Three Ways to Make Money in Real Estate Investing


There are three main
ways to make money in real estate investing. That’s today’s video. Let’s get to all three of them. Hey, everybody,
I’m Clayton Morris. Welcome in to the Morris
Invest YouTube channel. I’m so glad to have you here. And today’s video, we’re going
to be talking about the three ways that you can make money
in real estate investing. Now this channel is
totally devoted to helping you go out there, take action,
become a real estate investor, make passive income, and
build legacy wealth for you and your family. The whole goal is buy
and hold real estate. We’re buying it and we’re
holding it for life, frankly. That’s what I do. I buy and I hold it,
and I’m going to hand it down to my kids, eventually. That’s how you create true
wealth in this country. Today, I want to talk about
the three different ways that you can make money
in real estate investing. You can blend a few of
them together a little bit. But predominantly, you’re
going to be making money in one of these three categories. So when you’re starting out,
you need to ask yourself the question, what is my goal? And be honest with yourself. Sit down with your spouse
and say to yourself, what is my goal? Do I want to cover all
of my monthly expenses with real estate? Do I want to just
build up equity? Or do I want to
buy a house and I want to flip it later and
make some money that way? Be honest with your goals. I knew going into real estate
investing, my goal was, I looked at my monthly expenses
and it was like, I don’t know, my monthly expenses were like
$10,000 a month or something– my mortgage, my kids,
all of those things– your car payment. And I wanted to make sure that
I had all of that covered. If I could have all of that
covered by rental real estate, then I would have achieved
financial freedom. In fact, I call it
my freedom number. I’ve got a whole cheat sheet
you can download for free. It’s called my freedom
number cheat sheet. Go ahead and download it. It’s free. It’s three pages. And it’ll walk you
through how to do it. So I knew that was my goal. So for me it was
obvious and easy that the one way I wanted
to make money in real estate was cash flow. I wanted cash coming in
every month from my tenants to cover my monthly expenses. So that’s the first way. The first way to make
money in real estate– bing, bing, bing–
number one is cash flow. And once you break that
down and you understand how quickly can I acquire
rental properties that I can get the highest possible ROI– and, again, I’ve got
a whole video series on how to understand ROI. So you can watch
that video later and go through it, as well. So ROI– Return On Investment. How can I get the maximum amount
of cash for the least amount that I’d have to spend to
acquire a rental property? That was the goal. That’s the first
way that you make money in real estate investing. The second way is equity. So a number of years
ago, of course, during before the big
recession, before the big crash, a lot of people were
buying up properties, and they would sit on
them for like two months. And then they would sell
it like a month later, two months later,
and they’d make like $60,000, something
ridiculous in a short amount of time. Mortgages, faulty,
fake mortgages were driving up prices. So you could buy a
house in San Francisco and five weeks later turn around
and sell it and make $200,000. I mean, that’s the kind
of stuff, the Wild West, that was going on. This is the second way to make
money in real estate is equity. Are you going to
buy the property and then either you’re buying
it low enough that you then rehab the property and get
it up to par with the economy and then sell it and make a
profit or buy the property and hold it for a
number of years– make some cash flow
from a renter– and then maybe sell it a
few years later or even leverage that money. It’s a little bit
more complicated. Equity, though,
is the second way you make money in
real estate investing because you have a number of
ways you can slice and dice it. You can pull money
out of that property. So if you buy a
property for $150,000 but it’s worth $200,000, then
you can go to a local bank and they maybe give you a
home equity line of credit on the property or do a cash
out refinance on the property and pull some of
that money back out. So that’s one way. You want to make sure you’re
leveraging that money. Or you’re flipping it, frankly. You’re flipping the property and
you’re making money that way, as well. So you can’t really have both. So that’s the difference. If you’ve got cash
flow and you’re making fantastic,
high ROI cash flow, chances are you’re not
going to have high equity because the more you
pay for the house, then your ROI is going to drop. So if you’re paying maybe
$40,000, $50,000 for a house– $60,000– maybe your ROI is
going to be high, your equity is going
to be OK, not super. But then as you
start to pay more for that house, what happens? The ROI goes down, down, down. Maybe you feel better about
yourself by having more equity, you’re going to be
making less cash flow. So it’s a trade off and you
need to understand that. The third way to make money
in real estate investing is appreciation, which
I don’t care about. It’s almost dead as
an investment vehicle. I like to think of appreciation
as nice icing on the cake. Appreciation as a true
investment vehicle, like the only
reason you’re going to buy a house is because it’s
going to appreciate, is dead. That happened after the
2008, 2009 collapse. Again, you’re not
going to be able to buy a house for $100,000 and then
three months later sell it for $200,000 because
of the economy, because it’s going to
appreciate in value. Right now we’ve
got appraisers that are all over the map in
their numbers for appraisals. So good luck with that. It’s dead as an
investment vehicle. It is though, however, still a
nice little icing on the cake. So if you buy a property, say,
for $50,000 and you rehab it and do some nice work to it
and then a few years later you get it appraised,
maybe it’s worth $75,000 maybe it goes up to
$80,000, somewhere in there. Great. That’s nice. Make sure you
leverage it, though. Who cares if it goes up or down? Now go to the bank or somewhere
else, a private lender, and get that money
pulled out of it. If you’re just doing it just
to see your numbers go up, who cares? Again, cash flow is
king in my world. But, again, those
are the three ways to make money in real estate
investing– cash flow, equity, and appreciation. I’d love to hear your thoughts. What strategy do
you like to use? And we didn’t get into
taxes here because that’s all part of this game. Taxes, ROI, that’s all part
of this game– depreciation– other ways to make
money real estate, but you still have to follow one
of those three main categories in order to do it. In the comment thread below
head down there, please, and leave me your thoughts about
this video and any questions you have. I would love to help
answer them for you. We have other great playlists
here on the channel. All about getting ready and
started in turnkey real estate investing, maybe DIY, want to
do it yourself, all of that is here on the channel. So please subscribe. Hit that big subscribe button. We publish videos
multiple times a week. And we’ll see you back here
in the next video everyone. Go out there. Take action and become
a real estate investor. We’ll see ya.

12 thoughts on “Three Ways to Make Money in Real Estate Investing

  • I have a question should I use rental property as an type of heloc or should I creat an llc and move the property in to the llc then using llc as type of business loan

  • All my friends thought I was foolish in our early 20's. They would brag about how they would make like 10 thousand on a flip in like 3 months. They wondered why the hell would I rent out a house because my profit was only like 300 a month. Even I self doubted myself. Fast forward 18 years to the future  and now I own 20 houses, half of which are paid off and I no longer need to work and can literally save 5 thousand a month. They still are working everyday with no choice in the matter. I can take most days off and am focusing on other opportunities. If you have the patience, work ethic and foresight, buy and hold is what will get you wealthy. It's funny looking back on how I would beg banks for loans, now they beg me to borrow with all their crap they send me constantly. I don't need it anymore!

  • What's the difference between paying off the property so you can have the maximum ROI per property and then use that ROl to purchase more properties? Instead of leveraging?

  • How could someone like me with no money learn real estate and make money. How would I get to that point to be able to buy my first house for some cash flow

  • I haven't held a home over 12 yrs yet but from what I understand is that from a tax depreciation perspective it is best to sell or let's say do a 1031 exchange at around that 12 yr mark and start with a freshly acquired home with a new depreciation schedule. Thoughts??

  • One of my customers just flipped a house. Man did he run into shit. It wound up taking a year to sell after he was done with it cause the city wouldn't give a COA. They were making up lies saying he didn't have permits. They even said he didn't get a permit for the new furnace they claimed he put it. He DIDN"T put in a new furnace! He wound up having to sue the city. He recently won his case. I know he got paid back a lot of money for the months of mortgage payment he had to make and the taxes he had to pay. This particular city is known to be a pain in the ass for landlords and renovators.

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