Steve D. Valentine argues older investors should skip rental properties and lend money directly against real estate instead. A $250,000 deed-of-trust loan generates $1,500 monthly at 7% interest with no tenant headaches, versus a $300,000 rental yielding $1,480 after expenses and repair costs. You become the bank, earning fixed returns without landlord responsibilities.
Chapters
Stop buying rental properties and start doing this instead. I've had a lot of conversations with my older clients. Buying rental properties doesn't appeal to them at this age because tenant issues, repair issues, you just don't want to deal with those things. So I want to show you the difference between investing in deed of trust investing where you lend money to an individual based on the asset. Now you're the bank rather than the owner versus in order to earn money, you're liable for taxes, insurance, keeping it, the repairs and all the other things. I want to have something that works and have a cash flow asset that I own free and clear. I've had a lot of conversations with my older clients, let's call them the baby boomers, and buying rental properties doesn't appeal to them at this age because of a couple of different reasons. One, tenant issues, repair issues, just being grumpy and older. You just don't want to deal with those things. And cash on cash return because the prices isn't always the best. So I want to show you two different ways, the difference between investing in deed of trust investing, which deed of trust investing is where you lend money to an individual based on the asset. So it's private money. It's secured by deed of trust as a first mortgage and it's secured there, right? So now you're the bank rather than the owner versus if you bought it over here as a rental, you're the owner and you're liable for taxes, insurance, keeping it, in order to earn money, you have to keep the tenant full or have the property manager and the repairs and all the other things. So let me just give you a simple, quick breakdown, right? So if you invest with me in deed of trust and I buy this house right here from my client, which by the way, this is how we collaborate and partner together on this. This client wanted out of this house really simply, easy. So we have a price tag that we agreed to pay for them via hard money or private money. That's where you come in. And so I'm going to buy it for $250,000 at 7% interest, which is what I'm paying you. And that creates $17,500 a year in income or $1,500 a month in cash flow with no, no hitches, no repairs, no tenant calls, no anything. And it's secured by the same property versus you owning it. Now, the only thing you miss out on here is tax benefits, right? It's, you know, you have depreciation, you have tax benefits., but it doesn't always outweigh the problems or the depreciation. Now you come down here and you're like, okay, I want to buy it as a rental. Now, why I would buy rentals is because my income is higher and I want the depreciation and I want to have something that works while I'm working and still create an income to eventually pay this off and have a cash flow asset that I own free and clear. So different timing in life, but at age 60, if you're buying a $300,000 rental property, you're getting $22,800 in annual gross income, and after 35%, which is probably low in expenses for taxes, insurance, and repairs, you net $1,482 a month in cash flow. Now you have some other bonuses with depreciation and other things, but this cash flow is subject to change based on the repairs in this property. So if an AC goes out here, this $1,482 a month, which is almost equal to $1,750, just went down by $6,000.. And then when you take your return, your cash-on-cash return in this is less than 3% plus your depreciation, your tax benefits. So if I'm younger, I want to own these so that I can get them paid off and, and have a couple of them until they're free and clear, and then maybe add to them. But if I'm an older generation, I'm going to invest the cash and not buy rentals because this is an easier paycheck with less frustrations, less irritation, and a simple way to create cash flow, which, by the way, is above— almost double what a money market is. And it's secured by real estate, and it doesn't have the volatility of up and down in the stock market. So if you're looking for a simple private deed of trust program, we'd love to talk to you about it. So this is how we do it. But I also want to share with you, this is how we've been doing it for over a decade. You see, I learned that this is relationship capital. You see, I meet people that want to have an impact with their investment. And so we solve problems. This one's a pretty clean house, but we have solved problems with foreclosure, with death, with inheritance, and your money actually gets invested in having an impact on the community. Because on top of that, we're also employing crews that are bringing houses up in value. We're moving money around. And that's what you're a part of. And the other cool part is, is like, you're not only investing here, but you can come into our office and talk to us, hang out with us. We're looking for relationship capital, not investors, because I believe that this is the way to grow wealth through community and relationship. So if it's something you're interested in or know more of, click the link below, fill out the form, say you want a strategy, and let's just have a chat about what you're doing with your money and where you can have a greater impact with a greater return on it.
