Kris Krohn here with Limitless TV and today we're going back to some Q&A.
I cannot believe how many incredible questions you guys have. You're inspiring
new videos, new topics, and it is important for me to get your questions
answered. So today, I'm gonna handle about a dozen of them and get you the answers
that you've been looking for.
Alright let's get started. First question today comes from James Bicklebut. James,
thank you for this question. James asked, he says, ok Limitless TV super inspiring
Kris, I got $100,000 of equity in my home and right now I tried to get a home
equity line and they are they're offering me a thirteen percent interest
rate or I can take my four percent loan and do a cash out refinance between four
and a half and five percent. What do you think I should do?
Oh my goodness, you've got three options right now and I'm going to give them to
you right now James. Number one is, I don't know what is happening with the
bank you're talking to on a home equity line of credit but a home equity line
of credits are usually cheaper than a cash out refinance. So please go talk to
a couple of different banks. The only reason why they'd be quoting something
higher is that they're a non-traditional bank, or you're talking to a hard money
father-in-law kind of person, a loan shark, something strange is going on or
you don't have good credit but I'm thinking you do have good credit cause
your second option is you're thinking, oh man Kris do I really want to pay for a
cash out refinance and go from an awesome juicy 4% rate to maybe a 5% rate?
That's not a bad option. Remember it's all about the arbitrage. If I get let's
say of the hundred, thousand let's say I get fifty thousand out, can I place my
fifty thousand dollars somewhere that makes up the difference in that 1% cost
of increased rate on the rest? And with me of course you can. There are plenty of
options. We'll talk about that too. So this is a really great question. Right
now you should be able to secure a home equity line and it's gonna be between
three and four percent. If for whatever strange bizarre reason that doesn't work
then I want you to go to the cash out refinance at 45%. And if you just head all around bad credit
James, sell the property. I know you're thinking, wait Kris, I have a home. Why
would I sell it? You got a hundred thousand dollars of equity, Go take that
money and put it into three properties. If you want help knowing how to do these
things then click the link below and in the notes section make sure you tell me
James, maybe with your real name not picklebut
exactly what you want to do, what you have available, and I'll have my lending
team jump in. Give you all your options and we can even talk about me supplying
you with properties to help you actually get that moving forward. Fantastic
questions a lot of people in your situation.
In fact, if you're watching this video and you've got equity that equity doesn't
mean anything unless it's working for you. So if it's equity in a home, it's
doing nothing losing at the rate of inflation. But if it's equity an
investment property, how do you, how do you put that into another property and
start working almost infinite returns by velocitizing your money by having the
same dollar that was sitting here now sitting in two places.
Alright, next question comes from Eric Boyd. In a previous Q&A you said that you
prefer single family homes over condos because they generally appreciate in
value more. He said, this makes sense. Do two or three or even four family homes
appreciate similarly to a single family house in the right market. Okay hands
down across the board Eric you're gonna see single-family homes are going to
travel better than townhomes. They're gonna travel better and appreciate
better than condos and they're also going to do better than multi-family
homes when you're talking about duplexes, triplexes, and fourplexes. Single family
homes? it is a sweet spot below the median and 3 bedroom homes and greater.
Ok next question comes from
silent gamer. Not so silent today. Hahaha. What do you think about the idea, I can
be such a nerd in my head you guys make me so happy. I don't even know if you
know you're doing it. What do you think about the idea of buying a rental and
pay as least as possible towards the mortgage and keep whatever is left over
from monthly rent and do the process over again. Okay
silent gamer has a fantastic question. Basically says, Kris, when I buy a house
I could I could do a thirty-year, mortgage I could do a 15-year mortgag,e I
could do a like an interest-only mortgage. What should I do? and I want to
tell you something that as long as it is not a negative amortization mortgage,
they don't even exist anymore that was an '05, '06, '07 product but
they may come back so you gotta be super careful. I'm dropping it for you. The
the question is, should I try to get the lowest interest rate? and instead of
trying to pay off the house put it towards my next investment? Yes
silent gamer that is exactly what you want to do. Snowball
I was just sitting now with one of my clients they had bought four homes with
me and we had partnered on some stuff and they were making $80,000 on each one
of their homes. So think about that. 4 homes times
$80,000. They were doing pretty well. Over $300,000. Nice. And I went back and I
said, what do you want to do now? they said, Kris, we wish that we had bought 10
homes instead of 4. And silent gamer, that's what you're talking about. More
real estate done the right way is always more better. And it's also more funner.
Next question comes from Country Living. We're selling our home in West Virginia
we want to move back to Pennsylvania but we can't get a loan
however, we own our home outright. What are our options? Ok this is a fantastic
question. Option number one, sell the house. Homes that you've been living in
and our owned paid off outright don't always make the best rentals. Especially
if you're moving out of state. I do not like owning out-of-state property if I
only have one home out there because I've got no loyalty with the property
manager. I'm worth a hundred bucks a month to them. You do not buy loyalty for
$100 a month. So number one option, sell the home. And my advice is, sure you could
buy your house paid off in Pennsylvania but frankly it might be better to put a
20 or 30 percent down payment and have the rest of the money sitting in
investment properties producing more cashflow and building more equity than
paying off the house itself.
Country Living, those are your two best options
because if you can't get a loan then selling it and placing it that way is
something that will help you. You might be saying, but Kris if I can't get a
loan then I have to use the money to pay off my home in Pennsylvania. This is not
true. If you can't get the loan you have other options. You can cosign, there are
credit partners. I invest, I have my partners all the time come to me with piles of money. They want
investment properties, they want retirement income, but guess what? They
don't have the credit. So you know what I do? I rent somebody else's credit, safe
and secure and it works. You got options. If you want to pursue any of those, click
the form below and let me know and I'll have my team be in touch with you. Next
question comes from Joe Mar Johnson. He says, Kris in one of your videos, you
talked about buying a primary residence with 3% down but if you do this aren't
you going to have homeowners insurance and mortgage insurance? Well you're
always going to have homeowners insurance. Mortgage insurance is usually
what you have on a property until it's 20% paid off. And you know what? It is
cost of doing business in real estate. It's not always avoidable. But I'll tell
you what, I would rather have mortgage insurance and put 3% down and walk into
a Pirate Booty of equity rather than waiting to have a 20% down payment which
might take me a lot more time in many many more years all because us trying to
avoid perhaps a hundred or two hundred dollars a month on the mortgage
insurance. It's not a deal-killer. Okay next question comes from unsought bar888
What taxes are you responsible for when renting out your
property? This is a fantastic question. If you're renting out a property that
already has a mortgage in place, you might have already wrapped in your PITI.
Principal, interest, taxes, and insurance. So generally the landlord is responsible
for all those taxes. I'm not really aware of a landlord that ever went to attend
and said, hey this is what your rent is but then you also got to pay extra for
taxes. It might exist but in my hundreds and hundreds and hundreds and thousands
of homes, I've never actually encountered that. So generally, all that's on you and
it's not on your tenant. Okay Eddie Cervantes great question he says, do you
think investing in commercial property is more profitable than investing in
homes? Eddie it absolutely can be. It's just that
commercial usually takes a lot more money. Now I don't get interested in
commercial generally until there's a lot more money that needs to go into it. I
was sitting down with some of the other that are like, Kris why aren't you doing
just one big commercial project instead of five hundred little baby houses?
Because I have a system in place, I love the diversification of five hundred baby
houses. I've, this last month I sold five houses. I did not put any money in these
houses years ago. My partner's got their downpayment back and then we each got
ten to twenty five thousand dollars on every one of these homes that we sold
and so if you think about it, those homes I got great diversification it's easier
to liquidate. Lots of different little assets. Some people will argue it's a lot
of extra work. I don't think so if you've built the right team. I will look into
commercial. I do commercial deals especially when they have really
compelling ROIs.
If they're just comparable to my single families I don't
touch them. And then real estate where I'm averaging
ten to twenty percent a year on my single-family homes,
there's not really much reason to go into commercial. Sometimes commercial requires
a lot more money and it can be a lot more extra money and don't ever put all
your eggs in one basket. Because if it was scraping everything together to do
the commercial deal, I would say no bueno. I want you to go back and I want you to
do a pile of single-family homes. You're ready for commercial when you got a
massive chunk you can put in but it is only a minority of your total asset base.
Fantastic question. Okay from Derrick C. Can you explain how you use an LLC to
mitigate your risk as an investor?
You know, it's interesting. An LLC has
protected me from time to time but in the end I don't want you to think that
it is this crazy bulletproof system. There are some things out there that are
crazy bulletproof like life insurance. I stash lots of money in life insurance
because you know lawsuits can't get to it, governments can't regulate it, they
can't get their hands in that cookie jar. What an LLC does is it tries to create a
bifurcation between your personal and your business and you're only going to
be able to protect what you put in the LLC. I would never for example take my
art business of things that I paint and my real estate business and commingle
them. Because if I have a problem in one business it bleeds into my second. So I
will use as many LLC's as it takes to create separation in my different
business endeavors. There are LLC's out there called series LLC's. These are
proven to create a single entity LLC but with individual protection for property
so it's like an LLC with corporate veil protection between all the different
properties. They're more, they're more money to set up and so I don't
set them up because your likelihood of getting hit is very very small. When
someone has an issue on a house they're not trying to attack all your assets.
Generally, they're attacking the house and the house will take care of most
things. Remember you got homeowner's insurance and you have to have that it's
super important. That'll take care of 99% of problems that happen less than 1% of
the time but should it escape and go outside of that? It could hit the other
assets in the LLC so it's meant to create a corporate veil of protection
between assets. This video is going long but I got six more questions so now I'm
going to revert to my short quick answers okay? First one
comes from Jesus Jimenez. He says, hey Kris not sure if you can if you've answered
this question but basically my parents used my credit to buy their house and
now they don't want to refinance it but I want to buy another house so what
should I do? Fantastic question. You're wondering
whether you should put more money down on the next house? but I tell you this
put your parents on title and then have them do a rate and term refinance. What
that means is, you're not trying to pull money out you're just trying to shift
control so that it comes off of your credit. And that kind of refinance the
only reason why they wouldn't be able to do that is if they don't have the credit
to be able to refinance. If they do and if they can, they should. And a
refinance is easier than a purchase. So make sure that they are reflected on
title and a refinance is gonna be way easier because they're already owning
the home. So do that.This next one comes from Gabey. Kris, love your questions
I've got a question. I own a duplex with a partner. I was the
hard money, it's gone up $50,000 in value. I was the hard money lender but now my
partner wants to buy me out. And the question is, should we split the equity?
The answer is yes you split the equity. So you get your money out and if there's
$50,000 of equity, a true fair buyout at fair market value would be you getting
25 of the $50,000. Now sometimes, we're not acting at fair market value and
sometimes partners will be more conservative and your partner might say
hey I only think that thirty thousand of that is fair. Let's split at
fifteen thousand fifteen thousand. But either way, you should get credit.
Shellfish. When, renting out a house should report it on my taxes? Yes do this.
Maria Quint, Quintanilla. Maria Quintanilla. Hello, I
love your videos they're very motivating thank you I got a question. I got eight
thousand saved up but tons of money in my 401k. If I pull it on my 401k there'll
be taxes and penalties should I do this?
Maria, yes this is actually what I
specialize in. I get really fired up about 401ks and
IRAs and these ridiculous vehicles that are my money that ugh! I'm not gonna
start. Go watch one of my videos I'll rant on it.
Here's what I'm basically saying, yes use your 401k, your money sitting in real
estate will do way better for you than sitting in your 401k. Is it
worth it to pay the tax and penalties? Always. Why? because until you wait to a certain age
all you're gonna do is avoid the penalty. You're always gonna have to pay your
taxes. So you know what? Take the tiny hit and get your money working for you. If
you have questions on how to do that or if you want to partner do a pile of
deals with me I want you to click down below, hit the link, and put that in the
request and my team will contact you and get some basic information and we'll be
able to share with you specifically all your options of what you can do. RT
happens. Love your videos, tons very useful. Question, Quicken Loans or not?
Answer, depends. Is it a good rate? If it's not, don't do it. Is it a bad rate but you
have an investment that earns you a high profit margin? Maybe it's worth it. It's
all opportunity cost. If you can qualify for Quicken Loans you can probably
qualify for some others as well. Okay John Burgoody. Once the house is acquired
what is the best way to get the house rented out? John, hire a property manager.
That is your, have them do it. They're gonna charge you 8 to 10% of the gross
rent that they collect and it's their responsibility. Go with a successful firm.
Go with the firm that has lots of houses. They're getting lots of calls and they
can refer people to your specific house. If you want to do it yourself go to my
lease option video where I'm gonna show you how to put obnoxious bright neon
colored signs in the lawn and trust me it's going to pick up the attention of
people that may want to do a rent-to-own. It'll mean self-managed, it'll mean more
cash flow also me in down payment. I'm a fan of that. If you got a little extra
time, that's the way to go. Okay friends, thanks so much these are fantastic
questions. Thank you for watching today's video and if you have more questions be
sure that you respond below. If you're not a member of our tribe then go ahead
and subscribe and post your questions so that we can make more videos and more
Q&A videos to make sure you got everything that you need to succeed for
real estate investing to having a powerful rock-solid mindset.
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