How can I replace $70,000 a year in annual income with rental properties that is the subject of today’s video hi everyone I’m Clayton Morris the president of Morris invest let’s dive into it so how do we replace seventy thousand dollars a year in annual income with passive income with rental property income from tenants every month providing cash flow from the properties that we own you might think that that sounds like a tall order but it’s not and I’m going to show you how simple it can be to actually replace that annual income you know a little story about me that’s in fact how I got started I was frustrated sitting down with my wife one night I said we were frustrated with our bills and I said how come at the end of the month where we still have more bills to pay and we don’t have enough paycheck to cover it aren’t we doing well what are we doing wrong the problem was that we weren’t putting the money to work for us to start creating cash flow in our lives and creating passive income so I put together and it was really the foundation of my freedom cheat sheet it’s the number that changed everything for me by the way that link you can download a free pdf it’s like three pages long sit down with your husband or wife and go through it totally free the link is right below this video and it’ll walk you through step by step with some numbers and figures on exactly how to figure out how many houses it will take for you to recover that annual income but I want to tackle the $70,000 question specifically most of the houses that I buy and that my company rehabs and sells are in that forty to forty five thousand dollar range okay single family homes two bedroom one bath three bedroom one bath and some duplexes okay duplexes or you know door on each side typically and two bedrooms on each side or three bedrooms on each side those are the types of properties that I buy now I buy them low and I fix them up and I place a great tenant in the property each of those properties will cashflow about $700 let’s just say for round number $700 okay now think about how much is $70,000 a year how much are you probably making per week well let’s bring out the calculator so $70,000 a year let’s divide that by 52 weeks that’s about thirteen hundred and forty six dollars a week that you are earning from your paycheck okay thirteen hundred and forty six dollars a week so now let’s figure out how many houses it would take us to replace seventy thousand dollars a year in passive income seventy thousand dollars right it’s a simple formula if each of our houses is bringing in seven hundred dollars a month that’s a simple formula right seven hundred times 12 gives us $8,400 okay now let’s take that 70 thousand dollars and let’s divide it by eighty four hundred that’s eight houses that is eight point three properties eight houses bringing in seven hundred dollars a month now imagine if you’re buying a forty thousand dollar house if you had to bring a little bit of money to put down as a down payment or deposit you were able to reach out and get private financing or seller financing on a property then you’re able to accrue these properties very quickly now some of the things I didn’t talk about in this video and I can dive a little deeper now that we always want to take out money for for vacancy and repairs on our numbers right so that eighty four hundred dollars a year let’s multiply that now times point six so we’re gonna remove forty percent for vacancy repairs and expenses this is just to be totally conservative with your numbers so let’s take that eighty four hundred dollars and let’s multiply that times point six so we’re bringing in about five thousand and forty dollars per property per year okay so now let’s take that five thousand and divide it by seventy thousand so this will be a totally conservative number but this will help us really make sure that we’re totally covered should something go wrong maybe we have a vacancy for a few weeks or a month or two in one of our properties this will take in that into account so seventy thousand dollars let’s divide that by five thousand forty that gives us thirteen point eight properties so let’s round that up fourteen properties fourteen properties would bring you about seventy thousand dollars a year in net income that would replace that $70,000 paycheck that you’re making every year then in other videos in this series I’m going to go through exactly how to find properties how to acquire properties but just for the sake of this video I wanted you to start to put your mind in a place where you can begin to reverse engineer that number for a lot of people you don’t think that you’re going to be able to create passive income or bring in that much cash every year hogwash I do it hundreds of thousands of other investors out there do it every day they do it exactly the way that I do it some buy residential properties some buy commercial properties it doesn’t matter it can be done that’s what I do I’m Clayton Morris
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Hey, what’s up guys? Kris Krohn here. Yes, it is winter. Yes i’m driving with the top down. It is one of my favorites. I am totally impervious to the cold. But today I want to jam with you in real estate and I want to talk about why 90% of all millionaires make it in real estate. And there’s very, very specific reasons why. and so what I want to do is break it down for you. I really want to give it to you in in like the deeper science than I have in the past. And I think you’re really going to appreciate it. So, check it out. I’m up here at my mountain home. It is snowy, it’s cold. But a super exciting day. You know, as I’ve started this YouTube channel, I’ve been really honing in. What is the information that would create the highest level of value for you? And today, I want to give it to you in one straight shot. How you invest in your 20s, so that when you’re in your 30s, not your 40s, not your 50s, not your 60s. You can really living be living life on your terms.
To me, it doesn’t matter whether you have money, whether you don’t have money. You have good credit, you have bad credit. Frankly, it really doesn’t make much of an impact at all to me. So, here’s what I want to help you understand. There’s a number of strategies when it comes to the world of real estate investing. In fact, there’s 32 main strategies out there. The first thing I need you to understand is that most strategies, they’re not good. You shouldn’t do… There’s tax deedsm there’s flips, there’s a lot of things that are popular.
There’s multifamily. There’s rentals. And I don’t do those things and I don’t think you should do those things. I think you should do what makes the most money that takes the least time in the least effort and has the least risk. Because dude, no one likes to start over, no one likes to lose and when you invest, there is some risk. The reason why I retired at the age of 26 is because I followed a very specific formula. And I want to detail it out very specific for you because there are 3 things that you do need to know about making money in the game of real estate. And if you follow these 3 things it’s gonna be a total game changer for you.
So, let’s head over to the whiteboard and I want to document this for you. Because I want you understand that when you get in the game of real estate, you want each property to be a win. When I found out that you could make 50 to 100 thousand dollars per deal, I got to tell you. That was something that was super exciting for me. Because I realized if I want to make a million dollars, then I just need to be able to count to 10, right? I got 10 finger. So, so much easier than some of the other ways and methodologies are out there. And so I want to ask you how many deals do you need to do before you’d say, “Wow, I’ve made it. I’ve arrived.” And with what I’m about to show you.
I don’t want you to be thinking in terms of like, you know, “I want to be a millionaire so I need a million dollars. I need to do 10 deals.” it’s actually a lot simpler. You don’t need a certain amount of money. What you need is a certain amount of properties producing a certain amount of residual income. You’re not striving for a certain net worth. You’re striving for your real estate to perform in a manner to give you enough residual income that you don’t need to work.
When I say I retired at 26, truth is I didn’t really retire I just became financially independent. And I quit my job and I got to live life on my terms. And it’s because of what I’m about to show you. There are 3 things in particular that you need to be aware of. Every time you do a deal in your backyard and it doesn’t have to take money. Some of these deals take nothing or maybe 1,000 or 3,000 dollars.
Very little. And the first thing that I want you to know is that you should be making around $5,000. just for consummating the deal as in finding $5,000 is what you get paid up. Now, up front is really important because who wants to be in the game of real estate and say, “Hey, I’ll work today but I want to get paid in years.” You need to get paid now. The second thing that’s important is that when I buy single-family homes, I buy them underneath the median. I buy them with my specific system. Which by the way it’s in a book that you can get for free. You can download it. If you click the link or the one that’s popping up on the screen right now, you can get my book for free that will go into deep detail on this. What I want you understand is that you get paid 5 grand up front and then you’re getting 500 on average freedom dollars every single month.
Now, this $500 is really important because if you buy 10 homes and those 10 homes are each paying you 500 a month. 500 a month times 10, that’s $5,000. You might not be able to retire on $5,000. But guess what you can do? You can walk away from a job that’s paying less. And if you figured that out, dude then why not do 20 more why not do 100. Especially when I show you how you don’t need to access your own money to make this happen. The third thing though that you do need to understand is while there is upfront money, this money is along the way.
You just keep on getting it. There’s another kind of money that you get when you sell this home in 2 3, 4 or 5 years. And it’s tens of thousands of dollars. If you’re buying it buildings the median, I’m guessing for all intents and purposes. And I use this as an example sometimes. $30,000. It could be 50,000, it could be 80,000. It could be 20,000. But probably not less. And if you start adding the upfront money, the $6,000 on average that you’re getting every year and this money, you start making 50 to $100,000 on every deal that you do. And my friend, that’s that’s the part of this whole game that I want you to have an understanding for. Is that if you’re getting paid upfront along the way and at the end, then the cool thing is…
And here’s the secret: You can multiply this. You do 2 or 3 or 4 of these deals. And it’s… So your ROI, your return investment is so high that you’re going to start attracting a very special kind of people. These people are called partners. And a partner is an individual that says, “Hey, I’m into my career. But I’ve been saving up some money. I don’t want to learn what you’ve learned. Can we go in 50/50?” And this is when you hit the big time and this is when you can do. Right now, I can do as much real estate as I want. I have a goal of becoming a billionaire. I want to be a billionaire philanthropist the second half of my life. And right now, I’ve got assets growing like crazy.
But I followed the system to get started to recreate my financial independence. And then my partnering system which you’ll also learn about in the book is what has taken me from independence to true financial freedom. Did you know there’s a difference between those 2? Financial independence just means you got out of your job and you’ve replaced it. But financial freedom means that you’re now living the lifestyle that you want. So, living where you want, donating the way that you want, giving to charities the way you want. You know, being able to take the travel and the trips and vacations. It’s a very real byproduct of all the real estate investing that we’re talking about here. So, what I want to do right now is I want to share with you how you can get my book for free. I want to share with you what’s in it and first of all, it’s called Unstoppable.
It’s a brand new book. And it’s different than any my others. Because I took out all the fluff and I Shrunk it really small. I just can grab a drink here by my absolute favorite drink. If you ever come visit me, just bring me a six-pack of apple beer. It’s not beer but I got to tell you it’s really tasty and I know the carbonation is not good for me but… So.. So, here’s the deal on the book. It’s called Unstoppable. And what it does is it documents your custom journey to get a particular realistic game plan to go from nothing to millions.
And here’s what I want you to understand about that: Whether you are… Whether you would say you’re too young or too old, whether you would say I don’t have enough money or I don’t have any money, dude that doesn’t matter. In my matrix of the book, I actually show how all those combinations of people can get in the game of real estate. And dude, it if you come out to my live events which you very well might, you’re going to meet all sorts of people, successful investors that are out there crushing it and doing it.
Right now, the book is free. We’re going to do that for a period. All you got to do is click the link below, get your hands on a copy of the book. And it’ll even come with a consultation if you want. You can talk to remember my team and basically say, “Okay. I’m reading this book. I’m getting my custom game plan. I’m figuring out my next steps.” And having a member of my team contacting you it’s just to make sure you understand the book in its principles. And if you get stuck then we want to finish customizing the process so that you’re completely clear on exact steps you need to do to make your next million or your first million in real estate.
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Joe: Hey, it’s Joe Crump. I’ve got another video here for you. This one is from Karen Smith in Columbus, Indiana. Karen: “Joe, can you explain the millionaire matrix? Does it really work and can you do it without down payments or using your credit?” Joe: Absolutely, it works. The Millionaire Matrix is a structure that I teach that shows people how they can actually make a million dollars in equity and in cash within 2 years by buying just one property per month using no credit and no down payment.
And instead of just me explaining it in this video with a talking head, I’m going to pull up a little power point here and show you exactly how this process works. Joe: I created this little power point to show you what the Millionaire Matrix is and how and why it works. Joe: Before you can understand how it works, you need to understand the principles behind it and why it works. That brings us to the idea of businesses in general. 90% of all of the businesses that start up fail in the first year, whereas 90% of all new franchises succeed. Why is that? Why would franchises succeed and businesses in general, not succeed? And the big answer is — systems. Franchises have step by step systems to show the business owner (the person who’s implementing the tactics in the strategy of the business) how to do each little system in the business.
Joe: Let’s take the ultimate systematization — McDonald’s. If you go to a McDonald’s, everything is done the same at every McDonald’s that you go to because each of their processes is spelled out in a specific system. They have a system for making a Big Mac. They have a button to press when it’s time to flip the burger. They know how many burgers to put on there, they know what order to have with a picture of a hamburger, and how to put it together where it shows you that that’s where the bun goes and that’s where the hamburger goes and that’s where the lettuce goes and that’s where the special sauce goes. And it makes it very easy for people that are not very skilled to put together a hamburger consistently all over the world. Whether it’s here in Indianapolis or whether it’s in Wisconsin or California or Berlin or Paris or Ireland — it doesn’t matter — wherever you go to a McDonald’s, you’re going to get the same burger — it’s going to be put together the same way by the same skill level of people.
Now, McDonald’s has a 200% employee turnover every year. That means that they’re constantly trying to train new people. For them to get that consistency, they have to have a system in place to make that business work. Joe: And that’s what I’ve created in the Push Button Method and the mentor program. I’ve created systems so that I can take new people (people that have never been real estate investors before) and give them a system and say, ‘Step 1, do this. Step 2, do this. Step 3, do this.’ Joe: That takes us to the next question in the process here, which is what types of deals make you money.
You need to understand that as well. In real estate, there’s only two types of deal that’ll make you money. One is properties that you buy substantially under market value, either for cash or as an assignable cash offer. And two is properties that you can buy at market value or below but you can buy them on terms. Now, by terms we’re talking about zero down structures that I teach; subject-to, multi-mortgage, land contract, contract for deed, lease option, assignable cash deals. Those are terms and if you can buy properties on terms like that, then you can make money even if you buy them very close to market value. Joe: That’s going to take us to the next step which is the beginners Millionaire Matrix. Now here’s what we want to do with the Millionaire Matrix and the goal of each system. We want to be able to make $5,000 per deal. We want to be able to do one deal per month. We want to be able to work 10 hours per month. That means hours per week. We want to be able to have $200 residual income per deal.
That residual income I’m talking means every month you’re going to get $200. We want to buy 10% under market value; it doesn’t have to be dramatically under market value because you’re buying on terms, and I’m going to show you why that makes the difference. And you’re going to want to sell it for 10% over market value and I’m going to show you how to do that. Because we’re selling it on terms as well so we can sell it for more than it’s worth. So this is the basic concept for the Millionaire Matrix. Joe: Now let’s take an example deal — how the Millionaire Matrix and an example deal would work within it. Joe: Every deal is going to be a little bit different and you’re going to make a little bit different amount of money on each one, but this is sort of the model that we’re going by. I used the $100,000 as sort of the market value of the property simply because it’s a nice round number.
I know that the market value across the country is all over the place. You should probably go by percentages rather than this but I want to show you, even on a lower end market, that you can still make this kind of money. On a higher end market you’re going to make more money. So let’s start with a lower end market and then you can extrapolate from there. Joe: Let’s say you’ve got a purchase price of $90,000. The market value is $100,000. The financing — you’re not putting any money down, you’re not getting a new loan — you’re buying it subject to the existing loan. Which means that the property is going to be deeded to you and you’re going to take over the payments on the loan — without qualifying on that loan (remember that).
You’re going to sell this property for $110,000 to a new lease option buyer. You’re going to sell it on a one year lease option or maybe a 2-5 year lease option if you choose to do that. At closing you’re going to make $5,000 on the lease option fee at closing of this deal. The equity left after the lease option fee is about $15,000. You’re taking $110,000 sale price, you’re taking $5,000 from that, and that means you’ve got $105,000 that they still owe you for the property. You only owe $90,000 so that means there’s $15,000 in equity. Now the monthly loan payment on this 90,000$ loan that’s there — let’s say its $900 a month and you’re going to lease this property for $1,100 a month. This is an example deal. Joe: Let me also reiterate — you’re buying this property subject to the existing loan. That means that you’re not putting any money down and you’re not qualifying for a loan. They’re deeding you the loan. You have complete control of the property but it’s subject to that loan that’s existing on there.
You’re buying it for a little bit under market value but not that much under market value. You’re selling it for a little more than market value but not that much over market value. You’re selling it on a lease option which the buyer may or may not exercise. You’re getting a lease option fee at closing — you’re making $5,000 at closing. And you’re going to have that equity left in the property, and if they exercise that option, you’re going to make that other $15,000. You’re going to have that loan payment that’s on that existing loan of $900. And you’re going to get a lease income on that property of $1,100. So you’ve got $200 of positive cash flow every month. So that’s sort of the model of this whole thing. Joe: So let’s go to the next frame here. This breaks down to doing one deal per month over the first year. I’m going to show you how to become a millionaire basically over a 2 year period.
Month one — let me bring my little arrow up here — cash at closing, making $5,000, that’s the lease option fee. The $200, remember the difference between the $1,100 and the $900 a month payment so that you made $200 a month on that. Equity payoff this month, you didn’t make anything. It hasn’t paid off. Nobody has exercised their option. Equity buildup — you’ve got $15,000 because you bought that property and there’s $15,000 of equity. Remember the spread — you bought and sold it for $110,000, you got $5,000 and they still owe you $105,000, and there’s a $90,000 mortgage. That leaves $15,000 on there that’s your equity. Joe: And then a tax benefit based on $100,000. This is depreciation. If you take this property and you depreciate it by years, and then you divide that by 12, you’re going to end up with an actual tax savings in your pocket of about $106 based on about a 30% tax bracket. And these are just general numbers here but they’re pretty close.
Joe: Month 2 — you’re going to do the same thing. You’re going to do another property, make another 5 grand, make another $200 a month and so now your monthly residual income is going to go up to $400 a month. You’re not going to get any payoff because the year hasn’t passed yet. You are going to build another $15,000 of equity in the property. And now your monthly tax benefit is going to be $212. Month 3 — $5,000 -same thing – it just goes up every month for the whole year. Let’s go all the way down to the bottom of the year. At the bottom of the year you’ve made $60,000 in cash at closing from just doing these 12 deals. And believe me, I’ve got people that are doing 5 or 6 of these a month on a regular basis because they’ve set up the systems that I’ve given them to do that.
Joe: The next thing is the monthly residual. Just from what’s going on here, you’ve made $15,000 the first year in that; residuals. Equity payoff — nothing’s paid off the first year yet because nobody has exercised their option yet. Equity buildup — you’ve built $180,000 worth of equity in the deal and you’ve made $882 in taxable savings during that first year. So in that first year in the Millionaire Matrix, you’ve made a total amount of cash of about $83,000. You’ve made total equity of about $180,000. So you’ve just made $263,000 in the first year doing only one deal per month. Joe: Now with these deals, if you have 8 or 10 hours of work into these deals, that’s a lot of time in these deals. So remember there’s a startup learning curve. And there’s going to be the time that it takes to set this process up, to get this system going; all of that stuff. But the actual time of the deals is very, very low. And once you learn how to do it and once you get it going, it’s going to be easy to keep it going.
Joe: So let’s go to year two, and look at the second year. Things start to change dramatically in year two, if you’re going by this model. And we have different models that we go by. You don’t have to go by this one. But I’m just taking a simple model and how it can expand your income very, very quickly. Let’s look at month one. You’ve got $5,000, your residual income is now $2,400 a month because you’ve got 12 deals (and you only have to keep 12 deals like this because they’re going to be paying off as they exercise their options).
So as the first one pays off and you get your equity out of the property because they exercised their option, you made $15,000 equity payoff in cash plus you bought a new property, so you’ve got $15,000 new equity buildup and now you’ve got 12 months’ worth of tax savings over 12 properties. So you’re going to be making about $1,200 a month in tax savings, which is pretty substantial when you start making this kind of income; it’ll save you a lot of money. Second month — same thing. Joe: Now, keep in mind — this is the big variable — how many properties are going to actually exercise their option? It’s going to be much less than the total amount, so you may not make this full amount. There are ways to optimize this process and get more of the people to exercise their option, and I show you how to do that.
I’m not going to spend the time on this video to do that. Joe: But let’s look at the bottom line on the second year. $60,000 – same as you made last year on the cash flow. Monthly residual — it well over doubled. Equity payoff — assuming that they exercised their options, just made a nice chunk of money on equity payoff. Equity buildup — you make another $180,000 on top of this $80,000. You made $15,000 in real cash money in your tax savings through depreciation, so it was a really nice year two. Then your second year on the beginners Millionaire Matrix is total cash at $284,000, and total equity of 180,000$. The grand total of year two is $464,000. I add that to the $263,000 and you’ve got $750,000 in your first two years, not quite the million that I promised you but pretty darned good. Joe: Let’s say you get better at what you do, that you get a little bit better at the process. As you’re doing this, how much will you improve? Will you get 100% better? Will you get 75% better, 50% better, 25%? How much better are you going to get at this process after one year? I venture to say that it will be more than you think.
But let’s say that you only get 25% better. If you get 25% better at better price from the seller on your property, instead of getting 10% under market value, you get 12.5% under market value. Not very much — next to 2.5% better on your price. Let’s say you get 25% down from your buyer so instead of getting $5,000 down you get $6,250 down. Let’s say you get 25% more lease money monthly and your $200 goes to $250 a month. Let’s say you get 25% higher price from your buyer — instead of getting $110,000, your price goes up to $112,500; not that much more. And you do 25% more deals a year so instead of doing 12 a year you go up to 15 deals a year. Now this is very realistic to think that you can get just 25% better. I have people that get 100% to 500% better at what they do and their production goes up with that statistic. The ability that you have and the talent that you have in this grows as you do it.
This is a skill and you build that skill through this process. Joe: So let’s look at the second year Millionaire Matrix if you’re 25% better. Now you’re making $6,200 instead of $5,000 so that jumps that up from $60,000 to $93,000. That just increased your income by 50%; right in the first column. The second column goes up a good deal as well. Your equity payoff went up almost $100,000. Your equity buildup went up by $100,000. Your tax benefits, well, they didn’t go up at all. But still, you just increased your income by a substantial amount of money. So just getting 25% better at the second year of the Millionaire Matrix — now you’ve made $730,000 that second year. You made $260,000 the first year, so NOW you’re at the million dollars. Joe: This is a realistic model and it can work. Again, part of the biggest downfall of this process is the amount of people that exercise the option which is less than we would like, but keeping these properties — you also continue to build your equity and you buy down the notes.
You get the depreciation and those other things start to grow. So that’s not a bad thing, either. Joe: So this is a great way to do it. This required no money and it required no credit. All it required is your effort to follow through with the step by step system of putting together subject-to deals, of finding buyers for those subject-to deals and filling those properties.
And you do this all without risk because you’ve got so many contingencies in the deals that you’re doing that and if you don’t find a buyer for the property that you buy, you don’t close it. I think the whole beauty of this system is that you never have to close a deal until you know that it’s going to make you money, so instead of everybody doing zero down (which everybody talks about and I talk about as well) you’re not really doing zero deals.
What you’re doing is cash out deals, all the time, without using your credit. So it’s very exciting stuff. Joe: That’s the Millionaire Matrix. it’s a very powerful way to buy properties. It creates cash flow for you upfront so that you can have a sustainable business and it also creates that long term growth and wealth building that anybody needs if you want to retire from this business and be wealthy. It’s an exciting process. This, by the way, is what I teach in my six month program. It’s what I teach in my Push Button Method. So, either one of these programs will get you into more detail about exactly the step by step process of how to put all of that together.
I’d love to work with you and to help you and make your business and your dream come true on this. Thanks. Bye. .
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