Rookie Reply: How to Pass Down Generational Wealth & Top Airbnb Amenities

This story was originally published at BiggerPockets.com

You’re working hard to build generational wealth. But have you thought about a succession plan for your growing real estate portfolio? Today, we’re going to show you several ways to create a better life for your children while reinforcing the values of hard work, sacrifice, and entrepreneurship!

Welcome back to another Rookie Reply! Want to get more Airbnb bookings? In today’s episode, we’ll show you how to choose short-term rental amenities that will improve your bottom line. We also dive into seller financing and how to make your lender whole if you need to sell the property. We even discuss a unique type of real estate business that allows you to make a huge profit without owning any property. Finally, should you ever buy rental property if it won’t cash flow on day one? Stay tuned to find out!

If you want Ashley and Tony to answer a real estate question, you can submit a question here, post in the Real Estate Rookie Facebook Group, or call us at the Rookie Request Line (1-888-5-ROOKIE).

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Listen to the Podcast Here

Read the Transcript Here

Ashley:
This is Real estate rookie episode 425. Should I buy a deal? If it does not cashflow on day one, we’re going to find out. I’m Ashley Care and I’m here with Tony j Robinson,

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, three times a week, we’re bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. So today we’re going to answer questions like, how do you create an exit strategy for a seller finance deal? And what kind of amenities should you be offering for your Airbnb? And most importantly, how are you going to pass down all the generational wealth you’ve built from your rentals down to your children? But first we’re going to get into a question about passing generational wealth from your rentals down to your children.

Ashley:
Okay, so our first question today is from Jim K. Over the last decade or so, my wife and I have put together a nice little rental portfolio. We’ve really grown as landlords and property managers, and we have a nice little life that’s just getting nicer. Oh, that’s so sweet. Net rental income has almost completely replaced what we used to make in our jobs. That’s awesome. We can see the finish line when we call it quits sell and put out money into more stable assets, retire to a nice sunny place far from Pittsburgh and enjoy our lives. For those of you who have met with some success and have children, what’s the end plan? How are you going to pass generational wealth to your children successfully?

Tony:
That’s a really good question, Jim. I should probably put some more thought into how we want to pass this off. I think one thing for sure, and Tara and I have talked about this before also, is that I don’t know if we just want to hand anything to them per se, we want them to work for it a little bit, but there’s also the idea of reason we work is to make sure that we can pass things down to our family. So the short answer is, I don’t know. We know that we want them to ideally work in the business in some way, shape or form. Sean, our oldest, is getting to an age now where he’s expressed an interest in wanting to work with us in the real estate business. So I think having him kind of climb up the ranks and maybe making ’em cold call landlords to try and find some off market deals or something first. But I don’t know. And I honestly, Jim, I just haven’t put maybe enough time and effort and thought into what that succession plan looks like. Have you seen succession ash on HBO? Did you ever watch that show? Yes, I have. Yeah. So who maybe I’ll end up being Logan Roy where I get older and there is no plan and it just causes chaos in my family, which is what I don’t want.

Tony:
Do you have a succession plan in place, like a way to pass it down to the boys?

Ashley:
I don’t think that I’m a net worth value to actually put together a contract as a succession plan. I think the first step would be maybe a trust and things like that. But as far as a business to actually hand down, I have helped another investor who has had a business do a succession plan with his son because of their franchise they were involved with. And it was very interesting the things they had to decide on and to put in place. But as far as for my children, well, the first thing I wanted to say is there is this one investor who’s known pretty well around the BiggerPockets community, and he had told me the one day just driving around the car that for his children, they will not get anything from him. They will not take over his businesses and they will not work for his businesses.

Ashley:
If they want to start a business, he will be their private money lender to start that business, and that’s how he will use his wealth to help them. He will invest into whatever business they’re going to pitch to him, things along those lines. So I think that actually is a good option. You’re not just handing your children your wealth, but they have it at their disposal to start building their own wealth. I guess in a sense. I’m sure there’s an interest rate charge and everything like that, but getting a loan from your father would be a lot easier than having to go to a bank to start a business. But for my children, the things I’m, I guess I can kind of talk on the things I’m doing today for them, they each have a 5 29 plan and now that 5 29 plan will actually convert into a retirement account for them if they do not use it or choose to go to college.

Ashley:
And right now, only my 8-year-old is the only one that wants to go to college. My 10-year-old just wants to be a farmer, which you don’t need to go to college for my 7-year-old, he just wants to buy houses. He doesn’t ever want to have a job. But my 8-year-old, he only wants to go to college because he thinks he’s going to be drafted in the NFL. That’s what he wants to do. And he knows you have to go to college to be drafted. So as far as them paying for their colleges, that’s one thing I’ve planned for, but who knows if they’ll actually use it. So I like the idea of it turning into retirement. And then the next thing is they each have a rental house that when they are 18, the rental will actually be handed over to them. So they’ll each get their own little tiny duplex.

Ashley:
And then the last thing is I end this rant is we actually paid them out of our holding company for miscellaneous jobs. I did a real how they helped us landscape and we did a little spoof that they actually did the whole thing with a push mower and stuff like that, but they actually did help pick up sticks and do everything like that. So we do pay them, which is actually a tax deduction to them or to me. And then they aren’t paying any taxes. They’re not making enough to pay taxes, but it’s earned income, which then they can use to put into a retirement account. They have earned income now. So that’s my little bit there.

Tony:
And I think tying back to what you said about the other investors, said that he’s not going to give his kids anything. And I go back and forth on that, right? Because it’s, I mean, part of the reason that we work so hard is to be able to make it easier for the next generation. And I think that’s a big focus for me is how can we make that easier? How can we make that path maybe filled with less ups and downs than what we faced trying to build our portfolio? But I think of someone like Dave Ramsey who built this massive brand for himself, but now he’s built a roster of other people that are a part of his brand, one of those being his daughter Rachel Cruz. And now she’s also an author, she’s also a speaker and he’s got her own podcast and stuff like that as well. So I wonder if maybe that’s the way to go. Even Grant Cardone, do you follow Grant on Instagram? Yeah,

Ashley:
Yeah.

Tony:
He’s been posting a lot of his daughter, she’s like 15 years old and now he’s trying to build her brand. So I see the benefit because it allows you to kind of, I dunno, I go both ways. So the short answer to the question Jim is I don’t know, but I see benefits in both ways.

Ashley:
I see three different scenarios. So one is you just have cash, you have wealth, you maybe have cash and a trust for them or something like that. They have a trust fund and you have the decision of, okay, you sold off all your rentals or you sold your business and you have all this wealth. Now you put into a trust for the kids. Do you give them a trust? When do you give them that money? How does that work? So that’s like option one. The next thing is you’re actually running a business. So in Tony’s circumstances, it’s his hospitality business, the huge operator that manages all of his boutique hotels and that does the short-term rentals, those businesses as to do you bring your son on to become vice president? Does he start to get ownership of it? The investor that I did the succession plan for, they would actually gift their son shares of the company every single year up to whatever the A allow was for gifting where they weren’t taxed on it every year.

Ashley:
So that’s how they were able to transfer some of their wealth to him was gifting him shares of their company. But I also saw a turmoil as to, okay, the sun’s coming up, he wants to start making decisions in the company. And just a lot of head butting as to the dad being like, well, this has been my company for so long, and it causing a rift between them. So I would be terrified of that happening with my sons. But then the next thing is you have the rental portfolio or maybe it’s not really a business you’re operating, maybe you have a property manager or something like that where there’s not a lot of day to day that’s going on with your rental portfolio. Do you have your son come on and partner with you on the newer deals that you acquire and have the property manager manage those? So I think there’s, depending on what real estate investment is or your business is, there’s so many different ways to incorporate your kids into that wealth without actually just handing them everything.

Tony:
Yeah. Well Jim, I hope you got some diving from me, Ashley, just kind of thinking that through for ourselves right now.

Ashley:
I have to tell a story real quick. We haven’t done any boring banter in a long time, but I’ll say when this show was first happening and before the show was even created, BiggerPockets put out, they wanted to do a new podcast. And if you had an idea of what that podcast would be, you could submit an application and apply to be on the show or whatever. And my proposal was to create a podcast that talked about generational wealth and as real estate investors how to build generational wealth for your kids. And the producer called me. He is like, well, we really like you. We’d like you to audition as a host, but your idea is more of one show, not all series. So we’re going to do something about new investors, but it worked out. Okay, guys, we’re going to take a short break, but when we come back, we’re going to have a question about an Airbnb in a college town.

Ashley:
We are back from our short break with a question from Mark Proctor. I have a small Airbnb in a college town that is also close to several hospitals. Our guests are mostly visiting because of those two things and generally for one to three nights, but we do get the occasional longer stay. Would it be worth it to offer a gym membership as an amenity? The monthly expense would be a little bit more than what we charge for one night. And as far as I can tell, none of the other Airbnbs in our immediate area offer that. I’m not sure our guests even want that, and I’m not sure it would increase bookings. I was just trying to think of things that others don’t offer. Tony, this is right up your alley.

Tony:
It’s an interesting question mark. Before I even answer the question, I’ll just give my thought process for amenities and how we try and decide which amenities add and which ones to not add. But I always try and look at the data and say, how do the properties who have this amenity perform versus those that do not? And if I can see a consistent trend there of like, well, hey, the top performing properties all have this amenity, well then it becomes clear to me that I probably need this to compete in this market or that if I add this amenity, I can assume some sort of reasonable revenue increase. So I’ll give you a few different examples. Mark, in the Smoky Mountains, it is table six. It is just like the bare minimum that you have a hot tub in a movie room or a game room.

Tony:
If you’re a larger cabin, like pretty much every single four or five plus bedroom property in that market has a hot tub and a game room or movie theater room. So it’s not a question of should I or should I not? You just have to have it because that’s what that market demands. And when you look at all the listings, it’s something that’s present there. Now in other markets, maybe they’re not as common and sometimes it’s hard to know what impact exactly will a hot tub or pool the whatever else have on a specific listing. So the first thing I’ll say is I always try and go back to the data and say, Hey, what impact, if any, will this amenity have on this? Now for Mark’s question specifically about a gym membership, I would just test it out. And the reason I would just test it is because it’s a relatively low cost.

Tony:
You’re not talking about tens of thousands of dollars to add this amenity. It’s a few hundred bucks a month. So you could sign up if it doesn’t work and you don’t see that lift or you don’t see it necessarily having an impact on your a DR, then you just cancel the membership, right? So it’s a pretty low risk thing to add. So if I’m in your position, mark, I would probably test it out, let it run for 90 days or so, see what the impact is and let that data inform you of whether or not it’s worth keeping. What are your thoughts on that? Ash?

Ashley:
I don’t remember what this is called, but I know there’s some kind of software that you can connect with your listing where people can go and buy extra things like champagne when they actually, I don’t know if you can do alcohol, but roses at the property. What is that website called where you can create all these different,

Tony:
A few, honestly, I can’t remember what they’re called, but there’s a few of ’em out there that service that or offer that same service.

Ashley:
Yeah, so that’s what I would think is maybe one way you could go about it instead of fronting the expense, maybe going to the gym saying, I have people saying my Airbnb, could you offer a discount on a day pass or something? And someone could just add the day pass to their Airbnb booking and has all the gym information. Maybe it’s 10 bucks, whatever, they can just add it to their booking for the days that they want to have it. That was the first thing I thought of instead of actually fronting the cost is to offer that. Or in your guidebook even, we’re asking the gym if there’s a discount where in the guidebook it says, if you go to this gym, mention this code or something and you get discounted rate at the gym. But then they tell their son that’s at college and then he tells all his friends, but I guess it’s more business for the gym,

Tony:
Have more business for them. So it works out. So Air DNA, they have a podcast, it’s called the STR Data Lab, and it’s hosted by Jamie Lane, and I love Jamie Lane. Jamie Lane is the Dave Meyer for all things short-term rental, just incredibly intelligent guy knows the data behind short-term rental industry really well. And they just had an episode that came out was episode 77, and it was actually all about this topic about the impact that amenities have on short-term rentals and how to choose and what data you should be looking at to make that decision. So Mark, again, I know I gave you my answer, but just in general for everyone that’s listening, if you are curious about the impact that amenities have, that episode 77 of the STR data lab is a really good listen,

Ashley:
Tony, what are some other things that people could offer besides updating the membership? Now, you talked about actual amenities that are on the property, but is there anything you’ve ever done that’s not on the property that you’ve added as an amenity?

Tony:
We’re actually experimenting with that now, like potentially offering preed, pre stocking the house with certain items, decorating for certain occasions, things of that nature. So Sarah, that’s actually a project for Sarah and I that we’re just now kind of kicking off, but I’d say the majority of our amenities have been physically attached to the property in some way, shape, or form.

Ashley:
Okay, our next question is from Mark Graham. So I’m fairly new to the idea of seller finance, but understand the approach and negotiation aspects where I’m having some difficulty understanding is the exit strategy. My question is, in the event something were to happen in five to 10 years down the road, I needed to sell the property to raise capital. How does that work? Would it just be a double close to pay off the seller financing and I walk away with the appreciation and cashflow earned while under my control? My primary concern is taking care of the seller whom I bought from, and the end of buyer being able to have conventional financing in place as the end buyer. Any help on this would be appreciated. Well, Tony and I would love to tie this all together for you and help you out with this Mark. So Tony, you want to explain what seller financing is?

Tony:
Yeah, read my mind there, Ashley. So Mark seller financing for all of our rookies that are listening is instead of going to a bank, when you purchase your property, you’re using the seller as the bank. So I can go and buy 1, 2, 3 main Street for a $100,000 purchase price and I can either go to the bank and say, Hey bank, can you lend me money to buy this property? And they’ll say, Hey, we’ll give you $80,000, you come up with 20 and then we’ll carry that 80 for you. Or you can go to the seller with a similar offer and say, Hey, Mr. And Mrs. Seller, I want to buy your home for $100,000. And then the two of you can negotiate to say what the actual terms of that debt are. So for us, the boutique hotel that we bought in Utah, we sell or finance that one. So instead of us going to a bank, the seller is carrying that note for us. So there’s benefits usually for you as a buyer go and seller financing, a lot of times you get better rates, more creativity with the terms lower down payment, the list goes on and on. But that is the basic definition of seller financing.

Ashley:
So his question is, what happens to the seller financing when you actually go to sell the property? So in this circumstance, it would take, what would happen is just like if you had a bank financing, when you go to sell the property, the day that you close to the new seller, their funds to purchase the property would go and pay off the remaining balance to the seller financing portion of it. So they would be paid off. So where you’re concerned about the seller, about them getting made whole is that’s where you have to make sure that you’re selling the property for more than what you owe the seller. And so in New York State, we use attorneys, but other states will be the title company. They’ll actually make that transaction happen so that the money literally goes right from the new buyer to the person that did the seller financing. And it’s not you having to actually coordinate that person getting paid off either. That will happen instantaneously at the closing when you do sell the property.

Tony:
So like Mark Wynn, whenever you sell a property and regardless of what kind of debt it is, seller financing debt, bank debt, private money, whatever, when there’s a lien or debt against the property, shows up as a lien against the property. So when Ashley said, when titles coordinating this whole transaction between you and the new buyer, title’s going to see that there is a lien from the first seller that you bought from, they’re going to see that seller finance note. So they’ll make sure that that person is paid out before any funds are dispersed to you. But to answer your question, yes, whatever the equity is that you’ve gained, minus any closing costs is what you’ll get paid out. So if your original seller finance note was a hundred K, and say you paid it down, maybe you’re at 90 K now, and then you sell that property for round numbers, I’ll say you sold it for $190,000, so you just gained a hundred thousand dollars on that sale, and then your seller gets paid back their remaining balance of 90,000 as well. So that’s how the transaction typically works.

Ashley:
Okay, we are going to take a short break and we’ll be right back. Thank you guys so much for taking the time to check out our show sponsors. Next up, we have a question from Andrew Dre. I am targeting homeowners with dilapidated homes that need repair and offering to pay for the rehab and split the profits with them at the end of the project, after the sale of the home. Any idea what this would be called and how to structure it legally? I obviously would want tap control over the property and maybe a predetermined purchase price. Thanks in advance.

Tony:
This is a super interesting model, and actually I just met someone Ash last month at one of our real estate meetups here in SoCal, and he works for a company that’s based here and that is their entire business model. And he says that they’ve been crushing it lately because their value proposition to a homeowner is so much stronger than a wholesaler because the homeowners get to participate in the upside. And I was like, man, I’ve never heard of that before. So I don’t really know how it was being structured. I can kind of talk through what I would do if I were in that situation, but I just know, Andrew, you’re thinking along the right lines. I literally just met someone, I think you said they had a hundred flips going, some insane number. They’re all over SoCal. So there is definitely, I think, interest from the homeowners to be able to participate in that upside.

Ashley:
Yeah. So how would you structure it just off the top of your head if you’re going to do that deal right now?

Tony:
Yeah, I feel like, and again, this is me without ever pitching this to someone, so I don’t know if they would agree, but I feel like first I would want to make sure that my name is on title, but there’d have to be some kind of really strong agreement. I don’t know if it would be like a JV or maybe there’s an LLC that we put in place or some kind of partnership legal document that really lines out, Hey, under what circumstances can I keep my name on title? I don’t know, so that I don’t manage rehab correctly or I disappear in the middle of the night, whatever it may be. They should be able to kick me off if I don’t perform certain duties. But I would really want to specify, Hey, what is the service that I’m offering? How are we exactly splitting this equity?

Tony:
Who’s in charge for what costs? Right? Am I going to bring everything since they brought the property? In terms of the rehab budget, what happens if we go over budget? What happens if just all the different contingencies? And then I guess that’s really it, right? The contingencies and kind of how to structure it. And like I said, but I feel like for myself, I would want to be on title sir to know that if I’m putting whatever 50, 60, 70, 80 k into a rehab, I want to make sure I have some level of recourse, either that they don’t just sell the home and not give me what I’m owed as well.

Ashley:
Yeah, I think the best thing would be to do a joint venture agreement because I’m not sure I’d want to go on title with someone, especially somebody random. Now I have this deed to the property with them for liability reasons. So I think that would be the reason I wouldn’t go on title and I’d rather do a joint venture agreement where they stay on title and we have the joint venture agreement specifying that I’m paying this X amount towards the rehab of the property. The property rehab is to be completed at X date, and then the property is to be sold at X time. And I think I would have some kind of if thens or buts, so if the property doesn’t sell, this is what happens, or we will eventually take a loss on the property. Am I going to lose my rehab if we rehab costs that I put in, if we lose on the property, is the homeowner going to be responsible to put some money in or how all that plays out?

Ashley:
So having multiple exit strategies if it doesn’t play out how you’d want it to, but one thing that I thought of first after I read this was, okay, what a benefit to the homeowner compared to using a wholesaler where they’re getting hopefully a better return. They’re actually walking away with some money where maybe in the wholesaler situation they’re not. But I thought of too as like, okay, the property’s under rehab as if this is somebody’s home that they were living in. Where do they go while this is happening? So if you have rentals, you keep one of your rentals available where you say, you can live here during the rehab for three months, six months, you still have a lease agreement. Maybe they’re paying a hundred dollars or something. So there’s still a monetary value tied to the lease agreement, but you’re also giving them a nice place to stay and they don’t have to worry about housing until the property sells. And then maybe it’s after two months the property sells, then their lease is done in the unit, or they could continue to lease it for market rent or whatever that may be. So I think even providing them with options for housing, paying moving expenses, there’s lots of different ways that you could add value to get them to agree to do this with you. Yeah,

Tony:
I do like that idea. I did just look up the quick claim deed for my county, and it actually does not require the signature of the person that you’re deeding it to.

Ashley:
So you can just add people.

Tony:
I could just give my property to anybody it looks like even if they didn’t want it, I could quit claim deed my property to someone else, which seems like, it kind of feels like I should sign if I’m accepting a property from someone, because what if I quit claim deed a property that has a bunch of liens or something

Ashley:
That’s tons of liens

Tony:
And I just quit claim deed it to someone else? Well, geez,

Ashley:
Don’t ever piss off Tony.

Tony:
I’m just going to go around dropping properties to, I talk about

Ashley:
Being vindictive, getting a revenge. I could,

Tony:
That is crazy, right? But yeah, no, I do your point ash of like, Hey, is there a way without maybe avoiding the mingling too in depth, but honestly, what I would do if I’m in your position here, Andrew, is I would just talk to a real estate attorney for your specific state and get their insight on like, Hey, here’s what it is that I’m trying to accomplish. And usually a good real estate attorney is going to know the ins and outs of the local laws regulations, and they can kind of guide you through the process to say, Hey, here’s what you should put into this agreement and here’s how you should structure this deal. When we started partnering with folks, that was one of the first things that we did. We just sat down with the real estate attorney and said, Hey, here’s how we’re thinking of structuring this. What makes the most sense for us to move forward with? And she gave her a professional opinion on, Hey, do this, create this document, do this thing, and now you guys are all protected.

Ashley:
And if they tell you, no, this isn’t a good idea, talk to other real estate attorneys too, because there are some that are so set in their ways of, Nope, this is how a real estate transaction is done and not willing to be creative like this. So just keep asking. And

Tony:
That’s true for anything. I remember the first time that we wholesale the deal, the first title company that we’re using, they were like, this is impossible you guys. There’s no way that we can double close on a property at the same time. I was like, I am pretty sure there are other people in California who are wholesale. So it’s got to be possible and we have to find another company that did it. But yeah, calling around a few times helps.

Ashley:
Okay, so we have one more question today. This one is from Sam McCormack. If you are buying an investment property, do you need to see cashflow off the bat to make an offer and buy it? Are you okay with breaking even losing for a few months to a year before seeing cashflow for the sake of being in a better area where your property will appreciate much faster? I have an answer for this one. I think it depends on where you are in your real estate journey. Also, depends on your W2 income or whatever your income is. I would want to make sure that you can very, very easily cover that deficit, unexpected repairs, capital improvements that may come up on the property during that timeframe where you’re not cash flowing. But I would definitely do this. And most of the time I am doing this when I am borrowing a property, I’m holding it for three to six months with no income and I am draining money doing the rehab and then I go and refinance.

Ashley:
But even just a property, I just recently refinanced it, we’re renting it out for 1700 per month and our expenses are about 1500 per month. That’s including the mortgage, property, taxes, insurance, everything. And so that’s not a lot of cashflow. It’s only $200. And we also didn’t pull all of our money out. We left about 15,000 I think it was into the deal. And that’s because this is an appreciation play for us. This is not, we’re going to cashflow make a ton of money right now to this is we see so much growth and improvement in this area that five years from now, if a tenant can pay our expenses and we just continue to build up our reserves or have a little bit of cashflow to go out to dinner or something, they will be worth it to five years down the road to be able to sell this property for a bigger profit. So I think from my opinion, it depends where you are in your financial journey. So if you can easily cover those payments, if something goes wrong, then I say go for it for the appreciation play.

Tony:
Yeah, I think a lot of it comes down to, and kind of echoing what you said Ashley, but just what are your motivations when it comes to investing in real estate? What are you doing it for? Because everyone invests for different reasons and cashflow is the big sexy thing that everyone focuses on. But the truth is people are investing for different reasons. There are some people who truly enjoy the work that they do on a daily basis and they have no intention of walking away from that day job at any time in the near future. And if you’re one of those people who truly enjoys what you do and you don’t want to walk away from that, well, maybe it isn’t cash that you’re investing for. Maybe it is the long-term appreciation and you’re like, Hey, I’m buying this property today in 2024 so that in 2054 when I retire from my day job, it’s paid in full and then I can reap the benefits of that deal.

Tony:
But between now and then, I don’t need the cashflow. Or maybe you’re buying because for the tax benefits, a lot of people get into the short-term rental industry, not necessarily because of the increased cashflow, but a lot of people do it because it’s easier to qualify for bonus appreciation and leverage the benefits of cost segregation. And I know some people who, for example, I know someone, she bought a million dollar property in Sedona, and the reason she bought it was because her and her family have a successful, they have a successful business and they were getting crushed by taxes. So for them, they just wanted a nice place in Sedona they could use for themselves, and they wanted the tax write off and they got a big, big break on their taxes by buying that property. So they’re breaking even. They’re getting an asset they can enjoy and they’re reducing their taxable income. So for them, it’s not about the cashflow. So I think a lot of it comes down to Sam, what are your specific motivations when it comes to investing in real estate?

Ashley:
And I think that’s a great example too as to if it’s the tax advantage, especially with the short-term rental where you can, for me, we’re trying to get a lake house. If we can get a lake house and break even on it and still get to live there six weeks out of the summer, I wouldn’t care if I had to pay $500 a month throughout the year to have a lake house that I get to use for six weeks. That’s way cheaper than having to rent one for just a week. Anyways, so you’re right. There’s so many different motivations and reasons why you’d want to break even or to even pay out of pocket a little bit every month for your property.

Tony:
But I will say, if your goal is cashflow and that is why you’re investing, I would not buy a deal that doesn’t cashflow today. If you know that’s the only reason you’re doing it. It’s got a cashflow today.

Ashley:
And another thing too is if you are banking on it cashflowing in six months to a year because you think rents are going to increase, I would not bank on that either. I would bank on it. If rents are going to increase, because you currently have a tenant in there that’s under market and their lease isn’t up until six months or you’re going to do renovations that will bring the value up. But just banking on the fact that you think that there’s going to be rent growth in your area within that short of a period of time, and you can’t afford to continue on to hold this house longer than six months until that rent goes up. That’s where I would be very cautious as to not trying to bank on rent growth as the only thing that’s going to make you make your mortgage payment in six months. Okay. Well, thank you guys so much for listening to this week’s rookie reply. If you have a question, you can go to biggerpockets.com/reply. You can also ask a question in the real estate rookie Facebook group. If you’re watching on YouTube, make sure you have subscribed to the Real Estate Rookie YouTube and make sure you like this video. Thank you guys so much. I’m Ashley. And he’s Tony. And we’ll see you guys next time on Real Estate Rookie.

Tony:
This BiggerPockets podcast is produced by Daniel Zarate, edited by Exodus Media Copywriting by Calico Content.

Ashley:
I’m Ashley. He’s Tony, and you have been listening to Real Estate

Tony:
Rookie. And if you want your questions answered on the show, go to biggerpockets.com/reply.

Watch the Episode Here

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In This Episode We Cover:

  • How to create generational wealth through real estate and pass it down to your children
  • A “unique” real estate business that lets you make money without owning rentals
  • How to choose amenities that will help you get MORE Airbnb bookings
  • Whether you should ever buy a rental property that won’t cash flow right away
  • Seller financing explained and how to make your lender whole if you sell a property
  • And So Much More!

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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