01: Having you as your brokers, if I know your exit strategy, we could we could better advise you from day one.
• 30:09
  SPEAKER_01: And so that's very important.
• 30:10
  SPEAKER_01: I want you folks to think about that.
• 30:12
  SPEAKER_01: Last question.
• 30:13
  SPEAKER_01: Uh, how do most investors scale up?
• 30:16
  SPEAKER_01: Um, so let's talk about scaling up.
• 30:18
  SPEAKER_01: Okay.
• 30:18
  SPEAKER_01: So scaling up is like, let's just say you start off with your fourplex, you live there, you like the tenants, the tenants like you, you're managing it, it's not so bad.
• 30:28
  SPEAKER_01: Maybe, maybe the first 18 months you didn't make any money.
• 30:32
  SPEAKER_01: But then after that, you realize, well, one tenant moved out.
• 30:35
  SPEAKER_01: I was able to renovate the unit because you want to be a good housing provider.
• 30:39
  SPEAKER_01: You you were able to get a much higher rent.
• 30:41
  SPEAKER_01: All of a sudden, you're getting used to this.
• 30:43
  SPEAKER_01: This is, hey, this wasn't so bad.
• 30:46
  SPEAKER_01: And that's what most investors, I want you to know this.
• 30:48
  SPEAKER_01: Once you become an investor, you're gonna realize this is not that hard.
• 30:52
  SPEAKER_01: Because very, very rarely would you ever hear someone say, buying an apartment building was my biggest mistake.
• 30:58
  SPEAKER_01: You're never gonna hear that.
• 31:00
  SPEAKER_01: I've never heard it.
• 31:01
  SPEAKER_01: I've heard I should have bought more than one 20 years ago when I first got started.
• 31:05
  SPEAKER_01: Again, it's not get rich quick, it's get rich guaranteed.
• 31:08
  SPEAKER_01: So when it comes to scaling up, is again, that's your motivation, that's your exit clause.
• 31:13
  SPEAKER_01: We are in the middle of scaling up.
• 31:15
  SPEAKER_01: Um, and I tell people that we're on the offensive, okay?
• 31:18
  SPEAKER_01: Because here's what happens there's a point in your life where you need to grow.
• 31:21
  SPEAKER_01: So if we're playing a game of soccer, we need to be scoring points over and over and over again.
• 31:29
  SPEAKER_01: I'll tell you, Cody bought several properties this year, so have I, several.
• 31:34
  SPEAKER_01: Um, and I'm only telling you that because we believe in the market.
• 31:37
  SPEAKER_01: We do believe that this is a very safe investment.
• 31:39
  SPEAKER_01: We do it for cash flow purposes, for appreciation purposes, but appreciation first, cash flow will come later when we need it and we're working less, but right now we're on the offensive.
• 31:49
  SPEAKER_01: And so if you're on the offensive, scaling up should be something that's important.
• 31:53
  SPEAKER_01: If you have a three-unit building like Cody did, um, it wasn't in the best neighborhood, it wasn't in the best shape, but it did go up in value.
• 32:00
  SPEAKER_01: So he decided I'm gonna get much larger units, newer construction, better neighborhood, higher income.
• 32:06
  SPEAKER_01: Checked all the boxes, rolled over the money from one to the other.
• 32:10
  SPEAKER_01: Guess what?
• 32:11
  SPEAKER_01: He just scaled up.
• 32:12
  SPEAKER_01: I went from a three-unit building that that was the first property I bought while in college, thanks to a mentor of mine uh who made me believe that I could also do it.
• 32:22
  SPEAKER_01: And we we sold it over the summer and and I scaled up to an eight unit.
• 32:26
  SPEAKER_01: I love the eight unit.
• 32:27
  SPEAKER_01: I love driving by it.
• 32:28
  SPEAKER_01: There's nothing for me to do with it, but I like seeing it.
• 32:30
  SPEAKER_01: It's nice, it's not giving me problems.
• 32:32
  SPEAKER_01: It's a business that's up and running.
• 32:34
  SPEAKER_01: So that's what we're talking about scaling up.
• 32:36
  SPEAKER_01: When do you get to that point?
• 32:37
  SPEAKER_01: When you have the equity.
• 32:39
  SPEAKER_01: Um, and I'm not saying that everyone has to scale up, but if scaling up is something you want to do, make sure you hit the subscribe button because that's what we're gonna be showing you guys how to do, right?
• 32:48
  SPEAKER_01: And anyone could do it.
• 32:50
  SPEAKER_01: Um if anyone's been watching my channel, you know that I came from Mexico, my parents didn't speak English, and then, you know, with with with effort, with work, with learning and not and taking risks, I ended up with uh here in Southern California with multiple apartment buildings that we own and commercial buildings.
• 33:08
  SPEAKER_01: And so when I say anyone could do it, I really believe that anyone could do it.
• 33:11
  SPEAKER_01: Um, and so scaling up is what we're doing now.
• 33:14
  SPEAKER_01: It does come to the point, folks, where you've scaled up enough and then you play defense, right?
• 33:18
  SPEAKER_01: So, like when you when you're when you know you're gonna win the game and you're running down the clock, right?
• 33:22
  SPEAKER_01: Uh for those who play sports, I don't care what it is, even if you did wrestling, you put up a lot of points on the board and then you look at the clock, there's a minute left.
• 33:29
  SPEAKER_01: You don't have to score anymore.
• 33:30
  SPEAKER_01: Now you're just stalling, you're playing defense.
• 33:32
  SPEAKER_01: And so a lot of our clients now that are much older, they're playing defense.
• 33:36
  SPEAKER_01: Um, so it just depends on where you're at.
• 33:38
  SPEAKER_01: What would you say to that?
• 33:39
  SPEAKER_00: Um I agree, yeah.
• 33:40
  SPEAKER_00: Uh one other strategy that we didn't talk about is um doing value add deals.
• 33:46
  SPEAKER_00: So this is uh kind of accelerating the rate at which you can scale up.
• 33:50
  SPEAKER_00: So it's something that I've done where you know you buy a building, you improve it, you get the income up.
• 33:55
  SPEAKER_00: And by doing that, you force the value of the building to go up a little bit more quickly.
• 34:00
  SPEAKER_00: Uh it's a little bit more of an advanced strategy.
• 34:03
  SPEAKER_00: Um, it does take more time and money, but it's something else that you may want to consider if you're really aggressively growing.
• 34:10
  SPEAKER_01: So there you have it.
• 34:11
  SPEAKER_01: The top 10 questions, frequently asked questions that we get asked.
• 34:14
  SPEAKER_01: I hope you guys liked it.
• 34:16
  SPEAKER_01: Hey, we're heading into 2026.
• 34:18
  SPEAKER_01: If you would like, please let us know your biggest questions, videos that you want us to cover.
• 34:22
  SPEAKER_01: Let me know your goals for 2026.
• 34:25
  SPEAKER_01: Let me help you.
• 34:25
  SPEAKER_01: Someone help me, someone help Cody.
• 34:27
  SPEAKER_01: We didn't do this alone.
• 34:28
  SPEAKER_01: And we're glad that this channel's around.
• 34:31
  SPEAKER_01: We're we're glad that we could motivate, inspire, and some of your folks out there.
• 34:34
  SPEAKER_01: And if you need a little nudge, a little push, please feel free to reach out to us.
• 34:37
  SPEAKER_01: Make sure to like, comment, and subscribe.
• 34:39
  SPEAKER_01: Until next time.