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Is Your House An Investment?

Is Your House An Investment?
hi everyone the left Minh here for money evolution in today's video I'm gonna be helping you to answer the question is

your

house

and

investment

so if you go out searching on the internet you'll find a lot of different opinions about this topic some people are very adamant that

your

house

is definitely not an

investment

actually one of my favorite authors of all time Robert Kiyosaki talks a lot about that his book and he says

your

house

is is not an

investment

not an asset and I like
is your house an investment
his definition still to this day of what he defines as an

investment

versus a liability and he says an asset is something that puts money into

your

pocket every month and a liability is something that takes money out of

your

pocket every month so if you think about the

house

that we're gonna live in that

house

is not probably putting money into

your

pocket every month it's taking money out of

your

pocket every month but here's what my take is on this and why I think that

your

house

still could be an

investment

and that's that you have to live someplace you know and so you're either going to be owning a

house

and starting to build up equity in

your

house

which I'm a very big fan of or you're gonna be renting and you're gonna be putting money into somebody else's pocket because it's their

investment

so that's we're gonna talk about here in today's video and I've been actually making a couple videos about real estate investing here
lately just because

your

housing purchase is gonna be probably the biggest single purchase that you're ever gonna make in

your

lifetime and whether you're going out and looking for a

house

for the very first time or you're upgrading

house

s or downgrading

house

s there's definitely some rules that you should follow in fact that was actually the last video that I just finished recording here where I talk about some home buying rules and we'll put a link right below the video
here today so you can go check that out we've also got some great resources over on the money evolution Resource Center where you can download some PDFs and get some access to some additional videos and things like that so if you haven't already been over there kind of a plug there check that out as well but here today I want to talk about you know how you can think about

your

house

as an

investment

even if it's the

house

that you live in you know so we're gonna assume that
you've already watched that other video we're gonna assume that you're following some of those home buying rules but but here's a couple things to think about as you're making that

house

purchase number one is you know could you rent that

house

out and make money on it with the purchase price that you're making and I think especially if you're starting out and you're buying that

house

for the very first time one of the things that I think you can do kind of a
little bit of a

house

hack type of a thing is if you make that first housing purchase something that could definitely fit the demographic of a future rental property so think about it this way you go you get into that

house

you make the purchase you put

your

down payment down and then instead of selling that

house

like most people do in taking that equity and going and buying a bigger

house

you take the equity out of that

house

and you use that to buy a new

house

that you're going to go move
into but you keep that existing

house

and you look at it as a rental property you know and we'll probably make some other videos about rental properties as well in fact I did one here too not too long ago where I talked about stock market investing versus real estate investing and I start talking about the different ways that you can make money with

investment

properties but we'll take some deeper dives eventually on crunching some of the numbers on real estate but but you want to look
at that and say you know could you rent it and just as a rule of thumb here's what I like to do you know so if you're gonna buy a

house

for $200,000 and this is something very easily as you're making that purchase just just to keep in the back of

your

mind and

your

real estate agent can not only obviously give you the comps for what the other

house

s in that neighborhood are worth but they can also give you the rental comps you know so as a rule of thumb I like to focus on if I'm
is your house an investment
gonna buy this as a rental property I want to see that I can get at least 1% of that purchase price out on a monthly basis for a gross rent number so 1% of two hundred thousand is two thousand dollars a month so you can very easily go into that

house

and know that hey if I'm gonna pay two hundred thousand dollars for this

house

and the rental market supports at least two thousand dollars of rent that's something maybe a couple years down the road I can sell or I can rent that

house

out
as opposed to selling the

house

you know so number one is you know could you rent that out

house

out and make money on it from a cash flow standpoint if you were to do that right now today so the second way that you can think of

your

house

that you live in as an

investment

is to think about the equity that you're going to hopefully build up over time or the appreciation that the

house

is gonna have so according to the case-shiller housing index housing prices since 1928 have grown by about
3.7 percent a year so what that means if we just do some simple math on that even just using what we've talked about before the rule of 72 that tells us that housing prices are going to double about once every 20 years or so so is it is a long term capital appreciation thing now with that said it does stand to reason that some time periods are gonna grow faster than 3.7% and some time periods are gonna grow slower than that in fact going back to 2008 especially depending on the area that you
lived in some housing markets saw some pretty drastic decline so you know we want to make a good smart housing decision but it doesn't completely eliminate the risk that we could lose money the one good thing as long as we've bought a

house

that's affordable it's in our price range and we've used some of these rules that we talked about in the other video as we're making that purchase and don't overpay as long as we can still make that payment we should still
hopefully be okay because we're still making the payment and eventually hopefully the housing prices go up it may take some time but eventually housing prices go up so the way we can look at this as an

investment

is at the time of purchase and I talked a lot about that looking at price per square foot and looking at maybe the rehab that you might need to put into a

house

but in particular if you find what I sometimes called like an ugly

house

something that maybe has very good bones but has
maybe that green shag carpeting that's still left over from the 70s and you know has yellow you know paint on the walls and flowered wallpaper in the kitchen and all those weird things that you see when you go into a

house

most people walk into a

house

like that and they just walk right back out say this is awful I don't want to spend the time or the money to fix this

house

up and and because of that because that

house

doesn't have that appeal to many buyers and many buyers can't
get over that fact that it's got that green carpeting and it's got the floral wallpaper those

house

s tend to be a little bit cheaper and so if you look at it you did

your

price per square foot maybe you've determined that

house

is in a particular neighborhood that you're looking at would normally sell for $300,000 if they were in perfect shape but may you have a

house

that's that's listed for 250 and it needs some work and maybe it's been sitting on the market for a
while that's another way that you can come into this and and maybe find something that's a little bit more of a deal maybe a seller that's getting a little bit more desperate if that

house

has been on the market for a longer time that's something

your

Realtor can help you out with they can look at days on the market and so you might say hey there's a $50,000 gap there maybe you'd come in and you determined that maybe the

house

needs twenty five thousand dollars worth of
is your house an investment
work so you could come into that

house

buy it for 250 maybe put twenty five thousand dollars of work and you think it's going to be pretty close to that same quality of

house

that would normally be selling for three hundred thousand maybe even come in here because you think that sellers a little bit desperate it's been sitting on the market you negotiate a little bit and maybe you come in and you say hey I'll give you a two hundred twenty five thousand dollars for that

house

and now

your

potential equity that you're going to maybe have almost from the get-go is not twenty five thousand dollars but maybe fifty thousand dollars and again that's maybe extreme but you get the idea I hope that you can find deals with real estate because it's not as efficient of a market as things like the stock market where you've got thousands and thousands of people bidding on the price of something every single day in fact every single minute of the day

house

s tend to be a lot
less efficient in terms of the purchase of those now here's the really nice thing about this you know so we talked about you know maybe getting that equity in the

house

and let's say you bought this

house

and you made $25,000 equity in there we're not even gonna count the potential increase hopefully if that

house

went from 300 thousand maybe to 310 over a couple of years or 305 but you've got that $25,000 worth of equity in there maybe you you know you've got

your

original
downpayment in there as well you can pull that $25,000 equity out and use that potentially to buy that next

house

that you're gonna live in and then rent that

house

out if you decide to hate we just want to cash out of this

house

the IRS has a very nice rule for people selling their primary home if you're single you can have up to a $250,000 capital gain and pay 0% taxes on that so it's a phenomenal deal it's probably one of the best aspects of the tax code one of the one of the
biggest benefits if you're a married couple that numbers double to $500,000 so this is something that especially and you think about somebody that may be very handy that likes to do the work maybe likes to you know because nobody likes stripping wallpaper probably but if you're handy that way and you don't mind stripping wallpaper and painting walls and maybe not gonna wall down and and doing some plaster and things like that you could put some sweat equity into this and it could be
a way for you to you know to gain some additional wealth you know so maybe maybe that's a twenty five thousand dollar bill to get that

house

up to up to where it needs to be but maybe if you do the work maybe you could do some of that work and save five thousand dollars so you think of it like you know people talk about side hustles and and things like that so if you do some of the work and you say five thousand dollars because you were the one that spent the Saturday painting the kitchen
and stripping all that wallpaper off that's gonna go right into

your

pocket at the time that you sell so there's a lot of different ways you can do that you can also of course access the equity in the

house

through a loan so you can take money out of the

house

so two years from now maybe say hey we like this

house

we've got it fixed up well we'd still like to go and maybe get into a rental property or do something else with that money so you can refinance and if you've got
enough equity in there you can pull maybe that $25,000 that you've built up in there or 50,000 and pull that back out as a loan and then use that to do something hopefully smart with it you don't want to take the money out and go buy an RV or another vacation property or something like that you wanna you want to use that hopefully for if you're taking on debt we call it good debt and bad debt good debt is defined as something that's going to hopefully help put money back in

your

pocket and bad debt is something that just becomes another expense so if you you know take the $50,000 out go buy a big RV well you don't have that 50,000 you've got a payment now and you've also got the expense of maintaining an RV on top of that whereas if you use the 50,000 to go by a rental property that's maybe going to cash flow a couple hundred dollars a month and hopefully get some appreciation with that and kind of repeat this process over and over again that's what
we sometimes refer to as good debt in fact Robert Kiyosaki talks about that a lot in his book if you haven't checked that book out it's a great book I think one of these videos I'll probably do a little book review but the original book is Rich Dad Poor Dad but he has I think about seven or eight or maybe who knows twelve books now in the series I've read pretty much all of those I think I was really a big fan of his when he first came out and lots of good ideas and information
and actually just a lot of different ways of thinking about things and I think that's one of the hopeful hopeful things you're getting out of these videos is just kind of opening

your

eyes up to you know hey you know I don't have to follow some of that conventional wisdom there's other ways to do this then maybe the way that even

your

parents did things or the way

your

friends are doing things where you know they're buying this starter

house

and maybe they're doing it
with little down and then the

house

appreciates a little bit they cash that

house

in they go buy a bigger

house

and then they start having kids and then they just take out more debt and they never really get financially ahead but if you kind of start this out early you can really set

your

self up for hopefully a good financial future so anyway I hope you got some good information out of this video I hope this all kind of makes sense again check out the resource center money evolution will have a
link there in the description for that and I will see you back in our next video and don't forget to hit subscribe and we'll see you back soon thanks you