Minority Mindset: become a real estate investing millionaire: strategies for property investment, management, and profit

There are five keys to being a successful real estate investor. Number one, you need to know how to find a good location. Number two, you need to know how to build a good team. Number three, you need to know how to run the numbers. Number four, you need to know how to do the due diligence on the property. And number five, you need to know how to increase the value of your investment. These are things that I learned over the last 12 years of investing in real estate, making a lot of expensive mistakes and seeing some success. So let me start by talking about number one, The four factors that you want to be paying attention to when you're looking at a good location is the crime in the area, the population and population growth, businesses moving in or out, and the walkability of the area, especially if you're looking at a city, a more urban environment where people can actually walk around places as opposed to a suburban environment where people have to drive places. So let me start by talking about crime. I mean, the general consensus is people want to be in a safe place. And so you can go do a Google search to see the crime in your neighborhood, see the crime in the city, see the crime of the county and see the crime in the general area. And if you see crime increasing, that's a bad sign. If you see crime decreasing, that's generally a good sign because tenants want to feel that they're safe in your home. But you want to take this factor with a grain of salt because Manhattan has a lot of crime, but people want to live in Manhattan. California has crime. People want to live in California just because it's crime doesn't mean it's not a good place to invest. It's something that you want to be paying attention to if crime is rising or if crime is going down. And you're not always going to get a good answer by just searching crime scores and looking at crime maps on the internet. This is where you got to get the feel of a neighborhood where you're investing because real estate is very localized. And you don't want to just throw your money into an area because you think it's something good that you found on Google. You want to actually drive the neighborhood, walk the neighborhood, stay there for a little while and get the feel. You're not going to be able to get that real feel of the area without actually spending some time there. And if you want to actually be a real estate investor, you need to spend time in the areas that you are investing. If you don't live there, fine. Drive through it. Walk through it. Do you feel safe walking through it? And is it somewhere where you wouldn't mind spending some time? Second, on the population side, do a quick Google search of the city and neighborhood that you're looking to invest in and see the population. So go to Google, search Manhattan population. And what this will show you is the population and the population trend for Manhattan. And you can do this for different neighborhoods, different cities around the country. And what you want to see ideally is populations rising or at least population staying stable. But you don't want to see populations dropping because if populations are dropping, that means that the amount of tenants in the area are probably also dropping. And you want to be investing in an area where more people are moving to because if there's more demand for your property in the future than there is now, that means that rent prices will probably have to go up because more people want to live in the area that you own that real estate. Third, you want to be investing where businesses are moving to. So this is a little while ago now, but I remember I was looking at some real estate in a city that's near me and there was a city block that was completely vacant. And it had some big real estate that was all vacant and it didn't look good. And I asked the city about what was happening here. And what they said is that a Walmart had just entered into contract to purchase all this land, to purchase the building, and they were planning on opening a Walmart super center. When I heard that, I started buying up some of the real estate near this area. And over the next few years, not only did Walmart open up a super center here, but then you had all these other new retail stores that opened up around the Walmart because Walmart brings a lot of traffic. People want to go to Walmart. And so that opened up all these other new retail shops and then new real estate developments opened up on the other side of the street, which was also vacant. And this drove a whole new set of traffic and businesses into this area, which meant more people wanted to be here, more people wanted to shop here, and more people wanted to live here, which not only increases the value of the real estate, but it also increases the rental prices of the real estate. Now, how do you find where businesses are moving to? Now, you can look at the press, you can look at the news, but many times if it's already hitting the news, it might be a little bit too late. And this is where real estate is special because this type of insider trading, insider investing is not illegal in real estate. In fact, it's completely legal. So how do you get this information? Well, one of the best places to go is actually the city hall. Just go to the city hall, the building department and ask them if there are new businesses coming into a particular area. Is there some new developments coming? What's new happening in this city, in this neighborhood? And they'll tell you. And if you hear something interesting, that a big business is coming, that Amazon is opening a new Whole Foods, that Best Buy is doing something, that something is happening. I don't know why I said Best Buy, but something is happening here that's going to be driving new demand, that's going to be driving new businesses, that can create opportunity for you because now you can capitalize on the increase in real estate value in the area by owning some of the real estate. And then when rent prices go up, well, now you get to reap some of the rewards of that. And finally, you have walkability. So if you're investing in cities, walkability is extremely important because people want to be places where they have easy access to buses, easy access to subways, easy access to public transit, and easy access to food and groceries and everything around them. So walkability is extremely important when you're investing in those types of city and urban areas. But this is where you got to understand what type of investor do you want to be because you also have some investors that hate the idea of investing in big cities. I know some investors that I work with that do the complete opposite. They invest in more rural type areas and what they say is that one, there's much less demand, they're not competing against other investors, and second, the tenants that live there stay longer because they just live in these rural areas for much longer and people don't really move. So it's a completely different game, completely different demographic, but it creates opportunity for depending on what type of investor you want to be, it creates opportunity for you if you know what the goals are. If your goal is to be investing in the rural type areas, you've really got to know the neighborhood, you've really got to know the people, and you're not going to have the same type of demand as you would in the heart of Manhattan. And so you've got to understand where do you want to be and the returns that you're going to get are also going to be different. You have smaller returns in Manhattan generally if you're looking at a cash on cash investment because, well, it's much more expensive to buy in Manhattan than in a village somewhere. But in that village, you're not going to have thousands of tenants and thousands of people that are willing to make applications to live in your place. So you're going to have higher vacancies and you're going to have higher wait times and if you have a turnover that can be more costly. So you have to understand where it is that you want to be or somewhere in the middle as a suburban investor. So there's many different types of investing and each one is going to have their own goals and have their own interests and tenants are going to want different things. If you're investing in cities, that's great, but you've got to understand that what people want is walkability and something that will help you understand this is going to walkscore.com and you can see what the walkability is for a particular address and a particular neighborhood that we can see if that's somewhere where people would like to live. The last thing that I want to mention on location of walkability is you can also consider investing or walkability will be increasing. Like in Detroit, there was a new rail that was put in and many investors started buying up land around where this new rail was going to go to start investing in this new walkability because this new rail was going to create a new line of public transit and that would open up more opportunity for people to go from one place to the other. And so people started buying up the real estate all around it in anticipation for the new rail, but you just got to make sure that it happens because if that new rail isn't as good as people would expect, then you might be buying up this real estate and then find out that it's not as valuable as you would like. So you got to be careful with that type of speculation because there are risks involved with it, but it can create opportunity if you see the walkability increase. The reason why location is first is because you can change everything about a property except its location, which is why location is so important. Now this brings me to number two, which is understanding your team. And I'm going to be highlighting eight different team members that you need to have if you're going to be investing in real estate. This is your property manager, your real estate broker, your accountant, your contractor, your attorney, your banker, your title company, and your insurance company. Let me start by talking about your property manager because either your property manager is going to make your life completely miserable, or they're going to make your life very free and clear. I have worked with a lot of property managers. Some of them are great, some of them are very, very bad. And the bad ones will make your life literally a nightmare. My first property manager that I ever had, I don't even know if they were a real licensed property manager or not, but my tenant had my phone number and so my property manager did nothing. They were collecting the rent, they were collecting their fees, but my tenants would call me anytime something went wrong. Now the whole purpose of a property manager is to make real estate passive for you. When you buy the property, you're supposed to give them the keys, and then they're going to manage everything. They're going to find the tenant, they're going to make sure the tenant pays, they're going to make sure the bills are paid, they're going to handle all disputes with the city, with the tenant, and everything in between, and then they're going to take a small fee. This fee might be somewhere between 4% to 10 or 11% of your gross rental income, depending on how many units you have, depending on how much work that they're going to do. Now, this is a cost to you, but it also saves you a whole bunch of time because now the real estate whole investing process can be completely passive on your end, and your job is to be a real estate investor, not a real estate manager, which is why I never manage my own properties. But my first property manager was a property manager who was supposed to make it passive for me, but it was anything but passive. So I was getting calls from my tenant, I was dealing with all the issues, and eventually I fired this property manager, then I got another property manager. Now the second property manager was a lot better. They documented everything. I had a lawsuit happen in one of my real estate properties where a tenant sued my real estate company because they said that the bathtub got too slippery when the water was on, and it caused them to slip and fall because the bathtub was too slippery. Well anyways, that case got thrown out because ultimately they figured it out that the tenant didn't slip in the bathtub, the tenant ended up slipping at a barbecue, they were just trying to go after some money, and they did give some money, but the tenants actually didn't get any money because my insurance company settled with them, and they didn't make enough money to even pay the attorney fees, so the tenants ended up getting nothing. But that's real estate, and that's the way the world works, especially here in America. We are the most litigious country in the world, so you have to be prepared for these types of things. Well, having a good property manager can definitely help with that because one of the things your property manager is supposed to do is document everything. Every time your tenant has any sort of communication with the property manager or with the contractor, this needs to be documented, and if you are the one that's documenting everything, well it's going to be a huge pain in the ass. This is why I don't recommend you doing that. This is where you want to have a good property manager to do that. Well, that same property manager company had some changes internally, and then they started not really managing properties. I had a property, and this is here in Michigan where it gets cold, I had a property that didn't get winterized because when it gets cold in the northern states, you have to winterize properties. That way, pipes don't burst when tenants are not there and when the heat is not on. Well, this property was not winterized, and then a pipe burst because, well, nobody was there, and for some reason, the heat didn't work. And now the pipe burst, and the whole property got destroyed, and nobody knew about it. This property just kept flooding and flooding and flooding, and then eventually somebody from the property management team went out there to go show the property to get it leased out, and then they that this property is completely flooded, and this created a huge mess. Well, that property management company then had to pay me a lot of money, and then I fired them. So, this is where you have to make sure that you have a good property manager. Now, how do you find a good property manager? Well, you have to ask them a lot of questions. One, how are they getting paid? Some people say that it's very bad to pay a property manager a flat fee because now they're getting paid even if a property is vacant. I've had different experiences where it's not that big of a deal if a property manager charges you a flat fee so long as they do a good job. I don't like when property managers are going to charge you a fee to then do any sort of construction work. What that means is a property manager is going to do all the repairs, or they're going to go find a contractor to do the repairs. You're going to have to pay for the repairs. That's the way it works. But then if the property manager is charging you a fee to then manage and issue the repairs, that I don't like because many times what I've seen happen in the past with myself as well is a property manager is charging you a 10% fee on top of whatever the repair is, they're not going to have the best incentive to go out and get you multiple bids to find you the lowest price possible to do a renovation to fix a deal because the more that you have to pay, the more the property manager makes. So I don't like that. Second, when it comes to the way that they handle tenants, you need to understand what are their policies when it comes to issuing the eviction notices. What are their policies when it comes to being lenient on tenants? Because you want to make sure that whatever their policies are aligned with you and you need to make sure how you get paid. When there's a late fee, who gets that money? Is it the property manager or is it you? I don't think it should be the property manager. I think it should be you. Maybe the property manager takes a little bit if they're going to be issuing notices for the late fee or because the tenant's late, but that's money that you should be receiving, not your property manager. So you want to be asking these questions and understand what their protocols are and know where you can find all the information about your properties, about your leases, and about your P&Ls, your profits and losses. That needs to be figured out early on. So ask these questions to your property manager. Second, when it comes to your broker, the biggest mistake that I see real estate investors making is they try to find a real estate agent who's well-known, a good real estate agent, and then they want them to represent them to find them real estate deals. Well, a regular real estate agent is helping people buy and sell the home that they live in. They're not helping real estate investors find a real estate investment deal because a real estate investment deal is very different than the home that you're going to be living in. And that real estate agent who's going to be sending you deals is going to show you deals that somebody would want to live in, but not something that you want to invest in. And these are completely different deals because a cute home is going to give you cute profits. And you got to decide, you want the cute profits or do you want the big profits? And it's going to be completely different way of the way that you look at deals, the different way that you look at properties, different locations, different types of properties, because somebody who wants to live in a home might not want to buy a beat-up property, but that beat-up property can make you much bigger returns if you come in and renovate it because you'll be able to buy the property for a huge discount and then you can fix it up and then rent it for a better price because now you have a fully renovated property and you got it at a discount. So you want to make sure you have a broker that specializes in real estate investment deals. And even if you are a real licensed salesperson like I am, I'm a licensed salesperson. I got licensed when I was 20. I used to work with people who wanted to buy and sell homes. I worked with investors. I worked with a bunch of people, but I don't broker my own deals. I have another broker that I work with. I go look at the properties I'm licensed so I can go and do that. But then when I want to do up the paperwork and do all that stuff, I call up my broker and I have them fill out the paperwork and then they send it to me and then I sign it and send it back to them. That way my work is less. I want it to be as passive as possible for me. So I have a broker that I work with that does all of my contracts and that way now he takes a piece of his commission. I still get a little bit of commission and I just put that into the deal because I am a broker. But this is where understanding what are your goals. Do you want to be doing all the work to find the research, to find the properties, or can you hire somebody to do that? And that's where a good broker can help. Then you need a good accountant. I cannot tell you how valuable a good accountant is because I've had a bad accountant and I've had a good accountant. And if all your CPA is doing is filing your taxes, you are leaving a lot of money on the table. And if you are going to be investing in real estate, you absolutely need a good accountant now because now it's not just showing your W-2. There are so many different deductions, so many different things that you can do in real estate to allow you to make money and pay less money in taxes legally. And your accountant has to understand and specialize in real estate investments because there are so many different types of deductions, so many different legal loopholes that you can use with real estate that will allow you to pay less money in taxes legally. And you want to bring the accountant on and make them informed from the early stages. As soon as you buy the property, that's when you need the accountant to understand what's going on because there are so many different things that you can do when it comes from buying the property, to doing the depreciation, to potentially doing accelerated depreciation, to then potentially offsetting some of the income that you make outside of real estate through the real estate that you're buying. So talk to an accountant about the different strategies that you can use, where you use real estate to offset some of your other income, and where you use real estate to generate cash flow but pay less money in taxes legally. Fourth, you need a contractor. Again, I've learned this the hard way because I've had good contractors and I've had very bad contractors. And very bad contractors will save you a lot of money right now. But if things go wrong, then not only are you going to have to pay to fix their work, but then you're going to have to pay to do the work right. And I have dealt with this on multiple occasions because in the beginning when I was getting started, I found the cheapest of the cheap contractors and they did work cheaply, sometimes quickly, sometimes not so quickly. But it's such a pain where you have to stand over them every single day to make sure they're at your property, to make sure they start working. And then when they're not working, you got to call them to see where they are because then they start another job in the middle of your job. Get a good contractor. It's going to cost you a little bit more, but it's going to save you so much headache. It's going to save you so much time and it's going to save you money in the long run because when you have to keep paying to fix up your previous contractor screw-ups, it really starts to add up. And then it makes tenants upset because things keep breaking because your contractor didn't fix it the right way. So now I work with a licensed and insured contractor. And yes, they charge me more money, but it costs me way less headache and my things get done correctly the first time. Pay more to do it right the first time because if you don't, well, five years later, you're going to understand why it's way cheaper to have a good contract to do it right the first time. You all learn. Everybody learns at some point. Then you need a good insurance person because guess what? As a landlord, you need a good insurance. You need landlord's insurance and you need liability insurance. I talked about the time that I got sued because a tenant claimed that the bathtub was too slippery when the water was on. And well, I had to go through my insurance because now you need an attorney. Someone is going to charge $300 to $500 an hour who is going to sit there and defend you. Now, even though I was right, somebody still had to pay the attorney hours worth of work to go through the whole process to get this case settled and dismissed. And yes, we had to go through a settlement because it was stupid. The judge wouldn't see it. The judge said settle this outside of court, but you still needed an attorney to do that. And then the insurance company had to give the other party some money so they go away. The tenants who were suing me didn't make a penny, but we still had to go through this whole process because that's the way the system works. It's crazy. I know, but this is why you need insurance. So make sure you have landlord's insurance, make sure you have liability insurance, and it doesn't hurt to spend a little bit of extra money to up the insurance because we live in a very litigious country. Then you need your title insurance. Now, title insurance has been known to be one of the biggest wastes of money when it comes to insurance. Well, it is a waste of money that you hope becomes wasted because guess what? I've also dealt with title insurance issues. This is what happens when you go through a lot of real estate deals. Title insurance is something that protects what you buy. So if you buy a property, you think you're buying a home, what title insurance says is that you're actually buying the home that you think you're buying in case somebody from 10 years before comes and says, I own this property. You bought it from somebody who didn't actually own it. Title insurance is there to protect you against those types of situations. They are very, very, very rare, but when they happen, that's when title insurance can be valuable. Now, title insurance is something you get typically when you just close on the property, but you want to make sure that you have title insurance because there's sometimes when you go through auctions, you go through foreclosures that you don't get this type of title insurance, but you want to make sure that you get this because it can save you a huge headache. I bought an apartment complex on a lake and this apartment complex was made up of four different parcels of land. It was a beautiful area, beautiful complex. It was run down, but I was coming in to renovate it and turn it around and I did. And a few years after I purchased this property, we fully turned the property around. We put in a ton of money into this property and now it's fully rented because when I bought it, it was completely vacant. Now this property is doing great and it's producing a lot of positive cashflow. And then I get a letter from my attorney saying that apparently somebody else now owns a piece of my land. And I said, what are you talking about? So somebody had a claim on this land and they had owned this claim to somebody else, a previous owner. And this never trickled down to me and the title company never discovered this. So whoever owned this property and had this loan on the property wasn't making payments because they no longer owned the property. And then the bank, the lender that was owed money from the property wasn't receiving money. So then they started issuing foreclosure notices. And where did they put these foreclosure notices? Somewhere on the property where nobody was going to see it. And so they put it on the property and they knew that nobody was going to see it because apparently that's the way the game works because they wanted to get the property. They didn't want the money. And this went on and on and on. And then eventually they put up enough notices and then they then got the right to the property. So now we get a letter saying, hey, you no longer own this piece of the property that cuts through some of the units, that cuts through some of the land. And now they say that we own this and that we have to pay them for it. So what did I do? I told my attorney, my attorney talked to my title company, and then my title company had to then settle with that previous owner. Yes, it is very rare, but you don't want to have to deal with the headache if it does happen. Then you need a good banker. If you are financing your properties, you want to make sure you have a good banker that is going to be there to then help you get approved, to help you get the financing, and then who's not going to screw you over later on when things start to go wrong because the reality is the economy goes through ups and downs. And so banking, while it might seem just like a transaction, you need to borrow money from somebody else, it is a very much a relationship thing. So you want to make sure you know the person that you're working with, that they know you, they know your business model, they know your goals. So keep that relationship with your banker because they're going to be able to save you a bunch of headache later on. And just like anything else, you've got to make sure you have a good attorney. Look, I am a licensed attorney and I don't do any of my own legal work. I have a number of different real estate attorneys that I work with, people who specialize in different things, and you want to make sure you have an attorney from the early stages of the deal. Even if you're buying a single family home or a condo, get an attorney early on board so they know what you're doing, so they can give you advice. That way, maybe it's creating an LLC. That way, they can make sure you don't miss the insurance part. That way, you know you have all the things in place before you buy the property. That way, you're protected legally and that way, your contracts are reviewed. And sometimes you might say, but it's just a standard contract. Yeah, well, sometimes it's not. And you want to make sure that nothing is sneaking through the contract that shouldn't be, that they would make sure that your title insurance is what it should be, that they make sure that your closing is giving you exactly what you should be getting. So make sure you have a good attorney. If you need a good attorney, I have a referral service where I can refer people to a good attorney. If you want to learn more about that, I got the link to how you can find a good attorney, not just real estate attorney, bankruptcy, a business attorney, whatever kind of attorney. If you're looking for a good attorney, I'll put the link to how you can be referred to a good attorney down in the description below. The third thing that you have to do is run the numbers to make sure the deal makes sense financially. And you're going to always start with this, even if you're getting debt to buy the property. So you start with what you think the rent is going to be. Then you subtract the property taxes. And if you're going to be buying this property, you have to calculate if property taxes are going to be going up. Because if you're buying a single family home where somebody lived and are you going to be renting it out? Well, your taxes are going to go up because most cities charge higher taxes to landlords and to homeowners. And if the property value, the assessed value is going to be going up, well, your property taxes are also going to be going up. So you can talk to the assessor in the city and they'll give you a better idea of what your property taxes will be after you buy that. So just talk to the assessor, see what the property taxes will be. Then talk to a couple insurance agents to get an idea of what your insurance will be. You need insurance. You subtract your property taxes, your insurance, your maintenance costs. Now, this maintenance cost is going to be a number that you're going to have to calculate. If the property is older, if it needs more maintenance, you'll want a bigger number here. If it's newer, well, you don't want to put zero, but something. A fraction of one month's worth of rent. So you could put a month's worth of rent or a fraction's worth of rent, depending on how new the property is and how much deferred maintenance is on the property. Then you're going to subtract your management fee. Even if you're managing the property yourself, which I don't recommend, you still want to pay yourself because you have to make sure that you factor in your time where if somebody else was going to do it, how much would they charge? So you've got to make sure that the numbers make sense, even based off of yourself managing it. So if you are managing yourself, put in a number. If you have somebody else manage it, enter in what their number is, and then enter in a vacancy factor. Even if your property is fully leased out right now, eventually a tenant is going to leave and you're going to have to then re-tenant that. And when they leave, there's going to be a period of time where nobody is in there. So you want to make sure you enter in a vacancy factor. I like to typically put in one month's worth of rent. It depends on the economy. Sometimes it might be two months or a month and a half, just depending on where you are in the economic cycle, but enter in a vacancy factor. So now you start with your rent, you move these expenses. This is your NOI. If this NOI is big enough, well, that's a good deal. If this NOI is negative, that's not a good deal. Now, how do you know if NOI is big enough? Well, what I like to look at is I take this NOI number, this monthly NOI, multiply it by 12. So now you have an annual NOI number. This is how much profit you expect to make. Again, if you're using debt, we'll talk about that in just a second, but this is how much profit you expect the property to make over the year. And then you divide that by the price of the property. And this will give you something called the cap rate or the return on your property. And if that number is high enough, well, then it's a good deal for you. If it's not high enough, then you want to keep looking. And I'll show you what that means right now. Let's assume for the purposes of this video that you can buy this property right here for $100,000. And this property is going to rent out for, let's just say, $1,100 a month. And you have $500 a month worth of expenses. So you go through the same analysis that I just showed you, which leaves you with $600 a month of projected NOI, projected profit. Now, I'm going to take this $600 of monthly profit, multiply it by 12, which means that I'm going to have $7,200 of annual NOI, net operating income. That's what NOI stands for, or profit. Now, I'm going to take the $7,200 of annual profit NOI, and I'm going to divide it by $100,000, which is the total price of the property, which gives me a 7.2% return. For me, that is a good deal. I look for anything more than 7% here as the initial rule of thumb when it comes to investing on money. If it's more than 7%, I will consider the deal. If it's under 7%, it's not a good enough return. Now, this return is going to depend from area to area. Some neighborhoods are much higher, some neighborhoods are much lower. You got to decide what is a good rate for where you are. But for me, I know that I want a 7% return. This is where now you have to do your debt analysis. Let me wipe this off and show you what that looks like. If in this case, you were to put down 20%, that would be $20,000. So now, you put down $20,000, that's your equity, and you're going to be borrowing the other $80,000. And if you borrow the other $80,000, that's a 7.5% interest. That means now your interest rate is going to be costing you $560 a month, which means you have a $40 a month profit now, which $40 a month times 12 is $400, $480. So $480 is your new profit. Now, the way that you're going to calculate your return now is you take your $480 that you're making in profit, and you're going to divide that by your equity, which is $20,000. Here now, it's about a 2.5% return on your money when you factor in debt, which isn't a very good return because now that you're getting debt, you have a higher risk because your higher risk is you have to make payments to your bank. So you want to be compensated for that. So you want a higher return here than you would if you just paid cash. And this is where you got to start with the cash analysis. Then you do the debt analysis, and you want to make sure if everything makes sense. If the location is good, the numbers make sense, the next thing you want to move on to is the due diligence. This is after you enter into a contract to buy the property where you now review everything to make sure that everything is good. Now, before I go into the due diligence things that you want to work on, if you do want to stay up to date on what is happening in terms of real estate trends, and stock trends, and crypto trends, and the economic trends, then you can join Market Briefs. It's my free newsletter that I created to help investors make better decisions. It's completely free, and it's a simple breakdown that you can read in less than five minutes every morning that will help you understand what's happening in the financial markets. That way you can make better decisions with your money. So if you haven't joined Market Briefs yet, I'll put the link to how you can join Market Briefs down in the description below. As soon as you enter into contract to buy a property, there's going to be five people that you want to call. One of them is not listed here. This person is whoever's going to be helping you finance the property. Whether it's a bank, whether it's investors, you want to call them to make sure you can get the cash, but that's not really going to be your due diligence. The due diligence is going to be working with four people. One is your property inspector, one is your property contractor, one is your property manager, and fourth is the city. Let me start by talking about the inspector, because as soon as you enter into a contract to buy this property, you want to make sure that this property is what you think it is. And this is where you want to get a private property inspector who's going to be walking through the entire property to give you a report on the health of the property. You have to, have to, have to do this, because I can tell you from experience that if you don't do this, you can run into a ton of mistakes. My worst deal ever was a deal where I trusted my contractor, who was not a property inspector, that I should go out and buy a property. He told me to buy a property because, well, he said that we could flip it for a quick return, and turns out that he really just wanted me to write him a check, so we'd have some work to do, because he was struggling financially. I ended up buying a property that was so run down that you couldn't see, because it was covered up with a whole bunch of problems, where the pipes were completely frozen, because somebody had poured cement down the pipes, where nothing worked, the HVAC units were shot, everything was just wrong in the property, where it cost me tens of thousands of dollars, maybe more than what I expected, because I did not get a property inspector to walk through the property, to look at the pipes, to look into the basement, to look into the foundation, to look into the attic, to make sure that the property is what you think it is. So, do yourself, and do me a favor, pay a few hundred dollars, and get a good property inspector to walk through the property as soon as you enter into a contract to buy it, before you actually close on it, that way you know what you're getting. Second, get a good contractor to walk through the property, because if you're going to be doing renovations, you need to know what it's going to cost you, and you know the price of things have always been fluctuating, so this is where as soon as you know what's wrong, you know what you need to make changes on, and if you can do renovations, get your contractor to walk through the property, so you know an estimate of what it's going to cost you to make the repairs, and if it's way more than what you thought, then you can back out of the deal, but if it's in line with what you thought, well now you already have a quote, and as soon as you close, you can get the work started. Third, get your property manager to walk through the property, that way they can get an idea of what the property is, they can give you renovation ideas, if things need to be upgraded, because they should know the neighborhood, they should know the city, they should know what tenants want in the area, and they'll be able to give you a good idea of what you can get for the property in terms of rent, and then you can make sure that what you can get for the property is in line with what you expect. And fourth, get the city involved, because you want the city to know that you're looking at buying this property, that you want to rent it out, because maybe they're creating some new restrictions on new landlords, you want to know that before you actually buy the property. Maybe they have some outstanding liens, you want to know this before you buy the property. Talk to the city, see what needs to be done in terms of licensing, because if they have their own requirements in terms of licensing, if they have different changes that they want to make, you want to know that beforehand, because if you don't know that, it can end up costing you a fortune after you buy the property with a whole bunch of repairs and upgrades that you didn't know that you have to make. So talk to the city beforehand before you close on the property so you know what the total cost will be to turn the property around after you close the property. This is going to be done in the due diligence phase of the property. You always want to have a due diligence phase where you have time to do these types of inspections. If you don't do these inspections, you are taking on a huge, a huge, a huge risk. And the reason why I'm emphasizing this is because I made this mistake and it ended up biting me in the asset. So please don't make the same mistake that I did and get these inspections before you close on the property. And the fifth thing that you have to understand is how do you increase the value of your property? And for me, what that means is how do I increase the cash flow from the property? Because when I invest in real estate, my goal is not to flip the property for a big profit. My goal is to generate cash flow because I want enough cash flow for my real estate to be able to live my life that will now have this passive cash flow that I can use and I can live my life without having to worry about the cost because every month I'm going to get another cash flow check from real estate. So the question is now, how do you invest in your properties to increase the cash flow? And this is going to require research on your end and this is where a good property manager can help you. Just yesterday, I was talking to a property manager of mine and we were talking about an apartment complex that I own. And I was asking him what his thoughts on buying another property and what the different options were and what my goals are, because he knows that I'm looking for a 7% cash on cash return on my deals. And he said, one of the things that we could potentially do is do a $250,000 investment into this particular investment complex. And what he says is that we will be able to increase our NOI by 11% if I make this $250,000 investment by upgrading the bathrooms, by upgrading the kitchens, because according to him, he does the research. He's been looking at different properties. He manages different properties in the area. He sees that there's more upside in the area, but we need better units. We need better kitchens. We need better bathrooms. And so if we can make this investment to improve the property, it's going to cost me money today. I can use the 250 grand to go out and buy another property, but it's harder right now to find a good deal. But if I take that same money and invest it into my own property, I can increase my rents. I can increase my NOI and I can create a better property for my tenants. There's an unlimited number of things that you can do to increase the value of the property, but what you should do is going to depend on your market. And that's going to depend on what people are already willing to pay for. Now, you can be one of the people that's the trendsetter. You can be the person that's creating the new value, but typically that's going to require either a lot of money because now you're going to be making a brand new development that's creating a brand new type of market in the area, or you're going to have something small and you're going to hope for somebody who wants an exceptional property that no one else is willing to pay for. I rather, if you're in the middle, I rather look at what other people are charging and make sure that I'm in line. That way I'm not overcharging people. I'm charging within the market, but I know that I have one of the best properties in the market. So look around. Are people having upgraded bathrooms? If so, what's in their bathrooms? Do people have upgraded kitchens? If so, what's in their kitchens? Do they have stainless steel appliances? I love putting stainless steel appliances in my units because most tenants, when they come from other properties, they have those ugly, old, dirty appliances. But people love stainless steel appliances, and it doesn't have to cost you that much more to get a nice stainless steel appliance in your unit. Tenants love it. They're willing to stay longer, and many times you'll be able to charge a little bit more. If you can charge an extra $25 a month for your upgraded appliances, well, you might make your money back in three or four years. Kitchens, bathrooms, floorings, and ceilings can help you deliver a lot more value in your property, but you want to make sure it's in line with what's happening in your area. So if you don't want to be the person that's walking through the different properties for a lease in your area to see what's possible, then get a good property manager who's going to be doing this for you that can create a proposal about what needs to be done to increase the value of your properties. And then just naturally, when you upgrade a property, if it's a multi-unit property and you're making more money, it's going to be worth more money. And if it's not a multi-unit property and you upgrade a property, well, now your property is also going to be worth more money because you upgraded the property. If you want to be a successful real estate investor, there are five areas that you have to master, that you have to understand if you want to be able to make real money in real estate. This is, you have to understand how to find the right location. You heard people say, location, location, location. Well, it's 100% true when it comes to finding good real estate deals. Second, you have to understand how to find the right location.