So if you guys been following podcasts for awhile you know that I own most for short term rentals but I also do lease arbitrage and something just happened I just refinanced the property and essentially I own the property for free now and this is something we can never do with lease arbitrage Shawna break all that down with the numbers and just why lease arbitrage is never going to equal ownership although I still think lease arbitrage is good as well so let’s jump right in.

Welcome to short-term rental riches will discuss investing in real estate with a specific focus on short term rentals quick action items to wire. Scale your portfolio I’m your host Tim Hubbard.

Welcome back to the short-term rental riches podcast we’re going to break down one of the biggest and most important differences this week between lease arbitrage that’s running apartment to sublease it and make the difference between that and ownership and I just have to share this with you guys because this is something that’s never going to change if we don’t actually own the property so that is the end goal and and then not shell I’m gonna dive into the numbers and everything but I essentially just got a free apartment building 8 units that returns a heck of a lot of money and so I want to break that whole piece down from start to finish in this week’s episode the short term riches podcast. Good news everyone travel is coming back and so I’m super excited to announce our next upcoming live event takes place in Memphis Tennessee it’s gonna be July 30 to August 1 and incredibly jam packed weekend packed with info and all the tools and all the resources and all the procedures that my team and I have put in place to manage over 15000 gas as you guys know I’ve acquired a multi $0 portfolio across several cities across several countries and I’m really excited to share everything with you guys everything I’ve been doing to acquire these properties to set him up like a pro and to operate them as passively as possible it’s going to be a ton of fun you’re gonna learn a ton and I really hope to see there all be flying back from Colombia and you can find out more information by heading to rest methods.com to save your spot there is limited space because we’re gonna be going through some my actual properties the last one sold out so I really hope you guys can make this one a look forward to seeing you in Memphis. So I just got a free apartment building what do I mean by free well my definition of freeze I guess something that I own that I don’t pay for and that I have no money invested into in the world of real estate when we’re using leverage which I understand isn’t available in the whole world the US citizens undoubtedly have the most opportunities with leverage when it comes real state than anywhere else in the world so this is more geared towards the US but really anywhere where you can leverage properties so with real estate and ownership and leverage we have the ability to earn an infant in return and that’s essentially something that’s paying us that we have no money into an this is happened multiple times with me and I want to share this most recent one because it just happened about this 8 unit apartment building that I have to sell out the actual numbers on and I bought it about 5 years ago it needed a heck a lot all my gosh I need so much work and so was in the easiest project I’ve done but by renovating the property I was able to add value to it and so that’s one of the 2 ways that our properties can go up in value we can either add value to it or if the market’s appreciating on its own then that’s raising the value as well so I bought this property for $270000 I think and like I said it was in bad shape I ended up putting like almost $200000 into it of my own money so I realize that this part isn’t like a newbie type investment but there are you know this same model works for anything so if you bought $150000 house for example maybe was already in good condition in the market rose in value over several years well then you can still earn an infinite return if you refinance the property hole out your original investment. And then you still own the property so the only way we can refinance property get this infinite returns which is having no money in the property that still paying us is if the value of the property is gone out most lenders around the US are gonna get alone usually on investment property up to like 75 percent of the value of property so FOR Eazy number sake if we have $100000 property a lender might lend us $75000 now if we added a lot of value to that property or the property went up a lot value which is for the right markets pretty much anywhere in the US right now values are going up because we’re putting so much money but it for a good sustainable markets those have been appreciating for a long time and even though they may dip in recessions overall because they have good fundamentals are gonna they’re going to keep going up so let’s say you bought that 0 are property originally up to $75000 loan on it and now 5 years later 10 years later or maybe one year later if you added a bunch of value to it I need a lot of work can you put a lot into sweat equity maybe it goes up to $200000 now 75 percent a lender would give you $150000 for that loan right now let’s say you bought it for $100000 let’s say you had no money in it just to make things easy and it went up in value because of the market well you refinance the property the lender gives you $150000 you’re gonna pay off the original loan which is $75000 then what happens you’re left with another $75000 which in the US check with your tax advisor of course but that money is coming from alone so it’s not taxable so that can go in your pocket that can go in other investments and then essentially you have 0 money in that property right you’ve got your original down payment back you got. Any money you invested into it back a based on the value based on the new loan so hopefully that makes sense that’s what I just did on another property like I said I think I paid 270000 for it the properties worth almost 700000 now but I did put in $200000 so I was able to get all my original investment back plus some and it’s still an amazing amazing run all that I’m going to have for a long long time so that is the infinite return that is why lease arbitrage is never going to equal ownership we don’t have that piece of it now I like lease arbitrage as well I think it’s a great way to generate cash you can get into it a relatively easily and all the operations are going to be the same whether you own it or lease it so of course for us to be able to get these infinite returns we got to make sure they were in good markets with good fundamentals places where populations growing where demand is growing more employments growing so we gotta be in a good market for this to happen in the first place but as long as we are if we hang tight if you think back to me what what what do you think prices were on real estate 1970 or 20 years ago even can you think of any market that had 20 years ago the prices are higher than they are now not really maybe you could find some crazy 1 off ones like a Detroit or something like that where people just left the city but a form a good stable area. Prices over time even though we might go through recessions and dips they’re generally going to go up and when you have this extra equity in your property whether you added it to renovations or whether the market gave it to you through appreciation well then you might want to consider refinancing pulling some of that equity out and with interest rates is amazing as they are today I can be a really really good option to provide essentially a free property that you can known for a long long time so. Hopefully they gave me a little more insight hopefully that gets you guys excited about owning properties if you don’t already own them yet using leverage is the way we can scale in this business and this real estate world so until next time I hope you guys are doing. Really well wherever you are in the world. Next. There’s so much money to be made the short term rentals but it all starts by having the right property if you guys haven’t yet seen my free ebook on our website rest methods.com head over there and get a copy it’s going to break down what I look for in a property in some great short cuts so that you don’t have to spend hours and hours researching at over rest methods.com and you can grab your free copy there if you want a crash course in everything I’ve really learned to short term rentals in over 5 years managing over 15000 Gasol recorded on our last live event I am happy to say we broke it down really nicely into a bunch of different modules that you can watch at your own pace it takes you from start to finish from finding a property we talk about analyzing the property but then also some of the more important pieces how to find your team and how to set up everything so that you can run your operation is passively as possible and free up your time you can find that it rests methods.com forward slash virtual.

RELATED PODCAST EPISODES

• Episode 72: HAVE This in Your Lease Agreement (Lease Arbitrage)
• Episode 71: Negotiating a Better Lease Rate for Lease Arbitrage
• Episode 62: Professional Tax Advice From My CPA – Part 2
• Episode 56: Short-Term vs. Long-Term Rental? How Much Does it Really Cost?
• Episode 22: Precautions for Accepting Guests Over 30 Days