Best Way To Make Money In Real Estate

Best Way To Make Money In Real Estate

Hey, everyone. On today’s show, we’re going
to talk about the three ways to invest in real estate. There are only three ways. And guess what? By the end of today’s show,
you’re going to know that you cannot possibly do
all three at one time. You have to focus
on one of them. I’m going to tell you
which one is my favorite. That’s today’s show. Hey, everyone. I’m Clayton Morris, longtime
real estate investor. And in 2017, I left
my day job to focus on creating passive income. So I worked in the television
business for many, many years, and decided to say
goodbye to getting up at 3:00 in the morning
and broadcasting nationwide in order
to help people achieve financial freedom. Now I had achieved
financial freedom through real estate investing. I’d bought single family
homes, three bedroom, one bath, two bedroom, one bath. And that’s what I teach
other people how to do. So I created a company
called Morris Invest, and we now help other
people do that as well. But everything available
here on the channel. You can dive into all
of the great content that we have available to you,
so you can start from scratch. Everything from understanding
what passive income is all about. How to figure out ROI,
return on investment. How to find private money. We have a whole video series
just on private money. It’s a five part series. So you can watch that. And by the end of
it, you’ll know how to go out and
get private money. Don’t work with the banks. Work with private money if you
need it and you don’t have it. So that’s what is available
here for all of these resources. But today I wanted to talk
specifically about three ways to do real estate investing. Most people think that you can
do a lot of things combined. That you can put a
lot of these pieces together and do it
all at one time. But the truth of
the matter is, when you’re starting in
real estate investing it’s really important to have
one clear path, one clear way, that you want to move forward
with real estate investing. You cannot do all of
these at one time. And the reason you can’t– and this came to me
from one of my mentors in the real estate world. A multimillionaire real
estate investor said, the mistake that
people make when they get started
in real estate is they think they can do all
of these different paths. Right? They think that they
can invest this way. They think they can
invest this way. When you have to
focus on the one way that really provides
the most value. OK. So you’re saying what
are the three ways? What are the three ways? I’m going to throw
this out there. How many people here– I’m going to throw this out
there, and see how many people can guess the three ways. And see if you– if any of
these come to your mind. Well, I’m going to go through
all three of them right now. Number one, people
invest for appreciation. That’s equity. Right? Number one, is appreciation. Number two is cash flow. And number three is taxes. The tax benefits. Those are the three ways that
you invest in real estate. Those are the three reasons you
would invest in real estate. So now we’re going to
dive into each of them. So let’s talk about
appreciation and equity. We all remember the crash. Right? 2007, 2008– people were
investing specifically for equity appreciation. And I know where I lived
in Florida at the time, people were buying
a $200,000 house, turning around and selling
it three months later for $250,000. They were flipping it
based on the appreciation. Based on the artificial
equity and appreciation that was unfolding in
that market and markets all across the country. We saw obviously in Las Vegas. We saw in Phoenix. We saw in Miami. All of these
speculative markets. Right? People were able to buy,
turn around right away, and flip those properties. Now appreciation as a main
investment vehicle, to my mind, is dead. What do I mean by that? Well, if you’re going to
buy a property on the hopes that it’s going to go up in
value, that’s speculation. Because we don’t know. Yes, traditionally real estate
has increased in value anywhere from 2% to 5%, year over year. John Schaub and his great
book talks about this, that traditionally real estate
has appreciated like that. But if you’re investing
for that purpose alone, you’re making a huge mistake. And as we saw in a crash,
if you’re doing that, you’re going to be doing
that in areas where you can make a lot of profit. So California, for instance. Outside of the Silicon Valley,
where you can buy a property and hold it for a year and
maybe make 50, 60, $100,000. That has happened. We’re also starting to
see prices now really moderating in the Bay Area. So if you bought a
property in the Bay Area, hoping that you were going to
invest simply for appreciation and then sell it– well, you’re going
to be crap out of luck because we’re also
starting to see the market shift right now. It’s becoming more
of a buyer’s market in Silicon Valley
and the Bay Area. So investing for appreciation
is, as I like to say, nice icing on the cake. So the properties that
I buy in the Midwest– the three bedroom, one bath,
a two bedroom, one bath– yeah, I see a little bit of
value increase over time. And that’s fine. And if it goes down a
little bit that’s also fine because you know why? I’m investing for number two. The second one on the list,
that I love, is cash flow. I’m focused on
investing for cash flow. I want those $50,000,
$60,000 properties that I buy to produce $700,
$800, $900 a month in rent. I want that every month
to be producing cash flow, so I can live off
of that cash flow. And I get the benefits of
having to leave my day job. So every month I have
multiple properties that are spitting off
that amount of money. That is how I invest. And if you listen
to Robert Kiyosaki or other smart real
estate investors, and our accountant and tax
accountant, the best way to invest is for cash flow. Cash flow is King. Because I’m taxed
way differently when my main source of
income is the cash flow from my investments
and not a w-2 employer job. Listen to Warren Buffett. Right? Warren Buffett talks
about, all the time, how his secretary is taxed
at a higher rate than he is. Why? Because he’s taxed on his
dividends and cash flow. He’s taxed at a different rate
because he’s an investor who owns a business. So if you’re buying real estate,
you’re buying it as a business. Right? You’re buying it
in an LLC, I hope. Right? Some sort of
liability protection. And then you’re getting the
cash flow from that investment, from that business every month. And you’re building passive
income, consistently, that’s taking care of
everything in your life. So these are the things you
want to focus on, cash flow. Number three on the list,
as I mentioned, is taxes. So a lot of people– and if you listen to one
of my most recent episodes with Ken McElroy. He’s a longtime
multifamily investor who has told me that right
now he’s not buying anything in the multifamily space. That he sees the real
value, right now, for investing in single
family residential, which is what I do. And he said he’s
not buying anything right now because the prices are
just too hyper-inflated right now in the multifamily space. He was in negotiation on a
particular deal recently where the other– this large hedge fund was
buying this multi-family, and it was only going to produce
like a 3% return on investment. Well, I invest roughly in the
8%, 9%, 10%, 11%, 12% return. So for him, that– Ken likes to be in
the 7%, 8% range. This made no sense for him so he
said, I’m not buying this deal. And the hedge fund basically
was buying this deal at a 3% return, and
it was going to end up being almost a 0% return
after their expenses, and taxes, and
those other things. And it was OK for
this hedge fund to be making this purchase. Why? Because they weren’t
investing for the cash flow. They were investing
for tax purposes. Why? Because real estate is
an amazing tax vehicle. The depreciation that you
can claim on your taxes. What’s known as
cost segregation– that this large
apartment complex then, they’re going to hire
an engineering CPA firm to go in and
analyze each of the units and then be able to depreciate– accelerated depreciation
in that first year. So for them, they had a lot
of people that had money, and they wanted
their money placed. They weren’t necessarily at all
interested in the cash flow. They wanted the tax shelter
that was created by real estate. Now, I love a good tax shelter. I want my money to
be in real estate because, yes, it is an
amazing tax shelter. And that’s some of the benefits
of investing in real estate, but that’s not the
primary reason I invest. So you see the difference here? If I get distracted by
going after the tax shelter, then I wouldn’t be terribly
concerned about the cash flow. Does that make sense to you? Meaning, this
particular hedge fund– they were going after
this big tax shelter, but they weren’t really
concerned about the cash flow. And it becomes incredibly
difficult to find a great deal that is also going
to produce great cash flow and is a great tax shelter. And the point Ken
McElroy was making is that because he can’t find
the good cash flow right now, he’s not buying. And it becomes a distraction. So those are the three
basic ways to invest, and I’m going to
go over them again and dive a little bit
more deeply into this. So appreciation– I like to
say, you can’t eat equity. Right? So if I have a house that I
bought for $200,000 and now it’s appreciated
to $250,000, great. That’s icing on the cake,
but I can’t eat that equity every month. No one is giving me cash
flow from that appreciation. Right? So it’s nice on
my balance sheet, that my net worth has increased. Great. But it’s not producing
anything for me, so I don’t invest
for appreciation. I really, frankly, don’t care
about appreciation at all. I like to see my properties
going up a little bit, but I don’t ever really
even pay attention to that. I don’t even look at the
value of my properties. Having lunch with Robert
Kiyosaki a few months ago– he said the exact same thing. He said, I don’t even know what
the value of my properties are, and I don’t care. Because the cash flow
is what he’s focused on. Right? So I don’t know the
value of my properties. But I know that if they go
down in value a little bit, that also doesn’t matter. If there is some sort of a
course correction, a crash– why? Because the cash flow
from those properties is what I’m most
concerned about. They’re going to stay
consistently rented in a downturn. Guess what? Fewer people are going to
be able to get mortgages in a downturn. More people are going
to have to rent, and they’re going to
have to rent from me. Again, appreciation– I’m not
terribly concerned with at all. Again, you can’t eat it. Number two, cash flow. I love it. This is the number
one way that I invest. When I buy a property
I’m not caught up in the total value
of that property. I want the return on
investment to be high. So I want that ROI to be between
7%, 8%, 9%, 10%, 11%, 12%. I own a lot of properties
that produce a 7% or 8% ROI. I own a lot of properties
that produce an 11%, 12% ROI. So I want the cash flow every
month from these properties. We go through an
eviction process, let the property manager
get a new tenant in there. I want that cash
flow every month. That’s how you build freedom. That’s how you build
financial freedom. By the way, if you haven’t
downloaded our free freedom number cheat sheet,
you can do so. It’s totally free. And it’ll help you figure out
how many rental properties it will take for you to
achieve financial freedom. It’s the formula that Natalie
and I use in order to do that. You can download it for free
at It’s three pages and
it’ll kind of walk you through figuring
out your expenses and how to dive
into all of that. So cash flow is king. That is the number one way
to invest, in my opinion. In my humble opinion. And the third way
is the tax shelter. So if you’re a large
multimillionaire investor and you own a lot of properties
that currently cash flow, guess what? And you have some big business
that you’re running or you have some big w-2 employment
job that’s giving you a big salary– you also want to try to create
maybe more of a tax shelter with real estate. So you’re going to
buy that $15 million apartment complex
with 10 partners, and you frankly don’t care how
much cash flow it’s producing. You just want that tax shelter. You want your money
put in there in order to not have to pay taxes
on that big, big salary that you’ve got. So that is another
way in investing. That is not the way that
I invest, to be clear. So those are the three ways
to invest in real estate. I’d love to hear
your comments now and your thoughts around
the three ways to invest. What are your favorite
ways to invest? What questions do you
have around this strategy? All right. Let’s see. Let’s see. You don’t lose money on
depreciation unless you sell. Keep it rented and
keep it cash flowing. So that’s a great point. So what this person
is asking is, what if you then
sell the property? Well, yes. You would have to then
recapitalize that. You’d have to look back at
the depreciation and the way in which that’s structured
with your accountant and paying that back. But my goal, with
the properties I buy, is to hold them for
the rest of my life. So I’m buying
properties in the hopes that I’m never
going to sell them, and then I’m going to hand
them down to my children. And then when handing
down to your children– whether I’m upgrading
through a 1031 Exchange and doing all these
advanced strategies– I then don’t have
to deal with the– they’re not going have
to pay taxes on that, on those gains, which is an
amazing, amazing strategy. Cold Corporate wants to
know, yeah, I get that. But at what point do you sell? The ownership portion is kind
of like hedging in the stock market just because you’re
collecting dividends. No. No. Again, why would you ever sell? If you own a $50,000,
$60,000 property– a lot of commercial
investors will hold for between seven to 10 years. And what they’re
doing is they’re buying a large multi-unit
apartment complex. They’re trying to add
value to that property. Maybe they’re putting
in palm trees. They’re adding a pool. They’re adding a dog park. They’re putting in
new countertops. They’re upgrading that facility. Then they’re going to
take that depreciation over those first few years. And then they’re going to
sell it to another investor, seven to 10 years later,
in a 1031 Exchange. And then they’ll
keep rolling it. That’s commercial investing. That’s not something that I do. So with residential
real estate– holding that property
free and clear for the rest of your life. The properties that I own, that
I bought 10, 12 years ago– I’m never going to sell them. I’m absolutely not
going to sell them. Now, if you’ve got
50 rental properties, you may look at
your 50 properties and decide to yourself, well,
these three are kind of dogs. These three in this mix
right now have some issues, or they’re not producing
the ROI that I want. Or maybe they’ve
appreciated nicely. And so instead of keeping
them in your portfolio, maybe you sell them
off in a 1031 Exchange, so you’re not paying taxes
on it and you upgrade. Maybe you bought it for $50,000. It’s appreciated to $100,000. Now you could buy two
$50,000 properties again with that $100,000. So there are times to
look at your portfolio and make that decision. But for me, my goal is to
keep all of my properties for the rest of my life. Let’s see here. Watson wants to know, if you had
$100,000, what would you buy? A duplex or two single
family properties? Well, I personally am a fan
of single family properties. Duplexes– and I
own a few duplexes– but I personally– single
families provide the lowest amount of volatility. And what do I mean by that? Think about it for a second. If you’ve got a two bedroom,
one bath, a three bedroom, one bath house with its
own yard, its own driveway, then that tenant
kind of believes that that’s their house. They come home at
the end of the day. They kind of take
ownership of that property in that neighborhood. Perhaps the tenant moved
to that school district because they want to be in that
particular school district. They want to stay for five years
while their kids are in school. So I have tenants that will stay
a long time in my properties because they kind of
make the house theirs, if that makes sense. When you’re in a
duplex, you’re kind of sharing a wall with somebody. And the numbers bear this out. You’re going to have a more
transient tenant in a duplex. Unless you get large duplexes. I’m talking like three
bedrooms on each side, and it’s big so
you feel like you can nest there a little bit. An investor friend of
mine in New Jersey– he owns a couple of thousand
properties in New Jersey. And he only buys
large multifamilies because the smaller ones– the tenants tend
to move out a lot. And when you’re in
New Jersey, you’re not going to have a lot of
single families in the areas he invest because it’s
more densely packed. New Jersey is one of the
most densely populated states in the country. So you’re on top of each other. So the duplexes and triplexes
and quadruplexes that he buys have very large bedrooms. So they almost look like
little single family houses. Those are hard to come by. But again, if I had
my druthers, all of the properties that
I personally like to buy are nice, little 1,900 square
foot single family homes in C and B class
neighborhoods with a yard and a driveway and
a place that person can call home at
the end of the day. These aren’t super
fancy properties, but they’re in
good neighborhoods where tenants going to
stay for a long time. Aaron Rich says,
Clayton, I love you, man. You’re an inspiration. I’m 30 and will be retired
in about three to five years, based on your ideas. I love that. Aaron, that’s fantastic. I love to hear that. So good. So good. Jonah wants to know, do you
have any opinion on investing in Virginia real estate market? Any experience in the state
at all in central Virginia. Jonah, no. I used to live in West Virginia,
in Bluefield, West Virginia. And I actually used to live on
the other side of the border in Bluefield, Virginia. So you’re talking maybe
Roanoke and Richmond and– look, there are
deals everywhere. It’s just a matter of– like what my company
does, where we help people get properties turn key– is we have a team. Right? So we have contractors. We have a team of people,
property management team. All of those things
in the same area. So I’m able to go in and buy
a package of 10 properties, and then rip them apart,
and put them back together, and work with a good
property management team. So the thing is, you just
want to focus on ROI, Jonah. Just return on investment. So when you’re buying
single family homes, make sure that you’re not
spending more than $150,000 on a single family home. Here’s why. Remember you got to have
to rehab the house also. Right? So if you’re spending
more than $150,000 on a single family
home, the rent does not keep up with the
value of that property. OK? What do I mean by that? Well, let’s it’s renting
for $1,000 a month and you bought it for $150,000. OK? Then you go up to $200,000. You think, well, that rent
you go up to $1,500 a month. Right? Or if I bought it for $250,000– man, that must be cash flowing
$2,500 a month in rent. Nu-uh. Rent does not keep up with
the amount you purchase. Right? So by that metric, if you bought
a million dollar house– wow, you should be paying, what,
$10,000 a month in rent? No, doesn’t happen. It simply doesn’t happen. So don’t spend too much
money on a property. And again, I’ve got a whole
video series here on ROI. Check it out on our channel to
figure out where you should be. So again, the properties that
I have in my personal portfolio are between 7%, 8%, 9% 10%,
11%, 12% return on investment. And that’s a good rule of thumb. When you’re in that
7%, 8%, 9% range, you’re going to be more
of a B class property which I think everyone should
have in their portfolio. And then if you move into
more of a C class play, you can get a little
higher ROI, but you may have a higher volatility
in your tenant base. Meaning you’re going to
probably have more of a tenant turnover in your tenant base. That’s where it’s
really important to have a good property
management team. So I hope that helps. Let’s see. Victoria– helpful information. Do your research
before investing. Actually, no. That’s not true, Victoria. We actually buy a
lot of properties. Here’s a good question. Foody Unloaded says,
blue state with a lot of red tape but high rent
or a red state city that has investor friendly? Your preference? I think that’s a great question. You have to look– I guess Michigan voted– became a red state last year. Right? In the last election cycle. So a lot of my favorite
properties that I own, rent are in Michigan,
technically now a red state. But, yes, you’re right. I mean, it tends to be
that those blue states tend to have much more regulation. So in New Jersey, for instance– New York, for instance– it’s
a very tenant friendly city. What does that mean? It’s great for tenants. But for a landlord, there’s
a lot of hoops and hurdles to jump through,
and eviction process can be a royal pain in the butt. So California, for instance. Tara, I would never buy
a property in California because it’s a very
tenant friendly city. So you’re dealing
with all kinds of BS if you’re dealing in California. Ridiculous. And it’s very difficult
to get a tenant– a nonpaying tenant
out of your property. As you know, if you
listen to the video series we did on our story,
Natalie talked about the property she
owned in San Francisco where this A class
tenant, who lived in this really expensive condo
in downtown San Francisco had their dog banging hole– they ripped holes in the wall. Had to go through this
ridiculous eviction process to get them out of there
and get them to pay back, and they simply didn’t. It was a royal pain in the butt. So stay away from
those blue states. Preston here– parents
want me to buy their home. What are the steps, and
should I put it in an LLC? Absolutely. So liability protection
on rental property– if you’re buying a
property and you’re buying it from your parents. And they’re going
to rent it from you, or you’re going to rent
it out to somebody else– unless you’re going to
live in the property. You should buy that property
as a business, as an LLC. It’s very easy to set up an LLC. Our clients set them up, and
it takes like five minutes to set up. Then you buy that
property inside of an LLC. Then you’re protected
for liability. Because if someone slips
and falls on the property, then they can only sue the
LLC and not you personally, Preston. So maybe your parents
won’t sue you. But we’ve actually heard
stories in the news where like parents–
suing their kids. Right? So you never know. I mean, I hate– I’m sure your parents
are great, but make sure you have that
liability protection. Watson wants to know, for
a single family property that pays $700 a month,
what’s your net cash flow and what markets
do you invest in? Well, on a property like that
I’m paying mostly cash for it. I’m going to buy a $50,000,
$60,000 property for cash mostly. Now cash can come
in different ways. Right? I might borrow from my 401(k). I might use self-directed IRA. That’s still cash. Right? You’re just not taking
out a mortgage on it. So in that situation I’m still– I want to always set aside
40% out of that formula. Right? And we teach you how to
do that in the ROI video. Right? So that is– we
want to make sure that 40% is put aside for
vacancy, repairs, expenses, taxes. You’re paying your property
management company 10%. That’s all in that 40%. OK? So net cash flow. You’re going to actually
look at the end of the year– if you’ve got good tenants
in a decent neighborhood, you’re going to look,
and you’re probably going to be close to
that $700 a month. You’re going to
take 10% out. $70 for your property
management company. And you’re going to set
aside some money for taxes. So below $700, maybe
in the $600 range. And then you’re
going to want to set aside some just for
expenses and so forth. But honestly, you’re not going
to be digging too far down. I think maybe $420, $450,
$500 is a good rule of thumb to plan for. But I think you’ll be
pleasantly surprised at the end of the year,
that you’re probably going to be closer to that
$600 with the amount of stuff you’ve had to spend
on that property. Sweden– Christian
Whetherbrand is from Sweden. Nice to see you. So any other questions
around the strategy today? When we talk about investing
and the three different ways to invest– It’s very important to
look at these strategies. Right? Are you investing
for appreciation? I think when a lot
of people start they think they’re going
to invest for appreciation, or they think the house
they live in is an asset. Right? The house I live in is an asset. I’m going to invest for
living in this property, and that it’s going up in value. But again, you cannot eat that
equity unless you’re using a home equity line of credit. Right? You’re pulling some
of that equity out, and you’re rolling that
into other properties which is something that we do. I use our home equity line
to buy rental properties. So that’s one way to do it. Franklin Strong– please
keep teaching and sharing the knowledge. This is just such a positive
and informative broadcast. Thank you, Franklin. Much love to you. I appreciate it. I want people just
to go out there and take action and become
a real estate investor. That’s my whole goal
with this channel. You talked about how you
should have B properties. What percentage of
B and C properties do you suggest and why? That’s a great
question, Chandler. It’s really a matter of your
own personal preference. I mean, I have– I would say probably
30% of my properties are in a B class neighborhood. Now my C class– yes, I’m going to have
slightly higher volatility. Meaning, I want to have a
property management company that I work with in my
markets that’s higher touch. OK? Those types of tenants
are going to have just a little higher touch. OK? But I’m investing in areas where
that C class neighborhood is shifting, moving. The signs are there that it’s
moving towards a B class. OK? So yes, I’m buying
those C class, and I’m going to have
to deal with maybe more tenant turnover. But again, I don’t
mind expenses. I don’t mind those repairs. Because again, the tax benefits
of having those repairs. Then I can build
up and build up, and those kind of shift
into more of a C class play. So one of my mentors, John
Shaub– one of the legends in real estate. He has written a fantastic
book on how to become a millionaire investor. I think one house at a time. He buys the exact same
neighborhoods that I do. He buys the exact same types
of properties that I do. Those C and B class properties. B class increases
your net worth, has more consistent
cash flow because you’ve got tenants that want to
stay a lot longer typically. Maybe better school districts,
those types of things. So I would have a good mix. Look. It’s more of an
art than a science, but just know that– look. If there’s a new shopping
center that just went in– there’s a Target
that just opened– that your near public–
more public transportation– But if every house on the block
is burned down and boarded up, then that’s opportunity. But I wouldn’t necessarily be
buying in that neighborhood just yet, unless I could buy
all 10 properties on the street and revitalize all 10 of them. So just keep that in mind. But again, I would say 30%,
maybe 40% of my properties are B class or a B minus. You know, B minus. Because you want to
stay away from A. You absolutely want to stay
away from A class properties. A class properties
cause A class headaches. The tenants are entitled and
a royal pain in the butt. More things break in
a property like that. You’ve got garage door
openers, garbage disposals. Stay away from A
class properties. The value is just not
there, and it will cause you the biggest headaches. So take it from me. That is not where
you want to invest. You might live in a
$500,000 house, Chandler. You’re not going to invest
in a $500,000 house. Stay away from it. Remember, you are
not living there. You’re not putting in granite
countertops and a Nest thermostat on the wall. You’re going to
have a nice place to live for a tenant, that’s
updated, that’s clean. Where you would feel comfortable
moving to if you had to. Right? If your wife was like,
we’re selling this house. We’re going to move into one
of our investment properties. You wouldn’t lose sleep
about it by doing that. You could feel confident
going into that house, knowing that you’ve
got updated cabinets. You’ve got a nice
little kitchen. You might not have all the
space that you’re used to, but that you would feel
comfortable living there. I hope that helps. Luke– Alfonso says,
what do you think about appliances, AC warranty
contracts like service America, for rental properties? On all the properties
that I do, we don’t put appliances in
our properties, mostly. Most of the properties
we do, that’s the tenants responsibility. They buy sort of a package
of their own appliances at a local– a scratch and dent
company or something. Some of my B class properties,
I do put appliances in there. But most of the
time our tenants are buying their own appliances. So I don’t really
worry about that. And quite honestly– How often do appliances actually
break versus they’re destroyed? Right? A heating element
goes out on a stove– it’s not that expensive to have
a heating technician come out and take care of it, from the
property management company. So to be paying all these
additional warranties– it’s like when you
go to Best Buy, and they try to get you
to buy this warranty. Do you ever do that? That’s how Best Buy
makes more money. Right? It’s all those BS
warranties that they try to get you to buy
at the checkout counter. So I don’t worry about
that kind of stuff. Plus remember, repairs are a
tax expense for your business. So when you have to put
in a new appliance– yes, you want to mitigate
those, but remember repairs are part of the process. And as my CPA likes to
say, I love repairs. Repairs are a tax expense. Let’s see. Cold Corporate wanted
to know the book– Kelly, can we link up the
book to John Shaub’s book? We’ll put it right here in
the chat thread for you. It’s a great book. It’s How to Become a Millionaire
Investor One House at a Time. It’s a great book. Preston, you got our
freedom cheat sheet. Thank you so much. That is also available. It’s free. Go to
to grab that. Brian Standart says,
I have a solo 401(k). A solo 401(k) is great. That’s like a self-directed IRA. He has checkbook
control of his 401(k). How can I get the
remaining funds to purchase a rental property
sooner rather than later? I’m tired of making excuses. Well Brian, for
instance, if you would book a call with our team– on the front of our web
site it asks you– there’s eight questions you’ll answer. Your name, email
address, phone number– how do you plan on
buying your property? And you can click on unlocking
money from my solo 401(k). You can click that as an option,
unlocking retirement funds. So you can use that
money with cash on hand. So you don’t have to just– or you can pull it
from some other source. So we have people
all the time that– I mean, I do it. Right? You use a portion
of your solo 401(k) or self-directed to pair
it up with other moneys, so you can invest in
property that way. You don’t have to do it all
through that one source. Trey Hill– you skipped
my two questions. Sorry, Trey. There is a lot of
questions coming through. Let me go back. [CHUCKLES] How do I put a rental in my
LLC if I still owe a mortgage? It makes it hard to
find insurance coverage. Trey, listen to my
podcast episode. It’s the Investing
in Real Estate podcast with Clayton Morris. I did an episode
with Garrett Sutton. He’s Robert Kiyosaki’s attorney. He’s brilliant. He runs corporate direct. He’s a good friend of mine. And he talks about how to
put your primary residence or that residence into an LLC. He walks you through
that process. So check out that
episode specifically, and he’ll help you do that. The thing is because when
you’re putting in there– the fear is– right? That the mortgage
company is going to say– they’re going to call it what’s
called a due on sale clause. But you’re not selling
the property to your LLC. Your quitclaim deeding
it which is not a sale. So it’s not a taxable event. If you’re quitclaiming
it to your LLC, you’re not selling it. So it’s not due on sale clause. So he talks about all that,
and you can get creative. In fact, I would even
reach out to his company to help you with that process. He’ll help you with that. And how can I take money
out of a rental property that I have $140,000 in equity? Trey, well first of all, I’d
look at that rental property, and is the ROI there for you? So is the return on
investment there? You may say, I owe– I don’t know how much
you owe on the property. But let’s look at
that for a second because you might
want to consider selling that in a 1031
Exchange and buying three rental properties. For instance, we just had
a client at Morris Invest buy 10 properties through us. They had a 1031 Exchange. They were selling off
some bigger assets that the ROI was terrible. And they were upgrading to a
number of rental properties because of that. So you may consider looking at
that and doing a 1031 Exchange. We just did an episode
with Leonard Spoto on that. He’s a he’s our
1031 Exchange guy. We always recommend people
work with his office for 1031 Exchanges. But then you won’t
pay any taxes on it. So you can take that
profit from that property and roll that profit into three
rental properties that are producing $700, $800 a month. So Trey, just out of
curiosity, how much cash flow is that property
producing for you? Trey, answer me that
question before we move on. How much cash flow is that
property producing for you? Let me look at some
other questions here. Spike Boze, hello
from the Detroit area. Hey, Spike. Flat By Four, no. I’ve never used a margin loan. But it sounds interesting. I haven’t used that before. So we’ll wrap it
up here, and we’ll let you get back with your day. We’re going to try to do
these regularly now that we’ve got some of the studio properly
organized and built the way that we want. And now that we’re done
with all the summer travel we’re going to be
doing more Livestream, so I hope you’ll be able to
join us on these live streams. And subscribe to the
channel so you can be notified when we go live. Gamma Fighter says, do I need
to have a young, beautiful wife like you to be
successful like you? No, but it helps. I’d recommend getting
one if you can. [CHUCKLES] George says, I use your
investment principles, but it takes a long time
paying off the first one before buying the next one. George, we’re only held
back by our limiting beliefs around money. There is so much private
money out there right now. There are so many people that
have just millions of dollars sitting there that
want a high return or want some kind of a
return, but they don’t want to get involved in real estate. They don’t have the time. Doctors– you name it. Who would be willing to work
with you at 5%, 6% interest. You pay off and move into your
second, third, fourth, fifth property. So you don’t have
to be held back by this one investment,
one amount of money that you think you have. There’s so much private
money out there. Watch my private money
series on YouTube to watch through that
process, and listen to Susan Lassiter-Lyons. Her great, great, great
book on getting the money– In fact, Kelly, please
drop in the chat thread here our link to Susan’s
course on getting the money. OK? No more excuses about money. I’m sick of it. I was $75,000 in debt. I had a foreclosure. I had no access to
credit, and I was able to start investing
in real estate. No more excuses
about it, George. I love you. OK? We’re going to make this happen Trey Hill says, sorry about
$700 a month in cash flow. OK. Well look, you could get $700
a month in a $50,000, $60,000 property. So why are you with
a $235,000 property? Again, over $150,000 in
value, the rent value does not keep up with that. Right? For $235,000, you should be
bringing in three grand a month in cash flow. Right? So why not now trade up? I’d be calling a 1031
Exchange company. Listen to our podcast. We had Leonard on just recently. He will walk you
through that process. Connect with him. I’d move that property into
some higher performing assets immediately. If that were my property, that’s
exactly what I would be doing. I hope that helps. All right. Zebede Group wants, how
many states do I invest in? I think I invest in like
five or six right now. Oh, yeah. And that’s a free book. You’ve got to get
Susan’s free money book. She just contacted us
last week, and said, hey, can you give this book away. Her getting the money book– it’s free. Her getting the money book
is absolutely awesome. You just pay the
shipping for it. So just click on that link that
we just dropped in to the chat and walks you
through that process. She’s done over a
billion dollars in deals. She knows her stuff
around private money. She is the real deal. In fact, we should get
her back on the show. Should we? Yeah, we should get her
back on the show soon. In fact, we should. We should, we should. Oh, hey. One last question here,
and I want to get to this. We’ll wrap it up. But this person asks– Absurdicous says, so would
you recommend someone in $50,000 in
debt, who has cash, to invest first in a property
or pay off the debt first? So again, we’ve done
a video specifically on pay off debt or invest. Please watch that video. It’s right here on the channel. Maybe Kelly, if she’s fast
enough, can type it in here. Drop that right here
in the chat thread. Because it’s up to you. But honestly, why
would you want to wait to pay off debt in order
to invest and start making cash flow? So there are so many
different strategies. And I would even recommend
picking up our book, How to Pay Off Your
Mortgage in Five Years, because we walk through
how to pay off debt. How to get out of debt and
start strategizing to invest. You don’t have to just
pay off student loan debt, wait 10 years before
you start investing. OK? You can do things in tandem, and
you can take action and become a real estate investor. You don’t have to wait for that. All right? All right, one last question. I keep saying one last question. I’ve got to run to
another meeting. But can you borrow
against a rental property, get cash, that– it’s in an LLC. Cassie, of course you can. Don’t think traditional
banks all the time though. OK? You can absolutely
take your properties that you own in an
LLC and leverage them. That’s what smart
investors do all day long. Like my friend in New Jersey
I was telling you about. He started out
with one property. Right? And he then leveraged that first
property and bought his second. And then he leveraged that
one and bought his third. So you can keep doing that
over and over and over again. OK? You can rinse and repeat. All right. Thank you, everyone. And thank you so
much for subscribing. I really appreciate it. Remember, we publish this
show multiple times per week. I want to thank you
all for your time. I hope you had a nice
little break here today. We’ll be back publishing
another show very, very shortly. In the meantime,
please subscribe. Share this with
someone you love. And also go out
there, take action, become a real estate investor. Because I believe it’s the
number one way to build wealth. We’ll see you next
time, everyone. Much love.

26 thoughts on “Best Way To Make Money In Real Estate

  1. Jersey city nj

  2. California

  3. I love your videos… but 40% for expenses is not that much especialy when the 50% rule isn't enough many times so your 40% rule will even be worse. Maybe in your properties this is enough but in many simulations the expenses are greater… Thanks!

  4. Thanks Clayton for the information during the live stream earlier. I need to research and figure out my best options to use that equity.

  5. South Georgia

  6. Louisiana, sounds great

  7. Hi can comment?

  8. Hello Clayton,

    Great video, great content! Thank you for sharing such helpful information with us.
    I have a question, so I’m in the process of buying a small single family house in Detroit for $60k. Is just for the cash flow. Im paying cash for it. So, if I wanted to pull my money back in the future to repeat the process, can I just get a regular mortgage on it?

  9. Good sound

  10. Where can i dowload what you said on de video (the three pages i mean)

  11. What if you have a chance to buy a couple homes that need rehabbed but are already rented? The ROI is above 15%. Would I asked them to temporarily allow the homes to be rehabbed? Or how does that work?

  12. Thank you for the encouragement and confirmation. I'm sitting out for the next year and hiring myself out as a home repair man to pay off the last of my houses. Prices are too high so its a good time to pay off and save money or build new construction.

  13. shouldn't you care about appreciation because you can pull that money out through a refinance and purchase more properties with it?

  14. The link for Susan's free book doesn't work.

  15. What about wholesaleing the business your in why don't you ever talk about that ?

  16. What’s your take on buying older homes? What is the oldest property you will buy? 1950? 1960?

  17. Appreciation = speculative
    Taxes = money pit
    Cash flow = growth

  18. Thanks Clayton for this great video. I've got a question. Why do you prefer private money than banks' loans?? Thank you again.

  19. Love this video! I've been contemplating about buying my first rental for months now. Thank you for the knowledge and inspiration!

  20. Which type of HELOC do you recommend? Credit line or Loan?

    I see credit is only good for 65% and Loans are good for 80% LTV in Canada.


  21. Great content, nice video

  22. Where do you find 50k properties. Here in Idaho, you are way out of luck if you have 50k

  23. Doesn't depreciation end after 27.5 years. So you loose the ability to depreciate at this time. Then maybe you should sell after holding for so long?? Thanks in advance

  24. Love all your videos! is it easy to find tenants without appliances?

  25. My way is going to be cash flow. My reasons are a lot align with the same reasons for wanting to invest. Plus it seems to be the simplest for me to focus and learn how the best.

  26. I watching ant taking notes from your videos and doing the things I can do and put in place first before I reach out and get in contact with you and your team. Thank you so much for helping me fine my way and giving a outline to fulfill it

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