\n<\/p>\n
The best way to build wealth <\/strong>isn\u2019t always the most obvious. More people will take the passive road to wealth building<\/a>, which is usually far slower, and much less efficient than the active path to wealth<\/strong>. The active investor takes time making calculated decisions that would scare almost every average investor. Flipping a house<\/strong>, renovating a rental<\/strong>, or buying a thirteen-unit apartment building<\/strong> may be a little too much for most people, but probably not too much for you.<\/p>\n If you\u2019re looking to fast-track your way to millionaire status<\/strong>, have the passive cash flow to float you in retirement, and live life on your schedule, then real estate investing<\/strong> is probably your chosen asset. The guests of today\u2019s Seeing Greene <\/strong>episode prove this even with their quick questions. In this episode, David will answer questions on which investing strategy is best over the next ten years, whether to invest in stocks vs. real estate<\/strong><\/a>, how to start investing with as little as $5K and up to $100K, and how increasing your leverage can slingshot your net worth.<\/p>\n Want to ask David a question? If so, <\/strong>submit your question here<\/strong><\/a> so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums <\/strong>and ask other investors their take, or follow David on Instagram<\/strong><\/a> to see when he\u2019s going live so you can hop on a live Q&A and get your question answered on the spot!<\/p>\n David: Ben: David: Dave: Tom: David: Wade: David: Christin: David: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets podcast show 657. This is why we rarely see a ton of appreciation in areas like Indiana or Kansas. There is so much land they can build so many houses that supply continues to grow along with demand, that keep prices from going up. It\u2019s when supply is constrained and demand continues to grow that you see a rise in prices. I don\u2019t know where you\u2019re living, but I would definitely look for the best school districts. The areas that the city limits are pretty much all built out, the can\u2019t buy more homes, go find the best neighborhood, go find the ugliest house or the biggest house that you can, and then slowly add value to that property by fixing it up over time. Over a 10 year period, that will be the fastest way to grow appreciation, and it\u2019s super simple.
What\u2019s going on everyone. Welcome to the best dang real estate podcast in the entire world. If you don\u2019t know what BiggerPockets is, you are in for a treat. BiggerPockets is a company where we teach you how to build wealth through real estate. It\u2019s pretty much entirely for free, and it\u2019s some of the most talented people and best information you can possibly get. On today\u2019s episode of our podcast, it is a Seeing Greene edition, meaning you get me David Greene, answering questions specifically from our fan base who are stumped in a position they don\u2019t know how to solve or have come across some really good opportunity, you\u2019re trying to figure out how to make the most of it. I answer all those questions and more on today\u2019s show.
In today\u2019s show we get into several pretty amazing questions. One of them is from someone who feels that they\u2019re pretty good at real estate investing and wants to start coaching. And he asks me what advice I have for starting a coaching business, how he can incorporate this into other businesses, how he could basically change his life through real estate. I give a pretty detailed answer on a path for that person to take. I also get into one of my favorite things to talk about today, which is portfolio architecture. Not sure what portfolio architecture is, well make sure you listen to the show and you will find out about it and hopefully come to love it just as much as me.
And then finally we have several people on today\u2019s show who have done very well based on appreciation they\u2019ve gotten over the last couple years. One of them is a 20 year old, the other person I think is 25. They\u2019ve got over six figures in properties and they\u2019re trying to figure out, should I keep this house or should I sell it and reinvest that money? I give detailed and specific plans of action to both people that should definitely increase both their equity and their cash flow by increasing the efficiency of how hard their money works. And you will learn how to do the same by listening. This is my first quick tip, there\u2019s going to be another one. Today\u2019s quick tip. Think about how hard your money\u2019s working. So many of us are letting our money be lazy. We work really hard, but then we take all the capital that we\u2019ve saved and we don\u2019t hold it to the same standard we hold ourselves to.
Stop doing that. Your money should be working just as hard or harder than you are. And for the second quick tip, we\u2019re about a month away from BPCON. You\u2019re here because you want to learn, right? So why not come to BPCON and learn from 2000 other people that are taking the same journey as you. I\u2019m just saying that you should be there. It\u2019ll be in San Diego in the early fall. Who doesn\u2019t want to go to San Diego? And I will be there. So will a lot of other BiggerPockets personalities, and we\u2019re all there for one reason, to help you on your journey towards financial independence through real estate. If you haven\u2019t already go grab a ticket. All right, let\u2019s bring in our first question.<\/p>\n
Hi David. This is Ben from Denver, Colorado. Thank you so much for taking my question. Love the Seeing Greene episode podcast. Very useful information. So thank you for that. Here\u2019s my question. I own currently four properties, my primary residence, and then I have three rentals. One of my rentals is not performing too well, so I\u2019m going to sell it via a 1031 exchange. My question is, it\u2019s a two part question. First part, do I need to utilize all the proceeds towards one property or can I split the proceeds in 1031 into two single family homes? And the second part of the question is, in the long term, let\u2019s say 10 years from now, which assets will have retained the most value and prone to appreciating, a small multifamily or single family homes? Thank you so much for taking my question. Looking forward to your answer.<\/p>\n
First off, Ben, this is a great question. I just want to commend you for asking a very good question. Also I know our audience is loving how concise and direct your question was. If you\u2019re considering submitting your own video question, go to biggerpockets.com\/david and do exactly what Ben did, because that was perfect. All right, Ben, I like that you\u2019re asking about a 1031. I\u2019m in the middle of one myself right now. And this might come as a surprise to some of you, but this is the first 1031 I\u2019ve ever done in my entire career. Mostly because I rarely ever sell properties. Now I won\u2019t get into the reasons why I had to sell. There were some complicated issues that were going on. It wasn\u2019t anything to do with the portfolio itself. It was more business stuff that I had, but I was sort of forced to sell a lot of properties in Florida and reinvest that capital.
Now the road that I took was I wanted to high appreciating markets, just like what you\u2019re saying, that your goal is. And I took on more debt than what I had before and I went for bigger, nicer stuff. It was really an upgrade all across the board. I did learn several things during a 1031. If anyone here has questions, I would highly encourage you to submit them at biggerpockets.com\/david, especially if they\u2019re about at 1031, I\u2019d like to talk about this more. A few things that I need to say. First off, I\u2019m not a legal expert. I am happy to connect you with the 1031 company that I use. Not a problem at all. Just send me an email or a message about that. But I am not a lawyer, so I could be giving advice based on my understanding that isn\u2019t exactly accurate.
And especially with these situations there\u2019s often nuance that goes into them where you want a qualified intermediary giving this advice. However, I feel comfortable answering this at a general level. My understanding is, yes, you can change one house for several properties. It does not have to be one for one. That\u2019s not one of the rules. If you sell a property for a million dollars and you owed $500,000 on that house, you can go buy two new houses and put $250,000 down on each one. In my case I think I\u2019m actually buying less properties than the amount of them that I sold. It usually would go the opposite. I just had quite a bit of equity and I\u2019m buying more expensive properties than the ones that I sold. That\u2019s why it worked out that way.
Something you do need to be aware of though, Ben, you have to have at least as much or more debt on the new properties than the ones you sold. When that hypothetical example, if you had $5,000 of debt on the properties you sold, when you buy the new property or properties, you have to have $500,000 or more of debts. You can\u2019t actually access your equity through the 1031. There\u2019s several other rules that I don\u2019t want to take up the entire show talking about, but this is some really cool stuff. If you guys would like to know more about 1031s, please let me know. The second half of your question. What do I do with the money? How do I invest it? Is it going to work out better in a small multifamily or is it going to work out better in a single family residential home? Love this question.
First off, we have to make this apples to apples, because a small multifamily in Malibu, California is going to appreciate a lot more than a single family home in Tupelo, Mississippi, right? So just consider this as we\u2019re getting into it. But let\u2019s say you\u2019re investing in the same market, in general single family homes will appreciate faster than multifamily homes, but in general multifamily homes will cash flow more than single family homes. This is not an across the board rule. So please don\u2019t go comment on YouTube and give me the exception that you know about to this rule. It\u2019s a general understanding. My advice if you\u2019re looking for the most appreciation, the most money you can make over 10 years, is buy in a terrific neighborhood, buy the ugliest or biggest or both house in that neighborhood at the best price that you can get it at, and then fix it up over time.
If you\u2019re choosing an area because you\u2019re looking for appreciation, you want to see a place where demand is going to grow while supply will not keep up. This is why we rarely see a ton of appreciation in areas like Indiana or Kansas. There is so much land that can build so many houses that supply continues to grow along with demand, that keeps prices from going up. It\u2019s when supply is constrained and demand continues to grow that you see a rise in prices. Look for areas that are either built out or have a political environment that limits how many permits are given or the home prices themselves stop home builders from moving in there to build. Sometimes if the prices are really high, it\u2019s hard for builders to build a ton of homes and they tend to just be spec houses that are built in those areas.
I don\u2019t know where you\u2019re living, but I would definitely look for the best school districts. The areas that the city limits are pretty much all built out, they can\u2019t buy more homes, go find the best neighborhood, go find the ugliest house or the biggest house that you can in that neighborhood, particularly if it\u2019s both, and then slowly add value to that property by fixing it up over time. Over a 10 year period that will be the fastest way to grow appreciation, and it\u2019s super simple. All right, our next question comes from Travis in Newberry, South Carolina. Travis has seven long term rentals within one hour driving. I absolutely love real estate investing and managing properties. He has a W2 job, but he dreams about the day of leaving that to do real estate full time.
He\u2019s considering becoming an investing coach. The goal isn\u2019t just to make money, but basically to do what you guys do every day, help others get started in real estate, but do it at a local level. The question is, what\u2019s the best way to go about this? I\u2019m thinking of charging a flat fee of $1,000 to get people into their first investment property and basically walk with them step by step the entire way. Maybe a percentage of monthly rent to manage their property on top of that. I know technically I\u2019m not allowed to manage the property for them without a property manager license, but I still could do this under the title of lease up specialist. I\u2019m in the process of getting seven LLCs for each property and a holding company for the whole lot. Should I operate this coaching under the holding company?
I imagine that becoming a real estate agent who helps them find suitable investment properties would be a natural next step. I\u2019m considering this as well. What recommendations would you have for me? Okay. Thank you very much for this Travis. First thing I can\u2019t give you legal advice on if you should do the coaching company underneath the entity that the homes are. I don\u2019t see off the top of my head why that would benefit you. If one of your clients sues you and you\u2019re having that business run out of the same LLC as the properties, I\u2019m not a lawyer, so I might not be getting this perfectly right, but it seems like they\u2019d have access to equity in your houses and that doesn\u2019t benefit you. If you\u2019re going to start a coaching business, I would start a separate legal entity that\u2019s not connected to the homes.
Another thing to consider is that if you\u2019re charging someone a thousand bucks to get them into their first house and you\u2019re working with people that don\u2019t take action, you\u2019re never going to get paid, because they\u2019re not going to actually get into the property. Another thing to consider is that this is a very difficult business to get into. You end up feeling pressured to make claims that you can\u2019t really support, or you have people that are taking up all your time and blaming you for why it doesn\u2019t go. I don\u2019t know anyone who\u2019s running coaching businesses the way that you\u2019re describing. And because we here at BiggerPockets we give away information for free, you\u2019re going to be competing with people like me that are giving out the information.
I definitely like the idea of you getting your real estate license instead. Let me tell you why. If you get your real estate license and you help get people into their first property or their second property or their third property, you\u2019re going to be getting a lot more in commission than $1,000. You\u2019re not getting into this guru territory where you\u2019re now trying to charge people for something that they could get for free somewhere else. And this is part of the job of a real estate agent, at least a good one, and we could use more good agents in our field. I think that rather than people being coaches that teach people how to invest in real estate, it would be better if they became real estate agents that help their clients invest in real estate. This is what real estate agents are supposed to be, and they\u2019re not very good.
So rather than having agents and coaches, I wish coaches and agents were the same thing. I would love you to consider tweaking your business model to go that direction. And then if somebody wants your advice but they don\u2019t want to use you as an agent, just say, hey, I\u2019d love to help you, unfortunately I can only help my own client. You\u2019re going to have to ditch the realtor that isn\u2019t doing their job, which is why you\u2019re talking to me and use me. As far as collecting a percentage of monthly rent to manage a property, not every state has that rule that you have to be a licensed agent or have a specific property manager license. In California you don\u2019t have to be a real estate agent to manage property.
So verify the rules in the state that you live in to make sure that you do have to have a property manager license, but if you\u2019re going to be getting a real estate license, you might as well get a property manager license. It\u2019s probably going to be a very similar testing process. And then you can legally be compensated for both, and you don\u2019t have to worry about coaching. Okay? Even if somehow you do take the coaching road, you\u2019d be better off to have coaching, which is the front of a funnel, and then you could take your clients and you could serve them as a property manager or a real estate agent, which is another way to create revenue, but it\u2019s still bringing value. And then your clients that are the best at this are going to buy more properties. You\u2019re going to have more properties to manage.
You could literally build a real estate agent business and a property management business off of the work you did. So giving coaching, and you might not even have to charge for that coaching. It could be something that you do for free and you still get compensated by helping represent clients. I think we need more people in the real estate agent space and the loan officer space and the construction business and the property management side and the CPA side and the bookkeeping side, all of it that are actually real estate investors themselves. I hope that I see you in my world doing just that.<\/p>\n
Hey everyone, this is Dave Meyer, host of the, On The Market podcast. Tom, I have a question for you from Matt Wilson. Matt wrote us and wrote, I just got under contract on a flip I completed in Wilmington, North Carolina. The house has an inground pool, so the liability of that combined with the very hot market swayed me to sell instead of hold on as a BRRRR. I funded the purchase and rehab with a line of credit on my stock portfolio, which is great funding option because of the super low rate, low fees, and even the option to make no payments until you pay it off. I have a few long term rentals in town already and my goal is to continue buying short single family homes and small multis and eventually 1031 into something big and completely passive like an Amazon warehouse.
My question is, how best to use the profits from the flip to buy more real estate? After fees and taxes I should keep about 150,000. The type of rental homes I like to buy are about 300K. So the 150 profit could cover 20% down in the closing costs on two more homes. Should I go this route or would it make more sense to put the profit in the stock portfolio to increase my credit line, so I can go after more and bigger BRRRR projects?<\/p>\n
Well, Dave, let me address the tax side of that, because that\u2019s my expertise as a tax professional. From a tax standpoint, clearly better, you don\u2019t get tax benefits putting money into the stock market, period. Except for 401(k), IRA, you don\u2019t get tax benefits. The big tax benefits are going to be bonus depreciation from a cost segregation. You might be able to get 25 to 30% of the purchase price of that new project. The reality is, is that your flip is going to cause you to have ordinary income that\u2019s tax at the highest rates. There are some things you want to do to reduce that tax liability, and one of the big things is to reinvest the money into long term real estate, as opposed to just building flips, because you\u2019re just going to pay a lot of tax when you\u2019re doing flips.<\/p>\n
Man, Matt, I love these kind of questions. When you\u2019re starting off investing in real estate it\u2019s all about the individual house. I remember those days where you would just analyze every single angle of this entire house. You knew every floorboard in it. And then once you\u2019ve invested in real estate for long enough, you start to recognize patterns in investing and you start to see that the details don\u2019t ever actually make you money. It\u2019s much more of the big picture stuff. And then your priorities start to switch. And instead of analyzing a specific deal to death, you start just understanding the parts of the deal that are going to make you money and trying to capitalize on as many of those. So for instance, when I\u2019m looking at real estate now, I\u2019m looking much more at how can I add value to it? How is it going to cost?
Where am I going to find the contractor to do that? If it\u2019s a short term rental, what can I do to increase revenue? And then what can I do to decrease the amount of time I\u2019m working on this house? Which areas are likely to grow the most? What kind of backup options do I have? I\u2019m typically looking at angles like that rather than just analyzing 100 deals a day. So questions like this that involve several different asset classes, I\u2019ve got stocks, I\u2019ve got homes, I\u2019ve got options. I love it. Please send me as many of these questions as you guys can. I love talking about what I call portfolio architecture. How do I structure a portfolio for maximum efficiencies? We\u2019re kind of getting into that with your question here.
First off, I like the way you\u2019re thinking. You\u2019ve got 150,000, is it better to buy one property or a down payment on two properties or put the money into stocks? I think Tom did a great job of explaining the tax benefits of investing in real estate. I\u2019m going to take the next step and say that you\u2019re also getting leverage. If you put the money in stocks, you\u2019re not going to be borrowing more money to buy more stocks. You\u2019re just going to be dumping 150 grand into those stocks. I\u2019m also going to add that that\u2019s going to be a little bit riskier. Now you did make a great point that putting the money into your stocks will increase your line of credit. I wouldn\u2019t mind if you wouldn\u2019t submit another video and just tell us how that works. I think our listeners would get a kick out of hearing how they can take a line against their stock, especially if it\u2019s a low rate.
I personally haven\u2019t ever done that myself, so I wouldn\u2019t mind hearing more about it as well. However, here\u2019s what I\u2019d like to see. Let\u2019s stretch that 150,000 into even more than two new properties. What if you put a very low down payment, say 5% on a house hack that could become a rental property when you move into it and it\u2019s not going to take very much. If you can get a $300,000 house hack and you put down 5%, that\u2019s 15 grand, you get your closing cost paid by the seller. You\u2019re keeping almost all of that 150,000. So now you\u2019ve got a house right off the bat that will become a rental property when you move out. Then you take your remaining 135,000, you have down payments for two new properties at 300,000. That\u2019s 120. You\u2019ve got $15,000 left over and you don\u2019t even need that for closing costs because in today\u2019s market you can make the seller pay for those closing costs.
You take that 15,000, you either put it in reserves or maybe put that into your stocks. Then take the cash flow that you\u2019re making from these three houses that you bought, not two, you\u2019ve increased your portfolio size by 33%, and you\u2019ve increased how much money that you\u2019ve borrowed and how much leverage you\u2019ve taken as well, which your tenants are going to be paying off for you, which goes right to your net worth over time. Take the cash flow and put that into the stocks. Okay? You\u2019re not going to put this really big, huge lump sum in there like you\u2019re talking about where it\u2019s stocks or real estate, you\u2019re going to get both. You\u2019re going to get real estate. Plus three of them, not two. You\u2019re going to take that profit. You\u2019re going to put that into stocks and you\u2019re going to let it grow that way.
I like the idea of increasing your stock holdings, especially if you\u2019re good at doing that. And if you can take a line of credit. I don\u2019t like the idea of putting all your eggs in that basket, especially because like Tom said, you\u2019re not going to get as many tax advantages from it. And this is why I love talking about portfolio architecture. I don\u2019t know if I coined that phrase. Maybe I did. If anyone else has heard somebody else saying it, let me know. Otherwise I\u2019m probably going to start taking credit for it. But it\u2019s fun. I like getting into this kind of stuff. I hope that advice helped. I love to see you exponentially grow your wealth in many ways. Thank you for your question. And please let us know more about this line of credit you\u2019ve got on your stock holding.
All right. Thank you, Tom, for joining me and giving some backup on this, Seeing Greene edition. Thank you everyone else for submitting questions. At this step in the show, I like to read comments that we have on YouTube from previous episodes. And at this point I want to encourage you, if you\u2019re listening to this on YouTube, on your phone, on your computer, as long as you\u2019re not driving, go and write a comment. Tell me what you think about my question. What questions that you may have, what you liked about the show. Do you like Seeing Greene? Do you like different stuff? Do you want to see more coaching calls? Tell me what you want and we will make content the way that you like it.
All right. Our first comment comes from DJ Parton. Here\u2019s a show format idea. An episode entirely consisting of deal, deep dives. It could include deal deep dives into all kinds of deals from wholesaling to single family rentals to commercial. It could also include deals that went well and deals that bombed. It is a hard market to get started in right now, so hearing the specifics of deals real people are doing on a daily basis in this market could be very helpful to folks like me. Thanks for all the content y\u2019all put out. DJ, fantastic idea. I love that. And Seeing Greene is a perfect place to do this. How about this? If any of you like this, go to the YouTube comments and say, yes, I\u2019d like to see a deal deep dive episode.
We will either find a guest to bring in or several guests to do that. Or I could do my own deals that I\u2019m buying and I could do deep dives on some that went well, some that did not go well, and I could break down for you all of that. Maybe I do three, four, five of my own deal, deep dives right here on a Seeing Greene episode. And you guys can see what I did. I could even bring in a partner. My lending partner, Christian is intimately familiar with all my deals because he\u2019s financing them. And he also helps sort of, we tag team this when I want him to go smooth something out with someone that maybe my realtor ruffled feathers, I use Christian like a ninja often.
We could maybe bring him in and we could tag team these together. Let us know if that\u2019s something that you\u2019d like and I will have our awesome producer, Eric, put that together. Next comment comes from Cynthia Ibarra. Hi David. I loved your show. Loved, you don\u2019t love it anymore? Just kidding. You guys are the best. I would like to see more about second home mortgages. Thank you. All right, Cynthia, I will keep that in mind. We will keep an eye out for questions. If you\u2019ve got a question about a second home mortgage, please go to biggerpockets.com\/david and submit it there. And our last comment comes from King Elaine C1. Recently found this channel and it is growing on me. I\u2019ve only been investing for seven years and I learn something new with each episode.
Well, that\u2019s pretty cool. Glad to hear that we have you in our world now and I hope you stay here. All right. We love it and I appreciate the engagement. Please continue to submit your questions or your comments on YouTube as well as video submissions or you could even submit a question written out at biggerpockets.com\/david. Also don\u2019t forget to like, comment and subscribe on our YouTube channel and share this with anyone else you know who\u2019s interested in real estate. Oftentimes you can create friends for yourself by sharing content like this, that they end up liking to. All right, question number four comes from Wade Kelessa.<\/p>\n
Hey David, Wade Kelessa here, coming at you from Sioux falls, South Dakota, currently sitting in our second duplex that my wife and I own, doing a full rehab on this one, which is exciting. But my question is actually in regards to my parents who are both nearing retirement age, neither have a lot saved for retirement and do not have a lot of disposable income, but she reached out to me and was curious what she could do with a small amount of money, maybe around $5,000. If there was a way that they could jump in and get their feet wet in the real estate game. Any thoughts you have would be appreciative and I appreciate all you do. Thanks.<\/p>\n
Thank you for this, Wade. All right. How do you get started in real estate with $5,000? Well, there\u2019s a couple options that they have that don\u2019t involve actually buying property. I can\u2019t think of any situations where $5,000 would be enough to get you started in real estate. One would be, they could give it to you. You could combine it with some of the money you have and they could invest in a property as a partial owner. Let\u2019s say you find something that you can get into for $25,000 down. If you borrow $5,000 from them, you could give them 20% of the equity. I believe that that\u2019s around, my math might be wrong, but you could give them a portion of what that would be, and they could get paid that way, especially if the property grows in equity. And that would make sense if you could use some extra cash for the next deal you\u2019re in.
Another one, check out our episode with Matt from the Motley Fool, episode 639. Matt gives some ways that people can invest in real estate passively without having to qualify for a mortgage. In that episode, we talk a lot about real estate investment trust. Also known as REITs. REITs are very similar to investing in stock that\u2019s based in real estate. You\u2019re basically buying a portion of a portfolio that professional real estate investors and managers have handpicked and are managing. And as that portfolio grows in value, so does your investment. Matt talked about a couple REITs that he\u2019s into as well as how to research REITs. I would definitely steer them towards that.
If they\u2019re looking to buy specific property, they\u2019re going to have to partner with someone else or they\u2019re going to need some more money. Can they pull some money out of their 401(k) and use that to invest into real estate? That could work. However, they\u2019re probably not going to be good at it. If they only have $5,000. I don\u2019t know that investing in real estate is the best move for them right now. I would definitely turn them onto the podcast. If you guys are listening to this episode, hi, welcome. That\u2019s officially from BiggerPockets. We\u2019re really glad to have you here. And start focusing on education, right? Get exposed to this. The last piece of advice that I\u2019ll give you is house hacking. If they can buy a new primary residence and get a little bit more than the 5,000, they can start to live in a property and rent out part of it. And then after a year they could always move back into the house that they had before.
Maybe the house they\u2019re in could become a rental property if they live somewhere else. Overall I would need to know what their goals are. If they\u2019re just looking to make a little bit of extra cash investing it in a REIT could be a good idea. If they\u2019re actually trying to become a full-fledged real estate investor, they\u2019d be better off to put their time into learning about real estate than trying to get in with $5,000. All right. Question number five comes from Paul Williams in Florida. Hey there, David, I have a two, two unit that I house sack in downtown Sarasota. It has two separate entrances. I live in the front and I Airbnb the back. In this hot market of Florida that we\u2019re about a mile from the beach. I have a super good location. I have never had any issues renting this out as a short term rental.
I recently started travel nursing and raised quite a bit of capital to do something with. Travel nurses get paid really well. I just found this out not too long ago, like 15, 20, $25,000 a month, depending on where they\u2019re going and to work into certain locations. If you\u2019re a nurse maybe consider travel nursing, and if you\u2019re trying to figure out what job you might want, I don\u2019t know what the demand is right now, but travel nursing does seem pretty lucrative. Okay. Back to our regularly scheduled verbal question. I also saw that a similar house up the street for me sold for 500,000. My original plan was to drop 30K to fix the house up and make it a premium vacation rental. But my question is, what\u2019s the better play?
If my goal is to buy my second investment property at the end of the year, should I put the 30K in and get it to a premium level rental that basically runs itself? It looks like after all said and done, I\u2019d make between 10 to 12K a year after expenses renting it as a vacation rental. Or should I put a bit less in and list it and if I get an offer for four 50 K or more, take that and use it to buy other rental properties? My thinking is that would give me about 225K in cash in the bank, as I owe about 190K on it. I\u2019m wondering is the passive income over a long term is better or since I\u2019m new and trying to expand my portfolio as a chunk of cash as a potential jumpstart, a better play. Thanks. And I love listening to y\u2019all.
Well, this is a great question and I get to talk a little bit about portfolio architecture again. I am a happy camper. The question isn\u2019t should I keep cash flow or should I get a chunk of money? It just starts there. The question is, should I keep this property to cash flow or can I get more cash flow somewhere else? That\u2019s what we\u2019re really getting down to, because that chunk of money is going to be converted into that cash flow anyways. Right? The question is, is the property that I\u2019m in the most efficient way to use my equity? This comes down to the return on investment versus return on equity, calculus that I\u2019ve used before, where we look at how much equity are you making on your property. In fact, we might be able to do that because you gave me quite a bit of detail in your question. Let\u2019s dive into that.
You said that you\u2019re going to make 10 to $12,000 a year. Let\u2019s assume that you are on the higher end and you\u2019re doing 12,000 a year. That\u2019s nice because that\u2019s a thousand bucks a month. And you think that if you sold it after all your expenses, you would walk away with $225,000 plus. Let\u2019s say that you\u2019ve got 12,000 a year coming in and you divide that by 225,000 in equity. That is a 5.3% return on your equity. Not super amazing, especially for a short term rental. I think you can do better. I don\u2019t think it\u2019s uncommon for you to find a 15% return on your money, especially the area I\u2019m familiar with in South Florida, where you are owning Sarasota. You could take that 225,000 and you could get a 15% return on it, which would triple the money you\u2019re making from 12,000 a year into 36,000 a year or $1,000 a month into $3,000 a month.
You could also add to the amount of money that you\u2019re borrowing. You sound like a younger fellow. I\u2019m going to assume that you\u2019re in a financially strong position because you said you\u2019re a traveling nurse, which means that you are prioritizing building your wealth and making money, you\u2019re not someone on a fixed income who I would give different advice to. Which means if you sell this place, not only can you increase the amount of money you owe from 190,000 into more, but what that turns into is buying additional properties. You could probably sell this house and buy a legit three more. And if you look to house hack another one, you might even get four more houses. That\u2019s quite a bit of capital.
My advice would be this, sell this place, buy a new one that you can house hack, just like this, because you\u2019re going to need a house to stay in, but try to find one that has three units, instead of two, you can get more cashflow that way. Take the rest of the money and buy more short-term rentals. Now we\u2019re also assuming that you believe the fundamentals are strong, in Florida they are very strong, so I don\u2019t have any qualms giving you that advice right now. Increase the amount of money that you\u2019re making on the equity that you have and you could find that this could almost replace your full-time job with as much money as you make if you do another round of this three, four, five years later. You\u2019re in a fantastic position, Paul, you are doing everything right. Keep your nose to the grindstone, stay focused, keep on your hustle.
Look to maximize that equity as much as you can. Buy in the best areas, manage your properties very, very solidly and continue to save money just in case something happens, and you\u2019ll do great. Question number six, from Colby Fasilla in Des Moines, Iowa. Hi David. My name is Colby. I\u2019m 20 years old and I\u2019ve house hacked my first investment, a duplex at 19. Since then I\u2019ve also flipped a single family home. I purchased a duplex for 170,000 last year. And today I\u2019ve subdivided the duplex into buy attached units and both units are under contract for a total of 330, with a profit of around 150, along with the profit for my last flip, I have about 200 grand in cash. That is a good number for me to know. Thank you.
I\u2019m planning a building in a high appreciation neighborhood with the builder I currently work for, but I\u2019m wondering what I should do with the rest of the money, which is about a hundred grand. I\u2019m currently renting with my wife until that build is finished, and then I will be there for two years. My goal is to be a millionaire by 25. Love your opinions and advice on BiggerPockets. Your show introduced me to house hacking in real estate and now I\u2019m never looking back. Well, first off, I\u2019m really glad to hear that our show helped to make you $200,000 of tax free money. That\u2019s more like $280,000 of money if it\u2019s being taxed. That\u2019s probably more than most people would make in years of their life, and definitely more than most people would save. And you did it while still working a job. So you are off to a great start.
Let\u2019s talk about what to do with that $100,000. Well, if you\u2019re building a home, you\u2019re probably going to be somewhat busy managing that. So there is the option where you could let somebody else borrow that money and pay you interest for a year or two or three while you\u2019re working out some of the other stuff you have going on. Let\u2019s say that you\u2019re not too busy, well, you\u2019re doing this build because I\u2019m assuming that you want to live there. You didn\u2019t mention if you\u2019re going to be doing a build because you want to rent it out. So this $100,000 could be used for something else. I\u2019m not sure why you\u2019re putting a hundred grand into the new build if it\u2019s a primary residence, you could probably put less than that unless you\u2019re buying like a million dollar property. And doesn\u2019t really sound like that\u2019s something that you\u2019d be doing.
So how can you invest this $100,000? Is there short term rentals around there that you can get into? Can you get into a two, three or four unit small multifamily property and put your money there? You work with a builder, which means you probably have access to people that do construction and you have a competitive advantage. Can you find yourself a fixer upper or an ugly home and do a side, maybe not a live in flip because it sounds like you\u2019re going to be living in new construction, but can you work on a side project? You buy a house, you rent it out, maybe you leave one of the units vacant and you fix that one up with some of the connections you have in the construction business. Then rent that one out for more rent and fix up the next one when there\u2019s a vacancy.
I would definitely look for a value add with a construction component with that $100,000. Once the house is fixed up, you either keep it and refinance it or you sell it. You turn that a hundred into another a hundred or maybe another 200 more. Now you\u2019ve got 200 to 300 that you can snowball into the next deal. Continue to make base hits. Continue to find properties that you can add value to. Continue to buy in areas where there is growing demand, like where you are right now and continue to buy the worst property in the best neighborhood. You do this over the next five, 10 years, you will become a millionaire. All right, we have time for one more question. This one comes from Christin McKinney.<\/p>\n
I\u2019m 42 and my husband is quite a bit older than me, 59. We own three small single family homes, a commercial building where he currently runs his business out of. Our primary home which is a pretty modest home, a duplex, which I tried to do a BRRRR on, but it didn\u2019t appraise for what I thought unfortunately, and a house\/cottage in Florida that we rent out as two short term rentals. Now to buy the last two properties, I now owe over $88,000 on the HELOC and $30,000 on the 401(k) loan. But we have another exciting potential opportunity as well from a guy that we know that wants to sell his 13 unit apartment building, but he is a little bit back and forth, wants to wait a couple years. He is in his 70s, it\u2019s paid off, the rents are low, so it seems like it could be a really good opportunity for us.
Our goal would be to sell two of our single family homes to put down on the apartment building and then use the HELOC once I pay that off, as a backup for repairs. Now I also feel more pressure since my husband\u2019s quite a bit older than me and I want to be able to retire at the same time as him basically retiring from my W2 job early. We don\u2019t have any kids, so we do have a lot of flexibility there. I\u2019m just wondering a couple things. I have a really good job, should I continue paying the HELOC and the 401(k) off and save up like I\u2019ve been doing for the past few months, even though I feel like I\u2019m really missing out on an opportunity for cash flow in the meantime?
I\u2019m just not really sure if the smart thing is to pay off debt or to try to invest more with the risk of over leveraging ourselves. I\u2019m also not sure if I should put all my eggs in one basket in regards to this apartment. I appreciate you listening to my story and providing any advice you have on what you would do if you were us. Thanks.<\/p>\n
All right, Christin, thank you for that. You did give me some pretty good context about what your goals are and that helps me to give you the best advice I can. The question of, should we continue paying off our debt or should we go invest in real estate? Now, if you had said I have 25 years before I retire, I would\u2019ve said, well, then continue paying off your debt. But because you\u2019re in somewhat of a rush and you\u2019re trying to catch up with your husband so you guys can retire at the same time, that does change what you have to do. You\u2019re not going to get where you want to get at the current trajectory that you\u2019re on, which means that there is going to be some increased risk if you\u2019re trying to shorten the timeline of when you can retire.
This 13 unit department complex, I don\u2019t know the details. I don\u2019t know the area. I don\u2019t know the condition, so keep that in mind. But just assuming everything is good, this looks like a really good opportunity. I\u2019m also assuming that the two properties that you would sell to buy it would be cash flowing a lot less than this 13 needed apartment complex. I don\u2019t really see a reason why you would not do that. If you could sell those two properties and buy his apartment complex, that would increase your cash flow, would put you much closer to being able to retire. But you said he\u2019s 70 years old. He may not need you to actually get a traditional loan and pay him off. You should ask if he\u2019s interested in seller financing. You might be able to buy his apartment complex that\u2019s paid off without selling your properties at all.
You could keep them, you could just take out a note, give him whatever down payment he\u2019s looking for, which could be from the rest of your HELOC line, I just thought about that, and you could get these properties without having to sell the ones you have. If you do have to sell the ones you have to buy his property, it doesn\u2019t mean you lost two properties. It means you traded less cash flow for more cash flow, less equity for more equity. And that you can take the cash flow from this apartment, start saving that money and then go buy two new duplexes to replace the ones that you had to sell. Okay? This is something I see people get into pretty frequently. They look at it like if I do this, then I don\u2019t get that.
And at the beginning stages, that is true. But if you structure it the right way, there\u2019s almost always a way that you can have this and that. It just means how much time can you take to get there. It sounds like you guys are making a lot of moves the right way. Do you have equity in the commercial building that you own? Could you tap into that through a cash out refinance or a HELOC and use some of that money to buy the apartment complex? There\u2019s probably ways that you could get into it that don\u2019t involve you having to sell two assets that you like. But if you do have to sell the assets that you like, just come up with a plan to save more money to buy two new assets to replace them and decide how close that\u2019s going to get you to the money that you would need to be comfortable retiring.
I am rooting for you. I hope you guys are able to retire at the right time. I think it\u2019s awesome that you\u2019re doing this with your husband. Please tell him that we said hi. And then remember when you retire, you\u2019re probably not going to stop doing real estate. You might actually make more money when you retire from the equity and the cash flow that you build in your portfolio than you are making at your W2 job. I see that all the time. And you guys already have a good enough of a head start that you\u2019re going to be making some serious traction when you do start making moves. So don\u2019t look at retirement like it\u2019s just a scary thing and you\u2019re going to lose money, it may actually make you more money when you get there.
All right, that was our show for today. Thank you very much for joining me. I really appreciate that. I hope that you like these types of episodes, because we put a pretty decent effort into getting them set up for you because we are told you guys really like this. If you do like the Seeing Greene episodes, please let me know that in the comments below. If you\u2019re listening to this on YouTube and if you are listening to this as a podcast on an app, whether that\u2019s the Apple Podcast app, Spotify, Stitcher, or what\u2019s the other one? SoundCloud that people use, leave us a review on there. More people will get to hear about this if you would do so, and we really appreciate it.
If you would like to follow me or learn more about me, my name is David Greene. You could follow me on social media at davidgreene24 or on YouTube at youtube.com\/davidgreene real estate. And BiggerPockets has an entire website for you to explore. It is more than just this podcast and YouTube channel. Please go to biggerpockets.com and check out everything. You can start at biggerpockets.com\/podcast, and you can see a whole suite of podcasts we have. We have a rookie show. We have a money and financial independence show. We have a show geared specifically for women. We have a show geared specifically for people that want to invest in real estate. We have shows that are all about what\u2019s happening on the market right now.
Tons of content for you to peruse through, grow your knowledge and help build your wealth through real estate because we are passionate about helping you do that. Thank you again for being here, we will continue to support you. Please do the same and I will see you in the next video.<\/p>\n