Investing In Real Estate | 11 Terms You Must Understand To Be A Successful Investor
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Investing In Real Estate | 11 Terms You Must Understand To Be A Successful Investor

If you want to get successful in the game
of investing in real estate, there’s specific language you have to look for. There’s language to all things. There’s language to learning football. There’s language to learning an instrument. There’s language to business. There’s language to real estate. If you don’t know the language, you’re going
to struggle, you’re going to fail and you’re not going to have confidence. I’m going to share with you today the 11 terms
that are ultimately going to give you a comfort zone and ability to speak the language of
real estate. After you’ve watched this short video, those
11 terms will allow you to tell an entire story of a property from start to finish. And you’re going to start and acting like
a very successful investor. So, if you want to be successful investing
in real estate, there’s some terminology you have to know. And you know, when I got started in the game
of real estate, I was so intimidated by these words that seems so big. Or they were foreign or they were… I don’t know if I really knew exactly what
they really meant. And because I didn’t have the confidence,
it slowed me down. What I want you to do today is I want to take
you back to real estate school where we’re going to call it the school of the millionaires. And it’s what are the 11 things that you need
to know. The 11 terms that will really give you confidence
in going out there and crushing it in real estate. So, I’m going to put these up on the board
for you. We’re going to discuss these. And basically these terms are going to tell
the story of how you make a lot of money in real estate. The first one that you need to know. Purchase price. When you find a deal, you’re going to hear
people use this term. What is the purchase price of the home? What this is referencing is what are you getting
the home for? It might be… It’s listing price might be 200,000. But I am purchasing it for $190,000. Now, that might seem like a really basic term. But you’ve got to know how to use that term
with confidence. So, you know, if I’m going to buy the house
for $100,000. They’re asking 110,000. I made an offer for 90,000 and in the end,
we negotiated. And I got it for 100 grand. Hence my purchase price is $100,000. The next thing you need to be familiar with
is a downpayment. When you purchase property, there’s an amount
of money that the banks are going to require you to put down to feel like they can comfortably
give you a mortgaging carry the rest of it. They generally want you to have a job for
2 years. They want you to have good credit. And so, a downpayment on a primary residence
can be 3%. And that’s assuming that it’s a primary residence. Meaning, I’m going to live there is what that
means. Primary residence, my residence. Or it’s an investment property in which case
they typically traditionally want a 20% downpayment. So, just practice using this language. I’m putting 3% down on my primary residence. Or I’m an investor and I’m putting 20% down
with my purchase price of $100,000. Do you see how good how you start sounding
right now? It’s like a real estate investor? Dope! Pretty good! Okay. The 3rd thing that you need to become familiar
with is then what is called a loan balance. So, for example, let’s actually say that I
bought this house for 100,000. And my downpayment was 20%. What is 20% on 100 grand? It’s 20,000 dollars. So, if I buy the house and I have a purchase
price of 100 but I’ve put $20,000 or 20% down, what’s left? Well, 100,000 minus 20,000 is $80,000. This is now my loan balance. This is the amount that I still owe before
the house is paid off. Is this making sense? Listen. This may sound really basic. But having a comfort zone with these terms… Listen. If you’re going to do deal. I’m flipping a house right now, I’m going
to make $100,000. These are the terms that I use. I’m purchasing the house for $338,000. The asking price was much higher. It’s value is $545,000. For downpayment, we’re buying it cash. So, the downpayment is the cost of the house. $338,000. My loan balance will be zero. You see how that terminology helps create
the story? The 4th term that you then needs to know is
what is called equity? Equity is the opposite of you loan balance. If the house is worth $100,000 and I have
it paid down to 80,000, then my equity is the difference between what I owe and what
it’s worth. In this case, $20,000. But it’s not always what the downpayment was
like in the scenario. What if this house was worth $130,000? And I was able to purchase it for $100,000. And then I put 20% down and I have a balance
of 80,000. Well, it’s worth 130 and then I owe 80,000. The difference is, $50,000. So, my equity in that example would be $50,000. But let’s say that I then put $10,000 or repairs
in the home. And then I bring up the value from 130 to
150 thousand dollars. Now, the house is worth 150,000. I owe $80,000 on it. The difference is now, $70,000 of equity. You see how important these terms? You to know these? You got to feel comfortable. The next thing that I want to put here is
mortgage. Mortgage basically means, if you have a loan
balance of $80,000, there’s an interest rate. We know it’s owed. And this amount of money owe to the bank add
a 5% interest rate or 9% interest rate. Or whatever percent interest rate is ultimately
going to tell you, what is you mortgage? In other words, what is paid every single
month? And so, you might say, “Well, my payment or
my mortgage is…” Let’s say in this scenario that it is $600
a month. There’s a little bonus I want to put in here. I’m going to put this little different colored. And I want to call this PITI. You’re going to hear this from time to time. It’s stand for principal, interest, taxes
and insurance. Basically when you buy a house and the bank
knows there’s going to be a balance on it, they want to make sure that the taxes are
paid. The interest is paid. And so, the bank is charging you money for
the principle and interest. But most of the time, they will wrap in. They’ll take your annual taxes and cut it
up to 12 payments for the whole year and say, “We’re going to tackle your taxes.” And we’re going to tackle you insurance. So, my actual principle and interest might
be (in the scenario) $500 a month. But let’s say my taxes are $50 for my taxes. And let’s just say that my insurance is $50. That’s also really high. But that’s how I get to a total of $600. So, your mortgage of $600 is often a reference
that people also use with PITI. Now, by the way, you’re going to school right
now with a millionaire who’s shown you the ropes on these important phrases. Because when you know them and can use them
comfortably, I literally I invite you to watch these video, 3-4 times just to actually mirror
exactly what I am saying. Do examples and show that you can do this
math. Alright. To be helpful here, number 6 terminology is
what is my rent rate? So, if I rent this property for $900 a month… Now, we have a story. I’m renting it for 900 a month. But my mortgage including my principle, interest,
taxes, insurance is $600 a month. So, that would also mean my free cashflow
is the difference between the mount that I charge in rent, what my mortgage is. You see that 900 minus 600 is 300 left over? You would basically say this home cashflows
$300 a month. That’s a positive cashflow. Now, by the way, if you bought a house that
you put 20,000 in and you’re getting 300 a month… Do the math. 300 a month for a year is $3,600. That is a percentage. That’s over 10% return. That’s closer to 15 plus percent return from
what you put down just on the cash on cash. It’s a good deal. The next one that that I want you to understand
is sales price . At some point you’re going to sell this house. Let’s say that you’re actually selling this
house for $140,000. And so, it’s like, “Well, I bought it for
100. It was worth 110. I put some repairs in to it. Now, it’s worth $140,000.” Number 9, realtor commission. So that you’re aware the most successful real
estate is usually transacted through through the MLS. It’s Multiple Listing Service. You have to be a licensed realtor to have
access to that information. So, a licensed realtor, there’s 2 of them
involved on every purchase. You have the buying agent and a selling agent. If I won the house then selling it, I hire
a realtor to put it on the MLS. So,everyone looking for a house can see it
through the realtors. But someone that wants to buy my house, also
has a realtor. And he’s the buying agent. So, it’s generally accepted in America (at
least) that realtors are going to each get %3. Now, I didn’t tell you this when you’re buying
the house. Because guess what? The seller pays the realtor fees. But now, we’re selling this house. And so, I’ve got a factor. And if I sell it for $140,000, 3% of this
is what? $140,000 times 3 is going to be somewhere
right around 4 grand. It’s 4 grand to the buying agent and it’s
4 grand to the selling agent. I’m going to pay roughly $8,000 in realtor
commissions to sell this home. Now, sometimes people get greedy and say,
“Well, I don’t want that. I want to save money.” You just need to make sure that you have the
successful strategy for marketing this. Because for most people buying default, the
MLS is the most successful strategy. Okay. And then number 10, this is a fun one. The word is concessions. Everyone, say it. Concessions is essentially means that you
can put anything you want in contract. So, if I’m going to sell a house and now,
someone comes along and wants to buy it, they can ask for whatever they want. They will typically say, “Well, in addition
to you paying the realtor fee which is already your contractually obligated to do, I want
you to pay $5,000 in closing costs.” And those will be called concessions. So, this is the money they want in addition. It could be a price of action. It could be you paying the closing cost. It could be you paying for repair on the house. Like, “I’m all good to go in this house. But guess what? I don’t like the kitchen. If you’ll update the kitchen, then I’ll buy
this thing.” That means new counter tops, new this or that. So, they can stipulate those things. So, concessions. They might say, ” I want up to $6,000 that
I could put towards closing cost, repairs or whatever. And I want you to pay that if you’re going
to sell me this house.” The last terminology, and it’s a bonus is
I want to just show you real quick a simple way of calculating profit. Because look at what we have now. We have a story. The story starts with 1 bought a home for
$100,000. I’m not living in it. So, it’s an investment property. And my downpayment is less 20%. My buddy put up money for the downpayment
since I found the deal. And he put $20,000 down on his credit to buy
it with the bank. Which means we have a loan balance of $80,000. Because the home is worth $130,000 and we
only owe 80, there’s $50,000 difference. That’s the equity in the home. Because we owe 80,000 on the mortgage, then
our payment is $600 a month. It includes principle, interest, taxes and
insurance. Good news is we’re renting this property for
$900 a month. We’re excited about that. Because it means that we have a cashflow from
our lessee of $300 a month. Well, we sold in on the lease option using
Kris’s amazing compassionate financing program. And as a result, we decided to help the family
renting the home actually buy it. They’re buying it for $140,000. We we’re going to have to pay 3% commission
on this side. But Kris showed how us how to negate that
because we had the superior strategy than the MLS. So, we save ourselves roughly $8,000. They did however ask for $6,000 in concessions
for some repairs. And now, it’s time to calculate our profit. Here’s your definition of profit. Cashflow plus the capital gain plus the tax
benefit. If you add all of 3 of those 3 together, you’re
going to get a rough idea of what your profit is. So, let’s say that you held this home for
1 year. Let’s say that you lease it out in another
300-dollar a month cashflow. So, your cashflow for the year totaled $3,600. The house is worth 130 but you sold it for
140 minus your 6,000 concessions. Means you’re netting 134. You only owed 80. So, you have $54,000 in capital gains. Tax benefits, we live it up to the CPA. Let’s keep it simple and not worry about that. You basically say, “Well, Kris. In this story, we basically made… If we add those 2 thing up, we made $57,600
on this deal.” You can now successfully tell the story of
a home because you’re familiar with the terms. It is so important to understand these. Because real estate is it’s own language. And if you can’t speak the language, you can’t
transact this. So… Today, I wanted to give you that language
and hopes that it would help you really develop more financial freedom. Now, I did mention that a way to actually
get a higher cashflow and save money and have biggest profits is actually doing something
here called lease option. And if you’re new to the game of real estate,
it is the most successful backyard strategy I will ever tell you to learn. And if you want to learn more about it, I
actually created a video all about lease options. I think that you’re going to love it. It’s coming up right over here. And if you click on it, you’re going to see
all of this but at the next level. The next level of terminology. And it comes down to how do I make the most
money in the game of real estate. If you want to learn about that, go ahead
and click here. As always, subscribe. And please smash the like button. It does tell YouTube that this is worth sharing
on their part because you see value of it. Thank you so much for being here today. I look forward to join you on tomorrow’s video. And join me right here, right now. Le’ts get you actually making money with these
new terminology in real estate.

9 thoughts on “Investing In Real Estate | 11 Terms You Must Understand To Be A Successful Investor

  1. Yes! Learn to speak investor! #1 way to loose credibility with experienced investors is to not know basic lingo. I learned this the hard way when I first started, lol. Great advise Kris!

  2. I'm in my first year of college. I've been watching your videos a lot lately and my plan is to take a gap year, get a Real Estate license to gain experience in the field… My main goal is to become financially free. Thank you so much for your videos.

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