The world of investing can be intimidating and scary to jump into but having tips and tools of the trade can make it easier to jump in and start building legacy wealth for you and your family!
This episode is the follow-up to my season ending episode...
The world of investing can be intimidating and scary to jump into but having tips and tools of the trade can make it easier to jump in and start building legacy wealth for you and your family!
This episode is the follow-up to my season ending episode "Trade Secrets-Real Talk on Investing & Wealth Building"
I was joined for this enlightening discussion by 2 giants in their respective fields:
Asa & Kyle gave us some invaluable tips and advice on real estate investing and creative ways to build wealth.
Guest Contact Info:
Intro: "Welcome To The Kandid Shop by: Buss_TE (Anthony Nelson)
Outro: "Union" by Walz
Join me on Wednesday March 30th @ 7:30pm for a very special "live video " kandid chat with Cecil "DC Brain Supreme" Glenn from the 90's hip-hop duo "Tag Team!"
Trade Secrets Part 2: Real Estate Investing & Be Your Own bank!
Kandidly Kristin: Hola podcast nation it's your girl, Kandidly Kristin. And this is the kandid shop live. Tonight. We are doing a part two to our season ending episode trade secrets, where we discuss the foundation for any new investor mindset and financial literacy.
Tonight, we'll be diving into various types of investing real estate insurance and some others joining. Evening for this discussion, our entrepreneur real estate investor business and real estate mentor and coach Asa Patterson. Asa says he's always looking for individuals who are ready to take the red pill.
My second guest is real estate investor and founder of the property management firm. KRS holdings, Inc. Kyle Stephenson, KRS holdings manages over 1300 single family homes and twenty-five hundred multi-family units across the Commonwealth of Virginia. So welcome. Welcome, welcome Asa and Kyle to The Kandid shop.
Yay. Welcome. Welcome, welcome. Well,
Asa Patterson: thank you so much.
Kandidly Kristin: You're so welcome. Thank you for joining me for giving me this this little bit of time out of your day. So investing, like I said, last season in December, I ended the season with trade secrets. Part one, where we talked primarily about, financial literacy mindset.
Uh, we didn't really go deep into the different kind of investment vehicles that there are. So it was one of my most downloaded shows. And so I decided that a trade secret part two might be in. So my first question to both of you, since you both have a real estate background. Oh, first I wanted to read this us census bureau statistic.
The census bureau reports that individual real estate investors own over 74% of rental properties nationwide. Real estate seems to be a solid investment. So my question to both of you and I'll ask Asa first, and then Kyle is real estate as solid and investment, as it seems to be. And if so, what should investors be looking for in a good real estate deal?
Asa Patterson: Oh, that's such a loaded question.
Yes, yes, yes. Yes. It's a solid deal. You have to know your goal for the investment purpose. So if you're looking at single-family house apartments, whatever you're focused on, you have to know the outcome first. And I'm finding that a lot of investors that are starting to get going, uh, don't have hard stops on how much they're willing to pay for the purchase price, how much they're willing to pay for the rehab.
And it can cause some problems. So, it really. Comes on and getting a good foundation and understanding of what you want to do and knowing the goal of why you're doing it.
Kandidly Kristin: Okay. And Kyle, same questions to you.
Kyle Stephenson: So I think that the most important piece in getting going with real estate is not to make a mistake that.
Hurts your personal cashflow. And what I mean by that is you want to make sure in your first deal, that what you pay for and what the rent truly is that you you'll collect, that that will take care of all of the expenses you shouldn't get into anything speculative. So a lot of people will get into deals right now, where they go, well, you know, I'm buying it for, you know, a hundred thousand and it'll be worth
$200,000 and a few years in the meantime I got to feed the thing. That's not, that's not the way to do it. So I, I think it's the most incredible investment vehicle in the world, or at least in the United States. I think that it allows individuals that don't have an obscene amount of money to get rolling and really to generate wealth, like no other investment vehicle, but you got do it the right way.
Kandidly Kristin: Got it! Now here's my follow-up question for my own personal edification is land buying land, a better investment than real estate or just different. Now, when I ask questions like that, anybody can jump in.
Kyle Stephenson: Perfect. So I would say this not for your first investment, because land. The benefits of owning real estate, really don't apply the land itself.
And so, you know, my, my, you know, I, I think you start off. With a basic, you know, maybe single family home. Again, it really depends on your situation, but, but if you, if you're, if you're not a risk taker on land, land can create obscene returns, but it's, it's something that you're either going to have to be in the path
of progression and you hold on to it, for 5, 10, 15, 20 years, and then someone buys it and develops it, or you have development experience. And those are just obscene returns, but I, you know, I think about high risk, high return. So I, I think it's a great opportunity. But, but it's really not for someone.
I think that just gets into it. That's my personalopinion.
Kandidly Kristin: Okay. And Asa do you agree? Disagree?
Asa Patterson: I agree wholeheartedly. Uh, you know, land is not a cashflow, uh, initially type of product. when you look at, uh, investing in real estate, most people get involved in real estate for the cashflow. It really, once again, are you planning to purchase the land because you know, the growth is coming in that direction, then it is a little speculative.
However, if you know the growth is going there, then you know that you're not gonna make any money on it for the first five, 10 years. So, uh, again, it really depends on what is your intent, for the transaction. and what are you looking to get out of it? But it's, I would prefer a newbie focus on the single family or some type of, uh, asset that's going to have rent that's coming in immediately.
Kandidly Kristin: Got it. Got it. So what would the two of you say is the. The sweet spot in terms of your own money to invest to effectively and realistically enter the real estate market as an investor.
Asa Patterson: Ask the question one more time so I can make sure,
Kandidly Kristin: okay. How much of ,say it's me? How much money should a fledgling real estate investor? Have on hand liquid money to effectively enter the real estate market as an investor.
Asa Patterson: So I'll go first on that. Uh, with me I'm so anal with the numbers. So it's really hard to answer that question because it's such an, I hate the answer.
Well, it depends, you know, when someone says that, but it really does depend on the current situation of the individual,. what is their own risk tolerance? What is their own debt situation? Uh, are the children in college going to college and grammar school? You know, those kinds of things you kind of need to look at?
In my opinion, when you're thinking about getting into real estate. When I first got started in real estate, I didn't have a credit score and then I didn't have a dollar. So I had to come up with creative financing ways to get into real estate deals that did not require that. Again, it really goes back to getting a solid education or having a solid power team around you that will allow you to grow based on where you are. So it's really, I hate that answer that it depends, but it really does depend on the individual and their current financial situation because everyone's is different. And, you know, my risk tolerance may be different than yours and my cashflow goals will be different than yours. You know what I mean?
So it really depends on the situation.
Kandidly Kristin: Okay. And I just want, it's something that you said, you said you had to look for creative financing. Can you just briefly expand on what that means? And if it's something that a new investor should be looking for, should they have their own skin in the game,
Asa Patterson: right? Uh, so a lender's going to require your skin, someone to have skin in the game.
Um, but based on knowledge, it's amazing that when the wealthy, the wealthy don't use their money for anything, because they have the wealth and when you don't need the money, it always comes to you. So creative financing is I started in the, uh, short sale foreclosure arena, a distress property arena where, um, it was either a probate situation.
I dealt with situations where real estate was the problem, and the owner did not have a solution and wanted to dispose of the real estate.
Kandidly Kristin: Got it.
Asa Patterson: So that would be in the pre-foreclosure area, the probate area, the foreclosure area. Uh, those are some niches that I really enjoy operating in because it creates a win for myself because I can pick up a property where there's little competition and it is also able to help out the distressed owner, um, from that asset.
Kandidly Kristin: Got it. Thank you. Thank you for that answer. And Kyle, back to the original question about money and I'm sure your answer's probably going be you, cause I'm sure everything is dependent on an individual's particular circumstance, but if you had to, to say how much of your own money you should have saved to start investing, what would it be?
Kyle Stephenson: Wow. I'm really enjoying this. It's funny. Some of the same, the same comments I have, so, oh, so I, I do think it depends on your situation. One of the comments I will also say, though, is. If you're not only your risk tolerance, but I would say your, um, I mean your age, if you are, you are 21 years old, 22 years old.
Well, the one thing that the beauty of real estate, right, is this compounding appreciation, compounding wealth effect, a compounding interest. Right. All right. And so when you're young, you have time on your side. So even if you screw something up,
Time, as long as it's not that bad time, will, will, fix that problem.
Time will heal that wound. So, um, I would say that that's also pretty important. So when you're younger, you can take a little bit more risk because time can fix it. You can buy a property and maybe it goes a little bit sideways and you, you thought you'd make $500 a month and you're making $50 a month.
And, you know, you'll, you'll eventually, you know, get out of. But, but I would say again, I would dip my toe in the water, which means blue collar, three bedroom, one bath, one and a half bath, brick rancher, you know, not in, the, the highest areas or, and not in the lowest areas. And, and, and, and that's, that's a great, solid first time investment.
So whatever that looks like. Um, that that would be my, probably that would be my recommendation. That's kinda how I got started.
Kandidly Kristin: Okay. All right. So each of you in turn, could you explain to my listeners the different types of real estate investments that you can become involved in and which you personally feel well Kyle you kind of gave your answer are best for newer investors.
Asa Patterson: Okay. Um, so what type of real estate is the best for new investors?
Kandidly Kristin: Yeah. And what are the different kinds of real estate investment deals you can get into and which are best or better for new investors?
Asa Patterson: So I'll put it in categories, a new investor with little money and a lot of time and would be wholesaling and the purpose of a wholesaler is to find investors that are actively buying and take their order. So I like to say a wholesaler is a waiter or waitress and their job is to find out who's buying and what they're buying and go find it. That way they're partnering. It, doesn't require any of their money.
It requires a lot of their time, in the beginning. And you know, that's just one way, uh, there all the learning curve is kind of steep on all of the strategies, but that's the first one. Wholesaling. If you have a little time, if you have a little credit and a little money, Like there was just mentioned, you would look into a bread and butter.
What I like to say, a bread and butter neighborhood, whereas working class, the median income neighborhood, where the crime is lower, the better schools, uh, where you can get into that kind of neighborhood. And then you can buy something using your cash and your credit to rent. Those would be the first two, depending on if someone has good credit and some cash or no credit and no cash would be those first strategies.
Kandidly Kristin: Okay. Thank you for that. And Kyle.
Kyle Stephenson: All right.
So I'll, I'll, I'll talk about it. And it kind of a continuum fashion of what, what I think you start off with. Is that again, the, the, the single family home. I think it's an incredible investment residential property. Okay. Where there's always a need for housing.
Always a need for housing. There may or may not be a need for offices or retail space. There's always a need for housing. So I like that is the starting the jump off point. Now what I get really excited about. With single-family homes is you will have times where people want to own the home and you know that it's a greater time to own meaning an owner occupant, as opposed to renting that time you get what, what I call a disproportionate.
level of appreciation because people either financially there's, there's more excitement around ownership and you can get a tremendous amount of wealth or equity when those homes take off. Very similar to the times that we're in right now, where people want to own a home and live in a home. Okay.
Right now at that point, the investor can sell to what I would consider the next continuum for residential would be multi-family and they could either sell and buy. Um, let's say a duplex or a quad, or, you know, a 12 unit building. Those properties tend to throw off more cash. So it's not just wealth, okay. Or equity, but cash spendable cash.
Um, and to 10 31 or to trade into that is a concept I'd encourage listeners to just investigate, because what you can do is you can. Defer your tax or your, your capital gains liability. And that's what the people who really accelerate their wealth and become rich from real estate. They all 10 30 when they trade up.
Okay. And then at that point you can continue to trade up into bigger and bigger multi-families you could trade into it. 100 or 200 unit community, and that would allow you to generate even more cash and again, deferring your tax liability and you don't need a lot of money. You need time on your side, meaning it doesn't happen over night, but the individual that maybe had 10 or $20,000 and they were in their twenties.
Could potentially own a community that is $10 million, 20 years down the line, just from leverage compound interest trading and just, following that day to day, exercise of collecting rent, making repairs and letting the economy lift up the assets. So that's so, so you have residential.
The small, multi to large communities, you know, there there's industrial real estate, there's commercial, there's retail. Those are I, you know, I have not for the most part invested on that side, but there are people who like that stuff, because once you get a tenant in, they may stay for 10, 20 years. It's a little bit less lifting, but the time of vacancy on those communities or the communities vacancy on those properties can be very uncomfortable. And you just, you, you need, some liquidity to really play in that sandbox. So I think residential is, is the better, you know, continuum to, to, to play in a better sandbox.
Kandidly Kristin: Okay. So I think you kind of answered what my next question was going to be, which is. Should an investor be looking to fix and flip or hold and rent. So I think you kind of answered that unless you want to expand
Kyle Stephenson: I'd love to to expand. I'd love to expand all that. I love to explain it. Let me, let me see. I've been doing this for 30 some years.
I think the buy and hold strategy, it's a, it's a slower pace. I have not been able to really fix and flip and make a gazillion dollars the way everybody else says that they do. And I've been doing this a long time. Now I tell you who can make some money on fixing and flipping the bank, you know, hard money lender.
You know, they, they, they get to do that, but I think it's a lot of risk to say, I'm going to buy a $200,000 home, put a hundred thousand dollars in it. And sell it and try to make 20 or $30,000 now, you know, I hear stories, oh, I made a hundred grand or I made it, I, those are the anomalies. That that's my opinion.
So I'm not a fixer flipper, but there may be people's. Oh, that's. And that's why, if you, if you're trying to use some things like that and Asa, talk about wholesaling. You're trying to make some, some quicker cash. I think that's more of an avenue than flip, uh, fixing and flipping. That's my opinion. Asa may have another answer.
They have the secret I don't.
Kandidly Kristin: Asa do you have the secret?
Asa Patterson: I do have the secret and it is to stay away from fix and flipping because costs are going up so much. Yeah, you have the labor, you have the increased, costs on, um, you know, just different items. The, the drywall, I mean, it's just so much more costs involved with the fix and flip today, and, you know, the, the news and everywhere there is a shortage of houses available for homeowners to buy. So that reduces the number of houses for investors to buy. And, if a house comes on the market here in Chicago, it's bid up, not only are homeowners bidding on the property who wants to move into it and live in it. And they're not interested in making money on it. You have other investors that are attempting to bid on that same property.
And in today's market, that is not the move. In my opinion. I agree with you, Kyle. you're not going to have the home runs that people had years ago. and that's mainly because the market is so flooded with other investors,
Kandidly Kristin: right. Okay, so no fix and flip it, despite what TV says and that's, that's
Asa Patterson: just, you know, you can, you can put your toe in the water, but just be careful cause there are sharks out there.
Kandidly Kristin: Gotcha. Gotcha. So before we move into some other investment vehicles, my last question is what is the realistic, honest ROI return on investment that an investor can expect from a real estate investment?
Asa Patterson: Whoa that's a tough question. I think Kyle you may have a better answer you have property management over there.
You may have a more solid answer from your clients.
Kyle Stephenson: So we also bought buy and own, and we've done partnerships and, just, you know, you call syndication. So. We pretty heavy duty into, into, buying and owning and renting as well. And so my comment on that is, so there are two pieces that I think people should look at this is where, where a lot of investors get hung up. there's the cash on cash return. So let's say that I invest $10,000 in something. And at the end of the year, you know, I have a thousand dollars left over from the investment. Okay. You finance it, but all your mortgage, your expenses, everything, and the a thousand dollars left.
So that would be a 10% return cash on cash. That's pretty flipping good. Right? That's pretty good. The other piece though, is you're, you're paying down principal. If you have an amortizing loan people, don't take a look at that. I, you know, I also really look at cashflow. I look at principal curtailment.
All right. So the reduction of, your note and appreciation, and, and I look at all three of those and I combine them and I actually look at that every single year. And so that number is going to be, you know, north of 10%, it's a combination of equity. Plus cash.
There's a term that I would recommend that listeners look at, which is also internal rate of return. And you know what that is, is let's say my cash. what I'm getting on an annual basis. And then what I sell it for and put in my pocket, you know, that number, if you do it right, should be.
No, let's say 15% somebody who can get an internal rate of return of 15% it's at that's pretty good. So trying to not get too much into the weeds, this is why I think that real estate is one of the best investments because that clearly outperforms anything. I shouldn't say anything, but that outperforms a lot of other investment vehicles.
And, so that, that's what I would say. you should expect, I mean, you know, maybe it's a little bit lower than that. Now, if you can't get those types of returns, maybe you don't dip your toe into the market, unless you're willing to, let's say. If 5% and a 10% internal rate of return.
But, but I, I would say, think about your cash and then, kind of when you sell it, what that total return is going to be.
Kandidly Kristin: Got it.
All right. And all of this is going to be in the show notes guys. So pivoting away from real estate for a little bit. Asa I wanted to talk to you about insurance. And how investors can utilize insurance in their portfolios as a means to diversify or talk to me about it.
Asa Patterson: Insurance allows you to double dip and triple dip. So I was going to explain how I use my credit cards. So I'll use my credit cards and I'll order checks from the credit card company to pay my bills. Instead of paying my bills from my checking account, I'll pay my bills from my credit card. Once the credit card check clears with my home, my car, the utilities I'll then pay from my personal checking account to my credit card.
But why would I do that? It allows me to get those points. That the credit card company offers. So let's just say I'm spending a thousand dollars paying bills worth a thousand dollars with my credit card. And those points are a 3% bonus cash back, right? Four times the points in, in the store of the credit card.
So now I was going to spend a thousand dollars anyway. So why not allow it to double dip? So now I will spend that thousand dollars pay my bills and get the credit on the credit card for those bills. And then I will pay off my credit card. Let it sink a little bit. and that way at the end of the year, typically Christmas time birthdays and things like that.
I have racked up enough points, with my credit cards. where I don't have to spend my own cash for presents. Okay. Let that sink in. So I now use that same principle with insurance. You're able to be your own bank. So, uh, as you, accumulate funds, instead of having it sit in a chase bank or, a Wells Fargo or BMO, you park your money into your insuranc, I don't want to get into details, but your cash value insurance policy.
And it just sits there Whenever I want to borrow money for a deal. Even if it's a thousand dollars, $2,000 is escrow on the down payment, on the purchase. I borrow the money out of my own bank. And when I do that, I get credit for the, the loan that I get from my own bank. And then when I pay it back to my own bank, as if I would a lender, I pay it back to myself with interest.
Kandidly Kristin: Now Asa, this is, this can be done with whole life insurance policies, not term, because do terms have cash value.
Asa Patterson: Awesome question. Uh, no, they don't, uh, it's typically done with whole life, but there's also another, a new kid on the block I like to say is, uh, at index universal life. they're both cash value policies, and, they allow an internal rate of return on the policy so they can be used with whole life and an index universal life.
Kandidly Kristin: Interesting. So my next question was be your own bank. What does that mean? But she just explained it to me. I had somebody in the comments say, yes, I'm gonna do that. And the question is using a credit union or bank better
Asa Patterson: So credit unions are phenomenal because they are communal, typically when you're dealing with a community bank, the branch manager has lending capabilities in the branch.
For example, if you're a business owner and you want to borrow $10,000 and you've been with that credit union for a while, or you can even be a new. Uh, depositor, the credit union has the ability to make a decision in the branch without having to go outside to a committee. So it's, it's phenomenal to get involved with the credit union and introduce yourself to people and interview the VP of lending or the manager of lending there to begin developing the relationship.
But yes, I love dealing with credit unions.
Kandidly Kristin: Okay. So You're focus primarily is on teaching people how to use the money they already have in a unique and special way. I think I got that from your website or your bio, but is this the way to use that money or are there other little tips and, trade secrets that my listeners can apply.
And then I want to ask you a question about using the credit cards to pay the bills and then pay in the credit card,
Asa Patterson: but, okay. So, um, Everything, you know, to be successful, you have to have discipline those that either have it already or developing the muscle for discipline. Um, you know, you can begin to build that muscle tax time is right here.
People are getting ready to receive their tax return. What are they going to do with that money? Typically, they're going to blow it on something that has no monetary value after they purchase it. So it will just be, you know, began to think, uh, thinking in advance, what do they want? Five years from now. So it's just those little things and you get a tax return, spend half of it, blow half of it and take half of it and put it in your own bank.
I'll put it in the credit union, discipline yourself a little bit to see a different, financial future. I want to kind of touch on something previously. My business partner, her name is Sandra Noble. She, uh, has a, insurance policy that she was funding. she had been funding it for six years.
Kandidly Kristin: Okay.
Asa Patterson: Uh, and, at one time she stopped funding it for almost a year, but the way the policy is structured, it still survived.
And when she found a real estate property that you want to purchase, she was able to borrow the money from her own insurance policy to buy the property. So that's just an example of. Being consistent being regimented and continue to put money away. and some insurance policies are flexible enough where you can miss a payment, skip a payment, pay, pay, skip pay, and it still has value in it to reach a financial goal.
Kandidly Kristin: So how has cash value determined? Is it based on. Your premiums every month. A portion of that is at face value.
Asa Patterson: Yes. Awesome questions. So when I tell it, talk to people about it, when they ask that question is three things that would determine how your money will compound, the timeframe that you have to invest before you say you want to retire the amount of money that you're putting aside.
before you say retire, and is it in a taxable environment or tax-free, the cash value grows in accordance with, and I'm going to go into the deep end a little bit, but it's regulated by the IRS. So there's a certain amount of cash value, a ratio in proportion to the death benefit. so for a client who just wants to.
Um, have a death benefit for their, family when they pass on their cash value is going to be less because their focus is passing on the death benefit when they pass away.
Kandidly Kristin: Okay.
Asa Patterson: Versus an investor who wants to use the policy to flow money in and out, and to use it for building up cash value. Uh, their death benefit will be a little smaller because the death benefit, you know, there's a cost of insurance associated with it.
So it really depends on, um, again, I'm, I'm big on finding out what are your goals? What do you want to accomplish? And then we build a program around that.
Kandidly Kristin: Got it. So should young people be getting life insurance policies, people in their twenties?
Asa Patterson: in my opinion, most definitely because. with, COVID and all these things that are going around.
We don't know how our health is going to be from one day to the next and an individual may be insurable today, but next month may not be insurable. The younger you are, again with those three things and the younger you are, you have much more time. A 18 year old can put a hundred dollars away in their cash value policy and have millions when they hit retirement age.
Because of the compounding of the money and because the cheaper cost of insurance starting at that age.
Kandidly Kristin: Right.
I agree. I think every, you know, anybody, especially if you have children, whatever your age, a lot of people insure their children and they should be insuring themselves. Now a question I had about credit cards.
When you pay the bills with your credit card. Okay. Should you wait for the bill to come in or pay it? right away?.
Asa Patterson: Oh, yeah, you pay it right away because the money is in your account. So once it clears, you want to pay it right away, because that is it's a game you play with the credit cards companies, because as they see you making the purchase and paying it off off, making the purchase of paying it off, well, the credit card companies, their game is they want you to make the purchase and pay the minimum.
Kandidly Kristin: Right.
Asa Patterson: So a lot of times the credit card companies will then give you a credit line increase. So now they want you to make a payment or make a charge, leave it there because you have more money available. Right. So it's, it's very important to build the muscle, to pay it off as soon as it clears.
Kandidly Kristin: Got it. Because I guess the concern and I'm voicing what most people's concern would be, is, well, I don't want to pay all that interest and yada, yada, yada. So I guess the timing of making the payment would help with the interest part.
Asa Patterson: Well, uh, yes. And when you make the payment right away, depending on the credit card statement, closing date, that's when they calculate the interest that you're going to pay but typically you're doing all that before that happens. So it's just borrowing their money and paying their money back before in any, uh, interest is really a tax on the balance.
Kandidly Kristin: Got it.
Asa Patterson: So the other thing is you can just start with, if it's, you know, you don't, a lot of people don't have any room on their credit card.
Okay. We'll pay your cable bill. If that's $75, $150, pay that on your credit card and then pay it off, you know, so you can still do it. People can still do that. That's when I started doing it, you know, there was very little room on the card, so, um, but once you start seeing the benefits of it, you'll be blown away.
Kandidly Kristin: Okay. So say somebody has $2,500 balance right now on their credit card and they want to start implementing this. Do they pay. The 2,500 that they have on there off, and then start with a zero balance or
Asa Patterson: no. So what is the credit limit on that card?
Kandidly Kristin: say it's 3000, so they've got $500 wiggle room.
Asa Patterson: So I would pay, um, here in Illinois, his COM-ED or, you know, NIPSCO or whatever your power bill is, or your gas bill or your water bill pay those things because you can still, you know, they're under 500 bucks pay those, um, through the card, call the credit card company to get the checks, pay that, and then, um, immediately pay the credit card off again, that new usage.
We'll create the, the, um, the situation where the credit card company after about six months, we'll give you a credit line increase.
Kandidly Kristin: Okay. So then work into paying down that original 25k, or you're just going to stay in the, what you have left range.
Asa Patterson: Yeah. Well, you know, that again, depends on the individual.
Are they disciplined enough to begin to pay that down? But when the credit card company starts doing the credit line increases, let's say on that scenario, there is a utilization, meaning they're using, let's say 90% of the balance of the card. Okay. So that damages your credit score. Yes. But when you go from 3000 to 4,000, now your utilization went from 90% down to 68%.
Kandidly Kristin: Okay,
Asa Patterson: so now your credit score goes up.
Kandidly Kristin: Got it. Interesting. Very interesting. Never thought about insurance or using credit cards in that way to kind of leverage your own money. I guess that's basically what it is. And you got to have, you actually got to have the money to pay the bill, with the credit card.
Asa Patterson: And that's assuming, I guess, you know, what happens when you assume that, you know, you were gonna pay the power bill or the gas bill or the car note
Kandidly Kristin: anyway. Okay. Well, that's interesting. Well, I wanted to open the lines up to anybody that's listening. That's on the line that had any questions about real estate, leveraging your own money and being your own bank via credit cards and insurance. Anybody going once going twice. Okay. All right. At this point I'd like to, oh, of course, Dorian.
It's my son. He's late for everything. What's the best way to leverage debt? Or can you?
Asa Patterson: I would need a little more to understand. The question, Kyle, would you have a shot at that question as it is?
Kyle Stephenson: So let's talk about debt, right? There's good debt and there's bad debt. So I think the thing that allows us so an investment property that generates cash that can pay that debt is good debt because that debt allows you to.
Wait for the property to appreciate during inflationary times you absolutely crush it. If you have, let's say again, not to get too deep, but if I have a loan, That I took out in the past couple of years, and now we have all this inflation, we've got gas prices going through the roof. We got rents going through the roof.
Guess what? Doesn't change that debt. And so debt allows, I think it's the equalizer. I get really excited about it because it allows people that don't have a tremendous amount of liquidity to become wealthy.. You just have to make sure that you are generating cash to pay that debt. So bad debt is when you not, not necessarily the, the, the credit card, if you are going to pay it off every month and you're using it to get points or you're using it because you get a 1.5 or 2.5% discount or cash back, that's not bad debt.
If you have debt that you can't pay back and it's at 18%, that bank gets the, do what they love to do, which is generate obscene amounts of return. Yeah. Also you're off of your debt, right? So, I think that debt is the equalizer. It is the thing that allows individuals that don't have tremendous liquidity don't have a ton of cash to become wealthy.
So I'm, I'm a big fan of debt. I did it. I am a big fan of debt, big fan of debt!.
Kandidly Kristin: That's so interesting. So bad debt is.
Kyle Stephenson: Bad debt would be any debt. So, so here's an a, and there's a great book. I mean, it's been around forever that, you know, rich dad, poor dad. I'm not, I'm not saying the leverage your, your life.
Right. Okay. But, if you, so, so if you bought your own home, okay. And you have this mortgage payment on your home, but it's not generating, you know, there's no cash that gets generated from you living in that house. You don't want to overdo it because that's really not great debt. It would be a great example in business, right?
Let's say we know, we know that, um, let's say cars right now are really expensive. And it may, I'm not saying to do this, but if you had known this last year, you would have bought a car shoot don't drive it. Okay. And you could have made $10,000 on that car, now that you would've had to pay some, some note payment, but.
That would be good debt, right? I mean, and again, I'm, I'm, that's an extreme situation, but, but if you have cash that is paying that debt service, That is very, very, it can be your friend. You, you have to make sure that you are a steward of that debt. Okay. That you respect it. All right.
That you don't allow things to go sideways, but debt or leverage allows you to make exponential returns. You just have to respect it.
Kandidly Kristin: Wow. So I have a question. So say you're a homeowner, you're an owner occupant, and you're looking to dip your toe into investing in another piece of property. You know, that you don't live in that you rent.
How do you make that happen and not kill yourself?
Kyle Stephenson: Right. So we, I think we talked a little, so the, the, the one piece, right, is that I think you can use something called a home equity loan or HELOC,. You'll hear that. Now what's a little bit scary about HELOC's right now is that we are in inflationary times and HELOC's are adjustable.
And so those rates are going to go up. Okay. So that, that gets me a little bit nervous. Right. But if you're able to take out a home equity loan and you, you have a piece of property that you know is going to rent for, let's say a thousand dollars a month, like, you know it, you can get a 700 FICA score, tenant,.
You know, they're going to make, you know, a certain amount a month and three times the rent, you can use that all right. To leverage and generate more wealth. you just want to make sure again, let's say that you have the opportunity to borrow $50,000 on your hilar. Maybe you borrow 25, do not put yourself in that situation where if things go sideways, You got big problems.
You want to make sure you have a cushion
Kandidly Kristin: and Asa any comment to that.
Asa Patterson: Yes. Uh, you mentioned Robert Kiyosaki and one of my favorite books is rich dad, poor dad. You know, he says an asset, you know, we had to go back to what are, what's the definition of an asset? And he defined an asset as an asset is something that puts money into your pocket.
I, and he's big on understanding. Uh, an income statement and, you know, we're all taught and told that a bank buying a house. That's your biggest asset? Well, whose asset is it? What if you go with the definition that Robert says an asset is something that puts money into your pocket, buying a home is the bank's asset because it's putting money into their pocket.
Yes. So to, to kind of go with what Kyle was saying is if you're gonna. Use the equity in your home to make a purchase. You have to make sure you're really tight on the numbers and look to refinance out of that debt to pay your home equity line back. I'm really big on using money that you have to make a transaction, then figure out a way before you do it to refinance that money and get your money back and put it back where it was.
that could really be a great strategy for someone new is you made that purchase. And then because you now have equity in it because you use the equity from your home to make that transaction, that's an easier loan for the bank to do because you already own it. It has cash flow coming in. Uh, and it's a great possibility for you to be able to pay yourself back and put your money back.
And now you're working with the bank's money and the cash flow and the return on it. Really go up much higher because your money is out of the deal.
Kandidly Kristin: Got it. Thank you. Wow. This is… you guys, seemingly could talk about this all night but unfortunately we don't have all night, so there may be a trade secrets, part three.
This is a, um, it's a topic, especially millennials. My son I said is in the room. He's 26. He brought his first home a few years ago for himself and his new family. And he is looking to dip his toe into some real estate investments and so forth. So I appreciate you guys for being here. And as we come to the end of our hour together, I would like each of you in turn to speak directly to my listeners who are thinking about considering diversifying their maybe they have a stock portfolio or something like that. And they're really, really thinking heavily about real estate and other means to build legacy wealth, speak to them and give them your last thoughts and best piece of advice.
And either one of you can go. first.
Kyle Stephenson: Asa you want to go first?
Asa Patterson: I'm sorry. I was muted. I would just really, you to. Getting the education, you know, um, the reason why I got into all of this is because when I first got married, my wife and I knew we wanted to retire with wealth. So we started asking and I, we went on interviewing advisors and the answers they would give me either they didn't know, or they just didn't want to share all the information.
I just felt that they were holding back. And the more educated you become, the better, you can have a conversation with someone about what they're talking to you about because now allows you to build on what you know of what you heard. So I really, I would get the education. You know, my, my firm premiere 72 is really big on educating and getting people in a position where they're learning while they're earning. So it's really important to get that base and have an idea of where you want it. when you know where you want to go, then it's much easier for me to help you fill in the gaps to get you there. Uh, so I just think it's important to really know where you want to go and get the education.
Kandidly Kristin: Thank you. Thank you for that. And Kyle
Kyle Stephenson: Financial literacy will set you free. you need, I, it's not everybody's subject. Okay. But I encourage everybody. To really understand the financial world. It will allow anybody to become a millionaire over time and you just really need to just understand financial literacy.
And it's a shame that we don't teach it really in the schools. But, but it is, it's critical to get that cause that will set you free. And so that was, that's what I would urge everyone to do. Our mission is to make a positive difference in individuals, lives, and that's really through, you know, generation of, of wealth.
So, so again, just really absorb that and I just wish everyone, the best of luck.
Kandidly Kristin: Thank you, Kyle. Thank you. Asa thank you both so much for joining me. So we are sadly at the end of our time, but again, huge, huge, huge. Thank you. Thank you. Thank you to Mr. Asa Patterson and Mr. Kyle Stephenson for coming on, sharing your time, your knowledge, your expertise, and your tips with me and my listeners.
I appreciate you both for that so much. All right. So as always guys, Kyle and Asa information contact info will be in the show notes, be sure to tune in next week, next week, I'm doing a thing I'm having a, I don't really do. Video is not my zone of genius, but I am doing a very special live video, kandid chat with one half of and
for people over 30, you should know who I'm talking about. Uh, one half of the nineties hip hop duo tag team, they had the song “Whoomp, There It Is”, Cecil Glenn, who is half of the tag team is going to be on the show with me next Wednesday, March 30th at seven 30. And I hope you guys stop by and join me for that.
You get to see my smiling face and hear my voice, but until then, guys, I want you all to Keep it. safe. Keep it healthy and Keep it Kandid.
A brief introduction about myself. I have been investing in residential real estate since 1990. I own approximately 300 units individually and an additional 800 units in various syndications. The portfolio is comprised of single-family homes, small apartment communities, and large apartment communities.
I also own a property management firm called KRS Holdings, Inc. I was featured in a chapter of the book “Successful Property Managers, Advice and Winning Strategies from Industry Leaders” by Michael Levy. Besides being a licensed Realtor, I’m also a member of the National Association of Residential Property Managers as well as the Richmond Apartment Owners Association.
I never knew what I wanted to be when I grew up. All I knew is I loved being a Marine and I wanted to have some kind of wealth.
Then I had my lemonade moment. I was healing from my broken neck that I suffered while on active duty and was drawn to 2 books that changed my life. The first was Rich Dad Poor Dad by Robert Kiyosaki and the second was Why Should White Guys Have All the Fun which is the inspiring story of Reginald Lewis: lawyer, Wall Street wizard, philanthropist -- and at that time the wealthiest black man in American history. These books completely changed my perspective on wealth, wealth accumulation and what was possible.
Since that time, I’ve done a lot: real estate investing, public speaking for Rich Dad Education with Robert Kiyosaki, T Harv Eker, Christopher Howard, George Antone, Boys and Girls Club of America, and many more across the United States.
Today, I'm 100% focused on educating the world on the power of using the money they already have in a unique and special way.
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