How to Plan Your Wealth Building for 2017

How to Plan Your Wealth Building for 2017

Yes, I am. All right, we’re just
doing a little test here. Checking the stream. You didn’t tell me I had
something on my face, right there. All right. You got all your food
out of your teeth. Well, there was something
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out of your teeth? All right. We got 11 people. Hey, everybody, we’re
just getting started, getting the stream fired up. We’ll start here in
about four minutes. Merry Christmas, everyone. Happy New Year. Hope you’re all doing great. Are you doing great? I am, thank you for asking. Hey, everybody,
we’re just getting– But we have to turn
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see you on here as well. Sounds good. Sounds good. Thanks, you guys. Thank you, guys. OK, perfect. I’m going to close out
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live up here and– It’s red. Right. That mean’s it’s on. Oh, right. OK. Red’s good. Red is good. All right. Oh, can you go
tell them to turn– You really think– OK. Hey, Mark from New Jersey. Great to see you. Go ahead. Just tell them, for
an hour, they’re going to have to
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just a second here. Hope you guys are doing great. Making sure we’ve got
a good connection. Hey, John from Tennessee. OK, Mark, great to see you. Hey, Ellie from Philly. We’re just making sure
our bandwidth is strong enough here. We’re up in the mountains. And bandwidth is not as
great as it could be. But we’re hopefully getting a
better connection right now. All right, seems OK now. Good, good. OK. All right, guys, so
what we’re going to do is we wanted to–
first of all, hello. Happy New Year, everyone. Record– Hit record here. Almost Happy New Year. Hope you guys had
a great Christmas. We are up in the
mountains for a few weeks, enjoying some Christmas
time with the family. You’ll hear a baby in
the background as usual. And we’ve got a baby
in a swing over here. And we wanted to sort of
give back and just spend some time answering
questions about real estate. Mm-hm. And what else we
were talking about? Year-end planning, year-forward
planning, and setting your visions for what
you want your family wealth to be by the time
we sit here next year, if we do this again. Right, so I think I like to
do this annual tradition. As we take stock
of how far we’ve come this year in real estate,
wealth building, tax planning, all of those things,
building our legacy wealth, and thinking forward
to the next year. So hopefully, next year
we can do the same thing, meet back here talking
about and building upon the previous year, building
upon 2016, 2017’s goals. I watched a TED Talk
the other night. And I thought I’d
kind of kick off by talking about this TED Talk. And I thought it
was great, her point about planning for your future. Natalie and I both watched it. And her point was that
we’re so very often focused on our current goals,
what we want right now. And she makes the
point that, if we see time as elastic and making
that plan for the future, almost writing that
Christmas card– you know you get those Christmas
cards from everyone that has what they’ve done
for the whole year? Like, Johnny likes
playing soccer. And Kelly played her first piano
recital and that kind of thing. We don’t do that. But we enjoy it when
other friends do. Because we get to see
what their kids are into. And so often we don’t
do it for adults though. We never say, like,
Clayton lost 10 pounds or– why don’t we do that? Well, because it’s not accurate. Well– Because I’d like to lose– He lost it. And then he put it back on. And Natalie– Yeah, I’d like to
lose that 10 pounds. Natalie gained 35
pounds and then– With a baby. –gave birth to that 35 pounds. But so, her point is, what
if we wrote that Christmas card for the following
year, as if that year hasn’t occurred yet? And I love that idea. So a business partner
of mine in Florida– we’ve been working on this,
he with his wife, and Natalie and I are going to be working on
it here over the next few days before the New Year. And the idea is, what
if you could write that future Christmas card? What would you want
2017 to look like? And I know, maybe it
sounds a little hokey, but I have to tell you,
every time I’ve drawn up, like, a vision board
and put together my thoughts and goals for
the year, they’ve come true. This year our goal was
to hit a certain amount of passive income in 2016. Because that was on my
white board, because that was on my vision
board in my office and certain other
factors that we had planned for in our family,
we hit all of those goals. We hit all of them. Are we going to get specific? You want to get
specific about that now? Well, on the personal side, we
don’t have to get too specific. But just, on the
passive income side– Right. –we said we wanted to achieve
an additional $10,000 per month in passive income from
rental properties. Mm-hm. And we got
laser-focused on that. That meant that when other
shiny objects started coming into our lives,
we totally cut them out. And we had a specific
number of properties we wanted to acquire. We wanted one per month. Right. And– Well, two per month actually. Remember, we wanted
to get two per– Well, that– Yeah. Clayton said that. Well, I said two. And she revised us
down to one per month. So– This is how it
works for us here. Right. Hey, Prudence. Hey, Scott. A lot of great people
here in the chat. So any questions you
have– well, we’ll open it up to Q&A here
in just a few moments. And Natalie has some plans here
that we’re going to talk about, tax planning, family
planning for the new year. But I just wanted to open
it up with this thought about planning for 2017. So yeah, we were very
specific in our goals last year on how
many properties we wanted to acquire, what did
that passive income look like every month that
we were able to add onto our current amount
of properties that we had? Other things we wanted–
there were certain family goals with our
children at school and those sorts of thing. And– Having another child. That was a goal. Having another child. That was another goal. Should we pick her up? She’s right here behind us. If you see me looking
over, it’s like, I think she’s OK in the swing. She’s in a [AUDIO OUT]. And so, [AUDIO OUT]
able to sit down and [AUDIO OUT] wouldn’t have
to have enough [AUDIO OUT]. Dang it. [AUDIO OUT] Yeah, what do you think? OK, is it back now? Let’s see, it says back. It says it’s back. It says the
connection looks good. We’re back. We’re back. All right, good, good, good. Sorry about that. We’re dealing with YouTube. And honestly, YouTube’s
live streaming technology is still in beta. So they are not up to par yet. But you know, hey, we
know YouTube and Google. So hopefully, in the next
year, this will be fantastic. Anyway, what I was
saying is, think about 2017 and your goals,
putting together your Christmas card for the following year. So that is, write
out those goals as if they’ve already happened. You know, Johnny lost 10 pounds. We as a couple, as a
family, have acquired five new rental properties. My point– I wouldn’t put that
on a Christmas card. I would write it
down for yourself. But I wouldn’t send
that to family. Well, what you– That would be super obnoxious. Well, no, you’re not
going to send it out. You’re going to
keep it to yourself. So you can say– Right. You can say, you
know, Kevin and Jose– we’ve got a lot of investors
here the chat thread. And I love to see. You send me a lot of great
e-mails this past week on your goals for the new year. And I love it. So like, Kevin and
Jose, I know you want to acquire a number of more
rental properties this year. Like, we took that
trip to Hawaii. We acquired three
more rental properties and added that to our legacy
wealth building portfolio. I lost 10 pounds,
whatever those goals are. And literally, put
those on your computer. And everyday, stay
focused on those things. What it does is it
cuts out the crap. So when Shiny Object Syndrome
starts floating towards you, it enables you to stay
focused on the goals that you set out
at the new year. Right, we paid down
a primary mortgage. We paid off debt that we
had otherwise been carrying. Right. All of those things–
just allow yourself to feel what that will feel
like at this time next year. And we’ll get there. So anything else you
want to say about that before we dive into questions
and also some of our plans for taxes and wealth
planning for this year? No. No, OK. So we had a few quick questions
that people had written in. And Christopher Crocker says,
just relocated from Boston to Austin. Looking to buy my first
turnkey property in 2017. Great, Christopher,
way to take action. John Doe says, how does your
turnkey investment property work? What are your minimum
qualifications? Well, most of our properties
are in that $40,000 to $50,000 range, sometimes $60,000,
depends on the size and square footage of the property. As a lot of our investors
here know in the chat thread, it’s pretty simple. It’s a pretty simple
three-step process. We find the property,
renovate the property for you. Either it’s already
done or we renovate it, get in there knee-deep
in the rehab, and get it rented as quickly
as our team does, right as soon as we finish the renovation. So sometimes, on a heavier
rehab, it can take, you know, dry wall and plumbing
and everything like that. But it’s a pretty
simple process. Well, maybe you can
clarify, John Doe– if that is your real
name– in the Chat what you mean by
minimum qualifications. Right, because if you’re
saying the financing, a lot of local banks won’t
do financing below $50,000. So working with conventional
loans can be a bit of a pain. So you may want to do what a
lot of our investors have done, which is maybe
borrow from your 401K or use a home equity line of
credit or maybe cash on hand or what else [AUDIO OUT] dollar. So minimum requirements
are just up to you, what you’ve got to put
down or cash and then the refinance later. Maybe put a home equity line
of credit on the property and then use that money and roll
it into their second and third property. So those [AUDIO OUT]. All right, so let’s dive
into some of the planning. Well, Ted writes this. Wife wishes to reach 2,000
of freedom number per month, so she can retire. But she’s conservative
and wants an assurance. What can you say to convince
her to invest at a distance? Invest at a distance–
well, at this point, you’re going to have to
run some numbers then. And what’s the rental
website we use? Rentometer– Yeah, You say rentometer. I say “rent-o-meter.” And so, you’re going to
have to run some simulations for your wife then. Because if you live in an
area like New York City and you can show what the
returns are on rent there, and it’s going to be very
low, single digits maybe. And then you’re going
to look at some other– so you’re going to have to
take some actual numbers and simulations. Or even, we very often will
send you out a property, like, take a look at this. Look at the price, what you
rent, what it rents for, take out insurance and taxes. And then, you’ll be able to
see what you’re making on that. So again, we’re
looking for cash flow. Which she’s thinking
of it right, right. She’s not thinking about
appreciation or asset value. She’s thinking about cash flow. Right, and so all I
care about is ROI, is Return On Investment. And right here on
our YouTube channel, I got a whole series
of videos on ROI and how to figure it out. So I never fall in
love with real estate. Like, I don’t have
a wife who cares at all about the
adorable little bungalow. Like, oh, that one’s cute. We should buy that one. Oh, it sold? Well, let’s just wait for
another adorable little property like that
to come along. Our houses are all the same. They’re four walls and a roof. And we’re going
to renovate them. And a great tenant
is going to live in the property for
many years to come. So 1,000 square foot homes,
three bedroom, one bath; two bedroom, one bath;
and a few duplexes. That’s the bulk
of our portfolio. So don’t fall in love
with real estate. Try to convince your
wife that, look, it’s about the
return on investment. And if you live in a place
like Miami or San Francisco where your local
return on investment is crap– like it’s going
to cost you $500,000 to buy the same house that you could
buy in the Midwest for $40,0000 but it’s the same square
footage and you’re going to get a higher
return on your investment, it makes absolutely
no sense at all to buy locally just so you can
feel warm and fuzzy about it. And again, what are you going
to do at the end of the day? You’re going to drive
by this house every day so that you can feel
comfortable in your investment? It actually causes more pain. It actually causes more
of a problem for you. And you have to think about
the lifestyle you want. Are you going to be driving
by your properties everyday? But I think what she’s asking
for is an emotional connection to their investment. And so, you can fall in
love with the numbers. Everyone welcome baby Eve. Hello. But you have to have
an emotional investment with your team, as well. Spend some time on the phone
with your property manager and ask them, will you text
me when something goes wrong? We recently had an
experience where a property manager e-mailed me
about a heater going out with these tenants. This was my first experience
with this property manager. And she said, it’s going
to be in the teens tonight. Can I fix this? And we called her up
and we said, do not ever email about this kind of thing. Because our tenants
are going to freeze if I don’t check the email. You should have called me. You should have made every
effort to get me on the phone. Well, first of all, you should
just do those things, right? But if you feel like
you need my permission, you’ve got to get on the phone. So that was sort of
a relationship issue more than anything else. And so, you need to
make sure that you have a good relationship
with the people that you trust to
manage your investments. And I should mention that this
was a new market that we’re testing out and building. This is why it takes a
long time to build and get the sort of the
well-oiled machine that we’ve got in Indianapolis,
so where our primary market. So we’re testing certain teams,
property management teams. And they’re great. But they’re a little– we want
them to move at a certain pace. [AUDIO OUT] –email about a furnace
having [AUDIO OUT]. –that computer. Make sure that
you’re doing that. Make sure that you’re
taking care of those things. And make sure that you actually
have that thing turned back on. We don’t want an e-mail
about something like that. Rental property in the
first quarter of 2017– when you look to investing
in properties, what are the things you
evaluate when choosing the right proper– [AUDIO OUT]
neighborhoods [AUDIO OUT]. And [AUDIO OUT] way
more [AUDIO OUT] you’re going to have [AUDIO OUT]
class than you are in C-class properties. It’s just a matter of course. It’s going to happen. The properties are going
to break down more. You’re going to have more
things to fix– HVAC systems, garage door openers,
garbage disposals, all kinds of appliance packages,
and those types of things. So you want to make sure
you’re buying in– I like C into B-class
property neighborhoods. Those are my favorite. You also want to make sure
that your numbers are good. It just comes down to Return
On Investment and ROI. So for me, I won’t
touch a property unless I can get a
minimum 10% to 12% ROI. Like the property that we
just bought in another state that we’re testing
this new market, I overpaid for it on purpose. Because basically I didn’t want
to go through all the hoops and jump through all
the different things that we would
normally jump through. And I just wanted to
test a few things. So I overpaid,
meaning that I wasn’t going to get as
high an ROI as I’m used to getting in my other
markets like Indianapolis and those sorts of places. So ROI is the number
one thing that I look for when I’m investing,
Return On Investment. Number two is equity, and
number three are appreciation. But here’s the thing. I want you to think of
almost like a Venn diagram. You cannot have all three. You have to be OK with accepting
that you’re only going to be able to get two of those three. It’ll never happen. If you want to be
all warm and fuzzy and only– if you want
to try to get all three of those things– appreciation,
great equity, and great cash flow– it’s impossible. It’s impossible. So think about those
like three circles and there’s like an
overlap in the center. Two of them are going to be
stronger than the other ones. So for me, I go for ROI first. I want cash flow first. And number two, if I can
get a little bit of equity, OK, that’s fine. But I’m not really
concerned about equity. And I’m not really concerned
about appreciation. That’s a personal
preference for us. I want the monthly cash flow. That’s the whole
point of hitting that freedom number is that
monthly cash flow coming in, so that you never have to
work another day in your life. And it’s better to start
sooner rather than later. Because remember, that
cash flow compounds itself. So if you’re making $10,000 a
month in positive cash flow, it’s compounded. So five years from now,
what will your life look like when you’ve started
today to make that cash flow. So I hope that
answers the question. So then this month, as I’ve
been trying to get together our finances so we
can estimate taxes, I went to the spreadsheet
that I keep for each property. And I put in every month what
we made in rental income. And then I have another block
of equations where I write down everything that we’ve spent. And that includes taxes
and insurance and property management fees and
did we fix something and is there an electric
bill or whatever, from the city,
any of that stuff. And then I see, now
the year is over. How much did that property make? And so, then I know what
we’re being taxed on. I know, were our
expenses high or low? Does that need to be fixed? So it’s important to keep
track of all that stuff. But now is a good time
to know what you made so that, if you’re going to make
any additional investments, you have five days left in the
year to make those so that you can lower your taxation. So this is all a really
important part of planning. So now is the time to open
up those spreadsheets. And we always give the
same spreadsheet away. We’ll make sure we
include it somewhere, wherever we’re linking you to. But make sure that those
spreadsheets are complete, that they have all your
expenditures on there. And then you’ll know,
is there anything else? Can I buy anything else
by the end of the year? So we’ve got a lot of great
people here in the Chat. Nice to see you, Chandler. Great to see you here
in the Chat as well. Bob Dundon writes us, can
you realize any benefits, such as depreciation
or other tax benefits, when buying a property
in a self-directed IRA? That’s a really good
question about depreciation. I’m going to talk to you
off-camera for a second– Louder please. OK. –about depreciation
inside of an IRA. I don’t see why you couldn’t. But I don’t know how that
benefits you this tax year. So you’re going to have to
talk to your accountant. Because if it’s a
self-directed Roth, the benefits are not deferred. But if it’s a self-directed
regular traditional IRA, then your benefits
are tax deferred. So you should talk
to your accountant. Yeah, again, talk to your
accountant about this. But the bottom line is,
when you buy properties inside of an IRA– we
actually [AUDIO OUT] property [AUDIO OUT]
–9 and 1/2, then that money cash flow that
you were [AUDIO OUT]. Yeah. Not that if you own it inside of
your IRA, which is [AUDIO OUT], you [AUDIO OUT] get– Right. Yeah, and exactly
as Brian point– so [AUDIO OUT] years
old and you’re not having to pay taxes, that
is an incredible tool. Can you borrow from– Asks us, how many LLCs do we
have before you get a holding company? David [INAUDIBLE] By the
way, David was so kind. He’s one of our
investors, he and Valerie. Stay right here. Answer his que– OK, I’ll stay [AUDIO OUT]
is a good idea to then get a holding company. You have one LLC. The way [AUDIO OUT] is
to have up to $150,000 of value in each LLC. So we had to now– thank
you for the cookies, David, we really have
been enjoying them. Yeah, David and
Valerie– very great. I think you have, what? How many properties? Three? Four now? And they just picked
up another two I think. So they’re cranking it. Thank you for the cookies. They were delicious. We’ve been eating
them every night. So I love our investors. You guys are amazing. So I’m sorry. Answer the question. So I don’t know where I was. Sorry. You were interrupting
me with cookies. Sorry. And so, I would say, if
you have more than one, it’s a good time to think
about the holding company. Especially because
there are ways in which to put your holding
company and, therefore, your taxation in the
most favorable state possible for you. And your estate planner
can tell you where that is. And so, the way we do it
is we have up to $150,000 in value in each LLC. And those LLCs report
to a holding company. And then– [BABY CRYING] –we have– sorry– what’s
called a pour-over trust. So it goes sort of like,
Clayton and Natalie. And then there’s
a pour-over trust. And then the trust holds
all of these assets. Think of it almost like
Christmas ornaments that hang down from this tree. But the pour-over trust,
if it’s set up correctly, it will mean that if you left
anything out– like maybe you had some family stocks
and bonds that you didn’t know about– that stuff would
still be poured over directly to the descendants, the
way you want them to go. So the holding company is
like hung on the ornament from the pour-over trust. And then you hang your ornaments
down from the holding company and you have your
individual LLCs. And so, you break those out
by $150,000 [INAUDIBLE]. OK, so let’s dive a little
bit more deeply into that. Because this is what I really
wanted to talk about today is the estate planning,
planning your wealth for 2017 and beyond, and some
high-level sort of ninja strategies for investing. I see many people here
in the Chat thread who own multiple properties or
who are just getting started. But it’s really important
to think about these things beyond just getting started. So a lot of people get excited. They buy that first
rental property. And then they get started buying
that first rental property. But then, they don’t plan
for the larger umbrella picture of everything. So in this past year, we
put a lot of these pieces in place to really make
sure that we were planning for our children, we
were planning just for our family safety
legally, all of those things. Yeah. Let’s just walk through,
in three minutes, what we did this year. That we think you
should seek advice from your own accountant. We use ProVision. They’ve been fantastic. And we then worked
with a separate lawyer to set up our trust and to
build all of those extra layers of complexity. But they’re really so important
for our family’s future. Yeah, and I will– just
to go back to ProVision. Brian Keller in the Chat says
that ProVision told them, no depreciation inside an IRA. Which does make sense. Because depreciation
is a sliding scale. And so, your IRA’s going
to affect you differently at tax time. So that’s something you should
talk to your person about. But last year I was
looking at my goals. And I had written
down that I would like to hire ProVision to do our
taxes and our estate planning this year, because they’re not
cheap service by any stretch. And sometimes, we refer people. And they come back and
they’re like, ouch! That’s expensive. But this is something
that was important to me. I felt the exact same way. I was like, oh, how are
we going to afford that? But I wrote it down in
my diary, in my goals, that I would love to
pay for ProVision to do our proper estate planning. And this year, it happened. And we started in around
March or April, I believe, right after we moved. So no, that would be even
May by the time we said, OK. I feel comfortable
enough to pay for this. Let’s do it. And so, what they did was
looked at all of our assets. And what we had been
doing is putting all of our rental properties
inside the same LLC, because our tax person
before ProVision had said, oh, I don’t file all these tax
returns for various businesses. So do all your
business in this LLC. And that includes
our broadcast brands. Because we’re both broadcasters. And we have freelance
speaking engagements or– I built an iPhone
app or an iPad app. Right, Clayton’s iPad
app, Read Quick– we put that in that LLC. So it was like very
disparate businesses all in the same LLC– Bottom line is– –because our tax
person didn’t want to file several tax returns. Terrible advice. It made no sense. But I thought, OK. And I also thought, that way we
can funnel all of our expenses through the same business so
that it lowers our taxation. Well, it just doesn’t
work like that for reasons we won’t get into. So We hired ProVision. And they said, look, you need
to think about protection of, like, yourself. For instance, if
Clayton gives you crappy advice here on
YouTube– which he never would. And you decide, oh my gosh. I’m going to go after everything
that guy– then what about me? You’re going after me as well. So we need to protect ourselves. If I do something
like I tell you to put lavender oil
on your light bulbs and your house burns
down and then you say, well, I’m going
to sue that lady. Which you could. But then, you could
go after Clayton. So we need to protect ourselves. We need to protect our
assets and our tenants that live inside of those assets. And we need to protect
her children as well. And so, we realized,
everything we had was in this one LLC,
which is bad news. So we had to then hire
a law firm in order to take all of our assets and
put them into appropriate LLCs and corporations. Some of them are taxed as
an S-Corp. Some of them are taxed as an LLC. They report to a
holding company. But we also needed a
proper trust as well, like I said, the
pour-over trust in case we forget that we own–
I don’t know– securities from Clayton’s
grandmother or whatever. Then that stuff,
if and when it’s found when something
happens to us, then gets poured over in
the appropriate place. And then we also
needed to make sure that we had the right people who
were going to execute our will and trust and our estate. And so we had to
go through that. It was a big project
for us this year. But it feels really
good to have it done. And you might say, well, I have
one rental property and a car and a house and two kids. And so, I don’t need to
put on my branded stuff in different LLCs. Which may be true. Your life may be a
tiny bit simpler, because you’ve got one
investment and one job. But it’s good to think about
that stuff going forward. Because if you intend to
have five rental properties by next year, then they
shouldn’t be in the same LLC. And you need to make sure
that there’s someone who understands what you’ve done. And if something happens
to you between now and next Christmas–
god forbid– then your executor of your trust
knows how to come along and say, OK. This money is going to
go to your kids when, or your brother, or which
brother, or that kind of stuff. These are hard questions
that– you should have it in your goals to
have them figured out by the end of next year. I don’t want to
tell you your goals. But this is an important goal. Yeah, so like one
of my close friends. He’s like, is it time for
me to start doing this? I rent an apartment. But I’ve got two
rental properties now. I helped him get his first
two rental properties. And he’s like, he
just turned 40. And he’s like, I can’t believe
I actually never really planned for my future before. And wow. I really need to start taking
things to the next level. So he actually set up
a call with ProVision. And he’s like, you know
that– whatever it was, a few grand to work with them. He’s like, it was worth it. It’s totally worth it to
pay a good accountant who understands real
estate and understands your strategies going forward. It’s really important. Also– And we used a law firm– –it’s a write-off. –to execute on this that
had worked with ProVision. So because ProVision
was our wealth planner, they give you what’s
called a structure diagram. It looks like circles. Like, here’s your names. Here’s what you own. Here are your children. Here is each LLC. Like I said, it looks like
Christmas ornaments hanging from each appropriate entity. And then I said, OK, well
now I need a lawyer to set up these LLCs appropriately. So this LLC reports to
this holding company. I don’t know how to do that. I’m sure if you just
checked the wrong box when you do it online, things
could go really bad for you. So they recommended a law
firm called York and Howell. I think they just added a
third partner this year. It’s like York and
Howell– Howell is what I’m saying–
and so-and-so. Just Google York and Howell. One of them has a TED
Talk, which I highly recommend you watching and
maybe reading their book. And so, they were able to
take the structure diagram, because they work so closely
with ProVision and say, yep. We can set this up. We understand it. And of course, they had some
questions every now and again. Do you want to be
equal partners on this. Do you want this? And you’ll have to be involved
definitely in the situation. Or we’re going to file this. It costs this much. Can we spend that much? So it’s a partnership. That at least I know that the
right people are doing it. So when you choose
your wealth planners, ask if they have lawyers
that they like to work with. Now, one thing I’ll say is
that– I don’t know what. The book is called
Entrusted, [INAUDIBLE]. Oh, I just put that in the Chat. We were mentioning their book. Andrew Howell’s book is
fantastic, called Entrusted. So if you get a chance
to read it, do so. Anyway, we had a
couple of questions. While you’re thinking of
those other questions, Dan Varley was asking–
and he is a lawyer himself– which law
firm do you consult with to set up these
trusts and these companies? It is York, Howell– They’re York and Howell. And I just got in
their Christmas card that they added a third partner. So it’s like, York and
Howell and so-and-so. But if you just Google York and
Howell, they’re based, I think, in the Scottsdale area. Yeah, very good. They’re very, very great. John Doe says, how did
you guys feel when you got your first rental check? And Prudence writes, I had a
glass of wine with my invoice. I was so happy. TMI. No, that’s not TMI. That’s great. I think– Clayton, do the dance. Yeah, I did like the
Charlie Brown happy dance. And now, we’ve got, geez, now
dozens of rental properties. And we get those
monthly statements. It’s– We just sort of look
at each other like– Can you believe this? –we’re doing it. Because, I guess, the thing
is, so many people tell you you can’t. And they don’t advertise
this stuff on TV, right? You’re not going
to see ads on TV for investing in real estate. Because it’s you and the tenant. It’s that simple transaction. You own the property. And the tenant pays
you every month. Yeah, you have a
property manager there who’s managing it for you. But are you ever
going to– I mean, you’re not going to
see, like, Vanguard when they put out big
television ads for– we’re planning your retirement. Follow the green line. Or Fidelity– was it
Fidelity’s commercials? I think so. They spend millions of dollars,
because they make millions of dollars off of your money. So they spend millions of
dollars with those commercials. Follow the green line
for your retirement. Or that guy with that mustache
that stands in the field. And he’s like, we asked 100
people to pick their whatever. And they have, like,
a big paint roller and they’re rolling
up the side of a wall. And they have this chart. Well, the fallacy there
is not that you don’t need to plan for your retirement. It’s that a bucket
of money is going to get you to the
end of your life, between the time you stop
drawing a paycheck and the time you die. Right, the average
401K retirement. And that’s just
really hard to do. Because you can’t live
on a bucket of money. What we’re trying to do is
live on a stream of money. And yeah, the average
401K retirement– which Clayton was
about to say– is low. It’s like $90,000. It’s like $96,000. And then what are
you going to do? I don’t know. If you live here
in this country, that’s not going to
get you all that far. And it’s not going
to get you 10 years– I would love to ask everyone– –unless you camp. I would love to ask
everyone in the Chat thread right now this
question– yes or no. The average 401K
retirement is $96,000. If you retired at
65-years-old, would you be able to live for the rest
of your life on $96,000 total? Like, that’s your bucket. Would you be able to live? Yes or no. I mean, you can survive. But you’re not going to
be living your best life. That’s not the life
that you want to live. You can maybe live in the
woods like Henry David Thoreau. But you still got to pay taxes. Didn’t Thoreau go to jail
because he didn’t pay taxes? Yeah– So yeah. –everyone’s saying, no way. Everyone’s saying
no way in the Chat. Sherri, Eric,
Corey, Christopher. Nope, nope, nope, nope, no way. Yeah, you don’t want
to live that way. And Tom Wheelwright’s
great argument is that, why would you
want– like, when you retire, it’s our goal to retire
in a higher [AUDIO OUT] if [AUDIO OUT] at a
higher tax bracket. We’ll take that money
to work for you now, creating streams of income. There’s no preference. Tom Wheelwright would say,
I almost make the argument, take that 10% tax penalty now. Pay the taxes on it. And use it to your advantage to
go and buy rental real estate. So– Right. I think our stream
is frozen again. And while we’re catching up
with the stream and Clayton can look for another– Oh, it’s good now. Mark’s back. OK. OK. Clayton can look for
another question to take. But I just want to reiterate
that this is our journey that we take other
people on with, so that they can consider
something similar. We don’t give hard and
fast financial advice. But we let you, sort of, behind
the curtain to see what we do and what we’re learning. And hopefully, that
helps other people. It’s really our goal to help
and empower other families at wealth management. Ted asks this question, how
long will your property– will your management
company stay on for an investor that
lives at a distance and will not be able to
manage the properties? Well– How long? Well, I think the
question is, once we’re done with the transaction
and we own the property, will you be gone? And the answer is, no. I mean, we as Morris’ Invest
are here for the long haul. But the property
management companies that we work with in
our different markets have been there for many
years and have a track record and aren’t going anywhere. So we work with multiple
different property management companies in different markets. So, no. They’re there for the long haul. And of course,
they have a lease. There’s a lease in
place with the tenant. And so, if that
property management team should fold up or something,
you could literally take your property across town
to another property management company if you wanted to. Personally, we try to set you
up for success with the property managers that we personally
use that will go out in the middle of the night and
fix things, will not charge you and nickel-and-dime
you for site visits. You know, after a
thunderstorm, if there’s branches on the roof, they
don’t charge you $70 to go and just look at the house
to make sure that there’s a branch on the roof. So we try to really work with
people that are just like us. They’re human beings and– Usually, they’re in the
neighborhood anyway. So like, they’re working this– One of our crews
is going through. –property all the time. They’re going to stop
by 123 Main Street and just check on things. [AUDIO OUT] has to
go in. [AUDIO OUT] and a note for
another [AUDIO OUT]. Because we wanted to
acquire a bigger cash flow. So we went and got a portfolio
loan, eight properties inside one big loan. And they’ll lend to you based
on a couple of criteria. One, your credit, of course. The merit of the deal. Are the properties good? Are they cash flowing? What are they worth? Do They need to do
appraisals on all of this. But also, your
current holdings are a part of your credit and
your financial health. So if you’re investing inside
your self-directed IRA, you do own maybe one, two,
or three properties inside of there. And your lender will
then count that. And they’ll say, OK. Then we’re willing
to lend you 80% at 8% per year for 30 years. And then you say,
OK, I want that. And so what we were
able to do is get this deal of eight properties. They all cash flow between
$600 and $800 per month. And so, the lot of them
makes about $5,500 a month. That’s $5,500 a
month that they make. But the debt servicing
on it– meaning the loan that I paid back to
the portfolio company– is about $2,500. So we’re making $3,000 a
month on this portfolio. The lenders required that
we pay taxes and insurance inside of the mortgage payment. So I don’t even have to
save for that kind of thing. So now, I’ve got a
new lot of properties inside this portfolio loan. And we have $3,000 a month
coming into our family. And that’s it. There’s more cash. And all we had to do– we
did have to put down 30%. And you can negotiate less
if you can’t afford that. But that one’s
such a sweet deal. I feel like because
I’ve been having babies and I work freelance, I
kind of am like, well, do I draw a regular paycheck? And by securing
that portfolio loan, I feel like I did now
contribute an extra $3,000 to my family income per
month, which is awesome. It felt great. So I hope that
answers the question. Are we loud enough? I saw someone saying
the volume was low. Mark was saying
the volume is low. Is it because my
wife speaks softly but she wields a big stick? I just want make sure we’re
loud enough for you guys. This was a few minutes ago. So I apologize. Demola wants to know is,
there a tool for calculating good cities and
neighborhoods to invest in? Well, let me just
give you my criteria. There’s not one tool
that’s out there. I mean, you could honestly
watch my YouTube channel. Because I have a
series of videos where I talk about
high vacancy rates, the cities with the
lowest vacancy rates, the cities with the
highest vacancy rates, the cities with the
highest crime rates, the cities with the
lowest crime rates. So I’ve done specific videos. So my criteria is pretty simple. Like, I want stable
blue-collar job markets that are affordable,
low taxes, where there are cities that
aren’t tied to one employer. Like if Nissan decides
to close up their plant and move out of Memphis
or something like that, the whole city is crushed
as a result of that. That’s not something
that I want. So in cities that I like to
invest in– Indianapolis, my number one market. Why do I love it? Taxes are ridiculously low. There’s no flood
zone to worry about. So along the Mississippi
River in St. Louis, you saw what happened a few
years ago with flooding. I don’t want to have
to deal with that. So it’s one of those cities
that’s kind of plunked there in a town that really
doesn’t have, like, a navigable waterway
to worry about. I want companies and
businesses that are local and not going anywhere. So the life sciences buildings
that have been built, the hospitals that are new to
Indianapolis, the convention centers, the hotels, the
distribution centers– like all of the long-haul trucking
companies that are there. So one person wrote
to me and said, I couldn’t believe how much
stuff comes out of the Midwest. Right. So you have a lot of
the FedEx airport hubs that are located in these areas. So they employ a lot of people. And even in a down
economy, these are the types of jobs
that don’t go anywhere. I like to say that
the reason I like to invest in C-class
neighborhoods is because those are the
people that don’t lose their jobs in a down economy. These are the postal
employees that rent from us. We just rented a property
to a high school principal. So I get really angry
when people are like, oh, you get terrible
tenants in C-class property. They’re just going to
destroy your houses. I’m like, OK, tell
that to the woman who– It’s incredibly classist. It’s very classist. It really upsets me actually. I think it comes from that
sort of East Coast, West Coast elitism. And it’s like, you know what? Fly into these towns
and see these people. Like, David, I
know you just went and visited your
properties in Indianapolis. And one of our other investors
who lives in New York City, he goes, I don’t understand
what people talk about. They just don’t understand. It’s almost like watching A
Christmas Story with Ralphie. Like that house where
they live, that’s a typical house that we rent. Ralphie and his dad,
with the leg lamp– that’s a typical-looking
house that we rent. So those types of
criteria– I want to make sure that if one
of those big employers leaves town that all of my
tenants are not out of a job. What else? Hm, I look for good
charter schools. Because even the
school districts that we’re located in, they’re
not the greatest school districts in the world. But you know why the people
that live in those houses? It’s because there’s good
charter schools nearby. So they’re actually not even
going the public schools. They’re going to
the charter schools, and they don’t care
about the public schools. Vacancy rate– the reason I
like C-class neighborhoods is because you’re going to have
higher vacancy rates in A-class neighborhoods. And someone on the
Chat had asked, do you see the
differences in your rent when the economy turns down? And for A-class neighborhoods,
yeah, you definitely do. I’ll tell you the story that I
had a condo in San Francisco. And when I left San Francisco
right before the 2008 downturn, I was renting for– I want
to say– my mortgage on that was around $2,000 a month. And I was able to
put a tenant in there for, like, $2,500 a month. And then, the downturn hit. And because this was
downtown San Francisco, right down by the
Ferry building, I couldn’t get anyone in
there for $1,500 a month. So then, I was
losing $500 a month. And then the economy
turned right back around. And right before I sold it,
I was getting close to $3,000 a month. So that sucked. And that’s an
A-class neighborhood. So yes, you are going to– And the tenants destroyed it. And the A– We’ve told this
story many times. Yeah, on the podcast. But– I don’t want to tell you
about the dog pee again. But the A-class tenant
destroyed the house. Right. So there goes your
classist argument that C-class tenants don’t
take care of your property. Because it’s their property. So yeah. But then, we’ve had so little
variation with the properties that we rent that are turnkey. Because again, we’re not aiming
towards Silicon Valley type fluctuation. We’re going to support
working-class families to have somewhere nice to live. And so, that kind of
thing– even though we’ve talked about many
times on the podcast that we believe that there’s
probably a downturn coming for our economy–
people are still going to have blue-collar
jobs and need somewhere nice to live. And so, that’s where we come in. That’s our goal, is to be
involved in that business. And the point is that,
in a down economy, it’s not the milk delivery
man that loses his job. It’s the guy sitting
in the office who tells the milk delivery
man which houses to deliver to who loses his job. And that’s why the– Did you just make that up? I did. That was pretty good. I like milk. [LAUGHTER] I don’t like milk. But I like wine. But no, if you think
about it, it’s true. In those A-class
neighborhoods, why you’re going to see a higher vacancy rate? So for instance, if you
look at Indianapolis and you look at the vacancy
rate– that’s why I love it. Because it’s below
the national average. You’ve got about a 5 and
1/4 percent vacancy rate. It’s one of the
lowest in the country. But if you look at the A-class
neighborhoods in Indianapolis, those around the reservoir,
the nice areas, the $300,000, $400,000 homes, the
vacancy rate is actually higher than the
C-class neighborhoods. Those are the people
that end up losing their jobs unfortunately. So again, those
are the criteria, the things that I look
for in my neighborhoods. All right, let’s see. We got a lot of
other questions here. OK, group property
management, the leg lamp– we’ve had two people ask
about different markets and diversifying your portfolio. And if you’re a
student of economics and you study modern economic
theory then you know, you want to diversify
a portfolio. And so, we are looking
at other neighborhoods. We own some properties
in Michigan, in– Pennsylvania. Pennsylvania and North Carolina. North Carolina. We’re slowly building a
team in North Carolina. But it takes a long time to
get to– and I know I say this. My goal is, maybe by 2017,
mid-2017, maybe by 2018, to have another market online. But again, her point about
that property manager calling us or e-mailing
us about whether or not to replace
a circuit board on a furnace– like that’s
the kind of little piddly crap that I don’t ever have to
deal with my other teams. It just means we don’t have
the right chemistry yet to then help other people
invest in that market. Because if this
person– and then I got another email the next
day about something else. It’s like, oh, the plumbing
in the sink isn’t working. And I’m like,
tomorrow’s Christmas. Can you please stop emailing
me about this kind of thing and get it fixed? Because maybe– I
don’t know if they think I’m going to yell
at them if they fix it without my permission or if I’m
going to freak out because they spent $200 on a plumber. I’m not going to keep
that tenant for very long if I freeze them and also make
sure that their kitchen doesn’t work before Christmas. And so, you need to
make sure you have the right chemistry of a team. And so, that’s what we’re
working on in other markets. So Jody writes, how
does one do diligence for a turnkey property
purchased from Morris Invest in another state? Well, the bottom line
is, you can fly there if you want to spend
the money and do that. That’s totally up to you. That’s a really good question. And it eats into your
ROI anytime you do that. But that’s totally up to you. But it is a write-off. It is a write-off, exactly. And we’ve talked about
that on the podcast. So– And maybe you want to go
to the Philharmonic there. I mean, you can make a
trip out of it, right? Yeah– You can go there. –go meet our team, as David
knows and Prudence and others. They have a really
good symphony. I don’t know if
Prudence has gone there. But anyway, team is great, will
meet with you, take you around. So that’s one way, of course. But again, I almost think
that’s not really an answer. Because you’re not a contractor. So you don’t really know. I think a lot of people like
to fly into markets, in a way, to kind of feel
like it’s fun to do. But at the end of the
day, you don’t know. You don’t know that
what type of plumbing is going in the property. You’re not doing the inspection. So like, we’ll do
a full inspection on all of our properties. So we’ll do a full inspection. And then, we will match it
up with our lead contractor– And you get that inspection. –or head of construction. Yeah, so our head
of construction will have a whole scope
of work on everything we’re going to do
on the property. We match that up. And that way– a
third-party inspector. And that means we’re
not missing anything. So you know, if our team didn’t
crawl up through the rafter beams or something
or whatever, we’re going to make sure it’s all
taken care of and buttoned up. And then the proof is
in the pudding, right? The property is
renovated and it’s rented and it’s cash flowing. So to me, that’s– but when
you’re doing due diligence, you want to find
out, first of all, what is the cash
flow going to be? What are the numbers? Do the numbers make sense? And is the property
going to be renovated? What’s going to be
done on the property? Are you putting in
new PEX plumbing? Is it getting a new roof or not? Is there still 20 years
of life left on the roof? Like, these are the questions
our team will go over with you and walk you through
all these points. And at the end of the day,
with all of our properties, we want to make sure– our
goal with all of our properties is that we’ve got a minimum
10 to 15 years before you’re going to have to worry
about any repairs. That means, when you purchase
a property through us, you’re going to basically
be making back three times the amount you put into it,
three times over, before you’re going to have to replace
a $400 water heater. But this is such
a good question. Because I remember when I
was trying to figure out how to get into real estate. You kind of fart
around on Zillow. And you’re like, mm,
is that worth this? Is that a good deal? It’s really hard– Zillow is crap. –to figure out– Right, Zillow is crap. Redfin is crap. It’s hard to understand
what you’re seeing and what the market is and whether or
not that’s– the internet can be tough for this kind of thing. So you want to,
again, really look at the anatomy of each deal. Look on Rentometer. And make sure that
what we’re telling you you can get for rent
seems about right. And if you put down
this much money and you’re getting this
back from rent and, otherwise, you’ve got
some good insurance on it if anything happens– like,
a tenant does something dumb inside your house–
that you’re protected, then it’s the deal
you’re looking at. You really want to look at
the anatomy of each deal. Right, it’s the numbers
at the end of the day. So exactly. To Natalie’s point, the internet
can only get you so far. You’ve got to, at some point,
take a leap of faith– I’m telling you, that’s the bottom
line– like so many people here have in the Chat thread. You’ve got to, at some point,
if the numbers look right. If you’re an overly analytical
person and you think, ah, this isn’t for me. I don’t know. I’m nervous about it. I live in Florida. I can’t do this. What do the numbers say? We know our rents like
the back of our hand. So if we’re saying
it’s going to rent for $650 a month that’s because
it could probably rent for $700 a month. And we’re being competitive and
making sure super conservative so it’s going to hit that $650. All right, I’m going to
help you out with the ROI. Ready? So $650 a month times 12. OK, here’s how we
figure out ROI. $650 a month times 12. And then we want to take out 40%
for vacancy, repairs, expenses, all of those things that just
kind of come out of the blue. So this is a super
conservative number. So $650 times 12. Then, we’re going to
multiply it times 0.6. That’s going to remove
that 40% just to be super secure and conservative. Then, once we have that
number, that’s $4,680, right? So that’s $4,680. Then, we’re going to divide
that by the all-in cost of the house. So let’s just say, for round
numbers, the house is $40,000. We’re going to divide
that number by $40,000. That’s a 12% return. That’s a 12% ROI. That’s super conservative
because, remember, we took out that 40%. Most of the time, we’re
not going to have repairs, expenses, vacancies
to really worry about. So– You will have taxes. You will have taxes. But they’re minimal. That’s assured. But think about that
for a second that, really, on paper,
you’re going to end up with a 20% or even higher
ROI at the end of the year. I bet your stock portfolio
is not doing that. Yeah, I can’t
imagine it would be. So those are some
of the ways that I would consider looking and
doing your due diligence. Do the numbers make sense? I see some other websites
advertising, like, turnkey properties. And they’ll put
they’ll put what they call the gross yield,
meaning– what we just gave you was the minus 40%. So because you have
to figure vacancies, you got to figure repairs,
those types of things, they’re advertising the gross. Which I think is– I don’t know. I think it’s
disingenuous personally. It’s gross. I think it’s disingenuous. I could advertise our
properties and say, you’re going to receive a
22% gross ROI or 22% ROI. And someone could ask you,
well, is that gross or net? Well, it’s gross. But I don’t want to get
into the weeds and– Right. No, no. So when you see “gross
yield,” make sure that you know that
that’s not accounting for vacancies, repairs,
expenses, taxes, property management. You’re going have to take
off– I saw someone advertising a property with like a 10%
gross yield the other day. And I thought, that’s
like a 1% return. Or they’re going to break even. I hope some poor sap
doesn’t buy that property. So make sure you know what
you’re doing with your numbers before you invest. Right. OK, and someone said,
about the portfolio loan, are you using the
properties inside your IRA to obtain properties
outside the IRA? And not really. It’s not really that you’re
leveraging them at all. It’s just that it’s a part of
your overall financial health so that the lender
will then see, well, they own these things. They have this much cash. And that’s how they decide what
financial product to offer you. It’s not that you’re leveraging. You can’t really leverage
properties inside of your IRA for something else. Right, and David
writes– because he traveled to one of our
markets to see properties. He said, it’s a vacation
for us and a write-off. Absolutely. So there you go. You can treat it as a
write-off and go and see it. But I think David will admit
that, at the end of the day, it’s going to come down to, what
does the head of construction say? The scope of work? What types of things are
going into the property with the inspection? And what are the numbers
going to look like on rent? At the end of the day, the proof
is in that pudding rather than a trip to that area. I think he would
totally agree with that. For instance, I recently made– Although, Tom Wheelwright
says, invest in the places you want to travel as
well so that your travel– Hawaii. –then becomes– yeah, so that
your travel is a write-off. Now, we have yet to establish
a turnkey property in Bordeaux. Yeah, can we do that in France? Or a turnkey business. That would be great. But maybe we’ll make that a
goal for– not ’17 but ’18. So OK, Brian writes,
what about taking out costs for property management? 10% in taxes? Should that be part of the ROI? And yes, Brian, so exactly. In that 40% number,
we’ll take out that 10%. The taxes are in there
as well, vacancy. So that accounts for,
like, two, three months worth of vacancies. I have investor friends who
tell me, you’re crazy to do 40%. Like, that’s a really
conservative number. Even 30% is pushing it. Well, I like to say, good. I advertise properties
with 40% taken out of it, so that your net ROI– You don’t want to be surprised
by this kind of thing. Right. So I like looking
at our spreadsheet at the end of the year. Because we’ll figure
at taking out 40%. But then, when she pulls
up the spreadsheets at the end of the year,
she’s like, we actually had over 20% higher ROI
on these properties. I’m like, good. So in 10 years when we have
to replace the furnace, then it might be a little
bit different. Yeah, Brian says he was
calculating property management and taxes in
addition to the 40%. No, we account for
that inside of the 40%. Cigar says, can we come down
and check out the operation? Sure, absolutely. Our team would love
to meet with you. Ariel says, how do
you find tenants? Do you help if the tenants move? Well, our– Help move them out? Like pack their boxes? No, I think, if it’s vacant. Of course. And that’s what a great property
management team will do. First of all, a property
management team– a good one– is going to do a full
background check. That means a criminal
background check, credit check. They’re going to
verify employment. They’re going to check
with previous landlords to make sure they pay on time. And they are going to make
sure that they pay on time. So they’re responsible
for collecting that rent. And December is one of the
most difficult times, right? Because those families, even
though they are blue-collar, hardworking, they are concerned
about putting presents under their Christmas trees. So our team makes sure
that, hey, John, number one, pay your rent. Then, make sure you’ve got those
presents under the Christmas tree. And so, our team does a
great job of making sure that’s taken care of. So yes. And if they were suddenly to
move out and break a lease, then the team would
of course move quickly to get it turned over and get
a new tenant in there quickly. Well maybe they’re asking
if they replace the tenants? It’s the property
management company that does replace the tenants. If a tenant moves out, then
they immediately [FINGER SNAP] start to look to
find another one. And they use the same criteria. But they usually do
charge a lease-up fee. I know I’ve seen some forums
where people say you shouldn’t pay a lease-up fee. Or some people say,
yes, you should. I’m A-OK with that. Because I want to make sure that
they are paid for their time to properly vet the
tenants and also get a strong lease in place. I want to make sure
that the lease is not an expired document
or doesn’t have any kind of language that no
longer applies or any of that. So we pay $150 per lease-up
when there’s a new tenant, so that we get
everything in place. We get the credit check. They handle giving
them the keys. And you know, if you think
about it, $150 for their time it’s not that much
to do that properly. So I’m OK with that. I think some investors
will say they don’t want to pay
a lease-up fee, because it incents the
property management to have high turnover, so that they’re
constantly making this fee. And I understand that. That has not been our
experience at all. And like I said, I
want to make sure that these things are done well. But if you find yourself paying
a lease-up fee pretty often, you do not have a
turnkey property. You have something that–
what’s the opposite of turnkey? Well, I would be
getting a new property– Stopkey. Yeah. I would be getting a new
property management team. Like, if they were putting
tenants in the properties just– so what our property
management team who will do very often is they’ll wait. So let’s say they’ve got
a great property for you. We’ve renovated it. And it looks fantastic. And it’s three bedroom,
one bath, whatever. They’re not going to
just shove any old tenant into that property knowing
that six months later they’re going to have to put
a new tenant in there, because that tenant is just
sort of a marginalized tenant right now. They’re going to wait,
maybe a few weeks. Maybe you, as a new investor,
gets a little itchy. You’re a little nervous. Like, why is this
property not rented? There’s a reason for that. They want to make
sure they’re putting in a great tenant that wants
to stay there for many years. That’s the goal
with our tenants, they want to stay
for many years. And so, you’re going to
have tenant turnover. Absolutely. You’ve got to figure that
into your overall numbers. It’s a factor of life. But can you mitigate that? Keep that number
as low as possible. That’s the goal. And Ariel wanted to know,
how do you find your tenants? If you’re doing this
yourself, as Sherri writes, you yard signs. So yeah, our property management
team will put out yard signs. They’ll put on the busy streets. They’ll accept applications. We have three offices. And we try to match
up the right tenant. Oh, you want a
three bedroom house? [SNAPS FINGERS] Great. And we had a little [AUDIO OUT]
hopefully [AUDIO OUT]. Oh, it’s building
back up [AUDIO OUT] Right. [AUDIO OUT] So we [AUDIO OUT]. You want to take
that one for Brian? Well, yes, I can. But I will tell
you that the way I did that was to hire
a lawyer to do that. Because when you set up your
LLCs on each state’s website, they’re going to ask you
all sorts of questions about whether or not you’re going to
want a joint LLCs [INAUDIBLE] three properties
into [AUDIO OUT]. Do-do-do-do. OK, what is the average
renovation cost? James wants to know the
average renovation cost. Roughly around $15,000
to $20,000– roughly. And again, I won’t buy
a house on the front-end unless I can make
sure I hit that ROI, that Return-On-Investment
on the back-end. So again, I want to hit that
minimum 10% to 12% net ROI. A And if I can’t, because
there’s some big problem with the house, then I’m just
going to pass on the house. There are too many fish in the
sea for me to worry about that. And the last question there
was, how do you get started? And of course, you
can book a call. Well, yeah, if you want
to get started with us. I mean, if you guys are
doing this on your own in your own market, great. If you’re doing this and
you like swinging hammers and hanging drywall and
managing contractors and doing all that– like, a lot
of people like to do that stuff and finding property
managers and locating houses and all of that. If that’s what you
want to do, great. I would say, get out
there and get started. If you want to work with
us, it’s super simple. You know, you could always
just go to our website And just click on the Book
a Call button or Learn More. And it’ll ask you a series
of, like, four questions. And then, pick a calendar time
to talk with me or the team. We’ll talk for,
like, half an hour and figure out if
it’s a fit for you, if you want to start
building passive income. But I also want to
congratulate you for watching a YouTube stream
about two knuckleheads who geek out about family wealth
building all the time. Because that means that
you’re serious about it if you’ve made it this
far, and you really have a vision for what you
see your life becoming. And I think that’s amazing. So hopefully, your
vision will [INAUDIBLE]. I don’t know. We just said, look,
we got to take action. We put that out of our
head and take action. I was so impressed. And I see that in my best
friend who took action this year to buy some properties. I’m still trying to
convince my other friend to take action and start
his wealth building. But that theme has
just made me so proud of all of you for
taking action in real estate and spending, like Natalie said,
a portion of your afternoon with us today to focus
on your family’s wealth building for 2017. It’s been great. So Brian, Sherri, Kevin,
Jose, Kevin, Mark, everyone, thanks so much. Oh, Kevin Brooks–
nice to see you, Kevin. He’s on the West Coast. He asked a quick question. How do you decide
whether to keep a property in your portfolio
or sell it to an investor? Well, that’s a great question. I mean, personally– Clayton tries to
keep everything. I try to keep everything. If we’re selling something
that we can’t keep ourselves, it’s because we have
expended our cash flow and Clayton’s bought too much. Clayton– his eyes are
bigger than his stomach. So if I buy, like, a
package of 50 properties or something like that,
we’ll try to keep one or two. But we don’t go through
and cherry pick, like, what’s the best? and keep that. That’s not how we do it at all. In fact, many of you know
that I own properties right next door to you in
the exact same streets. And he’ll just say, OK,
this one rents for $750. It’s got someone in there now. It’s good. I want to keep it. And so, it’s up to
me to make sure– And oftentimes, it’s
because I don’t even want to do the rehab on it yet. You know, I’m like, oh, we’ll
do the rehab in two years. And so, it’d be more
of a headache for one of our investors with a
tenant living in the property and it still needs rehab. Usually, that’s kind
of one that I’ll grab. Because it means
that I don’t want to have to move a tenant
around to a hotel or something like that while I
do and fix the floor or these other types of things. I’ll make sure that
the water heater and furnace are taken care of. So I mean, case-by-case basis,
but yeah, Natalie’s right. I end up– He tries to keep everything. I try to keep everything, yeah. Thank you, guys. Thank you, Alan. You’re very kind. Corey, Alex, Eric–
thank you guys. Really, I love doing this. And thanks to all of you who
subscribe to this channel. I’m trying to do some
great videos each week. And any suggestions
you have, you can send me an e-mail, any
videos you’d like me to tackle, [email protected] Again, if you’re
new to this, you can book a call with
our team as well. We’ll see you back here soon. Merry Christmas. Bye-bye. Happy New Year, everyone. Thanks, everyone. Have a good one. Now, it’s time to
see Rogue One again. Yeah, we’re going to go. OK. Star Wars time. Well, you’re going to have
to turn off the streaming. All right, I got to go. Bye, guys. [AUDIO ENDS]


  1. Don Carlo says:

    Hi there! I live in Miami area and the prices here are crazy high for a nice house. Im really crazy about investing in real estate.( meaning, I want to buy houses) Should I look for another area to buy houses in? Like Tampa, Orlando etc? Where the houses are not as expensive? Any ideas? Thankx

  2. Stephen Pendino says:

    Enjoyed the chat, the authenticity comes through nicely. I've followed Clayton for a while and actually live in NJ as well. Had quite a good year this year investing in the market but looking to diversify and ive always liked the idea of rental properties but never quite had the stomach to follow-through. Plus my wife would be (understandably) very apprehensive about it. Maybe i'll try to convince her to meet with you guys some time in 2017 =)

  3. Shason M says:

    Does Morris Invest do the utmost investigating the properties they present to clients?

  4. Sprite11MISC says:

    Hey Clayton what mountains were you referring to in regards to your winter hideaway you got there? Is it in CO? How many personal property's do you have here in the states, Aside from your investment/turnkey portfolio houses? Definitely one of the many reasons I want to funnel income into real estate here in the coming months and get my REI Snowball rolling. I think you are terrific on fox and call bs when you see it.

  5. Lopezcll says:

    As a current home owner, which would be best to obtain the funds for my first rental property, a heloc or a refi?

  6. Cora Lee Culbreath says:

    Can a person get into buying and holding rental investments properties if they only have $10,000. Do you have to have $20,000 plus to take action? How many properties can a person acquire. Is there a limit and can we do this?

  7. pam perez says:

    just killing me hearing you mention PM basics…. Heating and plumbing are legally required basics, and MUST be repaired immediately…. OMG…. Always nice to follow up a phone call with an email just to confirm details, but HOLY COW… what happened to common sense?

  8. JA A says:

    I saw you on bigger pockets yesterday and believe in your vision. I am a new subscriber to your blog as of yesterday. I like how you care about the quality of life you provide your tenants. I would not rent a property I would not live in myself. I only have one property but I make sure it is a place that anyone can call home. Thank you for passing it forward.

  9. Ander Blake Real Estate Investor says:

    Great information! Perhaps a transcript or bullet points on some of the companies, book and other points that you recommend we research would be helpful. I had to watch the ENTRUSTMENT book recommendation 4 times before I heard it right. Thanks for all the value! ~ Isabel.

  10. Happiness, Etc says:

    Thank you for your work.

  11. Greg B says:

    What TED talk are you referring to? Thanks

  12. Courtney Pedraza says:

    I want to become an investor but do not have the cash on hand to purchase. How are you actually making "passive income" if you have to borrow the money to even get started?

  13. eBeing Tan says:

    Thank you for the LLC segment, would you explain more about how your trust work? For example, you have 3 LLCs, each LLCs has 4 properties, what is the relationship between your LLC and the Trust? Is the Trust essentially your holding company?

  14. nocoolname32 says:

    would you buy a $5K item from someone on ebay that had a 50% satisfaction rate…..OR NO RATING AT ALL? provision seems like a bully based on their reviews. we are the best and no one can do what we do so don't ask questions and hand over the money….$5K-$10K :O no thanks i'll pass. wonder if these guys are getting a kick back. fair question.

  15. MrJules says:

    On Average what square footage homes do you typically invest into for that 40-60k??

  16. Agent JR Ewing says:

    Can I form an LLC and pay rent to myself?

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