How To Invest in Real Estate For Beginners: 5 Ways to Make Even More Money

How To Invest in Real Estate For Beginners: 5 Ways to Make Even More Money

Five ways to start
making more money with your current real estate
investments– hey everyone, I’m Clayton Morris, longtime
real estate investor. And today on the
show, we’re going to talk about ways to take
your current properties, or ones that you’re about
to invest in, and expand it. I learned something many years
ago from a billionaire mentor of mine. And he became a friend. And I listened
back to some tapes with my mentor Jay Abraham,
one of the greatest marketing thinkers in the world. I believe he’s called
the $10 billion man. And what he taught
me was not to try to go out and
create new business, start a new business from
scratch and go somewhere else, but it’s to take your
existing business and to geometrically
grow that business. Well, what do I mean? Well, in the case of
real estate investing, we’re going to talk
about five ways that you can take your current
properties that you already own– in fact, I saw somebody in
the chat, earlier, saying, I have three properties,
and I’m stuck. OK, then this show is for you. Because you already
have properties. You’ve already
taken that plunge. How, then, do you increase
the amount of money you’re making on
those properties? That’s what today’s
show is all about. For those of you who
are new to the channel, please hit the Subscribe button. Please hit the Like if we
bring you any value at all. And please leave a comment. I want to hear where you
are currently in your life and in your investing
journey in trying to build financial freedom
for you and your family. Leave a comment below. I think, as you can see
here on the channel, we jump in and
respond to just about every comment that comes
in if we have the time. But we’ll spend nights
going through comments to try to help as many
of you as possible. So on today’s show,
these five ways to geometrically grow
and add more money into your pocket with the
properties of real estate that you already own– all right, number
one on my list– number one on my list– and
this may seem obvious to you, but to a lot of
people, it’s not. Number one on my list
is to raise your rents. How do you raise your rents? Well, one thing
you should be doing is working with a
property management team. If you’re working with a
property management team that has boots on the ground and
understands the local market, then it’s a very
simple question that, when the property is in
a tenant turnover phase– a tenant has moved out– I’m not a big fan of
raising rents on people while they’re living there. I like to wait until
a tenant moves out. Look, the bottom line is we are
in a rental nation right now. We are a nation of renters, OK? And it’s only going to stay
that way for many, many years to come. I mean, I don’t see
it shifting at all. We did see a little uptick
in the number of mortgage applications over
the last week, which is encouraging for those
people looking to sell a home that they’re living in. That’s good news. However, there is a
demand, a huge demand, for rental properties. And guess what, the types
of properties that I invest in, those C and B class homes,
those affordable house homes in those brick and collar–
blue collar neighborhoods, the three bedroom, one bath,
the two bedroom, one bath, the 900-square-foot homes
that are, I believe, the backbone of this country– those are the
types of properties I like to purchase and keep
in my personal portfolio. We need them badly right now. In fact, there was a story just
last week, or two weeks ago, about a big hedge fund company. They’re having a difficult time
finding the types of properties that I like to buy. They were buying them one-off,
and they’re just having a difficult time finding them. So what did they decide to do? They decided to build an
entirely new subdivision, just from the ground up. They’re going to build a rental
subdivision from the ground up. Fine, because there is
such a demand for them. How can you increase rents? Well, this is a
discussion and you should be having with your
property management team. So about a month prior
to a lease being up in a property, number
one, you’d hopefully extend the opportunity for your
tenant to stay in the property. You hope that they’ll stay. But if they do
want to leave, you talk with the
property management company about rental increases. And across the board in
our rental properties right now, we are seeing
a rental increase. So if you are renting
it for $850 a month, the tenant moves out, can
you raise it to $950 a month? And the property management
team will know, based on what’s happening in those
neighborhoods, can you raise rents. So number one is to
raise your rents. That’s the most easiest and
the most obvious way of putting more money in your pocket. Number two is an
opportunity for you to get your property
Section 8 certified. Now I know that scares a
lot of people, Section 8. We’ve got videos
here on the channel which I’d hope you will
check out about Section 8. I’ve got a lot of Section 8
properties, and I love them. There’s just a few
hoops and hurdles you need to jump
through in order to make sure that your property
is compliant with Section 8 housing. And it’s different
in every state, and to be honest with you, can
be a little bit more difficult in other states. So you might have a state where
they send out one inspector at one particular time. You get the property compliant. It could be little– it’s
usually little, fiddly things that maybe you– it’s just
wear and tear on your property. They want you to
change that outlet. They want you to change
that towel rack over there. They want you to fix
that screen door. There are certain things
that Section 8 inspectors will look for. If you called on a
Tuesday, you might get a totally different
Section 8 inspector who will come to the
property and will pick three entirely different things. OK, we just went through
this on a property we have in New Jersey where
we went into the property. We were actually surprised
that it passed the inspection. Because we hadn’t
yet even updated the three-prong electrical
outlets on the property. That work was scheduled to be
done but had not yet been done, and yet it passed
Section 8 inspections. OK, so if we had gotten a
different inspector on Tuesday than we did Thursday that
might not have passed, which is not a big deal. You go back and just
fix those things. But with Section 8 tenants,
you can get a higher rent. Typically, if you’re
renting for $900– for instance, on our properties,
we were getting about $1,000 a month on this
particular property. With Section 8, we’re able
to get $1,100 a month. The downside of
Section 8 is that it can take a few months for you
to get that first deposit check. So tenant moves in
in June, June 1. So you have to wait
June, July, August. You might not get your
first check from Section 8 until September. But it’s not like you’re not
going to get money in arrears. You’ll get the money from
June, July, and August, but you’ll just have
to wait until September to get said money. So if you need immediate
cash right now, Section 8 might not be for you. But I like Section 8,
because they also– I mean, they come out,
they inspect the property, they make sure that it’s
compliant, which is great news. I want to make sure
that my tenant’s not trashing the property. It also keeps me honest. I want to make sure that the
property’s in great condition for a tenant. I get more money because
of a Section 8 tenant. And they tend to
stay a lot longer. So there’s good news all
around if you can stomach that. You just have to know what
to do and to make sure that your property is compliant. Number three on my
list on how to add more money to your
rental property and how to make more money
from your existing rental properties– and
this particularly goes for those people who
do multifamily or commercial properties. But it’s, how can I add value? So number three on my
list is adding value to your rental properties. And what adding value to your
rental properties does, well, it’s– we’ll get to these things
in step four and five. But you are able to increase
rents on the property. When you add value
to a property, you’re adding value to
a potential tenant who might see added value in
that property, and therefore, able to bring in more money. So now, when do you do this? Well, you might do this when
you acquire the property, OK? Or you might do this
when you have a tenant turnover on the property. Or you might do it when the area
has appreciated significantly, and now it’s time to put
in granite countertops in the property, et cetera. So you might buy a C
class property that’s C class right now,
but the neighborhood is transitioning to a B class. And in the next
four or five years, it might be time, on
a tenant turnover, to put in some
hardwood floors, to add some value with a
granite countertop, add some additional– add some additional
things to the property. And that’s how you add value. Now in the case of a
multifamily investor, you might buy a
10-unit building, and there is no place
for a community gathering in the downstairs. I know that when I
lived in Manhattan, there was a property
that I moved into that they had added value. What do they do? They totally renovated
the property, but they also added a big
community space downstairs. They added ping-pong
tables, and a bar area, and a big screen to watch– everyone, we could gather
together and watch football on a Sunday. Or even they had a Nintendo
Wii that they put in there. You could add a park. I’ve talked to different
multifamily investors who will add a park next
to the property, maybe change part of the parking
lot into a dog walking spot. Adding value to your
property– adding value brings in additional and
higher rents on your property. So that’s another
way that you can bring in more money on
your rental properties. Number four is a big one. Please write this down. This is accelerated
depreciation, accelerating your depreciation. Well, how do you accelerate
your depreciation? So this is, of course,
what we’re talking about for tax benefits, OK? Accelerating your
depreciation you do by doing a cost
segregation, OK? We have videos
here on the channel which walk you
through, step by step, how to do a cost segregation. It’s not something that
you can do on your own. You have to hire an accountant,
a professional accountant, that will fly in. Now if you’ve got 10 properties
in a particular area, this cost segregation
expert will come in and will analyze each property. And under the tax
code, you are now able to accelerate depreciation
of certain items in that home– the roof, windows,
different things that are inside of the home– which, many years ago,
were lumped together as one collective. And now you can break them
apart in individual ways. So by accelerating
your depreciation, you’re lowering
your taxable burden, therefore putting more
money in your pocket. Cost segregation
can be complicated. But again, the good news
is you don’t have to do it. You have to find cost
segregation experts. Again, we have an interview
with David Brizel. He’s a cost segregation CPA. And we’re actually using him
on a number of our properties where he will fly
in in the spring. We’re not going to have
him do it in the winter. He’ll fly in the springtime. And he’s going to do
a cost segregation analysis on a bunch
of our properties in different locations. And that is how the
rich get richer. Because they take
advantage of the tax laws the way that they are written. Remember, the tax
code in this country is written for entrepreneurs. It’s written to benefit those
who are buying real estate, starting a business. So accelerating
your depreciation is the fourth way you can
put more money in your pocket as a real estate investor. And number five on my
list is infinite returns. That is a cash-out refinance,
refinancing your property and pulling your money
out of the property. OK, hopefully I’m not
blowing your mind here. But creating infinite
returns on rental properties is the ultimate goal. Fortunately, I had a chance
to spend time with my friend– now I’m lucky to
call him a friend– Robert Kiyosaki. And one of the
things he would keep beating people
over the head about is creating infinite returns
on your rental properties. Well, how do you do that? Well, if you’ve
bought a property– and I hope you
follow my laws here on this channel about
buying properties where you can add
value to that property, you’re not overpaying
for properties, you’re not buying a $100,000
property that’s worth $60,000 or whatever. Yeah, I hope I got
that math right. But you want to make
sure that you’re able to add value
to this property and then pull your money
back out of property. So that’s what we’re doing
on a property we bought just recently. We bought it in the
$60,000-ish range. We added about $10,000
worth of renovations to it. And we are now
refinancing that property and pulling all of our money
back out, or most of our money, because it’s now–
it’s worth $90,000. So the goal is you want
to pull as much money out of that property as you can
to create an infinite return. That means you have none of
your own money in the deal. And if you can pull your
money out of that deal, you can roll that money
into another deal. So to me, that’s the most
important of all five of these is to not have any
of your money in the deal. That’s an infinite return. So it’s not that you’re making
an extra $200, $300 a month. Now you’re making an infinite
return on that investment. The ROI is not 12%, 10%. It’s infinite. Because you have none of
your own money in the deal. So those are the five ways. I’ll go through them
again real quick. Number one is to raise
the rents on the property. Number two is to get your
property Section 8 certified if that’s something you
are interested in doing. Number three on the
list is to add value to that property in some way. Number four is to
accelerate the depreciation by doing a cost
segregation and hiring the right people to do that. And number five is to
create an infinite return, is to try to pull all of your
money out of the property if you can and roll
it into other deals so that you have no money in the
deal, none of your own money. When you have none of your
own money in the deal, you’re creating an infinite
return on that investment. So those are the five
ways to add value to your rental
property and to make more money with the
properties you currently have. I’m Clayton Morris. Thank you guys so much. Please hit the Subscribe button
and smash the Like button if you’d be so kind. And I’d love to hear your
comments and questions now in the comments threads below.

40 thoughts on “How To Invest in Real Estate For Beginners: 5 Ways to Make Even More Money

  1. Thank you so much for your channel. As an average joe in the midwest you have really provided a good foundation of knowledge and addressed any doubts about investing in a lower middle class rental property. It is my goal to do this and create that snowball cash flow effect to live the kind of life I've wanted. Much appreciation and respect, Clayton!

  2. Can you explain why you put properties in LLC's up to $150K?

  3. Thank you for your teachings they have been a blessing. I do have one question: when you speak about getting monthly cash flow….is that the money you are left with after deducting all monthly expenses associated with rental i.e., mortgage, escrows, property management fees, if any?

  4. When people buy from your turnkey company, is there any immediate equity or do you sell them at current market value? Trying to determine if the BRRRR method would still be possible. Or if there is another method would work better that you would recommend for properties through Morris Invest? Thank you for all your videos. I'm literally addicted. Moving to North Carolina in a few months and I know there are some good areas there that can still be tapped into. What do you think of Fayetteville?

  5. Thanks you guys always good information for financial freedom . We love u guys too !

  6. TQ for sharing your experiences. Fantastic knowledge.

  7. A friend wants to know what you would suggest he do if his mortgage company will not allow him to take ownership of the property under an LLC., or under any other corporate name, but will only consider his legal name on the property. What can he do in a situation such as that.

  8. I've learned sooo much. Wish knew this when I was 20. I'm getting ready to buy my first house!

  9. What a great, webinar once again Morris, your creating such great value, appreciate you Bother. Looking forward to our phone call soon I hope. 🙂

  10. Ur amazing keep it up 😉

  11. Do you guys invest in multi-family homes??

  12. nice place to recomendable to invesment 200k on PA or Ny?

  13. Hi Morris, another great video! Thank you! I understand about financing a property in the LLC name however the interest rate for financing in the LLC is at least 2.5%. More than it would be if I finance under my personal name. How do I finance under LLC and get a good interest rate as I would under personal name.
    Thanks in advance.

  14. thank you so much morris for the #value brother. Please understand i started real estate because of you. not because of BP. my brother and i started in c class neighborhoods all cuz of you and we highly appreciate all you do.

  15. This is the best most heartfelt video I’ve seen on this channel. I’m on my way 3 properties and counting!!

  16. hey morris why dont people quit their job? FEAR?

  17. 14:00 REAL talk. morris is a mans man. morris my boss keep talkin crap about me but i dont have the cojones to quit. what would u do

  18. Thank you so much Clayton for everything you do and all what you teach. You inspired me to take a bold step and acquire my first rental property. I couldn't do it with your team because I didn't have all the cash but you taught me to be creative and action oriented. I've had the property for a lil over 6 months now. I have learned a lot already from this one. I am getting my dough straight this year and next year, I will get more aggressive about growing my portfolio. Thank you so much!!!

  19. Hey morris u probably heard everything.. i hav 3 free and clear omw to cash out refi. Id like to get 31 houses..meaning collect rent everyday 31 days in a month lol. im weird i know but id like to attain that goal for now.

  20. @morrisinvest 5:35 you mentioned that you had a bad experience with contractors in Indy coincidentally I did find a negative review from on google where is shows a poorly rehabbed property. It definitely put back some fear after I have mustard the courage to call your team. Can you shed some light on this because I am really looking into getting in the rental property biz.

  21. Thanks for your videos Morris. I'm in Florida and have a rental but on the fence about selling to get working capital for reinvestment for buy and hold for passive income. How do I become part of your network? Buy or Sell…Thanks.

  22. Clayton n Natali you are both a great team and love all that you share in terms of Knowledge to help the common folks❤️All the blessings to both of u and kids and for much success, keep feeding us the knowledge God bless Thank You.

  23. Sorry a little delayed lol I'm from Redondo too

  24. Glad to be here, Clayton. Thank you for your guidance and your rich knowledge. Grateful for the help!

  25. Thank you, Clayton. I enjoy your channel. You are very inspiring.

  26. Thanks for sharing Clayton!
    To summarize:

    1) Raise the rent:

    2) Get section 8 certify

    3) Add value to your property

    4) Accelerated appreciation – cost segregation

    5) Infinite return – cash out refi –

  27. Hello Morris, i've watched ALOT of your videos, they are very helpful and inspiring. I havs a question, are there any cities in Florida that you would recommend investing on that falls under the same category of houses you like to invest on. I have looking at Jacksonville and Gainsville Fl, what are your thoughts?

    By the way, i already booked my consultation call and im really looking forward it.

  28. Thank you so much. Great show I learn so much each time you teach.

  29. Clayton & Natalli, this is the most helpful, honest, clear & informative channel on this subject. Thanks for the wonderful advice.

  30. Sometimes it seems that Natali is rather mean to you.

  31. I have a home that I need to turn into a rental property but need to know how

  32. Hi Clayton, you answered everyone's question but mine, was my question confusing? I only wanted to know how I can get or where I can refinance rental property under the LLC and still get a good interest rate. Thanks and look forward to your response.

  33. Did I miss it? Hoping to sign up end of year …..

  34. You look like the guy from Creep and I love it

  35. hey morris im in NJ any banks u kmow will work with me on 65k and under houses? im trying to push like u say but keep getting rejected. Houses i own are all paid for. thx

  36. But if you pull money out aren’t you adding a mortgage?

  37. Will I have a hard time purchasing more property with financing if I still have mortgages on other rental property.

  38. Enjoy your episodes. Still on the fence. I believe in the system but it never seems to the right time. I know the answer I just need dive into it. Thanks for all you do.

  39. Hey bro, been meaning to get back on your videos (always in the back of my mind). Been moving, doing group work, got a new job, and closing on my first rental (house hack). Will get back at it and continue to learn more! Thanks again as always Clayton!!!

  40. How hard is it to get a HELOC on an investment property from your experiences?

Leave a Reply

Your email address will not be published. Required fields are marked *