One of the BEST Ways to Start Building Capital to Invest

Mike DeHaan: [0:02] Welcome to the collecting keys Friday focus. What's going on, guys? On this episode of the Friday focus, I wanted to talk to you about a method that I think is the easiest way to start building capital to invest in real estate while also getting a basic understanding on how to go through the real estate process, do renovations, do all that sort of stuff. And this method is what a lot of people refer to as a live and flip, which means basically you buy a property to live in yourself and you renovate it or add value to it in some way and increase its value while you live there. Right? Some people that are into this, they have these stories of they were in the middle of a kitchen remodel. They're doing it themselves. Took them three months. They were having to do their dishes in the bathtub and all that sort of stuff. I think that's one way to go about it, but I also don't think that's the only way. When it comes to real estate investing, you know, whether you're buying mobile home parks or single family homes or apartments, whatever, the ultimate strategy to really get a return on your investment is to increase the value. Do a do a value add, something like that. And with a lot of people, they think when it comes to residential real estate, that means, you know, you redo the kitchen, you redo the bathroom, you make it look pretty, things like that. But that's kind of the rudimentary way to do it. And when it comes to a live and flip, if you just go buy like an old ugly house, sure, you can put some money into it, you know, make it look a little bit better while you live there.

Mike DeHaan: [1:39] But the ROI on that's still gonna be very dependent on the market and kind of the demand for your end product. And just with the time and everything and the money that goes into that, your ROI is gonna be relatively low. So the key when you do this and you're doing these live in flips and looking for these opportunities is to look for houses that have the potential to add value. And by that, what I really mean is by adding square footage. When it comes to residential real estate, appraisers, when they look at comps, they look at price per square foot of similar properties, similar sized properties, and that is how they determine value. So having that that calculation in mind, they're looking at the price per square foot, multiplying it by the square foot of the property. Now if you can add a bunch of square feet to the property, obviously, the value is gonna go up. Now this is something that my wife and I did almost on accident when we first started. It was actually before we were looking to invest in real estate as a business. We bought a house that had an unfinished basement. So when we bought the house, it was a three bed, two bath, had an unfinished basement. And we spent about eight months ourself doing everything to finish up this basement, and we were absolute amateurs. Like, I had never used a power saw before. I had never done hung drywall. You know, I had literally no experience with this sort of thing at all.

Mike DeHaan: [3:09] And we literally just went with the school of YouTube. We would go and we would rent tools from Home Depot, and we would watch videos on, like, how do you soffit in a HVAC vent. Right? And we would actually build the frame around the HVAC and we did that ourselves. And they're like, cool. So we understand that. And we're like, how do you hang drywall? Oh, it's pretty simple. We learned how to hang drywall. It's by watching YouTube videos and the stuff that we would need to hang drywall, you know, like the lift and all those sort of things. Well, first off, we didn't even know that was an option for the first little bit. So we were hurting, lugging these drywall panels around. But then my friend, Dan, and our business partner, he actually introduced me to the the lift, the open on the ceiling, and we did all that ourselves, you know, and that over the course of weeks. And then same when it came to the flooring, I had never installed LVP flooring before. So I was just like, well, how do I do this? Watch some YouTube videos, bought the flooring, went and, you know, borrowed some tools from people, and we installed the flooring. And the next thing you know, over the following eight months, we what we did is we finished this basement and turned the house from a three bed, two bath into a five bed, three bath, and we added over a thousand square footage to our house. Right? It was a full basement, this whole thing. And then at that point, you know, I was sort of starting to get into real estate.

Mike DeHaan: [4:31] I was learning about this concept of, you know, doing a cash out refinance, pulling money out. And I said, hey, I wonder what our house could be worth. So I started the cash out refinance process. We went through it. The appraiser even said here that's like, oh, it says that when you bought it, it was a three bed, two bath. You finished this downstairs now, so the house is twice as big. I said, yes. He said, great. That's really gonna help your value. We ended up being able to pull out $80,000 on our cash at refinance. And fortunately, with the interest rates, it didn't affect our payment that incredibly much. It was a way that we could still afford it, and that was fine. So we chose to do a refinance. But if you weren't in that situation, you could also go and live in the house for two years and sell and end up with a pretty good surplus for yourself. So a lot of different exits. But point being, that was a relatively low risk way for us to learn about the process of, you know, getting a loan, doing renovations, you know, managing contractors. We use contractors for plumbing, finishing the drywall, and a few other things that were in there. And, ultimately, worst case scenario, we kinda just screwed up the house that we lived in, and that would be our problem. It wasn't like we had to worry about crazy things going on, with other people involved, like liabilities, things like that. So that was a really good way that we could take our time to learn.

Mike DeHaan: [5:50] You The money risk was low because you're gonna be living there anyway. And it allowed us to go through the full process. And we ended up coming out with a huge amount of cash that really helped kickstart our investment journey, right? All of sudden, we had $80,000 in cash, know, tied to the refinance that we could do a lot with. And we actually use that exact money to go and buy a triplex that we still own to this day. And that that triplex cash flows us, think about $1,500 a month net right now all said and done. So, you know, we're able to the $80 and go and turn it into a very significant asset for us. So that's my Friday focus this week. If you are looking to start investing in real estate, I think that is a great way to go. And you're sort of new to the whole process is look for a property that you can do this live and flip, but be very particular to look for ones where you can add value to the property. Again, in something that's regarding square footage, think, is huge. And, you know, then you don't have to necessarily do, like, the house hacking where you're living with people and that sort of stuff. That's not your jam. There are other ways to do it, and I think that this live and flip is a great way to go about it. So, anyways, guys, go ahead and hit me up on Instagram at Mike underscore invest.

Mike DeHaan: [7:02] Let me know what you think about this idea. If you've done something similar, I'd love to hear about it. So again, that's at Mike underscore invest on Instagram. And then if you wanna learn about how to build a business, just like Dan and I have, go check out the instantinvestorprogram.com. It's a group coaching program, but we also have a second tier now where you get to work directly one on one with Dan and myself, basically to build out your business and go through the whole process. So we have the group element, but now we also in addition have an element where you get direct one on one coaching, and we're super excited about that. So go check out the instantinvestorprogram.com for those details. Besides that, you guys subscribe to this podcast and go and share with anyone who might find it interesting. We'll talk to you guys next week. Thanks for listening to this collecting keys Friday focus. Be sure to subscribe wherever you listen to your podcasts.