Should I Buy Real Estate in 2019? – Rod Khleif


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!

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