How Real Estate Investing REALLY Works – Real Estate Investing 101

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So, you want to invest in real estate? Here’s what you need to know before you start investing in real estate and become a real estate investor.
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Recommended:
Real Estate Investing – 6 Things You NEED To Know: https://www.youtube.com/watch?v=75lDoldC31A
Investing Your Money: https://www.youtube.com/watch?v=U7tJn4qv8Lk&list=PLKsS_EjCEmdojUw_JdJgLKkyPiGJphcmK
Real Estate Investing: https://www.youtube.com/watch?v=4-hnVtPCLms&list=PLKsS_EjCEmdqIuFuM-4soEpS0ybzBTnoh

How Real Estate Investing REALLY Works – Real Estate Investing 101
0:10 – The best way to build your wealth is by investing your money
1:01 – How does real estate investing work // real estate investing for beginners
1:30 – What real estate investing is not
1:58 – Why you need to invest in real estate
2:54 – Understanding real estate tax breaks
4:39 – The different kinds of real estate you can invest in
6:07 – How do you start investing in real estate
7:07 – You need to understand the real estate market

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Video host: Jaspreet Singh <br> <h3>Auto Generated Captions</h3>

What’s up everybody,
I am Jaspreet Singh, and welcome
to the Minority Mindset. If you’ve been
watching our channel, you understand that
the best way to build your wealth is not
by listening to your math teacher and just
saving 10% of your income in your savings
account. Keep saving, Johnny, you’ll be
wealthy one day, hopefully. The truth is,
the real secret to building wealth is
investing. With investing, you’re not
buying things that lose you money and
make you poorer, like cars, and shoes, and
clothes, you’re using your money to buy
things like real estate, which will, one,
pay you with cash, and they’ll make you
wealthier. So today, I’m going to give you
a crash course on real estate investing
because, I wish somebody would have told
me these things when I was getting
started in real estate, but, before we get
into it, make sure you hit that thumbs up
button below, and subscribe to the
Minority Mindset YouTube channel, right
below the screen, and make sure you hit
that little bell too, because if you don’t,
then YouTube doesn’t tell you when our
new videos are released. First, so we’re
all on the same page:
how does real estate investing work? Real
estate investing is when you buy a
property—not to live in yourself—but to
rent out to somebody else. You’re buying
property like a house, an office building,
a real estate building, a strip plaza,
this way, you can let other people live
in, or use this property, and in exchange
they’re going to pay you rent every
single month. That’s what real estate
investing is, but let’s talk really
briefly about what real estate investing
is not. As much as your banker and all of
your friends want you to believe this,
real estate investing is not going out
and buying a big beautiful fancy home
for you to live in, because you think
you’ll be able to sell it for a profit in
a few years. That’s buying a liability.
You’re buying something where your money
is going out, and your money’s not coming
back. Real estate investing is also not
buying a property, fixing it up, and then
they’re trying to sell it three months
later for a profit.
That’s flipping. It’s very active, and
it’s cool, and you can make money doing
it, but it’s not real estate investing.
Second, why should you be investing in
real estate? The simple answer is: so you
can make money. The complex answer is: so
you can be financially free. Real estate
is a tangible investment, and it is robot
proof, because people will always need a
place to sleep,
people always need a place to eat, and
people will always need a place to work.
When you are a real estate investor, you
will be getting rent checks every single
month, even if you’re sitting on the
beach in Hawaii. Plus, real estate
investors get tax breaks. Now, while I am
a licensed attorney,
I’m not your attorney, so if you have
specific tax questions, talk to a tax
professional in your area, but, have you
ever wondered why people like Donald
Trump can own a bunch of real estate, and
they can make millions of dollars a year
in rental income, and then they can turn
around and pay close to zero dollars in
taxes? It’s because the tax code says
that real estate investors get tax
breaks. And yes, it is legal. Let me show
you what I mean with some numbers. If you
are a highly skilled, and highly educated,
and highly talented heart doctor, you
might be able to make—my heart is
lopsided, sorry—1 million dollars a year
from all the heart surgeries you do. Now, a
million dollars a year is a lot of money,
but, because you are making this money
from your job, you don’t get to keep all
1 million dollars, because that’s what
the tax code says, you will get to keep
somewhere between 500,000, and 600,000
dollars after paying your taxes. Still a
lot of money, but you didn’t get to keep
all 1 million dollars. Now, on the other
hand, let’s say you are a real estate
investor, and you bought this property
for $100,000, and a few years later this
property goes up in value to 1.1 million,
so you sell it. You have a profit of 1
million dollars, and now, you think that
you have to pay taxes on this 1 million
dollars of profit, right? Well, the tax
code says: if you take this 1 million
dollars and you reinvest it into a
bigger piece of property, you don’t have
to pay any money in taxes today. It’s
called the 1031 exchange, and now you own
a bigger piece of property, and you’re
going to get bigger rent checks every
single month, and now if you go back to
your beach in Hawaii, you’re going to
continue getting paid vs. if you were
this heart doctor, and you go to a beach
in Hawaii, you won’t be getting paid
anymore because, well, if you’re on the
beach,
you’re not doing heart surgeries, and
you’re not getting paid. And in case you
were wondering, you also get a bunch of
special tax breaks for the rental income
that you get, so if you make a million dollars
a year in rent, you get a bunch of special
tax breaks for that too. Third, let’s talk
about some of the kinds of real estate
you can invest in. You have single-family
homes, apartment complexes, shopping
plazas, land, mixed use properties, mobile
home parks, office buildings, retail,
hotels… There’s a lot, but, what you have
to remember is that each piece of real
estate has two different businesses
involved. You first have the business of
owning the real estate, and then you have
the business inside of the real estate.
Look, you can own a CVS building without
operating a drugstore, and you can own a
hospital without being a doctor, or you
can own an apartment complex without
managing the tenants inside. When you own
the building that CVS is renting, now you
own the property, and CVS is doing the
work to find customers, and manage
inventory, and hire staff, and sell their
stuff, your job is to collect the rent.
When you are a real estate investor, your
job is to own the real estate, not run
the business inside. Now, this is easy to
understand when we’re talking about investing
in a CVS building, or investing in a
hospital, but what about when you invest
in a house, or an apartment complex?
Instead of being the person who gets the
phone calls when the tenant says: Hey, I
didn’t eat something too good last night
and I clogged the toilet. Can you come and
fix this? You want to be the real estate
investor. You can hire a property manager
who will get paid a percentage of your
rental income, and they will handle all
the management work. So, they will pay
your bills,
they’ll make sure the tenant’s paying on
time, and if they have to kick out a
tenant, they will handle it for you,
this way you can focus on being the
real estate investor. Number four, how do
you get in? If you want to invest in real
estate,
you need money. Okay, you can buy
properties with cash, you can go to the
bank and get a loan, or you can get a
bunch of friends who have money, and you
can pool your money together to go and
buy a bigger property. And then beyond
these three, you have this whole world of
creative financing, but you need to
understand that the numbers have to make
sense. You do not want to buy a property
where you’re losing money every single
month. Crunch the numbers, make sure that
the income that you’re getting is enough
to cover the expenses and put some money
in your pocket every single month. Once
you’ve got your numbers down, make sure,
this is not a recommendation, this is a
must, make sure you have a real estate
attorney, and you have property insurance
for all of your real estate. You have to
do this, this is coming from somebody
who’s not just an attorney, but from
somebody who’s a real estate investor
who’s been sued by a tenant because they
claimed that the bathtub got too
slippery when it was wet. This is a true
story, so make sure you have an attorney
and insurance. And number 5, you need to
understand the real estate market. Not
only do you need to understand where
you’re buying, which is the micro-level,
but you have to understand the macro
level, which is that real estate has
cycles. There are times when the real
estate market is booming, and then
there’s times when the real estate
market is coming down. Remember, when
you’re a real estate investor you’re not
buying property so you can flip it in 6
months for a profit, you’re buying it so
you can create a positive passive income,
this way you can make money each and
every month, so when you’re buying real
estate, make sure the numbers make sense.
And second, you want to buy in a location
where people are moving to. I have paid
premiums for real estate in locations,
while still being profitable, because
people were moving into a location, and
over the long run, this has proven to be
much more profitable. I’ve talked about
this before and I’ll link it in the
description below.
The key here is to make smart money
decisions, and in order to do that, you
have to understand what’s happening in
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