Real Estate As A Retirement Vehicle

In this episode, we continue to follow the retirement theme, which started with Ep 64 Retirement Savings, then the book review Ep 65 Latte Factor, and on to Ep 66 Opportunity Cost. With this episode, we're using real estate as another opportunity for monthly income and or a lump sum withdrawal in retirement.

The worksheet used in the episode and any other resources is below.


Books & Links From The Episode

Past Episodes Plus Links & Resources Inside

Opportunity Cost | Ep 66

66| Opportunity Cost

Opportunity Cost Opportunity Cost; The loss of potential gain from other alternatives when one alternative is chosen, a trade-off. What are you trading money or time or happyness for? Have you taken the time to evaluate the “Opportunity Cost” of one thing for another? How about that new car but we’ll have to take fewer […]
Book Review: Latte Factor

65| Book Review: Latte Factor

Book Review: David Bach America’s Most Trusted Financial Expert David Bach is one of the most trusted financial experts and bestselling financial authors of our time. He has written nine consecutive New York Times bestsellers with over seven million copies in print, translated into nineteen languages, including two #1 New York Times bestsellers, The Automatic […]
Time Is On Your Side - Retirement Savings | Ep 64

64| Time Is On Your Side

Time Is On Your Side Retirement Savings What does saving $100 a month towards retirement really added up to in 30 years? Is time on my side? Does compound interest really make me that much money? We answer all these questions, plus other scenarios in the realm of retirement savings. This is an interactive episode […]
Book Review: The Richest Man in Babylon by George S. Clason

55: Book Review: The Richest Man in Babylon

The Richest Man in Babylon Subscribe to our YouTube Channel George Samuel Clason American Author George Samuel Clason was an American author. He is most associated with his book The Richest Man in Babylon which was first published in 1926. Clason started two companies, the Clason Map Company of Denver, Colorado, and the Clason Publishing […]
An image of a modern two-story house with a wet driveway under a dusk sky. Text overlay reads "How To Buy A Home: FAQ To Buying A House".

43: How To Buy A Home: FAQ To Buying A House

How To Buy A Home: FAQ To Buying A House On this episode, Ransom talks through the questions he gets most when people want to buy a house. Learn the suggestions or answers to questions like: How do you get started buying a home? Tips for finding a realtor. What do I need? Learn your […]
Collage image featuring eight diverse individuals smiling in separate frames for a movie review titled "generation: freedom - how the internet killed the day job," shown on the social chameleon show.

42: Movie Review: Generation Freedom

Movie Review Generation: Subscribe to our YouTube Channel About The Docuseries “I’m wasting my life pursuing a living. I battle non-stop emails, unnecessary meetings, overbearing coworkers, and a company that doesn’t care about me. I know I’ll be ordering off the senior menu before I see the world or spend quality time with those I […]

Episode Transcriptions Unedited, Auto-Generated.

Intro: 00:15  Opening Music

Tyson: 00:15 Welcome to the social community show where it's our goal to help you learn, grow and transplant personally to become, today we're talking about real estate investment as a retirement vehicle. Kind of following our theme on the past few episodes, a 64 we'd started with retirement savings. We showed you guys a bunch of example models on on that a 65 we did not. They factor that book review. If you guys haven't seen that, those episodes would take those out. We did 66 is opportunity costs, which I think leads into a lot of the things before that. And then also this one, you know, if you haven't seen that as well, go check out that and understand a little bit more about opportunity costs and now we're onto you know, using real estate as another vehicle for retirement or, or are there types of things as opportunity maybe for monthly income in your later years or maybe even now or maybe a a lump sum Catholic draw kind of situation in retirement you're looking for.

Tyson: 01:04 This is just one thing you can use for that. And I guess we'll turn it over to ransom. He's got a little model. Ransom was a professional in this industry. So if you have questions, please, please you know, Male, the show, we'll get them over to ransom and if he can't ask that and we'll get it, somebody that can and please do, you know, like everything they'll do dumb shit. Lay Ass, see professionals, you know, get, get, you know, professional advice senior military or wherever, somebody that knows what's going on here can help you with ins and outs of all these different things. Yeah, definitely

Ransom: 01:36 The I am a real estate professional but just for the state of Hawaii, so anywhere else you know, like tastes and saying, please seek your professionals out there. So just, just again, you know, we're out here bringing awareness to people and trying different things. So in episode 64, we kind of put out a spreadsheet and made that available for people who are looking to get into, you know, putting money into their 401k or four oh three B Ira type of thing. And today we'll be talking a little bit more about, you know, using that I guess similar model, maybe not apples to apples, but maybe see apples to broccoli. I have no idea. That's a good comparison. But for those of you that, you know, you're not too hyper bought a 401k or a four oh three B that doesn't suit your at your, your play style, then this may be another type of investment strategy for you. So that way when you make it to those retirement years, you can do different things. For those of you listening to the podcast, this is kind of a visual Tyson nine. We'll probably do our best to explain the worksheet. But you know, again, if you're listening to this podcast and you want to get ahold of the, the spreadsheet that's out there, we'll make that available for you. Absolutely.

Tyson: 02:58 Social media that and then you'll, you'll, you know, search for the episode or whatever. And in the show notes will be all, all the links in the spreadsheets and any other resources we come up with three guys that make it easy as a jumping off point, as a starting point for you guys to think about these things. Okay. Well, any questions before we got started at Tyson that you think we should cover or, ah, I don't think so. I guess this is Kinda your deal. You're, you're, you're gonna run the show here. We'll jump over to the spreadsheet. I'm running the show, but all right, well we'll jump into the spreadsheet and, yeah. You know, you're, you're the professionals industry. I'll probably have questions as we go along to clarify my thinking. Please feel free to jump in and ask those questions, especially if, you know, you think it's valuable to people out there. So a lot of people might have very similar questions. So, yeah I guess, you know, in ours, episode 64, we kind of started with year 2020 being the year to do something. So you'll see that here in this similar spreadsheet. So starting with 2020

Ransom: 03:58 Rather than going every year, our real estate kinda takes its toll. You know, the cycles tend to come every St, maybe eight to 10 years, something in that they may be longer than maybe shorter. Real estate doesn't always go up in value. So just kind of keep that in mind. But you know, with the cycles that come and with the tools that are available, you support you to purchase real estate, real estate, the most common way to get it is by taking out what's called a mortgage. And that mortgage is for 30 years. So this type of investment goes over through to the long haul. In the event that, you know, you can actually purchase it without having all the money down. You know if you're going to buy stocks or put money into like a 401k, that has to be your own money that's going in.

Ransom: 04:51 But when you purchase real estate, you know, and it's example that we have here, you're the purchasing a home that's worth 200,000 but you're not gonna put 200,000 down to buy that home. You only be putting approximately 30% of the money. That'd be, you know, 60 to 70,000 to purchase that home. And as soon as you buy that home, like your net worth jumps by 200,000 just because of home is worth that much even though you didn't put that much into it. So that's kind of one of the things that you'll notice here, this section, we have the initial down and you know, 200,000 is a value. I've kind of made these numbers conservative on purpose. I kind of wanted to make this like a blanket thing that just about anybody can do and that I've thought that these numbers are pretty realistic and pretty achievable for anybody.

Ransom: 05:43 Whether you're like real estate, you know, one on one or whether you're a sophisticated real estate investor, these numbers shouldn't work. I'm putting 30% down and you know, a mortgage to get the rest. And if you're in that range, you should be able to get this property. And with that, all of the costs involved with holding that property, let's just say your taxes, your, you know, mortgage obligation, right? That includes your PMI or insurances, all that kind of stuff. With all of those things as your cost, you should be able to get a renter in that property that will pay for all of those plus give you an extra additive. In this scenario here, I put $100 as your net rents, you know, so basically that would be making $100 a month on that Opry. When you put 70,000 down, I guess, am I going to fast ice in and that Kinda, I guess I keep hearing you say 30% down.

Ransom: 06:48 That seems high to me. I keep, I hear 20 or less. Why? Why do you go 30? What's a why? What are we doing? 34? Well, 20% down is, you know, I'm not going to say old and I guess I don't want people to get offended, but my father, his father probably had to actually purchase real estate at a 20% down type of Shenanigan thing or deal as it was. Most lenders out there, if you put 20% down and you get 80% of the value in a mortgage, they won't charge you what's called mortgage insurance [inaudible] me in additional costs every month to hold that property. So this is for residential properties in general and for commercial properties. However, when you get to that 30% number, you know, that would usually get you the best interest rate and or the best amount of fees in those programs in a and you know, again, this model was just kinda like a one size fits all blanket model.

Ransom: 07:55 And I just wanted to put these numbers again cause I think that they worked the best and we talked a little bit earlier offline. You know, for those of you that are sophisticated and you know, you're going to go into the higher numbers, say instead of getting a property worth 200,000, if you're going to add a zero, you know, and just, or this case being here, you're going to put another zero and get a $2 million property a on those types of properties. Anytime you're getting alone, maybe 700,000, probably a good marker. Anything above 700,000 in debt, you're going to be required and alone, you're probably gonna need to put more than 30% down, possibly even 40, maybe 50% out. So anyway, don't want to jump too ahead of the subject can get rather complicated rather quickly. And I guess that's kind of why I just chose 30%.

Ransom: 08:45 But for those of you out there if you know, you know if you don't know, you know about the ratio is 30% down, you should be able to go to any lender in town, any broker in any credit union in town, and they should be able to get you a loan. If you put 30% down and your rates and, or your fees to get that type of package should be very reasonable. And that's, that's why I use those numbers. So, so, so at 30% on your, I guess hedging your bets or protecting yourself and not in a way so you can get the most monthly rental met. Is that what we're going to and that's kind of how it goes about. I don't know if I still have the mortgage calculator up on this screen, but for this particular period, right? If we're going at $200,000 property and if you're going to get a mortgage of 140,000, right?

Ransom: 09:38 Cause you know, I know the math doesn't always add up. 70 minus 200,000 does equal one 30. I get that. But for those of you that don't know, there are sometimes other costs included such things like closing costs points that you're going to have to pay on your mortgage. So I just kind of put a $10,000 buffer in there. And again, this is a blanket sheet. You guys can go back to the sheet at any time and change these numbers around and you know what I mean, change it from here. Instead, if you actually did put 70,000 down and include all your costs, you can change it to 130 in mortgage. And that's kind of the beauty of it. Again, we're just trying to explain this in general terms. $10,000 error so that you can get a $200,000 property or maybe you buy something at two Oh five you know, we just kinda want to try to keep the numbers simple, you know, for the purpose of this show and for the purpose of explaining things.

Ransom: 10:35 And when you get down to actually using it for your own purposes you can get a little bit more technical. And again, if you have questions, please let us know. But anyway, we're getting back to the mortgage calculator that I have here. I'm at 4% and the reason I went at 4% is also when you're getting a commercial loan, you will get interest rates that are typically higher than what you'll see on your residential properties, right? So if you go in and you buy a home to live in it, the bank is going to give you an interest rate that's preferable for you. So they will give you the lower interest rate. And in today's world that should be somewhere around 3.5 to 4% a just kind of depends on when you get it and how much points you're going to pay. Again, you know, these are kind of, you know, complex questions that you'll have to meet with your loan officer and our realtor about, but I just did 140 at 4% just for the purpose of, you know, getting it, your monthly obligation becomes $668 at that point.

Ransom: 11:36 So I know earlier you're saying, well why not put 20% down? Well, as you can see, if you only put 20% down rate in this mortgage value gets higher. Right now your monthly payment changes from you know, six 68 to seven 64 so almost a bucks more. Right? And then shooting that's going with the 20% down option giving you a mortgage at 160,000 so you know what I'm saying? Just that that number alone right there from one 60 to one 40 if you know in most case scenarios, again this is just general information that will give you this hundred dollar a month in net rents. Okay. For most case scenarios, if you're putting less than 30% down, especially if you're putting less than 20% balance, your net rents or your cash flow from that property tends to go down quite a bit. And that's kind of why you use that model is that kind of makes sense.

Ransom: 12:34 Or that could also be part of maybe your strategy of, right. And for those of you out there, if you're, you're sitting master, you're full of crap. I don't want you talking about, I found properties of zero 0% down and they, we make you know, $500 in net rent every month. Like, I'm not saying that that's not possible. You know, if there are properties that are out there that are going to make sense in which you can, you can find those deals. By all means go get them and you can go back to this sheet and change it. You know, I put $10,000 down on a property that was worth, you know, 500,000 and it nets me $300 a month. Like you, no, those are also real scenarios that you know can happen. You know, the this type of strategy here where you're putting less money down so you get a property that's worth more and you're getting $300 a month like that deal.

Ransom: 13:29 It tends to be a little bit more complicated. There's a little bit more moving steps involved with that. And you know what I mean? That's if you want to talk about that kind of stuff offline, we can get into that. But this is just, again, we're going back to the whole blanket thing of this is something that anybody can use. And with these numbers it should be able to work out. And these are two, what I, what I was thinking or saying or trying to say, I guess I didn't come across maybe in a, you know an option or an idea would be I'm going to eat 100 bucks a month and only put down 50 grand or 30 grand. You know what I'm saying? That's also possible. For those of you out there, if you're a tax professionals or you understand how the tax games work sometimes a property on paper, well I shouldn't say on paper in actuality, and news is $100 a month, like all things considered.

Ransom: 14:27 But when you get down to the tax rates and the tax benefits of it, you actually kind of have this phantom money that goes out there. So that property actually ends up being positive on paper. Right? So, or sometimes it ends up being negative on paper. So there are some fans, some things that are out there just, you know, depending on what type of tax structures you have. I know this past year with the changes, the tax law usually most people end up paying more in taxes nowadays as starting as of last year. You know, and that, you know, a lot of those things, especially if you're a sole proprietor or do we just as like a side business kind of being those went away. If you're more of a corporate structure or LLC type of structure you can probably still have some pretty good tax advantages just depending upon, you know, again, seek tax advice and that kind of stuff. Google, go ahead.

Tyson: 15:24 I was, I was thinking my, my thought and I wouldn't, I wouldn't be trying to buy properties solely to get a tax advantage. You know what I'm saying? Like,

Ransom: 15:34 Well, it's, it's, you know, that's not the goal. Again, this is to show you that you can use this strategy to get a home and it's worth 200,000. You only put 70 down, whether you're $100 a month to keep that property. That's up to you. If you feel that keeping an extra, you know, 10% in your pocket in cash value is worth it. Yeah, he can $2 a month. Just remember that you know, your mortgage is going to be for 30 years. So,

Tyson: 16:06 So that's what I was thinking when I, when I seen that, you know, from 20 to 30 I'm like, that's 100 bucks a month so I can keep 10% of my money and break even zero maybe that I could, you know, and then that other money could be buying maybe another property or part of my emergency fund or I can make a little bit of extra on the side with that and maybe I can make, you know what I mean? I don't know. Yeah,

Ransom: 16:29 No, that's all fine and dandy if that's what you do. I'm not a big fan of that. If you're going to purchase real estate, there are tons of properties out there, Tonga emeralds that you can go out there. You should be able to make some type of net profit on your real estate investments. You know, again, using 30% down. I don't necessarily even need to take a loss every month. Because then when you get here to the last column where it says total money invested, we're going to add $100 a month. And as you can see here, it's $1,200 a year times 30 years, you're going to add another a hundred thousand dollars to that over the 30 year period. That's kind of the thing that I don't necessarily recommend. But you know, whatever the case might be, if you've got a better place to put that, you know, 10% by all means do.

Ransom: 17:23 So just for this case scenario, I didn't want to show that. Cause now you're increasing your total invested costs, which is not the goal, right? This goal is to purchase a piece of real estate that will pay for itself and give you possibly a little bit additional income every month. Yeah, mostly grows in value. And that's kind of the strategy. And that's kind of what I wanted to talk about. So I guess we'll get into any of the further. Maybe I can just get to the point, I know some of you are like waiting like, well what's the point? [inaudible] But but anyway, so initially when you put the 70,000 your net worth is 200,000 and you can see here on the sheet and then in 30 years you have to remember that that mortgage goes away, that mortgage of 140,000 was paid for by your tenant who lived in there.

Ransom: 18:13 You know? And on top of that, you should have been making, you know, at least a profit if not broken even. We should be making a little bit of profit. So every year you've been making $1,200, you know, minus all your expenses, including vacancies. And in 30 years your house is actually worth more than you bought it for. You know, and again, I'm not saying real estate always goes up in value, but there should be a time in that 30 span, 30 year span period from 2020 to 2050 when you're $200,000 house is actually worth 300,000. So whether you cash it out at that moment in time or we keep it just for the purpose of this example and to kind of keep things simple, let's just say it went up by 100,000 in 30 years, it may be worth more than that in 30 years and maybe worth less.

Ransom: 19:03 You know, I, I really don't know. But through the proven amount of time real estate, those tends to go up for the long haul over the long period. And I think from 200 to 300,000 is a pretty reasonable gain and pretty reasonable value. And also if you take a look here in this column, you can see that the mortgage gets reduced to zero in 30 years. And again, you can pay that off earlier if you want to. That is going to be where your money, I notice, or you're talking about losing money every month, but if you wanted to actually pay your mortgage on earlier, let's just say you get a bonus or something, you want to get that mortgage earlier. When you pay that mortgage off, if you remember, according to the mortgage calculator, that's 660 bucks a month. That's monthly expenditures that you're paying.

Ransom: 19:50 So now instead of your property grossing $100 a month, your property is grossing $700 a month, right? And then maybe either a hundred plus the six 68 maybe even more than that, but yeah, well, I mean, I'm just saying, right, volume is worth more. It's worth 300,000 right? Giving you now $700 a month, which is 8,400 a year, right? And you've only put $70,000 into this investment. And that's kind of the beauty of things. And the beauty of time, you know, the more you know, time that goes on, you know this, if we're just going to grow and grow and so on and so forth, the net value of your home can also grow as well. So, you know, these are just kind of simple things and simple or just kinda wanted to touch basis and make sure we went over this initial ocean cause things will get a little bit complicated as we go on to the two house model and the three house model and can kind of explain.

Ransom: 20:47 So I'm sorry, any other questions that you had and I cut you off earlier. No, no, no, no. I just, yeah, no, I think we're good here. I mean it makes sense. I mean you paying 660 bucks a month and then now you're not, so you have that six 68 right, plus whatever or whatever, $500 you're making on top of that or maybe, yeah. Yeah. So you know, you can kind of use this strategy to get in there. And again, for those of you that are more sophisticated or for those of you that are getting started and you say like, well you know, the actual value of my homes in my area is actually three what are we, we're looking at like 330 I guess. Yeah, it's like the thing that median area, right? For other areas like 330 so you know, now you're going to change this number to 110 right? Or let's just say you don't need that much to make it. Maybe you only need 90,000 you know, now I would just put in, you know, whatever kind of numbers we want. And then from there you're going to carry a mortgage of what, 240 so something like that and you know, and then this property instead of netting you $100 a month kind of nets you, you know, or $100, I don't want this. I say two 50 whatever.

Ransom: 22:11 And then this is the kind of stuff that you can play around with. So Aki, this number, you can put it over here. And then this is going to be your initial three 30. So for those of you out there that actually want to use this sheet, I'm sorry for those of you listening on the podcast, can't really see what sells, I'm going to and how I'm changing those numbers and making all of that happen. But you know, just, just so you know that this sheet you can go in here and you can change it and make it to do your bidding and all of that kind of stuff. So on the show page, so there will be the video and the audio version. So if you want to see the video version, go to the show note page or go to youtube and you can easily just scrub ahead to this and you can see what we're working on here.

Ransom: 22:58 Okay. So, you know, and this is just a quick way that you can go in here and kind of change some of the numbers around. So that they'll see, you can see thing, I should have actually made a copy of that and they, but sorry for those of you out there and just going to change it back to the original maybe, no, I'll just leave it there for now. Okay. So moving along, but right along to our next thing. So with this, you can actually use the sheets here and at the bottom as you can see the tabs. So this is the example of the house and then so this is the one house model. So now let's say and again for those of you that are out there thinking that hey, I don't have $70,000, you know, you can change this number wrong, this doesn't have to be next year.

Ransom: 23:49 Right? Yeah. Using the latte factor hay or whatever factor that is, you know, for those of you out there that like to buy expensive cars, you know, car factor or whatever. No, whatever your factor is out there. This doesn't have to be 2020 this can be 2025 right? Just say it'll take you five years to save up $70,000 is that, is that possible? Is that reality for you? In five years you can buy a house, make it your reality, you know, and that's this 14,000 a year. And if that's not it, then you know what I mean? Maybe this has to go to 2027 you know, we talked about opportunity costs last episode, right? Like what does that time costing you these years that you're going to be saving this money is going to be towards your future investing in this house, you know, and or you know, if this could be the home that you live in, this could be an investment home, whatever the case might be. For those of you that are sophisticated and you get a duplex, you live in one area and you rent out the other, you can do a number of things with this. This could be the home that you actually live in. You know what I mean? That you put 70,000 down and you're getting paid $100 a month because your renter that lives in your sub unit is paying your mortgage for you. Like these are all things that are reality and this is using real estate versus using your 401k or your four oh three B. So

Tyson: 25:19 Yeah, I mean lots of scenarios. You can house hack, they call it getting roommates, you know, converting your basement or whatever. There's like lots of scenarios you can do things. So talk to people, get creative, look things up. I mean, lots of ways you can make a little extra with your house, you know, depending on your situation or when you're out there looking for houses. Looking at this house saying this would be a good, I can do this, we could do that, we can convert this, we can split it. Like there's tons of different scenarios to make income opportunities in your home and not inconveniencing your lifestyle necessarily.

Ransom: 25:56 Okay, good. All right, so didn't mean to get too sidetracked with all the questions we had out there for the questioners in us, but you're kind of wanting to cover the basis and show people how they can adjust the worksheet so that it suits their needs and you know what I mean? And now we can get into the little bit more complex things. And then on here we'll show you three houses after this. Okay. So for, we'll just keep things the same again, you know, the numbers can be changed, right? It's like that show, the names and faces have been changed. But you know what, I heard the cases. So we're just gonna use the same simple numbers so that we can, you know, get the point across here. Right? So putting $70,000 down, buying a $200,000, you know that property is going to cashflow you net rent of $100 a month, including all of your holding costs, cleaning vacancies, all those kinds of things gross in you.

Ransom: 26:54 $1,200 a year. Okay. And the net worth of that house, the second that you buy it is what it's worth. 200,000. Okay. There are times in which you have built in equity, so that home might actually be worth 210 or towards your 20,000 when you buy it. Yeah and that's the beauty of real estate, but we're just gonna keep things simple for now just so that when we start compounding houses upon houses, we keep the numbers the same. So that kind of people get the idea, I guess that kind of makes sense. [inaudible] Yeah, yeah, definitely. Okay, so we got that. That's our first house. And again, I'm just using a three year model, right? Cause we talked about, you know, putting money away. So if it's not three years for you, you know, why don't we just change this here to 2025 we'll use the five year model. Okay.

Tyson: 27:44 So, and I guess that's the, the, the core message out here is to set yourself up. Like what are you going to do and plan that out. Like we're going to do this every three years. Every five years or whatever. And then setting that up, making that automatic or whatever you need to do to get that dom payment, like thinking about that future wise.

Ransom: 28:02 Exactly. And you know, and so from here we'll just go with the five-year model. So you buy your first house next year, 2020 okay. And then you buy your next house and five years from then 2025 he owned two houses. Okay. You put $70,000 on your next house, right? It's worth 200,000 so the numbers get a little bit skewed here. So the reason you see the mortgage value of 280 is because remember we have two houses. So we have two houses, which means we have two more origins, more 140,000 this is the power of leverage, right? This is the ability of the bank. It's going to give you the money to do that. And again, your net worth is worth twice as much, right? Yeah. Two houses. So your net worth is now 400,000 right? And instead of making $100 a month, you'll be making $200 a month, which is 24,000 a year. I mean, I'm sorry, 2,400 sorry for those of you have more dog.

Ransom: 29:04 Sorry, I I added another zero. Okay. And again, the total amount that you have invested is 140,000. You're not near your net worth. The second that you buy it as 400,000. So then you just kinda gotta keep in mind like how these things work and you know, the beauty of real estate, beauty of all types of investments and how these things can play out. It's a power. We're going to wait 30 years from 2020 when you bought your original house and here's where things can kind of change, right? So in 30 years you still own two homes, but now your mortgage instead folding two mortgages, you're actually going to all be only holding one mortgage and your mortgage left on your second house is probably going to be a lot less than your original 140,000. But again, for the simplicity of using the sheet, I just kind of want to put it that it's still there.

Ransom: 29:57 Right? You still have it. Okay. And then from here, remember you're a $200,000 house went up in value to 300,000 okay. And then the Second House that you bought 25 years ago probably also went up in value. But again, we're just keeping the numbers simple so that people can use it right. And there, since your first mortgage has gone ours, I shouldn't say that. The mortgage on your first property is gone. You're going to get that additional $600 a month. So now you're making $800 a month in, right? Which comes out to just under 10,000 a year. And your net worth, you know what I mean? Total money again on your 40 that you put in is still the total money that you put in. It's all the money that she needed to put in for this investment. 30 years later, it's worth 500,000 and then you wait five years later to when you 55 right when your second house is completely paid off and it's worth more than you bought it.

Ransom: 30:54 So now the numbers compounds 600,000 for both houses and now you're making $1,400 a month, right? Which is 1680 a year. That's not bad. That's in Hawaii is still poverty but a lot of poverty. But I'm just saying, you know, and this supplemental to whatever you're making right now, it's whatever you're making at the time. And you know, you got houses here and then the beauty of it is, you know, as this compounds, if you can imagine on the next one when I show you, and you know, if you bought your third house in 2030 in 2060 right, your three houses would be paid off four and you'll have $900,000 net worth as you can see, it is in the home. And it's like, look, you put in 210,000 right? It does put that extra 70 for the third house. Right now you have a net worth of $900,000 you know, and this is this is a span of, you know, 20 to 60.

Ransom: 32:00 So that's another, that's 40 years, you know, on this sheet, sorry, the for those of you that are watching, you can actually see that I kept the three year model here. You violent would be three years. But again, you can change those numbers to whatever, whatever years you buy them in. And if you miss a year and you know, you've planned to buy it by year three but things didn't work out and you bought it a year for it and change the numbers, make the sheet yours. Yeah. Know this is just planning, right? I mean this is not necessarily just for actual stuff, but yeah, you can use it for actual investment that you own. If you are a, you're starting this model of, you know, these are things to kind of get the gears running to get your brain turning into be like, hey, you know, this is possible. I can do this. Like to put things on paper, then you know, you can actually look at something, you got milestones through. She got, you know, you, you now have things that are attainable when before, like you didn't have any idea how to get there. Like that's where the show is all about. We want to show you the places we want to help you transform to that person that you want to become and accomplish what you want to accomplish. So,

Tyson: 33:08 Yeah, and you know, I was thinking about when you were doing this, you know, I was thinking, you know, 70,000, you know, if you did that for five years, I would, you know, you'd have to put 14,000 in each year or, you know $1,167. But I was thinking, I was like, you know, as you start to kind of go here you could, if you, if you took what you were putting in, plus you took your rental net into that pot as well, you could actually wind up speeding this up a lot faster.

Ransom: 33:38 Oh yeah, exactly. Exactly. Yeah. So, you know, for those of you that just to reiterate what Tyson said, you've got to remember that you're making $1,200 a year, right? So if the first year you saved 14,000 right? And then the next year instead of saving 14,000 years saving, you know, what does that plus 1200 right? That's 1512 right? Right. And then same thing. So by, you know, by year three, I'm sorry, by the Third House that you buy, you know, I mean, adjust just $300 a month, you're making an extra 3000 a year. So yeah, you're right. You're making money every, you know, every time, every month from these houses, you can put that into your, your, your next fund to buy your next house. Right.

Tyson: 34:28 It's only every three years or whatever. It'd be easier for you to save up or you can do, you can do it maybe quicker or whatever.

Ransom: 34:36 You're at the for year three, when you make that 3,600 like you're like, hey, you know what, I've worked hard for for nine years to put money away, or for 15 years to buy these three houses every year. I'm a little on Disneyland, right? Some foolish this Kinda, however you want to live your life, whatever you want to do, however you wanna do. So, you know, and that's kind of the beauty and the power of this. And for those of you that are thinking, well, I'm only making, you know, sorry again for those that are listening on a podcast, but if you're looking at your net rents that you're getting after you buy your third house, the net rents after all those houses are paid off, isn't going to be 2100 a month. And that's like 25,000 a year. So for supplemental to whatever other things you're doing.

Ransom: 35:22 Well, I understand that, but what I'm trying to allude at is that, hey, you know, you're at 2000, you know, 60 or whatever, you know what I mean? You're going to be in your golden years. Like I want to cash out on this 900,000 and my worth, you know, you can do that. Yeah, you can sell one of those houses, right? And right now they have the stipulation, I don't know what the stipulation is going to be in 2050 or you know, 40 years from now, but you live in a house for two out of five years. You can sell that house tax free, 250 you know, and so if you do that, you can sell this house for 300,000 cause that's what it's worth. And now you have 300,000 to live off for the next three or four years. Right. That's a good life.

Ransom: 36:12 And I know I've known people to do that. They spent their whole life buying houses, how soft the house and then you know, towards the golden years, they live in a house for two years. They sell it and they cash out on that, you know, 250 or 500,000 just depending, you know, whatever they made. And that's the money that you live on for the next two years. While you're living in the next sentence and then you sell that house and so on and so forth. Or if you want to just go broke and sell them all at the same time, pay the taxes and go out with a bang 900,000 whatever you want to do, man, that's

Tyson: 36:44 Whatever you're as a bat, that's the thing. Whenever you're planning is whatever you want to do, that's a beauty of it. You're giving yourself options, opportunities, you know, it's, you know, especially when we're older, it's so much nice to not have to worry about money and these different types of things.

Ransom: 37:01 Yeah. And so, you know, and just Kinda, I, I think I left the IRA worksheet from 64 on here too. And those of you that are watching along, I'm just going to click on the IRA worksheet, but if you remember right, we were contributing 19,000 a year on this sheet from 2020 all the way down to 2046 hit, you know, two mil. Like, it's like, yeah. You know what I mean? Whatever your year plan is, you can buy a house with this money every three years and accomplish something similar

Tyson: 37:37 And that's more than the every five years you would need to put 14 away. So that's more than that.

Ransom: 37:43 Yeah. But, well, whatever, you know, once you get your three houses, you can go back to this model and put your 14,000 into your 401k or four B or you can do whatever other kinds of things that you want to do with that money there. Things that are more liquid, like speculating stocks or ETFs or whatever it is you want to do. So, no, I don't, you had some other questions over offline, but what are some of those other questions? I can't remember.

Tyson: 38:13 We covered a lot of them, but I, I don't know. I was just trying to get ahold of what we were going to talk about. So I'm asking, these are perfect, but I know I was talking about the down and I was talking about oh, I was asking about getting a getting a a more, a different type of mortgage. Like if you're gonna live there. So like you said, you were saying that if you get a a regular home mortgage, like for your personal residence, you've got to live there for a year. Yeah. Okay. So you know, you know we talked a little bit about earlier at the beginning of the show that putting 30,000

Ransom: 38:56 Don should make it a pretty foolproof, don't get me wrong, everything can fall apart at the head of design, but 30% down is a pretty solid strategy to to get positive cashflow on your properties just because of the debt obligation. But if for some reason or you know, you find a property in which less money down makes more sense, you can put less money down and you can still get net proceeds off that property, go ahead and do that. And one of the ways to do that, especially if you currently don't own a home at all, is the buyer first investment as a owner occupied. And again, for those of you out there and be like, we're around some, you're a real estate professional you should be doing that. Shouldn't be advising people to do that. And I'm like, okay, I hear what you're saying.

Ransom: 39:45 Mortgage fraud is very real. You know, you just have to understand that if you're buying a house as a owner occupant, okay, owner occupant being the word, you will get a lower interest rate and you will have better loan programs available to you with less money down. Some of those programs go all the way up to 100%, you know, mortgage on the property, some basically just paying closing costs. Okay. But keep in mind that the numbers when you have 100% mortgage on the property, don't always look the best. The numbers for that property are kind of, they're kinda horrible. But you know, in some cases they may work. So if you are going to purchase your first investment property as a home owner or own one owner occupants at you, you have to make sure that you live in that property for at least a year. At least that's what it is. And why you'll sign an affidavit that states that you have to live in that property for a specific specified amount of time. Right. To make it owner occupied. Okay. And if you're going to do that, you know, made sure whatever you're signing the affidavit, you live in the hall and for that specified amount of time after you live in it or that your owner occupant period is over, you can sell the home or you can rent it out. You can do what you want after that. So

Tyson: 41:07 Yeah, so that's what I was thinking about, like living in it for whatever the year or two years or whatever makes sense for you in your life or your family or maybe you're in the military or something like that. You move a lot, whatever. And then you would have better favor. Am I I is favorable terms or something? Maybe it doesn't work out at a rent. No, but

Ransom: 41:27 Then again, you, you know, you can also, you know, you can buy like a duplex occupant and you know, after a year rental rental portion.

Tyson: 41:37 Yeah. So that's what I was thinking about. Like, you know, you lived there for a year or two. I mean also factoring in moving costs and different things like that, you know, you might eat into some profits or maybe even go a little bit more negative or whatever.

Ransom: 41:47 And also keep in mind that, you know, you want to put some money on the side because 30 years is a long time. You know, you've got to replace a roof, you got paint thing, you know, toilets are going to break stuff. So, you know, you should set some money aside for closing costs, which is kind of why I didn't really touch this, you know, 1200 a year or 24 36 a year. Cause you can use those funds to kind of replace and do your daily maintenance on things that you're going to need throughout the, throughout the life of your investment. But again, you can make these numbers work. This strategy right here on paper is, you know, it's, it's pretty solid one and it's pretty conservative, you know. I definitely think that the venture to make more is out there. But again, this is, this is something that I think is, is very feasible in today's world and it's very doable and that's Kinda why I wanted to share it.

Tyson: 42:41 Yeah. Not Selling the hype of whatever, you know, of course, century comes by every day, every week. So there's things out there. You've got to look, but you got to know where you're going and you got to know how to start. So, and this is, you know, that I think. Yeah. For sure. Sure. Right? Yeah, I don't I, I don't, I don't have any more question. I think, I think this is fun and it's not necessarily a lot of money every year, you know what I mean? Anywhere from 14 to 20,000, you know, it depends on what you're looking at. What's your pattern? Maybe do every seven, maybe 10, whatever your plan is. Well, you've got ways setting that up, what it is. Can you put, you know, 14 away every year? That's a little over a thousand dollars a month. Yeah. It's like, yeah, 1111 call it, call it 1200 bucks a month. Yeah.

Ransom: 43:32 Yeah. And that's, that's pretty reasonable. And you know, again, if you don't make that amount of money on the show, we got other episodes to do. You just kind of get out there and get motivated, do things. I think that one of the things we talked about, you know, the jobs that are out there, really. Yeah, we did get jobs. Like you know this, if this is one of those pieces as like, hey ransom, I want to do this, but I don't make that. And I use this as your motivation, your is yours to attain. And to get, like you got to get out there and get it.

Tyson: 44:04 Well maybe, maybe you don't make that now or maybe you don't have that extra cash available now, but you can start saying, okay, listen, I'm gonna, I'm gonna work on paying off my car loan. We'll work off paying off my credit cards and mortgage pay my student loans. And each time I do one of those, I'll get an extra hundred bucks, 200 bucks. And then you can start. So that maybe only not that right now, you can only do $150 a month, but as you start paying something off, now you've got that payment plus what you are doing. So now you can double it up. Now I can pay $500 a month into this and eventually you can start getting to a point where as you pay things off, as you get that free, maybe you get raises and different types of things. You can start to save a bigger amount of money every month and it might take you whatever. But you got to have that plan. Like I need to get to the point where we're saving 1200 bucks a month so we can [inaudible]

Ransom: 44:48 Buy our first property with our, you want 30% down or you can be like that guy in a latte factor. You know, his, like, he was in debt. It was all this stuff. Yeah, he had health problems and you know, just took him, I think he had a heart attack or something in that bill. Right. I think it was his doctor's like, look man, you gotta Stop Smoking. And My, that became the secret. It's like, yeah, all the money that he paid for cigarettes was pretty Dang expensive. I don't know where you live, but where I live like it's like hundred dollars a cartoon.

Ransom: 45:20 I think here it's like 70 or something. I don't know. That's crazy. I don't, yeah, but I'm just saying like how many cards and these small like don't you know that's the, he just bought the cartons. If you buy packs, like it's like $8 and $10 a pack of cigarettes. Like what? I mean like that can be that money you stop smoking used to use the money that you spend on smoking, start investing in somewhere that you know that that worked for that particular character in their book. And again, we just want to help you get forward and start moving and in getting where you need to be.

Tyson: 45:51 Yeah, just ideas for you guys. I mean different things to think about. Whatever works for your lifestyle and what you're trying to accomplish. It's not impossible. It may feel or look like it is at the moment. But when you, when you're looking and you look in the future and you say, okay, where, where am I at now? Where do I, where do we want to be in 30, 40, 50 years? And you start bringing it forward. He started breaking it down to a monthly, a weekly thing and he started having a plan of attack. These things start feeling less crazy and overwhelming and impossible, right? And if you're looking for more things that get you ahead or, or, or, you know, get you a leg up or, or different things or books or whatever it is, check out what we got going on for a monthly giveaways.

Tyson: 46:35 That's what we're doing there. Go to the social media.show/pick me. See what we got going on. We've, you know, we've got supplements, we've done masterminds, books, different, all kinds of different things. We're always looking out there for things that we're using and, and we're, we're loving and we're liking that's adding value or more time or efficiencies or being more effective on our life. We're trying to pass it on. You guys go over there, see what we got going on, the social media.show/pick me. But your chance to enter to win this months giveaway and as we said earlier to be in the show and probably several times through, we will link these, these resources for you guys here. The, the spreadsheets and a different, the latte factors, all that press episodes and everything for you guys to comb through and find that stuff. Get that going. And we'll link all that in the show notes for you guys at [inaudible] dot show. Any, anything else ransom you think for links and resources like that will, I noticed

Ransom: 47:32 This one is Kinda just the spreadsheet that I put together. So I don't really know anyone that uses this specific Matthew, but there's lots of real estate investing books and resources out there.

Tyson: 47:42 Yeah, I'll, I'll, I'll put a bunch together for you guys in different past episodes we've done that is relevant. It has resources there for you guys as well. And then on to this week's challenge, Bart, with the end in mind, what do you need in retirement? What are you looking for your retirement to be like? What is your monthly income goals? Are you looking for cash out opportunities in your later years? Figure out what that number is and come up with a plan now with whether it's it's your monthly savings goals in retirement, like we talked about priests episodes or like we're talking about here in this episode. I'm getting a property every, you know, three or five, whatever number of years works for you and works for your plan, your risk tolerance goal. Sit down either yourself or your spouse, your family, whatever it is. Come up with a plan. Figure out what you guys want life to look like in your retirement years. Set that out. Get that goal from there and work your way back to what do we need to do today? What do we do to do now to start going or maybe your clothes and you never knew what to do with it. Here's a, here's a vehicle that's available. Go do that, that you guys challenged this week. Sit down, figure this out. Start with the end in mind. [inaudible]

Ransom: 48:52 Thoughts. You know, this show is about bringing awareness. The other weeks we showed you a four oh one K or four oh three B plan strategy that you can use and this week we're showing you a real estate investment strategy that you can use too. You know, there's nicely in your golden years, you know, and I hope that this information is useful or that you can actually put this information to use because knowledge without actions, just knowledge. [inaudible]

Tyson: 49:19 Yeah, no applied knowledge is power. So if you know other family members, friends, coworkers, you know, whatever it is, you guys share this with them. Sit down. Maybe you guys can brainstorm a little yet. Come up with some things, different ideas, share this stuff. It, you know, it helps enhance your learning. It helps enhance your understanding and also helps to show you know, if you like what we're doing, leave, leave, leave us like to leave us reviews. Let us know. If you have ideas, you have questions, whatever it is, do that. And in between shows. You guys can connect with us all week long in the social media show on Facebook, Instagram, and Twitter. Don't forget, if you like the video version, subscribe on Youtube, not in your podcast app for past episodes. It makes everything we've talked about here today because it's social chameleon that show. Until next time, keep learning. Keep growing, not just your mind. What's your bank account and your retirement savings and transforming to that person. You want to become

Speaker 1: 50:23 [Inaudible].

Connect On Social

This podcast is available on…

Scroll to Top