Should I Buy Real Estate in 2019? - Rod Khleif - YouTube

So should I buy real estate in 2019? I often get that question. Should I be

buying real estate right now? In this year 2019? My name is Rod Khleif and I'm

host with the number one real estate podcast on iTunes called "Lifetime Cash

Flow through Real Estate Investing" We're blessed to have over 5 million downloads

I'm also author of the critically acclaimed book on multifamily real

estate investing titled "How to Create Lifetime Cash Flow through Multifamily

Properties" Now real estate, like life goes through cycles and we're at the top

of a cycle right now you know. There's gonna be a contraction in the near

future in fact it may have already started okay. Lots of luminaries have been

quoted saying that the contraction has already started. So, is it a good time to

buy in 2019? We're gonna answer that question today. I'm gonna break it down

first between buying a home to live in versus buying an investment piece of

real estate. So let's start with buying a home to live in. Well the first thing I'd

say to you, is if you're young and you're looking to buy yourself your first home

go buy a duplex or a triplex or a four-plex because you can get

residential financing you can get low interest rates and you can get 30-year

financing. So purchase a duplex. You can live in one of the unit's very

inexpensively or maybe even free in many cases with the renters and the other

units paying your mortgage payment for you

That said purchasing a home to live in is a very subjective and even emotional

purchase and because there's emotion involved and you need a place to live

those factors come into play. Now the interest rates right now are still

incredibly low historically. So I would tell you to weigh the fact that you're

likely going to be paying top dollar for your home against the fact that you've

got great low interest rates. Now many people say that it's likely the interest

rates are gonna continue to go up and that they're never gonna reach these low

levels again. I'm not sure I believe that but who knows you know that said if

you're asking my personal opinion, I wouldn't buy a single-family home to

live in right now because the prices are definitely going to go down in value in

my opinion enough to justify your higher interest rate if that come if that

happens if rates go up. Now I take a different position as it relates to

multifamily real estate investment property because multi-family investment

real estate should be purchased based on its cash flow and it's ability

to service your new debt. Now you know when you buy, the values really don't

matter. Now I'm going to tell you that buying a multi-family property based on

value versus cashflow is a huge mistake in this year 2019 and 2020

you know values out the window.

Focus on cash flow

Forget property value right now in this hot market. Now I've got podcast

listeners and even coaching students sometime that send me deals to look at

and they tell me you know this property sold three years ago for four million

dollars and I can buy it for two million today and I tell them it absolutely

doesn't matter what the price is you know in the past. All you should care

about is the current net operating income meaning the net income on the

property and the property's ability to service the debt. For those of you that

don't know what net operating income is it's really just the net income on a

property after the property expenses but before you pay your mortgage payment okay

Also, if a cash flowing multifamily investment property is purchased with a

decent debt service coverage ratio, you can survive any contraction. Now let me

take two seconds and explain what a debt service coverage ratio is. It's a very

simple formula. Now so the debt service coverage ratio is what a bank is gonna

look at and what you should look at when you're evaluating an investment property

To figure out what it is when you're looking at a multi-family property you

just divide your new mortgage payments on an annual basis by the net annual

income of the property okay. Let me give you an example. Let's say you net $10,000

annually on an apartment building and your mortgage payments annually are

also $10,000. Now that's a debt service coverage ratio of one.

Now in the same example, let's say you were netting $15,000 a year

on that same property and your mortgage payments are still $10,000. That's a

debt service coverage ratio of 1.5 you see how I did that? Now I won't buy a

property unless I can have at least 1.6 debt service coverage ratio or the

ability to get there very quickly with a small bump in rent or a decrease in

expenses shortly after closing. Now if you buy multifamily real estate in 2019

with that barometer, you're gonna be fine and you're gonna make a lots of money

Now there are lots of people, myself included, finding great off-market deals

right now even in this market we have three of them that right

now we're raising money for. That's because we're focused on connecting

directly with sellers okay and we've built comprehensive deep relationships

with brokers in our target market. So we get off market deals from them. So if you

get a property that's listed with a broker that's on the market

it's most likely overpriced and not even worth consideration. Now I go into how to

find off-market deals in my free book and certainly at my live events. Now if

you like "Total Immersion" to learn like I do, come see me at one of my live events

Now I don't bring outside people in to sell you stuff. It's just me teaching you

this business and as importantly, I teach you how to take action because 80% to

90% of your success in anything is your mindset and your

psychology. Only 10% to 20% is the actual real estate stuff. So I spend

a lot of time pushing you through fear and getting you to get outside of

comfort to build that life of your dreams

I will kick you across the finish line. So if you can come see me live, I promise you

you'll be very glad you did. So back to the question, is it a good time to buy

real estate in 2019? for multifamily, if you focus on cash flow, you find

off-market deals, and you can add value too,

abso-freakin'-lutely okay. I'm Rod Khleif wishing you incredible passion and

massive success in your business and in your life!