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3 Real Estate Mistakes I See People Make All the Time | The Upgrade w Joe Adevai #009
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Pastor Joe goes solo on this one and gets into something he's been teaching young men for years: how to actually make money in real estate. No fluff, no guru talk, just 30+ years of experience from a guy who bought his first rental property for $75,000 and has pulled over a million dollars in profit from it without ever selling. Joe breaks down the difference between flipping, buying and holding, and house hacking (which his own son did). He walks through the real numbers on refinancing, depreciation, tax write-offs, HELOCs, and newer tools like HomeTap and Unison. Then he hits you with the three biggest mistakes he sees people make: buying on emotion, rushing in because of FOMO, and skipping due diligence entirely. Whether you're a young person wondering if you'll ever be able to afford a house or someone thinking about their first rental property, this episode is packed with practical wisdom rooted in Proverbs and real life experience. It's only up from here.
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Transcript
Misconceptions and Approach to Real Estate Investments
00:00:00
Speaker
So many people, all right you hear people are making mebo making money in real estate and Pastor Joe, people are making money in real estate and I need to get into real estate and they just go and buy a house and they don't even know why they're buying it.
00:00:11
Speaker
and But Pastor Joe, it's rented out. Well, what are the rents? I don't know. They could be rent controlled at $300 a month. I mean, you don't know. Welcome to the upgrade. Pastor Joe Attevay here with my production team, Steve and George and Joe Attevay. Say hi, guys.
00:00:30
Speaker
What's up, everybody? Yeah. I'm really excited. Today's a great day. Tonight, I will be mentoring my group of young men between the ages of 18 and 35. And, you know, when you talk to men in general, finances always comes to the forefront because, you know, especially young men, they want to have families. They want to be able to provide.
00:00:53
Speaker
One of the things that I always tell young men, and I told my kids, I have six kids as well, is the first thing I would look to do when I have enough money for down payment is buy a multifamily, live in one part and rent the other part. Why? Because I have been very successful in real estate by owning long-term rental properties.
00:01:17
Speaker
Now, I have flipped a property or two, but the ones that have really helped me have been my rental properties. One of them I had for over 30 years. Actually, now two I have for over 30 years, and they have really helped me through lean times, my Wall Street ups and downs, taking care of my family. It has really helped
Success Stories and Lessons Learned
00:01:38
Speaker
me.
00:01:38
Speaker
And just to give you an example, this one rental property I bought in 1994,
00:01:44
Speaker
A four family. Now I bought this in a distressed area. And, you know, you with real estate, you're looking, you know, to make money. You're, you know, that's a key. Like some people actually get into real estate, they're not even thinking about the fact that you're doing this. If you're doing it to live somewhere, that's fine. Location is important.
00:02:02
Speaker
But if you're doing it to make money, actually think about how I'm going to make money. Well, I bought this house for $75,000 and needed some work, so I borrowed an extra $15,000 at the time. Yeah, construction costs were lower then.
00:02:16
Speaker
So it was a total of $90,000. And then I was able to rent the total for family for $3,000. So think about that. It's $36,000 a year. I paid $90,000 for it. At that time, interest rates were probably around 6%. I was most likely, as I can remember, making about $800,000 to clear own work.
00:02:40
Speaker
a month i did a lot of my own work But I would never get into any rental property unless I was making a minimum of $1,000 a month if I'm paying less, ah you know, anywhere from a quarter million to $500,000 for the property.
00:02:56
Speaker
um You got to make profit. I mean, there's people that literally buy real estate and take a loss. I just don't understand it. I would rather wait for something that makes money.
00:03:07
Speaker
Not to mention... That three times during the life of this property over the last 35 years, I've borrowed 50, 100, $300,000 in refinances.
00:03:19
Speaker
And you know, of course, that when you do a refinance, when you take that money out, you don't pay any taxes on it. That's one of the secrets of the rich. You know, they borrow money against real estate. They borrow money against stocks.
00:03:32
Speaker
And, you know, that's if you get into the geopolitical, I shouldn't say geopolitical, political discourse, that's a big discussion. They want to tax people on unrealized gains. And that's totally crazy. But we'll do that in another episode.
00:03:47
Speaker
I don't want to get too complicated. But I want to tell you that my property, i figure in rent and refinance and everything, that $75,000 property, made i've probably made
00:04:03
Speaker
10 times what I put in. Now the property, of course, has worked almost 10 times what I paid for. So I've already taken 10 times out with no tax, and I still have the property.
00:04:17
Speaker
And I'm sure my son's back there thinking, I wonder who he's going to leave that to. Anyway. I want to start out with some scriptures to support what I'm talking about. One of the richest people, probably the richest person now with gold of 5,000, you know, because he calculated Solomon from the Bible. It's probably the richest man who ever lived. And he wrote a book of Proverbs. And, you know, if you want to prosper financially, you should probably leave read a proverb a day.
00:04:44
Speaker
But Proverbs 10.4 says, he who has a slack hand becomes poor, but the hand of the diligent shall be made rich. Let me read another one to you. Proverbs 21.5.
00:04:56
Speaker
The plans of the diligent lead surely to plenty, but those of everyone who is hasty surely to poverty. and And basically it's talking about the fact to be diligent with things. to He who gathers little by little becomes wealthy is another proverb. you know Here's a perfect example.
00:05:16
Speaker
A lot of people that win the lottery, believe it or not, become broke. Why? Because... It was hasty. It was quick. And for some reason, you don't appreciate it as much. Now, that's not 100% fact.
00:05:30
Speaker
But people that gather little by little and are faithful in the little, God will make them faithful with much. So when it comes to real estate, it's pretty much the same thing, mostly.
Real Estate Investment Strategies
00:05:44
Speaker
Now, there's... I would say, I'll just say three categories of real estate investing. The first one is the one you see on TV and everybody talks about it and it's flipping, you know, buy a house, sell a house, you know,
00:06:02
Speaker
Well, I've done it once or twice and we made money, but it was a short term gain. So we had to pay capital gains taxes and state taxes. So they, you know, we had to give away 40% of the profit right off the bat.
00:06:15
Speaker
Now I do know people that do flipping. And right now, actually in this environment with interest rates and housing prices, flipping is probably a little more attractive than trying to buy and rent. Now,
00:06:30
Speaker
Buy and hold is another thing where just, you know, you, I mean, how many people probably watching this, you bought a house. A lot of people have bought a house that they live in and it is appreciated, but you know, to sell it, going to take a big hit unless you do a 1031 B you could sell your house and buy another house, not pay taxes on as long as you buy some within 45
00:06:53
Speaker
um So there's flipping, there's buy and hold. There's also what we might call house hacking, which is what my son did. And ah we found a house when he got married, he bought a house and it was a two family and he lived in the first floor and you have to stay there for at least a year to get the low interest rate that he got. So he stayed there, he toughed it out for a year and now he moved from there and he rents that out and he makes a pretty good profit.
00:07:23
Speaker
um And then finally, you know, buying multifamilies and renting them. And that's what I've done. you know but You know, but the houses that I bought to rent, i don't I didn't aggressively seek them out. I waited till the market presented a really good opportunity.
00:07:43
Speaker
So just to break it up for you. probably five to, I i think the the they say that five to 10% of people flip houses.
00:07:55
Speaker
The other 90% are either buying and holding or buying and renting. Now, there's something people do call the cap rate, and I don't even, you know what, I don't even want to get into it because
00:08:08
Speaker
I never used it, but if you want to look it up and do a little study on cap rate, go right ahead. But let me tell you a little bit about something called depreciation. I didn't even mention that and as far as how much money I made over the last 30 years with just one of my houses, but On a $300,000 investment house that you keep, over 30 years, you can, through depreciation, which means the government gives you a break because your house depreciates, the wear and tear, basically, you can make anywhere from $30,000 to $80,000 extra through taxes.
00:08:47
Speaker
Not to mention when you buy a house, And, you know, the interest is tax deductible except for salt. They put that salt in some states and only you can only up to 10,000. But that really didn't affect me. That's another thing for another podcast. But basically, you get to write off the expenses.
00:09:09
Speaker
Also, what did I say before? Refinance, when you refinance a house, the time I took out 50 when I was in a little bit of financial trouble where I needed liquidity, the time I took out 100 to buy another house, the time I took out $300,000, didn't in tax.
Accessing Home Equity and Financial Planning
00:09:28
Speaker
Then you have something called a HELOC. I think you all know what that is, right? You guys know what that is. Home equity line of credit. I have a HELOC on my house. Yeah. Well, the interest on a HELOC is only tax deductible if you use that money to improve the house that you borrowed against. Otherwise, you're paying tax on that.
00:09:47
Speaker
Now, there's new ways to take out money. on your house and these things are really inventive and I've thought about doing one of them, I haven't.
00:10:00
Speaker
But I mean, if I had to, I'd probably look into this. Now, there's companies called HomeTap and Unison. HomeTap is limited to 10 years. So let me give you an example.
00:10:13
Speaker
Let's say you have a house that's worth half a million dollars and you owe 100 you have 400,000 in equity. so you have four hundred thousand inqu Well, you would get up to 15% of the value of your home, which is 500,000. You can get $75,000 wired into your bank account.
00:10:34
Speaker
And for the next 10 years, you don't have to make one extra payment. There's no interest on it. No payment.
00:10:43
Speaker
You get $75,000 for years. here's the catch HomeTap gets to take part. If your house goes to a million, say it doubles, which would be a lot, but say it doubles. This goes 500,000 to a million.
00:11:01
Speaker
So you've made a half a million dollars in profit. Well, HomeTap, These things vary, but they would get approximately 25% of your increase in 10 years.
00:11:14
Speaker
So after that 10-year period, you would have to pay them back the 75 plus they would get 125. That would be $200,000. You'd have to pay them back. And you'd have to do it in the 10 years, either by refinancing, which I would do, just take out the money tax-free, pay them back, or you would have to sell it.
00:11:35
Speaker
But what if the house doesn't go up? What if it stays 500,000 and you've borrowed 75?
00:11:43
Speaker
Guess what they get? Just their money back. So you've had tax free money. What if it goes down 10 years? If it goes down, yeah they take part of the loss.
00:11:58
Speaker
basically what this is now let me tell you about unison before we get to that next thing and your expressions are exactly the same thing i should have done that with my house every person i talk to that looks into this unison which i started to go through the process with but i didn't do it i was so interested in this unison will do it for 30 years years I'm 66 years old. I know I don't look it, but I'm 66 years old.
00:12:31
Speaker
So if I have a house worth a million dollars and i owe 300,000 on it and there, this. euniceison would let me borrow say two hundred thousand dollars cash pay no tax on this
00:12:50
Speaker
I don't have to make a payment for 30 years. I'd be 96. I'll just leave it for my kids to pay off. But just think about that.
00:13:02
Speaker
30 years. Now, for me, I mean, if the house when I'm 96, I don't need money, okay? You know, but the house could triple, right? So they'll get a third of that.
00:13:17
Speaker
But I've had this $200,000, I haven't made a payment in 30 years. Do the math. And what if real estate crashes?
00:13:29
Speaker
What if real estate crashes? See, basically, these things, i i to me, it's like doing an IPO on your real estate.
00:13:42
Speaker
You know, private companies, when they go public, they do something called an IPO. initial public offering of stock. So what happens is insiders get to sell some of their stock. They sell some of their risk.
00:13:56
Speaker
I did it when I was at my company. And, you know, sometimes people pile in, they're afraid the stock's not going to go up, you know, so you you pass that risk off. Actually, i didn't put any of my shares in the IPO because I believed in my company. That's another story.
00:14:12
Speaker
But people do that, and you know they just want to get some cash up front because they don't know what's going to happen. Well, if you have if a big amount of your worth is in real estate, this is an opportunity to sell some of that risk to somebody else.
00:14:30
Speaker
So, you know, just just wanted to fill you in on that and HomeTap Unison. I'm sure there are going to be some more places coming out with that kind of thing.
00:14:41
Speaker
Now, here's the thing, you know, because people listening are probably going to be, well well, so what really matters, right, is the original price. Of course, there has to be an appraisal, right? Because if you have a house that you think is worth a million dollars, but HomeTap says we're only estimating at 800, then it goes right to a million right away. They make money. But that is not the case.
00:15:07
Speaker
because I actually went through the process. I got the appraisal, and I didn't go through with it, and they didn't even charge me. So I got the appraisal, and I realized that it was an independent appraisal. Like, the you know, that's the law. Because, of course, if they come in and lowball you, you know, immediately they have equity, and you see?
00:15:29
Speaker
So they did the estimate. I was, like, pleasantly surprised. I was like, wow. You know I didn't go through it because I didn't need to, but I was definitely thinking about it. Over the years, I've acquired up to four rental properties, but they were so spread out. The first one I bought was in 91. The second one I bought was 94. The third one I didn't buy till 2016 and the fourth in 2017.
00:15:54
Speaker
So, you know, I've been through ups and downs in the market. And with real estate, you just have to, you know, you just have to wait. The numbers have to make sense.
00:16:08
Speaker
Don't just jump in. You know, the numbers should make sense in your head. You need to have a plan. You need to have a plan. And so now I want to get into three things to avoid when investing in real estate. Three things to avoid.
00:16:29
Speaker
Number one, impulsion or emotion. impulsion or emotion. Don't go out there and buy a house because I got to invest in real estate.
00:16:43
Speaker
I got to invest. I've seen people, I'm like, what is your plan with this real estate investment? What are you going to do with it? Are you going to flip it?
00:16:56
Speaker
ah Are you going to rent it? Because I don't think you've checked the rents. You know, people will jump in and just buy a house because they feel like i want to buy a house and this one's in my neighborhood and other people are buying houses. So I'm going to buy house.
00:17:17
Speaker
I had somebody recently. I'm not going to say who it is, but they're very close to me.
00:17:22
Speaker
They've never bought a piece of real estate in their life. And they're like, do you think I should buy this place? It was $1.5 million. dollars And this is a couple in their twenties. I'm like, have you run any numbers?
00:17:39
Speaker
Do you have any idea what your plan is? Have you looked at the mechanicals? Have you looked at the, you know, the heating system? Have you, you know, First of all, it wasn't like too good to be true.
00:17:53
Speaker
The best real estate deals are the ones that are too good to be true, but you investigate them and find out they're good. Like that has happened for me and my son. He's pointing to himself. Yeah. Well, you, you had somebody giving you advice. Yeah. Somebody.
00:18:07
Speaker
So if anybody has any questions, just put them in the comments
Tenant Management and Financial Considerations
00:18:12
Speaker
and we'll get back to you. But You know, you got to you know, he had, my son and I both had a similar situation in buying two families.
00:18:21
Speaker
There was a question about an oil tank. And as soon as people hear oil tank with real estate, everybody freaks out. I had this two family I was looking at. It came out on the market for $135,000. And I was like, I know I can rent this place for $2,500.
00:18:40
Speaker
twenty five hundred So I know i can make the thousand a month because I'm looking for at least a thousand a month. People go out and do rental properties to break even. i don't understand that.
00:18:52
Speaker
I don't know why you would do that. Why do it? Unless you're doing it as a vacation home or unless you think that you're sure that in five years it's going to appreciate. But I know that that's not the case because my rentals have gone up and down, but my rent has stayed the same or gone up over time. I've been too good to my tenants. Just if they're watching right now, I really need to raise these rents. But anyway, I'm not going to.
00:19:18
Speaker
I always talk about it, but I never do it. But I saw this two family and so I found out that there was a question about the oil tank situation.
00:19:29
Speaker
But somebody told me they did do a report on it, and it's okay, but nobody knows the report is. So I did my due diligence. I tracked down everybody involved with the thing. I ended up in North Jersey in some basement apartment. There was a business up there, and I gave them $150, and they gave oil test approval.
00:19:50
Speaker
the oil test approval so the house was 135 i went and i said oh guys this house is worth at least 200 but because of this so i went and i bid 152 because that point 17 000 meant nothing for mortgage that's nothing
00:20:09
Speaker
for a mortgage i mean that's nothing I got it, and that has been one of the best. I mean, that property's gone up fourfold, and I've made $1,000 a month in rents, and I bought that one in 2016. let me tell you something. I wasn't looking to invest into real estate at that time.
00:20:29
Speaker
I've got too many other things to do, but it just came up. I saw it, and I was like, wow, this is too good to be true, so let me do my due diligence.
00:20:41
Speaker
Don't rush in, number one, do not buy on impulse or because something feels good or because you like the way the house looks. Hey everybody, the mission of the upgrade is simple.
00:20:53
Speaker
Upgrade your life in every area, in relationships, in purpose, in finances, and most of all, in your walk with God. Because you're not broken, you're just due for an upgrade.
00:21:06
Speaker
So hit the subscribe button right now and share it with a friend or a relative and let's build this thing together. And if you want to go deeper, i have two books to share with you.
00:21:17
Speaker
The first one is Everything Makes Me Prosperous. It's the memoir of my life, my story of how I went from rock bottom to where I am today. Secondly, now this book is written with my ghost writer, who's not a ghost anymore, Stephen George.
00:21:33
Speaker
It's about the miracle babies of Grace Church. Couples who were told they couldn't conceive, but through consistent prayer, miracles were born. If you want to get a hold of these books, the links are in the description. And if you want to see us in person, come out to Grace Church of North Brunswick, New Jersey.
00:21:52
Speaker
I hope to see you there. Now back to the video. Number two is Proverbs 21.5 in real life, where you rush into something. You're trying to get rich quickly. And that's that famous word, FOMO, fear of missing out.
00:22:07
Speaker
So many people, all right you hear people are making mebo making money in real estate. And Pastor Joe, people are making money in real estate. And I need to get into real estate. And they just go and buy a house and they don't even know why they're buying it.
00:22:19
Speaker
And if you don't think people do that, I see them do it all the time. Like, do you even know why you're buying this house? Just because you heard that people making money in real estate? You don't even know why you're buying it? That house, and but Pastor Joe, it's rented out. Well, what are the rents? I don't know.
00:22:38
Speaker
They could be rent controlled at $300 a month. I mean, you don't know. You've got to do your due diligence in every year. And you have to consider what is the mortgage payment? What are the taxes? and Is the tenant paying the water? Who's paying for the energy bills? You know, these kinds of things. You know, it's very important.
00:22:57
Speaker
Very, very important. But people don't think about that. Listen, you know my motto. I don't know anything. There's always somebody that knows more than you. And with with AI these days, with chat,
00:23:11
Speaker
And, you know know, these young guys, they love chat and Claude and all that stuff. And it's great, but it's wrong sometimes, you know? So i don't know' I don't always listen to what chat says, but it'll give you an idea.
00:23:23
Speaker
And, you know, then you can do some other research. But make sure that you at least run the basic numbers. I always run the basic numbers in my head. I'm like, worst case scenario, I'll make $800 on this rental per year, ah per month, which is $10,000 year.
00:23:42
Speaker
And, you know, that's for a house, you know, $500,000, $600,000. If I'm going to go got make $1,500 $2,000, you know, because I'm taking bigger i gotta make fifteen hundred to two thousand you know because i'm taking a bigger risk With the house price, that's where you get into cap rates. So number one, emotion.
00:24:01
Speaker
Don't let emotion in. One or two are very similar, right? um But there's still things that you need to avoid. Emotion being, i feel like this is a good thing.
00:24:15
Speaker
FOMO is like, everybody's doing it, so I got to do it. Most likely, if everybody's doing it's time not to do it, right? I mean, do you think like the whole world is stupid? I mean, there are people, the efficiency that goes on right now in stocks, which I'll talk about in their next segment, which, you know, it it is taken out the edge for people. There's efficiency everywhere.
00:24:42
Speaker
Everybody has models. Everybody has data. You know, you're not smarter than everybody else. If you thought of this thing, someone else has most likely thought about it. You know, but there are times when things slip through the crack, like that two family I got.
00:24:58
Speaker
And, you know, youve got to be ready to pounce on it. But if you're really interested in getting in real estate, you have
Market Conditions and Investment Timing
00:25:05
Speaker
to do your due job. You have to understand the market. You have to, you know, comb through it. The good news is it's right at your fingertips. You can see the listings when they come out.
00:25:14
Speaker
but don't get into a bidding war. So right after I bought that house for 150,000, another house went up similar, ah slightly bigger in the same area for 150,000. I went in, go online and I go, oh, I picked this up for 160. I bid 160. Somebody bid 165. The bidding went up to like 250 and people were still bidding. And I was like, okay, I'm out.
00:25:40
Speaker
Like, I don't want to be the last one. i don't want to be, you know, and pay up. Now, because real estate has really taken off, whoever bought that has probably done decent, but they didn't do as well as I did, you know?
00:25:55
Speaker
So timing is everything, you know? So FOMO gets in the way of timing, right? With real estate, the timing's gotta to be right. So avoid that FOMO, avoid that rushing in.
00:26:08
Speaker
You know what they say, fools rush in. Finally, the third one, is you've done no due diligence. That's the thing to avoid. You've done no due diligence. And when I say due diligence, I mean a lot of diligence. I mean a lot of study. I mean, you know something about that market. See where I buy close to me because I know something about that market. I got people, I was talking to somebody recently and he said, I have a rental. I go, where is It's like two hours away. i'll go,
00:26:40
Speaker
I mean, what if you have to fix something? You're relying on people, you know, unless you have an infrastructure set up, somebody you can trust to fix, to repair.
00:26:52
Speaker
i have someone now that I've known for probably 30 years. he's one ah He was my tenant. He takes care of my rental properties. He gets 10%. They have management companies to do that as well. But some of those companies, if you're not in town, I mean,
00:27:08
Speaker
unless you get to see it yourself, or then if the property gets vacant and, you know, you think they're they're going to do as much as you would to get it filled? Of course not. So I recommend being close. Now, that doesn't mean you can't do it because people do do it and they're successful, but that's only because they got a great deal and they have a cushion, you know?
00:27:29
Speaker
If you don't have a cushion, that's why I say, Do your due diligence and then go to every worst case scenario. If the heater broke down, if I didn't have a tenant for six months, what kind of you know, what kind of a rental area is this? Do people rent or is this a place where people are leaving because people are getting shot up on the street? You know, it's like,
00:27:52
Speaker
Now, there were neighborhoods in our, you know, just south of here. I'm not going to say the names of these cities, but they had houses going for $5,000 to $10,000. If you have the stomach for that, then you can, you know, really make a lot of money.
00:28:07
Speaker
One of the earliest houses i ever bought, because I bought a couple houses with a partner, and he didn't he didn't have the stomach for it, so we got out. We made a lot of money, but he got out. One of the houses I bought for $22,000, I put down on my credit card.
00:28:22
Speaker
and raise the other 7,000. ah You know, but it was in a depressed area, but I wasn't afraid because I grew up in the streets. I'm not afraid of you know, whatever. It doesn't scare me. But, you know, make sure that the place that you get as a landlord, that you're comfortable driving it into the neighborhood.
00:28:41
Speaker
Because I've seen people buy these places and then they're scared to go there. And then when they finally get there two years later with a security guard, their house is dilapidated. So, you know, do your due diligence in every area and always go to the worst case scenarios.
00:28:59
Speaker
Financially, physically, geographically, right? what are the worst What is the worst case scenario that could happen here? And make sure you're able to stomach that. Because what's going to happen if you can is you're going to sell your house cheaper and somebody like me is going to come along and make money on it. And that's happened. Believe me. I've seen it so many times where people just couldn't handle the smoke. So if you're going to be a landlord, you got to be able to handle the smoke. You know, there was a few times I had to go to court and and i had to remove. Now that was before renting. Renting now has been.
00:29:34
Speaker
That's why it's so hard to get multifamily to make money on. because all the corporations bought up, the hedge funds bought them up, the smart investors have bought them up. And because everybody's renting because these young people can't afford a house because the interest rates are too high. So it's really, but that'll change.
00:29:50
Speaker
It always changes, always cycles. So emotion, fear of missing out, you haven't done due diligence. Remember, he who gathers little by little shall become rich. Remember, he who's faithful with a little, God will make them faithful with a lot. You know, you got to be smart and you got to be slow and steady.
00:30:12
Speaker
And, you know, sometimes you might miss out on something. That's all right. Just move on. You know, just Look for something that makes sense.
00:30:22
Speaker
Do not rush in. This is a major investment. You're not buying 100 shares of stock here. You are investing in something that's going to need repairs. that you There's there's you know people trip on your sidewalk and they sue you. I mean, real estate is not for everybody.
00:30:39
Speaker
But. I will say this and I tell all the young people and my son could tell you this. I told all my kids. First thing you do is get yourself into some kind of real estate situation that makes sense for you I wanted them all to get two families if possible. Now, some of them didn't because they didn't want to play with that smoke. They just have a good job and they just got a house, you know, and they all got in right before the big pop.
00:31:05
Speaker
But there'll be dips again. And I know some of you out there right now are like, you're in your 20s or early thirty s and you're like, man, am I ever going to be able to get something that makes sense?
00:31:17
Speaker
Do your due diligence. Wait. Yes, you will find something. Houses are still selling. Stop saying you can't do it. You can. But you just need wisdom. You need to get wisdom.
00:31:29
Speaker
And you need to be patient. And people say, well, you know, why should I rent now? And I could be putting that money in equity in a house. Well, yeah, but you might be putting equity in a house that's 600 now is going to be 500 next year because we are at a peak spot right now.
00:31:50
Speaker
My outlook is that
00:31:53
Speaker
We're going to stay here a little bit, and we're slowly going to see some loosening up. we were We're already seeing it in certain pockets that were way too hot. And real estate's goingnna it's going to level off. It already is somewhat.
00:32:05
Speaker
And then you're going to see it come down a little bit. Interest rates is all a matter of the price of oil coming down, inflation coming down. Right now, it's not a great time, but interest rates were on their way down.
00:32:20
Speaker
Listen, just think about this. In 1980, interest rates for mortgage were like 14%, so 6% doesn't look so bad right now. That's probably the average. I don't know if one of you wants to look it up, but I'm guessing the average over the last 50, 40 years or 50 years is probably like 7%, 6% or 7%. So we had quite a nice run there when they had those rates so low. you know We had quite a nice run. What was it? What's the average?
00:32:47
Speaker
It's coming up. Oh, chat's slow. What's clawed? What's taking them so long? 8%. 8% is even higher than i thought. I got a question. Yeah.
00:32:59
Speaker
I think most people, most people around my age, I'm 32. um Like you said, i got a lot of friends from high school, married, but they're still renting. I think the biggest problem, or think the only reason people don't take risks is obviously because of fear and especially fear of the unknown.
00:33:15
Speaker
i hear people talk about how like you and I were handy. I replaced my hot water heater last month. um So you don't have to pay all that money to someone to do it for me. So people are afraid about that, you know, the cost of repairs, which really hasn't been a lot for my house.
Challenges and Costs in Property Management
00:33:31
Speaker
um But maybe you could talk about that when it comes to your rental properties, give someone, because you have four, give someone an over idea of overall idea of how much money they're spending on repairs. and that's a good that's a good thing to bring up saying is i think another put a new kitchen in one of my rental properties i think another fear is a lot of people are like oh well you just have good tenants and i do i have a one family living on the first floor and the second floor so they don't fight with each other they're not you know so i don't have much issue with tenants though like i said these days people are just they need a place um
00:34:06
Speaker
But when you do have problems, that's what I said, you've got to be able to deal with that smoke. you know You've had to deal with it a little bit. oh and i Remember when I first got the house? The squatter in the basement? Yeah, the squatter in the basement in his house. And it was like holding everything up. And one day I was just really...
00:34:24
Speaker
I was upset because I was like my son's you know he's getting married or you were married maybe at that point. Yeah me and Grace were looking to move in in like three months and this guy was saying he's not gonna leave. i was an He was an old guy in his 60s he played all nice I'm gonna leave and do that and he was playing us the whole time. you remember what happened?
00:34:41
Speaker
I went down there with my old gangster Staten Island voice and I said you better well I'm not gonna say it. But let me tell you, he left. Did a little good cop, bad cop. People have asked me, like, how do you get rid of squatters?
00:34:54
Speaker
Well, just don't get a squatter, number one. We didn't know there was one. Remember? Yeah, that was that was kind of unique. But. You know, that's why I said you got do your due diligence. Now, there's places where they won't kick the person out.
00:35:09
Speaker
Now, where I bought my house, one of my houses in New Brunswick, I've only had to do this once or twice, like 30 years ago or whatever. But I went to court. The person wanted to leave. The sheriff came with me. It took one month.
00:35:23
Speaker
They didn't pay the rent. They had no intent to pay. the The sheriff came to the house, opened the door, and said, Eddie, out of here. You have 10 minutes. And I just sat there and, you know, I didn't want to do it, but the people were just, you know, they were trying to scam me. So, you know, but it app depends. There's places where you can't get rid of somebody.
00:35:44
Speaker
There are actual places where you cannot get rid of somebody and that's dangerous. So you just got to be very careful who you rent to. and And another thing, you know, people with the Section 8, have heard of that? If you guys never heard of that, that's where the federal government pays people's rent. And a lot of people are like, oh, I just want to get tenants with Section 8. Let me tell you something.
00:36:05
Speaker
You do not necessarily want that. Because tenants that get Section 8 means they're getting free money from the government and they're most likely going to trash your place. Not everybody. I don't want to so say that everybody, because they're, you know, and I know some great single moms and and people that get Section 8 that are fine. But some people, you know, they just take advantage of the system and they get the rent paid for them and they just...
00:36:30
Speaker
you know, everything's free. So they just, that was the person I had to kick out. Actually, I thought I wanted all section eight tenants, but when you have people that are working hard and paying the rent out of their own sweat equity, their own, their jobs, everything, they're more likely to really take care of the place. Now, as far as repairs go,
00:36:53
Speaker
Like I said, I just had to put a kitchen in, but there's a lot of cities that have really cool deals. So when I bought my four family, the city had a program and you got to look into this stuff.
00:37:05
Speaker
They would lend me, first of all, lead paint, second renovation. They were giving out 14 year loans that if you kept,
00:37:22
Speaker
the same tenants that you had in or lower income tenants in your property for 14 years, they would give you that money and you wouldn't have to pay back. I got 150,000 lead abatement,
00:37:38
Speaker
just crazy And $125,000 to renovate. It was more money to cover up a little bit of lead paint. That's a whole other scam. Than it was to renovate four-family. So $270,000 was given to me.
00:37:58
Speaker
I held it, rented to the same people. 14 years later, I went to the state to have my mortgage erased. They tried to tell me that I owed them the money. I said, guys, you need to find, I i actually always hold on to your papers, always hold on to your stuff. But eventually we found it and everything was fine. So the 270,000 that I got from the city and the state, I never had to pay back.
00:38:25
Speaker
So I renovated the place. They got rid of the three drops of lead paint for $150,000. And ah so there's always things like that if you're... Well, not always. What should people expect repair-wise?
00:38:39
Speaker
You've had...
Tax Benefits and Expert Advice
00:38:40
Speaker
rental so I mean, there's probably writing off 100 to 200 a month average. But there's some years it could be more.
00:38:51
Speaker
You know, I always, like I said, I want to make 1,000 a month, so that's 12,000. So if that month I had some big repair, would probably be 5,000 to 10,000. It happens.
00:39:02
Speaker
But don't forget, you get to write that off. Don't forget it's depreciation. Don't forget you write off your interests. Don't forget you write off your repairs. Don't forget everything that you get to write off.
00:39:13
Speaker
And that's major. Especially with the kind of taxes you pay in city and state. So, you know. And hopefully your house is depreciating. Also, your tenants are paying your equity, right? Right.
00:39:29
Speaker
Like that a house, I bought the one for $75,000. I've taken out $600,000 from the house in tax-free money.
00:39:42
Speaker
And i owe less than that. And the house is worth more than that. So on a $75,000 investment I've made, if I sold, I mean, I'd be over a million bucks on how much profit I've made. So do you recommend it? most of it, if you're taking the taxes, it comes out to more like 1.4 million because of the tax-free implications. Do you recommend that nobody pays off their mortgage then?
00:40:07
Speaker
Just keep the mortgage going so that you could always take out? Well, for me, it's easy to say in retrospect, right? It's 34 years, but. At one time, I had them, a couple times, I had the mortgage down to the $50,000, you know.
00:40:20
Speaker
But then I just borrowed against it. Why would, I don't want to sell it and pay that big capital gains tax. And I want to keep it because it makes money. So I just do a refi. Right? And take the money out tax-free.
00:40:35
Speaker
It's like a bank account. Kind of like when you borrow against your life insurance, which I've done as well too. You can borrow against your life insurance policy, right? Some of them a whole life. And you just keep making the payments you've been making monthly. And before you know it, like I have a quarter million dollar life insurance on me. So nobody's going to any ideas. Hopefully my wife or anything, but I've already borrowed $80,000 free from it.
00:41:04
Speaker
And pretty soon it'll be worth $250 again. So I've been paying money in, but not nearly as much as I borrow. So it's basically free. Due diligence, baby. I'm a numbers man. It's always going through my head.
00:41:17
Speaker
That's what Wall Street and drug dealing did for me. Numbers are always going through my head. But you got to do the numbers. And if you're not good at numbers, it's okay. You can still do well. Find somebody that is.
00:41:29
Speaker
You know, ask somebody for help.
00:41:33
Speaker
Don't try to do it all by yourself. There's always something you're missing. We all have blind spots, believe me. And that's, you know, there's been times when i was thinking, this is god this is a great event. And I talked to someone, they said, no, no, don't buy in that area.
00:41:47
Speaker
That's not a great area. I wouldn't do it. Thank God for other people to give you advice.
00:41:55
Speaker
If we don't have any more questions, I think we can wrap it up here. But if you want to put something in the comments, you have any questions, I'll be glad to respond. Or can come to my young men's mentoring group, but there probably won't be any room tonight cause it's go to be packed.
00:42:09
Speaker
Man, young men really need advice these days, you know? it's It's just a different world. it's Sometimes as a young man, you can feel like it's stacked against you. Not just young men, women too. My wife will be talking to them, but...
00:42:23
Speaker
This is good information for people. Just share it with somebody. If they ask you, you can share this information. I don't have all the answers, but I have some. And subscribe to our channel, The Upgrade, and I promise you, you're going be blessed. You're going enjoy it, you're going learn stuff. You're going meet some really cool people.
00:42:40
Speaker
So remember, it's only up from here. And the three things to avoid impulse FOMO and a lack of due diligence.
00:42:52
Speaker
Make good decisions. God bless you.