Albuquerque Real Estate Investing: 4 wealth generators in long term real estate investment
(Transcript Snippet): “Tracy:
So Tego real estate investing. So you did an amazing class this week and you trained on,
Tego:
Did y’all hear that. She said I did an amazing, did you say it was amazing or do you just said I did an amazing hold on. I got, I got to make sure I got that right. Just kidding.
Tracy:
Uh, so you taught a class on real estate investing this week to real tours and it was really great because you talked to them about why they should also be investing. Right? Because we talk about being a resource for our community, as far as, you know, helping people find investment properties, but just kind of went through some things that I thought were really good bullet points and hoping you could recap them.
Tego:
Yeah. See, you know, the thing is when people hear real estate investing, I think maybe at a high level, all they think are about are the late night TV ads that say, get rich flipping houses, right.
Tracy:
Or buy houses with no money down.
Tego:
They think about all these air quote. I use that term too much air quote that the, the, the, the kind of the get rich you know, make lots of money, quit your job, you know, educational programs that are out there to teach people how to invest in real estate. Right?
Tracy:
Yup, yup. Educational. Yeah. So, yeah.
Tego:
So I mean, basically what they’re selling is a, you know, three, four, $5,000 class on how to buy and, you know, buy homes cheap and flip houses. Right. So there’s a lot of that out there.
Tracy:
So when you think about investing people think of flipping or investing,
Tego:
What kind of breaks down into two very broad categories and understand within these two categories, there’s a lot of subsets as well. So you’ve got the, the, the now investing and the tomorrow investing. And so when we’re thinking about now investing in real estate, that’s the flipper, that’s the person that buys a distressed property goes in there, cleans it up, makes it beautiful, resells it,
Tracy:
And now, now makes a profit. Then now, now investing,
Tego:
Investing, right? That’s that’s like a job, right?
Tego:
That’s like money for now
Tego:
Income. Yes. That’s that’s money for now. The other type of investing, which is, which is much larger in, in Eddie knows this world really well, because he was in the commercial world, was the, basically the hold investor, which is more of a you own it, you rent it, you collect rent over a time. But there’s a bunch of other advantages, which I’m going to go into here in a second. So it’s the tomorrow to a certain extent. It’s not like, you know, you’re just making the money now. It’s, it’s your investing in the property in, you’re getting cashflow and you’re getting another, a few other benefits over time. And it’s, it’s more of a long-term investment. So what
Tracy:
Are some of the ways that you make money over time with a long-term investment
Tego:
Long-Term real estate investing basically falls into there. There’s four. What we call wealth generators. So you’ve got your cashflow. Cashflow is very simple. That’s if you own a property, you rent it out, you pay all the bills, you pay your property manager. If you’re doing that, you pay whatever else you’re doing. Taxes, insurance, utilities, repairs, and so on. Right. Whatever’s leftover. Why do you,
Tracy:
That didn’t sound like there was going to be anything left over the way. You
Tracy:
Said that after you pay this and this and this and this whatever’s left over,
Tracy:
I’m like, wow, it doesn’t sound like anything would
Tracy:
There is, usually
Tego:
No. And that’s why, you know, you, you, you can’t just think, oh, it’s rent minus my mortgage payment. No, no, no. You gotta think about all that other stuff too. Yeah. So, but, but cashflow is okay, what’s leftover at the end of the month after you’ve paid all those things, right? So that’s cashflow, that’s one way you’re generating income from a real estate investment. And that, and that to a certain extent is now money. You’re getting that in your pocket, in your bank every month. And that would fall right to a P and L you know, your bottom line of your P and L on your business statement. Well, you’ve got three other things that are, are definitely more of A longterm play. So one of them is price appreciation, you know, over time, no matter what happens over time, historically home prices on real estate go up, it goes up on houses. It goes up on multiunit. It goes up on commercial. It just does. And, you know, even if you bought a home in 2007, you know, at the height of the market, you know, eventually that home would have, you know, even though it fell covered 20 or 30%, it recovered. Right. So that’s one way. So you get appreciation over time. The other, the, the third one is your loan gets paid off over time.
Tracy:
I’m assuming you have a loan. Yeah. Assuming you have a mortgage, right. You’re paying it down. Yup.
Tego:
You’re paying it down over time or even better. Your tenant is paying it down over time. Right. You’re not paying it down. Right. So again, that’s just banking money every month. Right. It’s, it’s, it’s kind of like what we talk about when we’re talking about why you should buy a home is every month you’re paying down your you’re paying down your loan payment, which is forced savings. Right. Right. and then the fourth one, and this, you know, w we could talk about this one for hours and hours and hours, and still scratch the surface. You could,
Tracy:
I couldn’t talk about it for hours and hours and hours
Tego:
And that’s tax savings. There’s a great book that I just finished reading. It’s called tax-free wealth. It’s part of the Robert Kiyosaki series of, of books. It’s written by rich dad, dad, guy. But it’s called, it’s called tax-free wealth. And the one big takeaway for me on that one was the us tax code, which is crazy long, right? It’s, there’s not a whole lot in it. This is what he said. There’s not a whole lot in the tax code about collecting taxes, but there’s a whole lot in it about how to save on taxes or certain things and behaviors that you can do that save you on taxes. And one of those things is buying real,
Tracy:
Right. And what’s interesting about that is people call those things loopholes, but it’s the tax code designed to incentivize incentivize certain behaviors. And they want people to buy properties, right? And they need rental properties for our economy and all the different benefits that come with it.
Tego:
You know, we are in a housing crisis in this country right now. It’s a different kind of housing crisis. And we had, and let’s say 2008, you know, when in 2009, when everybody was going through foreclosure, we have a housing shortage crisis. Right now, we have just like I was talking about earlier, we have, you know, more families, more people wanting homes, more people starting families. We have this huge millennial boom population of people that want homes. And there’s just not enough. There just hasn’t been enough built over the last 13 years. So anyway, back to the whole, again, that the fourth for wealth generators of hold real estate investing, just to summarize it again real quick, it’s the cashflow it’s monthly money. You got leftover. It’s the price appreciation of the property. It’s the loan payment or the loan buy down. If you do have a loan.
Tego:
And then the last one is a tax savings. And I will just want to say something about the loan. I’m a huge proponent. And I think most people that have spent a lot of time researching and understanding real estate investing getting a loan on the property and no what’s his name? Dave Ramsey is not going to like this, but, but loan leveraging against a property getting a loan from a bank, especially when we’re talking three and a half percent, mortgages has some huge advantages. I mean, again, we don’t have time to go into it now, but it’s something that, so
Tracy:
What you’re saying is you’re a big fan of other people’s money, OPM, OPM, other people’s money. So
Tego:
Eddie likes OPM too, but the good, the, the, the, the, the, the real estate leverage type of opener. Right, right. Exactly. Yeah.