How do you make Millions from Real Estate? - (W7:D4) Debt Free Millionaire Podcast

Simplified Explanation: Real Estate is the buying and selling of real property, or buildings and land that have a monetary value to another party. If you can find deals and buy a piece of property, like a house, and you can fix it up or hold on to it long enough, the value almost always increases.

Real Life: Real Estate is a very large subject. So large that we have multiple books being written on the subject: Debt Free Flipper and more. Any of these will give you the experience of one of these avenues of real estate. For this game and book, we are focusing on residential because that is the most used form of real estate investing you will find by the average consumer. Be aware that there are many more avenues you may go.

To start off, allow me to introduce a little of each of these avenues, from least expensive to the very expensive real estate ventures you can go into, then teach you how they works.

Wholesale – This is to acquire land, by contract, from one party and sell it to another party, where you never need to pay your own money, so you don’t need any money in order to begin selling real estate. The process is simple, you find a buyer and what they are looking for, potentially you should be looking for a dozen or more buyers, you then find a property they listed as something they would buy and contract with the owner to sell their property to an agreed upon amount. Then, contact your buyer and, after increasing the price by $5,000 - $10,000, you secure the buyer. You then write a contract to buy the property from the original owner and you assign it to the buyer that you found. In the end, they bought a deal of a house, while you made $10,000 on the side. Everyone wins. Be careful because these contracts are binding and if your buyer doesn’t buy the house, you ended up buying it from the original owner. Again, the benefit is that you can get into real estate without any money to do so. 

Land – This is the least expensive property you can buy because there are no buildings built on it and so raw land can be used for so many different purposes. The buyer will be expected to develop the land themselves. These deals normally take longer to find a buyer because people are normally not looking to build on a property but instead buy something they can move right into.

Rental Cycling (Renting out other’s homes) – Did you know that you don’t need to own a home or apartment in order to make money. You just need to rent out a property that you can sublease to others. Whether you want to stay there or not, you can sub lease a bedroom from the apartment or house and they will help you pay the rent. This takes a smaller amount of money, but includes first and last month rent, and a security deposit, and you can sometimes make money from those you allow to stay in your home. Now, make sure that it is okay with the landlord, and that it is spelled out in the contract that this is allowed, or you may be evicted for breach of contract, and then have to start over again. 

Flipping Houses – To flip a house is to buy a distressed or non-aesthetic house or building and fix it up to be more valuable after your work is complete. You add value to it by fixing it up and then selling the property for a higher price than you bought it. Be warned that you should know what you are doing fixing the property or ask a professional to help you, especially with water, electrical, or heating and air conditioning.

House Hacking – This is a process where you buy a house as a business and fix it up, much like flipping or renting but instead of owning your own home or living in a rental, you live in the house that you are repairing, saving money on your living expense and working on the property at all hours of the day. Normally, you would fix up the areas you would need the most, such as the bedroom, bathroom and kitchen, and then work on the rest of the house while you enjoy the early benefits of your labor. 

Real Estate Investing (Rentals) - When you buy a house, you can live in it, sell it, or rent it out to someone to use for their purposes. You allow them to use your property for a price, which pays your debt on the building and a little profit to increase savings. This type of real estate is what has made the most millionaires in the United States than any other type of work or investments.

Commercial Real Estate – You can buy a home, or you can buy a larger property that will be used for some type of business. You can use it, sell it, or lease it out to someone else who would pay you to use it for their business purposes. These are the most profitable at times but normally take a lot of work, including trying to find the right people to lease it from you. If you find a very desirable property, you will need less help to manage or market your property. If you are buying it with cash, this is a great option to keep stress low.

Now, if you choose to go into any of these types of real estate sales, you should know there are two ways to sell houses, one way I agree with, and one way that could start you off on a very hard path to live when the market turns. I tell you these things that you may have the wisdom to find the right path for you.

Buying and selling with credit – There are many gurus that will tell you to start up an LLC and buy a house that needs a lot of work, on credit, fix it up, then go back to your bank and refinance it 100% off the new value after being repaired. Take all the equity (money it is worth) out of the house and buy your next house. Fix that house up and 100% refinance that house on it’s new value and buy another house. Then, pay yourself a large amount, living the life of luxury, as the money starts coming in from rent and pay minimums on the house. Over time the houses values will increase, and the houses will be slowly paid off. Sounds great, right? But, what they don’t tell you is what I told you earlier on. Remember that there is a recession every 8-10 years, or a pandemic, and people can’t pay their rent. If someone can’t pay you their rent, then you can’t pay your bills. During the 2020 pandemic, the U.S. Government tried to help people by saying to Landlord, you can’t evict someone during the pandemic, even if they aren’t paying their rent. What does this do to landlords? The landlords couldn’t pay their mortgages and many of them lost their houses. Same thing happens during an economic recession, if people can’t pay, you have to find other tenants or now, the government has realized they have the power to make you rent to people that aren’t paying the bills and will most likely never be able to catch up, so you are left with a house that is 100% mortgaged, with no equity, and then you can lose your house. But again, you went into real estate investing knowing that the mortgage had to be paid, even if you didn’t have the money. 

So, what do you do? You foreclose on that house, and they go after you for the difference of the house and loan they gave you, which means you need to sell the next property to afford the first and that house has no equity, and so on and so forth they all are sold off until you have little to no houses left and your company has to go bankrupt. Now, because you created an LLC, your personal finances may be safe, right? Well, there are ways of going after your personal money, but more than that, you just promised all these businesses (banks and other lenders) that you would pay them all back, and yet you just sold all your houses and lost off your business savings and you can’t pay them all back. Thinking you personally didn’t lose anything; you actually lost your name. I am not talking about your credit score, that is the least of what is important. You promised you would pay back your debts and you went back on your word because your business couldn’t sell the houses. Your word is now worth nothing. You basically gave up your honor for a sack of cash that you took in your personal life and didn’t pay back your debts. Now there is an alternative where you never have to worry about losing your money or houses and I’ll teach that next.

Debt Free Real Estate - Anyone can get into investing in real estate, and it takes no money to begin. I will teach you a brief overview of how to start your real estate empire with no money at all and walk away with a million dollars of equity, but it will take a good amount of your time and may sending you investing in a way you never would have thought. Start with nothing in your bank account and start at any age. The only limitation is that below 18 years of age you will need help from an adult to co-sign your contracts.