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ADPI_021: Don't Believe The Hype

Aug 31, 2018


Episode Transcription:

Hey guys what's going on welcome to the active duty passive income podcast. We’re really excited to have you guys here, thanks for listening. In this episode we're going to have a little mindset Friday right. We’re going to talk about one of the common misconceptions that I hear all the time when I talk to folks about real estate.

It’s going to be great episode but first, Hey freedom fighters welcome to the active duty passive income podcast. The only place where military members, veterans and their families learn how to build wealth through real estate investing. I'm your host Mike Foster and I'm here to show you how to stop wasting your benefits.

Now get off your ass, step up to the firing line and make ready for today's lesson. Shooter stand by. What’s going on team, how you doing out there Mike foster here. Really really grateful to have you guys here listening and thanks again for taking your time. This is going to be a little mindset Friday episode and I really want to discuss something that I always hear when I'm talking to folks about real estate.

Especially when it comes to those with families. You know that may be here for one two or a few years for their tour and they're moving somewhere else. The one thing that I always hear when I ask people why they're afraid to buy real estate right and they tell me oh I'm not looking to settle down here. I'm not looking to make Norfolk my home. Well guys this is one of the oldest ways of thinking right. You need to think you got to buy a home, you got to live in it and at some point 20 30 years down the road when you're ready to move out, you may be either pass on your kids or you sell it for cash and then you move on right? no guys no no. we have to break our old ways of thinking when it comes to making wealth okay and this is definitely one of those old ways.

It’s not about whether you're going to settle down in the area. Yes right everyone wants to buy a home in the place where they settle and that's completely understandable and that's okay right. But you have to get in the mindset that wealth is not built you know in location right. Having one investment that you sit your money into is not how you build it. Especially when you're banking on appreciation right in at home. I mean you sit in a home theoretically right, you buy your home. What are you going to do? While you're sitting in it for years and years.

Every year that you're in it it's losing you money, you're paying money to maintenance, you're paying money to expenses right, bills you name it. Right taxes all that stuff. nothing that you're doing in that house is making you money unless your house hacking it the entire time you're living in it okay all right that's different. but you know with the traditional sense and I'm just going to buy a home, sit in it for years and years and years and then hopefully at one day right maybe sell it, that's banking on appreciation and that's 100 percent you relying on the market to do the work for you and hope and pray and at the time you sell it that house is worth more than what you bought it for, okay.

That is the wrong way to invest in real estate. I'm sorry to tell you but it has been proven time after time it was proven in 2008, in 2007, most recently with this market crash; the market is going to crash again right and you don't want to be the person in that situation where the market tanks right at the point you're looking to sell or right at the point you need to sell and here you are stuck or the house that's worth significantly less than what you paid for it and you're going to be left in some serious debt okay. Now I'm not saying it that's going to happen okay. I'm not saying and I'm not wishing that on any of you guys, I honestly wish you the best.

However right that's the wrong thing to account for when it comes to investing. You should be focused 110 percent on cash flow. Is my investment making me money month after month, after my net expenses? If you want to find out what a good investment is, make sure you calculate your returns off your net expenses. Calculating all of the loss, the potential loss that you're going to gain from that property or from that investment right. Okay that is definitely what you need to make sure your account for before you invest your money. But the good thing about buying a home in the military is that it doesn't take any money down for you to invest. You buy your home with your VA loan and it's 100% free to you at the time of closing. Now yes you have to pay a funding fee.

Okay so is it free? Not really, I mean you are paying for it over time. The good thing is that that funding fee right and any closing cost get wrapped into the loan for you. So again you're putting zero money out of pocket, which is great. However all right that funding fee or those closing costs being wrapped in a loan is still something you have to pay over time. So I mean in retrospect we're talking about an extra maybe ten bucks on your mortgage each month to cover those costs, that's not necessarily bad right. So understand that while you are paying for it it's still not bad and it's essentially free at the time of closing.

But while it's free let's say you live in it for six months or one year, however longer your tour is and again right you're of that mindset I'm not looking to settle down in Virginia or I don't want to settle down wherever I am. Okay that's fine you buy your home, you stay in it for the short amount of time that you're going to be here; you refinance it to something conventional and you get 100% of your VA loan back so you can buy at your next duty station. done oh and by the way you put a tenant in that property after you left, so now your cash flowing over your mortgage payment and all because you decided to buy that home when you did.

So with the profit that you're gaining, from the difference of your mortgage right and the renters that are paying you rent; you're getting a monthly income. Whether it's a hundred dollars a month, whether it's $200 a month, whether its two dollars a month right your mortgage is getting paid by your tenant. Right so as your mortgage gets paid off your net worth increases. Because you start to own more of the equity of that home and you're also getting a little bit of money each month from that home. so the prize is not the appreciation, the prize is the cash flow that you're investing in with each purchase and the cake, right the icing on the cake is the appreciation at the time you're finally willing to sell or transfer or whatever right.

Because that's a bonus. you've been making money this entire time by renting out to someone who's paying you more than your mortgage payment okay and then later on after your investments already been paid off by the cash flow you've been making, you can sell and make even more cash done. You see that is the point. That is where the goal with real estate that you want to have okay. So you need to get in the mindset shift and understanding you to challenge the old way of thinking. What your parents are what your grandparents might have told you about buying a home may not be right when it comes to building wealth.

So do yourself a favor and challenge it. If you haven't read the book Rich Dad Poor Dad by Robert Kiyosaki, you need to read that book; absolutely do it okay. It’ll change your life. It’ll change your mindset and make sure you take a look in the show notes and see I've got that book listed and referenced on our webpage, you need to go check it out. All right highly [09:38 inaudible]. If you are a busy guy like me always on the move and you don’t have time to flip through a book, okay that's fine; download the audiobook. it's cheap and you can pop it in your ear buds as you're working out, as driving to work, as you are flying, wherever you're going whatever you're doing; audiobooks are amazing. I love them and I praise by them 100%.t

I recommend them to anybody. Okay so you know whatever you got to do man. But you got a challenge your way of thinking and you have to understand that Bank own appreciation is not a smart move, it's not. If cash flow doesn't make sense then you need to be able to you know reevaluate or re-educate yourself on it. Because it should make 100% sense right. I mean think about the pension you're working for. You’re working for the goal of getting paid money every single month without having to work for it. Why can't you buy property for that same purpose guys.

You buy property with your VA loan, you pay off enough of a mortgage where you can refinance it and put a tenant in there afterwards and get property management so you don't have to worry about it. Heck here's something take a look at the rent you're paying. If you realize that the home that you're staying in, the mortgage that you'd have on the home you're staying in right cost less than your rent, why aren't you buying it? Why aren't you buying a property similar to it so you can pay that much?

Oh and by the way if the property management company that you've been using with that renter, I'm sorry with that that landlord has been great and you've had no issues with them; hire them to take care of your properties. You already trust them, you've built up relationship.

Done right so we have a unique advantage guys when it comes to being military. You have your VA loan where you can buy a house with zero money down, you have the BAH that where the government pays your living expenses right; if you're privileged to live out in town. Obviously rank has its privileges and whatnot right. But if you are the Navy or I am sorry the military in general right will give you a housing allowance. So the government will pay for your place to say, they'll pay for your mortgage for you.

You couple that with a little bit of house hacking and you can generate some serious income from your one purchase. Refinance it again like we teach. Put a tenant in there, make yourself a little extra monthly income and then rinse and repeat. Rinse and repeat, go do it again. That’s completely cool and that is what you guys should be looking for okay.

Challenge your mindset; you don't need to settle down just to buy a home. By the time you move from duty station to duty station and you've had three or four homes, you get out in 20 years now look at you; you have enough money coming from your rental properties that you've built up while you're in the service to pay your mortgage for you when you do decide to settle down into that home of your dreams in the location of your dreams.

You won't need to worry about your pension check, you won't need to worry about your next job income right wherever you're getting that income from. You’ll have income streams coming from the properties you've built over time and that can pay for anything you need, for anything that you need. If you need a place to stay, boom! It’ll pay for it. If you need a vacation you want plan at the end [13:28 inaudible] boom! Your passive income will pay for it and that is the goal. Alright I hope you guys have understood a little bit of what I'm trying to say here.

I really hope I painted a clearer picture. Because I'm telling you financial freedom is amazing and once you buy off on that goal, right whatever that goal looks like for you, whatever it is you need to accomplish your dreams right to fund your passion life; if you're not doing what you want to do right now passive income can help you fund your passion. It can help you achieve what you want to do alright. Alright anyway thank you so much for listening guys I really appreciate you taking the time to listen.

Make sure that you come out and connect with us, we want to hear some of your goals and some of your dreams for passive income. What is your why, why are you listening to this podcast, what do you hope to get from it. What do you hope to achieve from having a certain amount of properties and growing a certain amount of passive income. Is there something you're working hard towards alright, let us know. We want to know we want to share in your excitement in your joy and your passion and you guys are the reason we do this right.

Our families, our own personal notification, not motivation, that's why we become financially free. But you guys are the reason that we do this, we do active duty passive income and we want to hear from you okay. So please feel free. Go ahead and reach out to us on our Facebook, reach out to us on our Instagram, hit us up on email right, on through a website whatever. Just reach out to us and give us a shout. let us know how you're doing, where you're at, right what you're doing and what you'd like to be doing and how we can help okay and if you haven't subscribed to this podcast yet, you are wrong alright.

You need to subscribe this podcast and you definitely need to come give us some feedback and let us know how we're doing. How can we best serve you? Do you have any particular questions? You know what if anybody has a particular topic that they want me to cover in this podcast, please go ahead and share it with me and I will make sure that it is covered relatively quickly, as quickly as I can right. I mean if everyone sends me a rush of topics then I'm going to have to schedule them out.

But I will let you know as well. You reach out to me personally and tell me you want me to cover a topic, I will cover it and not only will I cover it I will individually let you know when I have and you can be ready for it. Okay so thank you so much again for listening, you guys are awesome. I really really appreciate you and everything that you guys are doing out there. Thank you for your service, thank you for keeping us safe and thank you so much for going out there, achieving your dreams one day at a time. Mike foster active duty passive income. Booya guys. 

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