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Real Estate Investment Playbook: My Proven, Low-Risk Strategy for Wealth Building
17 Plays2 months ago
In today's episode, I’m finally recording some of the real estate investment strategies I’ve shared countless times. I’ll dive into my personal approach, shaped by years of hands-on experience—both successes and hard-learned lessons. From setting investment criteria to understanding cash flow, appreciation, and debt reduction, I’ll outline a method that’s safe, conservative, and designed to minimize risk while maximizing returns. Whether you're new to real estate or looking to refine your strategy, you’ll find insights to help you build wealth while avoiding common pitfalls.
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Transcript
Introduction to All Roads Lead to Real Estate
00:00:06
Speaker
Hello everyone, this is Matt Rine and here on in today's podcast, All Roads Lead to Real Estate, I wanted to go over some, the basic discussion related to my personal investing criteria, why I do it, a little bit of how I do it. And I probably have set a version of what I'm about to share on this podcast no less than 500 times. So it's interesting that I'm finally going to have a a version of a recording of what I say, because it's one of the top questions that I
Real Estate Strategy: No One-Size-Fits-All
00:00:42
Speaker
get. And
00:00:43
Speaker
The hard part about when you invest in real estate is that there is not one way to do it. So I'm going to outline a strategy that has worked for me. It is a hodgepodge of what I've learned over all these years. And it is not something that I could say is Matt Ryan exclusive. I'm the only one that's ever thought of this.
00:01:04
Speaker
no way. In fact, I consider this to be one of the safest ways to possibly invest in real estate. It's a secure way and it's done in such a manner that the risk associated with it is exceptionally low.
00:01:20
Speaker
Because by my very nature, I am a conservative person and and I've learned the hard way. I've been to rent court. I've had horrible things happen to properties. I've bought in areas I shouldn't have. I've done many, many of the things I'm about to outline as not what not to do. I've learned ah through personal experience.
00:01:41
Speaker
Yeah, I've done all I can to safeguard myself from going out there and doing the wrong thing. And at some point you just have to jump. yeah You just have to take a calculated ah risk, something that's appropriate and go for it.
Personal Approach, Not Financial Advice
00:01:54
Speaker
What I'm about to share is what I do. So I'm saying that with five asterisks at the end of this is that I'm not an account. I'm not your financial advisor. All the disclaimers I can have. This is my personal approach. It has certainly worked for me. It has worked for many clients that I have represented and have taught this strategy to. What I hope can come from this experience if you're listening to this is that you can add it to your own repertoire. right Your own learnings and maybe you'll take a few pieces and adopt it in your own world and go from there. so so this is what This is what I'll
The Appeal and Risks of Real Estate
00:02:31
Speaker
to help describe. as a base Let's start with why. so Why in the world would you want to invest in real estate? I can tell you someone like my wife who had zero experience in this prior to having having met me.
00:02:43
Speaker
and The reality is it sounds risky. It sounds scary. It's where do you start? What do I do? That doesn't sound right. I don't have the money for that. There's a million things that are gonna pop up in your head. And I also have found people that have become what I call like a reluctant landlord. And that's they've lived in a home for a while. They don't know if they should sell it or rent it. And I know nothing about this, but guess what? I'm just gonna throw a rent sign out there and let's rent this bad boy.
00:03:12
Speaker
And then they figure out the hard way of what this all is. And they that is not usually the best experience for them. And that reluctant landlord I have helped buy many of their homes personally, by the way, because they had no idea what they wanted to do. They never thought it through. They didn't price it correctly. They got the wrong tenant, all the things. Trust me.
00:03:33
Speaker
And you don't want to be a reluctant landlord. I personally have sold every home I've ever lived in and I have not rented it. So someone you're listening to someone who loves rentals, has a portfolio and has never kept anything I've lived in.
Criteria for a Great Rental
00:03:47
Speaker
So in the and the reasons for that, are as I'm about to describe, none of them met the criteria for what I consider to be a great rental. And they were too expensive. They were a little too nice. The ratios didn't make sense.
00:04:02
Speaker
Let them go, get my capital and I can reinvest the capital when I sell it into something that makes an appropriate rental. So going back to the wise, I can tell you my degrees in finance. I'm a extremely nerdy to the extent that I listen and read the quarterlies in the stock market. I thought I'd be a ah in all I thought I was going to New York, right? I thought I had dreams. That's what I was going to do is go in the financial world nb and be in Wall Street.
00:04:31
Speaker
I learned enough about that to know the people that I worked and saw and even had internship opportunities with. They were miserable. With that, I started looking at real estate right away and buying my first property at age 22 and starting that journey.
00:04:48
Speaker
Real estate in general financially offers advantages that are very, very challenging to find
Tax Advantages of Real Estate
00:04:54
Speaker
elsewhere. and It comes back to tax advantages because taxes are something that rich people in general spend a lot of time thinking about. and they They ensure their portfolio and their financial plan considers it in just I mean, sometimes that's the whole plan, is to find out how to properly invest to avoid paying an unnecessary share of tax. Real estate, once you start to understand what these, quite frankly, rich people that wrote these laws have done to protect themselves from paying additional taxes to keep the money working,
00:05:27
Speaker
You have to do it. You have to follow it. That's just what inspired me is is not only is the rate of return fantastic, but I can shelter majority of it from taxes and I can push through certain terms, which I'll use like a 1031 tax free exchange. I've done that and utilized that process in the past several times to avoid paying taxes today. You can push it down indefinitely until one day you die and then it's a whole different set of problems. but yeah I'm gone. I'm not going to be my problem. I can live the rest of my ah life not having to pay, quite frankly, much in terms of taxes with a fabulous rate of return.
Cash Flow Considerations
00:06:05
Speaker
Some of the things that I want you to become familiar with because everyone should continue to educate themselves on what what is a rate of return when it comes to real estate, cash flow is something most people are familiar with and understand. So cash flow simply means I have
00:06:21
Speaker
payments I might have a mortgage on the property. I have taxes for property taxes. I have insurance on the property. i have All these things, the maintenance on the property, all of that goes into your expenses and then you have rental income and you just do a subtraction and right there, folks, is is going to be your cash flow. and You look at cash flow pre-tax and cash flow after-tax. You have to look at both.
00:06:46
Speaker
But that's primarily what most people think of when they think of real estate investing, specifically in rentals. There's other types of income that you have to consider. And I've created spreadsheets for myself. I i utilize it with all of my clients prior to helping them determine what's appropriate for them ah in terms of what's a sound investment. um However, that's one piece, right? Cash flow. The next is appreciation.
Appreciation: The Bonus
00:07:12
Speaker
And i I correlate appreciation as dessert. It is not my main course. I will not personally invest just for appreciation. I'm not doing it. I believe appreciation for the pure purpose is almost like speculation.
00:07:27
Speaker
So if I bought a home that didn't cash flow at all, maybe even negatively cash flowed, people do it. People do it all the time because they say, well, listen, that's an area that's going to go crazy. Like it's going to it's going to double in value in two years. That is very speculative. I'm not doing it personally. So if you want to do it, God bless people. Like I said, don't don't hate on me. That's just my philosophy.
00:07:50
Speaker
I'm not doing it. However, it's a dessert. It's that chocolate cake at the end of a good meal. It can add up and boy, it can be amazing. I'm just not going to ever buy a property that doesn't have enough cash flow to merit the purchase in and of itself. So if I buy something, I'm making up numbers here, but for 300,000, if I can't sell it,
00:08:11
Speaker
you know If it doesn't appreciate a dollar, let's say put it that way, and I sell it 10 years later for exactly what I paid for it, $300,000, if it cash flowed properly, I'm okay with it. I got my money back, and I did well, and I know my I didn't get dessert maybe with my meal, but I did okay, and that's important to know for me, because I'm conservative, that that's how I can that's how i make my decisions.
00:08:36
Speaker
So you have cashflow, now you have appreciation, um which adds up. And for the purposes of majority, I know the areas in which I purchase, but I use a very conservative between three and 6% is my appreciation, the number that I stick in there. Oftentimes it's more, the last several years it's been significantly more than that. However, I won't add that into my calculation because I don't want that to sway the decision.
00:09:01
Speaker
So most of the time i I'm very conservative. I'll put 3% in my equations to appreciation.
Debt Reduction Through Tenant Payments
00:09:08
Speaker
And the next part of my return is debt reduction because my tenants will be paying off the rest of my mortgage.
00:09:18
Speaker
that debt reduction is going to increase the amount of cash right that I have when I go and I sell that property. That can add up. if you hold something for the len If you buy something with a down payment, have a mortgage, pay the mortgage completely off and sell it, once again, if I have no appreciation and it was $300,000, if I sell it for $310,000 years later, I had i get all $300,000 now because I have no debt.
00:09:45
Speaker
That's a powerful thing in and of itself. They paid that off for me. If I add up my cash flow, a modest level of appreciation, at least on paper, and the debt reduction in which I'm accounting for because I can figure out and use an amortization schedule that's online, you'll see how much you're paying down and how quickly.
00:10:05
Speaker
You can add this up and it's pretty simple math. Anybody can do it. There's a million programs online that do this for you. I did my own because I want to geek out and be able to manipulate each thing and alter it to my liking. However, you can do it yourself. And once again, there's free tools online for you to do this and you can then start putting in properties that are around your area that you know, whether it's your own neighborhood, whether it's just an area you're interested in, you should start doing the math and you could figure out what rent rates are in that area and that can be your rental input for income and then you can look and get a free quote online for what a mortgage could be and do the math and start running numbers and practice, practice, practice. So when you really start this search, you are educated.
00:10:51
Speaker
And you'll know exactly what's a good deal and what's not a good deal. There is no rule that says you have to wait until you are 100,000 percent ready to buy something before you do this exercise. I would highly encourage you to do it way before you even want to start.
00:11:08
Speaker
Because that way, nothing's a surprise. By the way, you can call and speak to real estate agents, lenders. There's investment groups. You can start that process today to get that education level up. So if you're not familiar with the terms I'm describing,
00:11:23
Speaker
They're out there, like become familiar with it. There's really no excuse.
High Returns on Investment
00:11:27
Speaker
So if I look up those three pieces, my appreciation, the debt reduction pay down, as well as my cash flow, my blended average rate of return is between 25 and 40% annually on the money in which I have invested in these properties. Now granted, majority of that is either tax deferred or tax free.
00:11:50
Speaker
And that's insanity. Now, I would like you to go talk to your financial advisor and say, I want to give you money. And I would like to get between 25 and 40 percent. And I don't really want to pay taxes on it or not much. And I when I go in 10 years and I sell my so quote unquote stock or my investment, I want to defer all that as well. It's challenging. They have a couple tools that can do it. They're all in usually retirement accounts.
00:12:14
Speaker
And by the way, you can invest inside of those. It's called a self-directed, tax-free account that's within your IRA. You can do it. So you can look into that if you have money that's saved up and it's pretty substantial and you're like, you know what, I want to get this working. Trust me, you can look that up. Most traditional and advisor Advisors might not be super familiar with that, but you can do it. And then you can buy and own real estate inside of your retirement account. It's a powerful, powerful thing. By definition, all your returns are inside of it. And when you sell one day, it stays inside of it. You're not paying taxes there either. So that's a fabulous additional way to to research and figure that out.
00:12:53
Speaker
But primarily I do it for those reasons, everybody. it's It's the tax nature of I get to utilize depreciation, which is a hell of a write off. I get to also ah you know write off all the other components related to my expenses with the property. And you have a relatively low um' tax rate at the end of the day. And once again, when I sell, I'm gonna do a tax free exchange. That's how I choose to do it. I'm gonna keep it invested in real estate for life.
Funding Education Through Real Estate
00:13:19
Speaker
And then I can pull out the money And is if I pull it out in in ah in a format of a loan or a lien against the property and I can get a line of credit against the property, guess what, everybody? That's a loan. That is tax free. So I fully intend going a slight tangent, but not really.
00:13:38
Speaker
One of the things every time I knew my wife and I had another child we have three I would go out and buy a property and The full intention is I made sure to put enough down and amortize the loan over less than 20 years so by the time each child reaches that 18-year mark and The house would be completely paid off at which time we have a decision to make if they need to go to college, if that's their goal, and we need to help pay for it. We can then have a paid off property. I can then take a lean against the property, a line of credit. It's usually the way I do it.
00:14:12
Speaker
And I could write, I'd have a checkbook. My Lord knows what in 18 years that'll look like. Probably not a checkbook, but something digital. And I could then write a semester of college that way. And then just that piece, whether it's 50,000, whatever it's going to be then, per semester, I'll have that written off. And that now is the only debt on that property. And my tenants will continue paying it off. I paid zero taxes because it's a loan. So I could write that check. And then the next semester, the next semester, the next semester, I could write it all off.
00:14:42
Speaker
It's a business expense. It's a loan on investment property. I didn't pay taxes on it, and my tenants will pay it completely off for me. I still own the asset. I didn't sell the asset. Nothing happened to it, and I'm still getting cash flow. Once again, rents have gone up over 18 years. I'm still getting money each month, and my kids are going to school for free, essentially. It's ah it's a really interesting way to think of this.