The EASIEST way to Invest in Real Estate

You're gonna start small, learn as you go along, and then slowly over time, over the period of maybe three, four years, or maybe over a few decades, you're gonna slowly scale this up, and each time you're gonna make more and more and more money.

What's up you guys, it's Graham here! So one of the most requested topics I get on my channel is about real estate investing and how to get started in that. So I want to discuss one of the easiest, best ways to get started in real estate investing, especially if you don't have the 25 percent down like a lot of investment properties require and also if you don't have much experience investing in real estate.

This is probably one of the most simple strategies to use. I'm talking about buying something now, investing your money in real estate that can pretty much pay you monthly for the rest of your life, while also cutting down on your housing expenses, which frees up more cash and allows you to invest even more money. And also, at the same time, you're gonna end up building up a ton of equity in the process.

So let me first explain what this is, and I'll go more in-depth of exactly what you can do to get started with this. Now, what I'm talking about is called house hacking, which is basically where you buy a multi-family property, move in one of the units, rent out the other units, and when done correctly, this should pay for all of your housing expenses while also paying down the mortgage, while also utilizing a whole bunch of tax advantages of investing in real estate.

By doing this, you've now invested in real estate, and in some situations, you can actually get paid to live for free, depending on how much money the rentals are generating you. And by the way, I literally practice what I preach, and this is exactly what I'm doing. I pretty much can live entirely for free and have everything paid for by the tenant, and also by building up equity in the property and everything else that comes along with owning real estate.

And that, you guys, is one of the best ways to get started investing in real estate for someone with not a lot of money and also someone with very basic experience. One of the advantages of doing this is that you can buy the properties as a primary residence, which generally gives you a lower down payment amount and lower interest rates as well. So there are a ton of advantages of buying something for you to live in while also investing it out at the same time.

That's another reason why house hacking is one of the best ways to get started investing in real estate. So let's start here. Why would you even do this? Well, as you know, housing can be one of the largest expenses that you have. Here in Los Angeles, it's estimated 50% of someone's income goes towards their housing expenses. Now, I know in the rest of the US, it's probably closer to about 30 to 35 percent, but regardless, one-third of your income is being eaten up just by your housing costs.

So it's basically just imagine that if you're able to eliminate your housing expenses, you pretty much are giving yourself a 30% raise. Because all of a sudden, now you've freed up an extra 30% of your cash flow every single month, or it could be higher. It could even be, if you're in LA, it could be closer to 50%, which is ridiculous.

Now, this is also something that you can pretty much just repeat every few years and then slowly over time, build up a multi-million dollar investment real estate portfolio. Now if this sounds a little bit too good to be true, that's because it is a little bit too good to be true. There are three things you will need in order to do this. The first one is you're going to need a down payment. This is not something that you can do generally with like 3% down. Most likely what I'm seeing is anywhere from like 10 to 20% down payment.

If you don't have that amount of money, don't worry about it. You'll just need to continue saving up until you have enough money to invest. If you're in Los Angeles, it's gonna be pretty expensive to do, but I recommend moving to maybe a little bit less expensive of an area or something that's a little bit more affordable, so you can buy something to do this house hack.

The second thing you're going to need is about two years’ worth of tax returns. So this is going to be something really difficult to do if you're like 18 or 19 years old and you really don't have the income history. You'll need two years of tax returns. The third thing you're going to need is a good credit score. Again, if you don't have these three, don't worry about it. I still recommend watching this and learning the process, that way you can be prepared when you are ready to invest.

So then, once you have your down payment, two years’ worth of tax returns, an income, and also a good credit score, this is where you start. So when it comes to real estate investing, the first place I recommend you start is looking to invest somewhere around where you live. The thing is, you have a huge advantage of knowing the areas inside and out around where you live because you see it day-to-day. You know the areas that are good, you know the areas that are bad, you know the areas where businesses want to move to, you see what's getting better over time.

The big advantage here is that you see where you live obviously every single day, and therefore you're able to better spot opportunities when they come up, and you can also see where most of the demand is and where people want to move to. Again, all of these are huge advantages in trying to find the best deal possible in an area that people want to rent and other people want to buy.

And like I said, sometimes this could get expensive if you're in a city like Los Angeles, San Francisco, or New York, or maybe parts of New Jersey. Some of these, it's not very easy to save up, you know, a 20% down payment. But in most other areas, properties are much more affordable and aren't going from millions of dollars like they are here in LA. So if that's the case, you'll either need to just continue saving, or maybe move outside to a less expensive area.

Now my second piece of advice is to find something that needs a bit of repair. Now, the easiest thing for most beginners to do are simply cosmetic repairs. I don't recommend a beginner or a novice or someone doing their first renovation to go into like adding square footage, removing walls, rearranging floor plans. I don't recommend it. I recommend a property that just means very simple cosmetic repairs. Just imagine a bit like a facelift: like redoing the floors, paint, kitchen cabinetry, bathrooms. Things like this are very simple to do, they can be done in usually a few weeks to maybe a month, and they have a pretty high ROI for what they are.

Also, these are things that most contractors are able to do very easily, or sometimes these are things you can do yourself if you're more handy. And don't get me wrong, you can certainly get into like adding square footage and rearranging floor plans and stuff like that; that does have a pretty good ROI to it. It's just, it's a little bit more advanced, it's gonna end up costing you a lot more money, and I do not recommend doing something like that as a first project.

You also don't need to buy something that needs repairs; you could just end up buying something turnkey and move right in. But the one thing that I found is that by doing the repairs yourself and finding a fixer and fixing it up, you're generally able to get a higher yield on your money, and you're also able to charge a little bit higher rent. So again, it's not something you'll 100% have to do; if you find the right deal that's turnkey, good enough. But you will generally be able to increase your return by finding something that just needs a little bit of work.

Now the third step is to understand a bit of cash flow and what makes a property worth it or not, especially when you're looking to house hack. I would say probably 80% or 90% of properties here in LA aren't even worth it. You will be negative every month; you can't house hack. It's a very small percentage of properties at a certain price that will make sense, and learning how to identify this is extremely important.

When calculating something like this, it could be a lot more intricate than just how much money is it making every single month. So the first thing you have is what's called your gross rent. This is the total amount of rent you receive every single month before all of your expenses. The second thing that you have is what's called your equity pay down, which is when you get a loan, every month some of that money goes towards interest, and some of that money goes towards paying down your loan. When you pay down your loan, this basically means more equity and more money that you have in the property.

Now the third is also the tax write-offs. It's just one of the main advantages I see in investing in real estate. To a certain extent, you're able to deduct the mortgage interest that you pay against your personal income, and you're also able to depreciate the cost of the property against the rental income, which usually offsets the taxes that would have been owed on that rental income. Then of course, there are a ton more tax write-offs out there, but just for purposes of this video, I want to keep it a little bit basic.

Finally, you might see some appreciation on your property. Generally, this will be anywhere between 2% and 4% per year, tends to keep up with inflation, maybe plus a percent or two depending on the location. But a lot of this is very location specific, so I won't get into too much about appreciation because that's something great if it happens, but I never would recommend just purely counting on that alone.

Now let's go back to the first point of gross rent. When I mention this, it's a bit misleading because even though it looks like you're getting a ton of money every month, this is before your expenses. This is before repairs, vacancy, property taxes, insurance, and everything else that goes along with owning a rental property. Also, sometimes you might be responsible for paying the water bill, or the gas bill, or a gardener, or any other little other expenses that go along with owning the property.

So just as a total basic example, let's take a $300,000 property and go over some of the expenses with this. So this one's a triplex, which means you have three units in one building. So let's take a closer look at how to examine the cash flow of this property.

So, we'll say each unit is renting for $800 per month, so the total building is getting $2,400 per month in gross rent. But of course, you have expenses, and that's not how much money is actually ending up in your pocket every single month. So let's just say, as an example, property taxes are gonna run $250 per month, insurance is another $120 per month, repairs are gonna cost you another $200 per month, let's say you pay gas and lawn care—that's another $100 per month.

So that means your $2,400 per month in gross rent is really more like $1,730 per month. But also, each unit isn't always going to be rented, so let's subtract another $100 a month overall for vacancy. This means that our $2,400 rented place is really netting about $1,630 per month after expenses.

But wait! Now since you also want to live there, that means you're going to be sacrificing $800 per month in rent for one of the units, which means your leftover cash flow every single month, with you living there, is now $830. And then finally, drum roll please! You have a mortgage. Now if you put 20% down, your mortgage is going to be $240,000, which means your payment will be around $1,150 per month.

That means you're paying $320 per month out of pocket to live there. Now on the surface, this doesn't quite mean living for free, but it's when you start digging deeper that you really start to see the benefits. Now just by paying down your mortgage over the course of a year, that means you would have gained about $4,200 in equity, or about $350 per month.

When you take this into account, that pretty much means that you're living in this place now for free and coming out ahead $30 per month. When you pay down your mortgage, you then have a ton of ultra tax advantages and write-offs that could even boost these numbers much higher. But because I don't want to get too complicated and make this video an hour long of me just going over crazy numbers that might confuse people, I'm gonna end it there.

So pretty much, if I stop there just with that alone, you pretty much just reduce your housing expense to zero while at the same time investing in real estate. Also, the advantage here is that you've invested your money in multifamily real estate at a lower interest rate because it's a primary residence with less money down.

Also, because it's a primary residence, now officially, you are a real estate investor. Okay? And also by doing this, you freed up a significant amount of your living expenses, which means that, drum roll please, you're gonna be showing less expenses and more income. With this, the bank is gonna see this and give you a larger loan in the future to buy an even larger building that's hopefully making even more money, and then you just continue repeating that process.

The bigger the investment, the more money you're generally gonna end up making, and also you're gonna be scaling up over time. You're not gonna just jump into something right off the bat that's gonna be over your head and too confusing. You're gonna start small, learn as you go along, and then slowly over time, over the period of maybe three, four years, or maybe over a few decades, you're gonna slowly scale this up, and each time you're gonna make more and more and more money.

In an ideal situation, you basically just end up buying a place that needs some work, fixing it up, adding some equity, living there for a few years, then moving out and renting out the unit that you were living in, buying another slightly larger multifamily property, and then doing the same thing over again. So just imagine you do this over the next ten years: you start buying a place, live there for three years, do it again, live there for three years, do it again.

Over ten years, you will have accumulated three multifamily investment properties that are all hopefully producing some cash flow every single month while also paying down the mortgage. So if you could pretty much just do that and focus on getting three properties over the next ten years, which is very doable—many people do many more than that— you will have properties 20, 30 years from now that are just spewing cash flow at you every single month.

You're gonna hopefully make so much money, you're not even gonna know how to spend it! So that is the goal with this, and by doing this, it's pretty much a guaranteed retirement for the most part just twenty, thirty years from now with a bit of upfront work now and also by living for free.

And it all starts with house hacking and investing in real estate, and this is also what I'm doing myself. Even though I'm living in a duplex right now, I plan in probably another two to three years to buy something even bigger, something nicer, do the same thing, and then from there buy something even bigger and something nicer and just continue moving up.

Then in the back, there's going to be all of these multifamily properties that are gonna be rented out generating cash flow in some of the best areas in Los Angeles. And that’s it, and it's fun to do, and I enjoy doing it, and hopefully, you enjoy it too.

So with that said, one favor: if you liked this video, if it was helpful, if you enjoyed it, make sure to smash that like button. And also, if you're not a part of the notification squad, make sure to smash that notification bell so YouTube notifies you anytime I upload a video. I'm gonna be getting into a lot more real estate investing topics in the future, so if you don't want to miss out on that, make sure to smash that notification bell.

Also, if you're a real estate agent looking to expand what you're currently doing and make more money, or if you want to start working as a real estate agent, which is what I do, I have a program in the description. It's called the Real Estate Agent Academy where I detail everything I do from start to finish and how I built my entire career of over $120 million in sales and real estate, and other steps and things you can copy and recreate for your own business. If you're interested in that, the link is in the description.

Also, feel free to add me on Snapchat and Instagram. I'm doing so many plugs here at the end; I gotta cut down those plugs! But yeah, on Snapchat and Instagram, I post there pretty much daily, so if you want to add me there, feel free to add me there. What else can I ask you to do? Make sure to comment down below, let me know if this video made sense, if you liked it, if you actually made it to the very end.

I probably lost, I want to say probably 80% of you at this point, but if you're part of the 20% who watched it at this point, make sure to comment down below. I do my best to respond back to as many comments as I can; I read them all, by the way. There’s not one comment that’s ever been posted that I don’t read. I see that, I see everything.

So make sure to comment down below. Thank you again for watching. Hope you enjoy this, and until next time!