I was watching Ben Mallah on youtube, he is real estate mogul. In one of his videos he said this "You become rich because you use banks money".

  1. Starting out he says to get a FHA loan on a multi unit. You can have 4 FHA loans that only require 3.5% down. What he does now is he borrows against the equity in his properties at 3% because he can go use it some place else and make 10%.

  2. you can have only one, in some cases two, FHA loans; they can be for up to 4 unit properties. if 3 or 4 unit then they have to pass the self sufficiency test (basically, it must cashflow).

  3. Which is all fine until property prices tank, then you have negative equity and not enough income, you get foreclosed and are bankrupt in a heartbeat.

  4. Does this process only work if you continue the process of borrowing and finding and borrowing and finding or can you full stop at some point?

  5. Real estate is the business of taking a million out of the bank at 3%, getting a property to return 7%, and you keep the remaining 4%.

  6. Yeah this is what I do. You want to just research real estate investing in general. Beware, a lot of the most promoted stuff are scams or no better than them, so you'll need a good bullshit detector.

  7. It’s a good strategy. Are you thinking of liquidating any to own some outright to mitigate the chance of prices slowing or rental market having issues because of depression ?

  8. You buy real estate with say 20% down. That means you are 80% leveraged. So, for instance if the value of the property goes up 10%, you make 50% on your investment.

  9. do forget you have to pay back the other 80% with interest. Borrowing $400K for a house at 3% for 30years means you have to pay back $600k.

  10. This is the right answer. It amazes me when people casually say "Oh you can buy with other people's money or just put 3% down". No, you don't. You can do that but if 2008 comes knocking, you can go bankrupt. Most average people do not understand the risks of "leverage" and frankly don't know how to work leverage. People like this youtuber, always take things with a grain of salt.

  11. Just to clear something up, most traditional financing from banks on investor CRE will not lend 80% LTV without cash securing the other 5%. There are examples and loan products that lend 90% LTV or maybe even more, but these are not for commercial lending and are for multi family, which is a different investment all together.

  12. If you borrow money at 3% and find a real estate investment that yields 7% you get to clip the 4% delta as income and benefit from the appreciation of the real estate while it is producing the income.

  13. The most important part of this is the leverage you can get in real estate. If you put 10% down and borrow the rest, you are leveraged 10x with your cash. In traditional investments, you get a return on the cash invested so let's imagine 4% on $10,000. In real estate $10,000 down on a $100k property, the 4% would be gained on the full 100k so you would yield $4k annually in appreciation from an investment of only $10,000 which is a 40% return.

  14. Yes, but you're gonna need about $100k in cash and a 750-800 credit score before you can even play this game in a way where you will come out on top and not just in debt or bankrupt. Also not a great time for getting loans as interest rates are sky high at the moment. Also also, he deals a lot in business properties like hotels and shopping centers, not necessarily single family homes.

  15. that's not really true. i'd say $20k in reserves on top of 3% downpayment is enough. more is better of course, and so is having stable active income.

  16. I can help. Save every penny build some cash. Live in the cheapest dwelling eat lentils. Drive a really cheap reliable car. Find free/cheap entertainment. Parks and public events. Save Save Save. Find better employment up your income so you can save more.

  17. Banks are still lending at rates in the 3%-6% range depending on asset class and competitor competition. We recently looked at deal that was SOFR+1.00% and decided not to continue with our participation in the credit because pricing was just too low for us.

  18. I'm too lazy to read the comments. In a high level aspect what it means is leveraging debt (good debt) to generate wealth.

  19. I would suggest reading Rich Dad, Poor Dad. Basically there is no way of amassing enough money to do anything significant these days without debt. Meaning there is no way to start a real estate business without having the bank lend you money. Of course, you need some skin in the game. With conventional loans you need 20%, with FHA you need 3.5% but you have to pay mortgage insurance which ups your monthly mortgage payment, or VA loan which is 0% but you need to have served in the military. As you grow as long as you have 20% of what you need for a purchase you can get the rest from the bank. And as you build a relationship (a good one I hope) then they are willing to give you a lower interest rate even for larger purchases.

  20. If u think rich dad poor dad is a good book wait until u actually read a good book haha u will feel swindled

  21. In my case, to support my business I consider access to money cheap. If I have 500K in the company and want to expand I have two choices. Lets say that expansion cost is going to be 300K I could tie up my own funds and either put myself into a cash flow situation, or not have liquidity to take advantage of another opportunity. I would rather pay the points and use the banks money at low interest than tie up my own funds.

  22. It means you get a loan from the bank to invest in real estate. Use debt, use the bank’s money, use other people’s money.

  23. Side note, if u r looking to go this route, make sure u understand how to implement a 1031 exchange for tax purposes

  24. I just listened to an interview on Fresh Air with a journalist from ProPublica who investigated the tax returns of billionaires. He said what they do (to avoid paying income tax) is retain their company stock, then use it as collateral to take out loans, and live off that instead of "income." I believe the debt could be taken as a loss of some kind too.

  25. I think you guys are confused about the term house hacking. What you would do is get a government backed first time home buyers loan. With only a 680 credit score, you can get a loan for 3 5% down. (Grants are used for the remainder) With government loans, you can purchase up to a 4 unit building and still be eligible. As long as your live in one of the units for a year, after which you can move and rent out the remainder apartment.

  26. This is exactly what the world needs: more garbage flips, over-extended individuals and rental units owned by people who own lots of real estate.

  27. Bank Loan is available in very cheap price, like 3-4% per annum in english countries, if you invest that money and make 20-30% return, then you can gain good growth with bank money.

  28. I'll give you a very simple example for buying a business. Let's assume you borrow have 2M in Equity, and borrow 8 million from the bank to buy a business. To make it simple, let's assume that there's no interest, and that you can pay back $500K/year on the loan with your cash flows for 6 years. You then sell your business for the same price you bought it for - $10M. You owe the bank $5M ($8 - $3M you paid down), and keep $5M. You just made $3M ($5 - $2M you had in equity) in 6 years selling a business for the same price you bought it for. Leverage can amplify your returns both ways though, so you have to be careful. This is a very simple example, and please let me know if I've screwed up somewhere, but this is what the YouTuber means.

  29. Borrowing money to buy real estate is betting that the value of the real estate will be larger than the loan and the interest that the bank charged you.

  30. Borrowing money at 3% and having a property bringing in 10% creates you profiting 7% rather than you paying for the entire property in cash just to make that extra 3%. Then you have all of that cash making you money somewhere else. For example, another down payment.

  31. Read the book, rich dad poor dad! But it’s mean he use the bank to buy real things than will pay itself back! For example, if buy a house and you rent it and the rent cover the mortgage or more. In theory, you have a free house

Leave a Reply

Your email address will not be published. Required fields are marked *

Author: admin