Options Trading Chat with Randy Perez from @My Life of Learning
hi guys I'm here with Randy and this is another options trading chat the previous chats that we've had have been extremely fruitful and valuable to our audiences so I reached out to randy and he so graciously carved out some time in his busy schedule to sit down with us so um randy if you could please introduce yourself sure first of all David want to thank you for this opportunity it's a privilege to me and an honor my name is Randy Perez my channel is my life of learning based on the mistakes and the lessons i've learned in trading stocks and options primarily i'm an option seller but i also do buy some stocks outright awesome and from reviewing some of your and actually for a brief intro for his viewers my name is David Jaffee i have the website beststockstrategy.com and on youtube youtube.com/beststockstrategy that's the channel name randy from from looking at a lot of your videos it's my understanding that you're primarily focused on protecting money and generating cash flow from selling options is that correct yes protecting capital would be my number one goal and once i fight that capital is sufficiently protected then the next major goal is to generate as much cash flow in return as possible you have to risk some capital in order to make a return but we can definitely maximize that return while we minimize the risk because that's our goal is how much cash flow can we generate by selling options while also protecting this pool or pile of money that we've set aside and with your strategy are you primarily selling puts on a small group of stocks are you selling puts on indices what type of stocks or indices are you looking at in order to identify good opportunities to generate cash flow yeah that's a great question it's one that that i'm always trying to get a add to my pile of stocks that i track so currently i track about 200 stocks looking for opportunities on a daily basis um for potential trades we look at the entire universe but we shrink it down to about 200 stocks that we are willing to trade in their companies that have proven over time that they'll be consistently profitable and good in bad markets uh their cash flows are stable i look at you know what happened to them in the recession what happened to them and the code would drop in march of 2020 and like to make sure we're trading in those stable companies and then on a daily basis looking for opportunities when certain moments when we can sell options puts maybe covered calls or maybe some of the other option training strategies that we use to to generate that cash flow and when you are identifying opportunities are you scanning the 200 based upon their like their changes in price like their price range are you looking at implied volatility rank are you looking at vix levels or maybe you're looking at all of those things what is um what are some of the things that you look for to identify good opportunities yeah there are definitely a lot of things you can look for and and there are a lot of indicators you can use and it can almost be overwhelming i've overwhelmed myself to the point where i almost didn't like i could make a good decision so i've really tried to simplify what i look at and so the biggest thing i like to look at is a stock that has been coming down in price or maybe even having somewhat of a crash but it's starting to level off as i especially like it when it's leveling off around previous support and generally my my um my interest in a stock happens on the weekly charts i look at multiple time frames so every weekend i'll look at all the 200 stocks that i track and on the weekly chart it's starting to come if it's been coming down starting to approach support it speaks my interest and i put on my watch list and then on a daily basis i'm saying well what has it done over the past couple days and again if i'm finding it finding support on the daily chart then that's the trade that i'll do and so at that point depending on how urgent i want to get into the position i'll look at the 15 minute and even hourly chart to determine what is the best time should i place this trade right now should i put an order out there that has a little bit better price we get filled at and that's how we enter those those trades yeah i agree with you for me i tend to look at i would say about 10 to 20 stocks and there are high liquid stocks high liquid stocks with large market caps that have strong brands like amazon or facebook or microsoft or jp morgan things like that because i'm i'm in my mid-30s and i don't want a situation where um where there's high beta where as you've experienced as we've experienced over the past week or two if the market falls like 10 or 15 percent i don't want a situation where the stocks that i'm involved in are going to crash 40 or 50 i think that minimizing portfolio volatility is one of the most important things because oftentimes people don't take into account the emotional toll that they experience with losses and the losses are about four to five times more painful than the elation and the happiness that you feel from the gains so i'm very similar where i look at a little bit um a smaller of a universal stocks but at the same time i give tremendous amount of weight to the trading range of a stock and if i see that something is at the low end of its range then i have a tendency to sell a put option anywhere from 10 to 25 below that depending upon numerous factors like basically i want to sell the highest strike price that i don't believe is going to give me a headache and that i don't believe is going to get challenged and especially during periods of low volatility when the vix is trading at 15 i need to be okay with that strike to make sure that even if fix spikes up to 15 or 30 that that loss on that option that i sold when the vix is trading at 15 is not going to get me into trouble yeah it reminds me of a comment i had on my patreon this morning a patient asked me they said randy we've been watching your suggested trades or the trades that you've been doing and they're like you know bravo good trades um can you tell me why the market's been crashing but you know a lot of your your trades have been doing pretty good and that was basically my answer was well the stocks were trading in they're great solid companies they've already come down and yes they can continue to come down of course but there's enough interest at these levels that they're kind of being held up and maybe even pushed up by the market because it just makes sense they're great companies so kind of along the lines of what you were saying david yeah yeah i definitely agree it's kind of like uh the whole like warren buffett thing where he says okay when there's blood in the streets then it allows you to buy great companies on sale be greedy when other people are fearful do you um do you use portfolio margin or you or are you using regulation t or do you not use margin at all yeah i'm a proof of portfolio margin and i do use a little bit of leverage and margin not much early in my career i used a lot of leverage and margin and it burned me several times gave me that three to four or five times pain factor you mentioned but now if i use margin it's a very small amount for a small for a short period of time i'm not big on on using ton of margin i i looked at the really wealthy people i knew in the recession and asked myself you know what did they do right that i did wrong and i was one thing that that blared me right in the face was people that were really getting hurt in the recession had a ton of of margin leveraged debt and the ones that just flourished well they may have used some debt and margin but they didn't overuse it and so i try and copy their examples that's an amazing point um two really quick things on that the one great thing about having portfolio margin is that it kind of does provide you with free money because and i know that that you know everyone says oh there's no free money there's no free lunch however if you're buying stock on using portfolio margin it actually provides you with free leverage whereas if you're buying stock using regulation t then they actually charge you margin interest so if you combine both strategies where you buy stock or an index like let's say you think that right now because the queues have pulled back like 15 or amazon's down almost like around 20 from its previous high if you wanted to or tesla you know right now i think it's january 27th like tesla was down relatively significantly today if you wanted to buy one of those stocks or an indice you can actually buy those using portfolio margin and it's not going to use up a lot of buying power and then you can sell options around that and use the long stock as leverage so that it actually is not going to decrease your buying power significantly so so that is one thing to take into consideration one benefit of portfolio margin the second thing i agree with you a hundred percent about conditionally using leverage and um i do think that that's one issue especially with younger viewers who are watching this video they say hey why should i be interested in protecting my money or earning two to four percent a month you know two two three four percent a month by selling options when i can buy options and turn 500 into ten thousand dollars or i can day trade and earn one to three percent a day why don't i just try to hit home runs because earning two percent a month for me is not going to move the needle what would you say to someone based upon that because clearly you're successful you've been through ups and downs and hey we were really young too we were 18 we were in our early 20s at one time too so we probably thought the same way that these young people doing what would you say to them if they were watching this video you know it's that's hard and someone who can be that discipline starting out they're probably end up being extremely wealthy because that's the that's a lesson that needs to be learned and hopefully it's learned the easy way there's a video that i watched one time that helped me get my head around being smart and taking baby steps it's called them i think it's called the man that planted trees it's a thing about a 30 minute video but it kind of shows the power of just slowly plugging along at investments and in the end you have this glorious forest of these beautiful trees that can produce fruit or whatever the trees are and that's kind of what i like to look at i like to look at the big game don't look at what's right in front of you don't have that tunnel vision look at the entire field and know that this is a long-term game you know i call it a game i i take it very seriously but i call it a game because i i really enjoy it and i want to play it the rest of my life and the people that i associate with um and that i'm someway a part of their their trading life i want them to play it the rest of their life and i wanted to do well at it do really well at it and that's why leverage has been controlled i'm not i'm not against using marginal leverage if the market crashed i would entertain using not wide open margin but i would use more because it's an opportunity but you have to be careful because it's a double-edged sword you know it's great while things are going good but you and i both i'm sure you get the same messages oh man this position went against me i'm having a margin call what do i do and you feel bad for him but what do you do is actually that that answer should have been answered before you got in a position because you can prevent that no one no one can force you into that bad position and you just want to keep playing the game forever so that's why it's important to me to control that margin you know just make what you can make learn from it and in time that money will come if you love this game you'll figure out how to get enough money to play on a bigger scale it may take time but most good things that are worth it do take time i agree with you again i i feel like if you're targeting return if someone comes to me and they say hey i don't need to learn how to make two to four percent a month because over the past six months i've earned sixty percent and then they get this myopia or this short-sightedness where my response to them is okay i hope and i wish that that your returns continue but deep down inside i know that they're taking way too much risk and then at the first pullback at the first time that the vix doubles in price or you get even a five percent pullback in the market forget about the 15 that we've recently experienced they're going to be hurting and they're going to be losing almost all their gains and first hand experience i've been approached by a few people who they traded too large when four months ago paypal was trading at about 310 dollars and then it fell down to about 240 they loaded up on puts at a strike price of about 200 and then for about three months paypal was trading between 180 and 190 and now it's trading at around 155 because of that pullback and i'm also i'm also stuck in a paypal position but the difference is that my confidence level in making money in that paypal position is probably around 80 and for them they not not a lot of them but a few people contacted me where they traded too large and they ran out of buying power and they will not even have the opportunity to make money on that position because they were closed out and remember oftentimes when you're forced to close positions you close them out at the absolute worst time because your broker issues you a margin call generally during the worst time when the market falls like over 100 points and then maybe it rallies back later in the day like it did earlier this week and those are the worst times to close out of position because you're out of the position and unable to participate in the upside and the reason is with every single person that i've spoken to it almost always comes down to sizing and being too aggressive yeah yeah i agree with that i have specific rules when it comes to sizing and and they have changed over time i mean currently my my rule is no more than five percent if i gotta sign that full position no more than five percent but really by trying to stick to is around two and a half to three percent that way if the position goes against me because some of them will that's just how it works if it goes against me i still have an extra two to two and a half percent that i can sell puts at a lower price to get that cost basis down to help you know improve the position so it that sizing is important and i mean no matter how right we think we are dave i don't know about you but i know several times i was just so convinced that i sold it here seoul puts here came down sold some more here man that hit really good support on the weekly monthly hourly whatever hit all the supports like i'm good now i'm loading up man i just kept going so you just don't know if we trap at the odds of winning in our favor but you have to plan like you might be wrong in every trade that's a great point so correct me if i'm wrong but you'll put on a position that you think is good enough to enter and then you'll kind of like hope and feel it out that it goes against you and then you'll have a full position in that specific position if your starter position so to speak goes against you is that is that accurate yeah and usually what i do is let's say that my full position would be six foot contracts i'll start out with one or two and i'll watch it usually these these stocks they're they're in your sweet spot for a few days sometimes they just rock it up and sometimes they keep dropping and so by doing one or two out of the six potential contracts it gives me a chance to kind of fill it out okay how's that looking so i did one today i tried a put option yesterday look looked good held support again today pop hit another one so now i'm at about three out of six potential contracts and if i'm wrong then it lets me okay it goes past my support okay well let's just give this guy a minute to cool down let's see what he's gonna do if he keeps going then maybe i'll just sit back and wait and maybe i'll enter another position and just kind of try and repair that one or if it finds really good support below there maybe i'll sell some more but i just finally kind of eased into trades and what i mean by easing in is you know every day i look at it every day if i can add to one that i wasn't in full position that yesterday and it's still looking good and it just confirms what i was thinking was most likely going to happen it's so funny you say that because i'm the exact same way especially during periods when the bix is low and volatility is low and the market i feel is overbought i'll sell like one contract and then people will will sometimes email me from my trade alert students they'll be like how large is your account don't you have a large account why are you selling one contract on dollar general or one contract on on like x y z stop and the reason is that i don't want to be trading that often when the odds are stacked against me and you know okay yes the odds are in your favor you do have positive expectancy even during periods of low vix the problem is that if you trade and use up all your buying power when the vix is trading at 15 then when you're not going to be able to last during times when the vix is at 35 you're definitely not going to be able to open up new positions and collect three to four times more premium than you were collecting when the vix was trading at 15 because remember not only is the vix increasing the ivr is increasing but if you have substantial buying power after a ten percent fallback and after vix is trading over 30 then instead then that same like 2200 strike that you sold on amazon at 15 when you collected five dollars is now trading over twenty dollars because amazon itself has pulled back around 10 or 15 percent so what do what do you say to people when everything's all good and stocks are going up and um you know you're selling like maybe an occasional contract and you're just you're thinking hey um i've seen this before i'm i'm prepared for the next sell-off but they're saying hey i want to be more aggressive like stocks are going up and i'm selling options but you're making more money by buying stocks right now because tesla's going up every single day tesla is going has been up 10 over the past two days like why don't i just do that when david you and and randy you guys are just selling like like a few contracts of puts when the stock when bix is trading at 15 and the stock market's going up every day what do you say to those people you know i've been around long enough to know that a big part of our success is because we found something that matched our personality our desirable level of risk um and it just kind of fits us and so i told you is look the way that i trade it may be the complete wrong way for you to trade i respect the way you're trading it just doesn't match how i feel about the market the way that i feel comfortable trading and so you know i encourage people you find a technique that works for you or a way that you that works for you and go for it that's great because that's one of the big important factors of being a successful trader but i absolutely don't allow it to change how i trade i trade the way i do because it works for me and it has for a long time and i've made mistakes i've traded ways that didn't match my personality i was too risky or maybe i was a little too conservative i've just found that that sweet spot that sweet zone that fits for me it feels good it makes sense when i look at the charts it's i can determine within a few seconds if it's a position that i'll most likely go with or if it's one i don't want to touch so you know i encourage everyone you have something that works for you that's awesome keep going share your story and um and hopefully it works out well but i like to hear their success but it doesn't really i do listen to what people say to see is that something i'm missing randy should i try to implement that and if it's not then i just i ignore it and keep plugging along if it's something i think sounds of interest to me then i'll kind of figure out does that fit with who i am and who i want to be as a trader and um and wish them well i i agree with you the only caveat to that is if i have people who email me and they say hey i've i've made a few hundred percent by buying options or day trading and i've been trading for six months i don't necessarily respond back and say hey i encourage you to continue doing that instead i look at it from like a statistical perspective and you know i because i do have good intention where i try to help them now they think that it's skill but i believe that it's luck and you know hey you can go to a casino and you can play you can play you know any game craps or whatever roulette and you can win but that doesn't mean that you have skill you know skill is going to be replicated over for long periods of time when there is actual statistical probability and is statistically valid so i do think that there are some things that people engage in whether it's you know buying options at like the wrong time and having it be like 100 of your portfolio or day trading which has a negative expectancy which i wouldn't necessarily if someone emailed me i wouldn't be like oh yeah you should continue doing it because i i believe that you know they might lose money um yeah i agree with that do you do you sell call options as well i do um covered calls poor man's covered calls on occasion that's one of my repair strategies i'll sell a naked call or a bearish uh call credit spread so yeah i do i do use calls not as much as puts but i definitely use them especially situations where stocks can assign to us or an expensive stock like amazon or maybe even like a microsoft or an apple i don't want to own the stock outright to me there's not a whole lot of benefit because the dividend's so low i'll do a poor man's cover call and definitely that's one of my i call my little secret weapons is when a position moves against me if put moves against me or were signed a stock well below our our the stocks crashed well below our our strike price that we were assigned at at that point we really work the call options whether it's a covered call or performance cover call or try and do some ratio spreads or just use those call options you know round resistance or just above resistance to generate as much cash flow as we can while we wait for the position to come back for us i agree 100 we um yeah this is awesome it's one thing and i actually had a call with a student earlier today like this afternoon if you have a deep in the money option or you're assigned then you can actually sell relatively far out of the money call options and you could actually sell more now don't i wouldn't go crazy on this but let's say you're assigned like two contracts then it would actually make sense to sell for i would say a maximum of five that are relatively far out of the money and the reason for this is that if the underlying stock goes up by let's say two hundred dollars then on the put side that's either deep in the money or that you're assigned stock you actually profit the full two hundred dollars per contract or per you know 100 shares but also even if you sold four or five contracts that call option might move against you by i don't know like 10 or 20 cents maximum so a fraction of the amount that you'll experience the loss on the call side will more than be compensated by the gains on the put side so i think that's a i definitely agree with that you know as a repair strategy and also during times when you believe that we're entering like a two-sided market or maybe like a bearish market are you are you finding yourself selling more call options now in like late january 2022 uh you know i sold some towards the end of last year i've noticed over my years of trading that january not always but january tends to be a volatile month i know whether it's big guys repositioning or taking profits or getting new positions and so actually one of the trades that i've been doing the last quarter of the quarter last quarter last year was selling some naked calls in spx and about the value of my portfolio my portfolio is predominantly a bullish or a neutral portfolio it's not designed to really go away up in values market goes up so volatility was somewhat lower and so i've been i run my numbers and calculations and do my little geometry and figure okay well i don't think sty is going to be up here by this date and so we were selling some naked call options at spx which is 10 times spy approximately so i use that to drink some cash flow especially in a lower volatility environment people p they're paying a little more for call options so why not take advantage of that if they challenge it then it's time to adjust it like those spx numbers are pretty large they have a lot of zeros behind them so you want to be careful with them but otherwise you know when the position goes against me one trade i'm thinking of is a trade we did in amgen ticket symbol amgm we had been selling the 240 puts this is throughout last year and early in the year maybe mid-year we got assigned at 240 and amgen ended up getting down to 200 and then it kind of found support and again i'd done one contract so i sold another one but i looked at what our cost basis was and it bounced up to about 207 208 and i thought okay i bought this thing at 240. let me see where i'm at we're at we're at i think it was 200 or 198. so everything was down 20 you know pretty big money for a higher dollar stock but we're actually doing good we're up in a position that the stock had really moved against us in a big way so and part of that was selling naked or we did we didn't do naked call options in that instance we did a covered call then we also did a bearish call credit spread just in case you know the thing went crazy on us and flew past our short call after strike price yeah i'm a big proponent of using calls to repair positions but at the same time not being too aggressive with the strike selection because as we saw in march 2020 there was a v-shaped bottom where pretty call sellers if they sold too close to the current market price after the market lost about 36 percent in 33 days they really got their face ripped off so be judicious when selling calls and really look at the overall market i think that right now in late january 2022 i personally believe in you know it's never good to give predictions i know i'm going to be wrong but my personal belief at this moment is that we'll experience some two-sided markets this year especially considering that the market was up around 30 last year so i think that i don't think that we're going to crash even though the market's gone down around 10 or 15 over the past two weeks but i do think that you know having the market end down anywhere from five to ten percent this year pretty much puts things aligned with the historical mean or the historical median with where they've been if the market over the next two years closes down like 10 a year then you know that kind of that kind of gets worked into the mean over the past 10 years and brings down the 15 back to more of like you know an eight or nine percent average which is where it's spent historically so so we'll see i i have been selling more call options recently um yeah and i think it's okay and and when i have been selling puts i've been going farther out of the money and because volatility is extremely high then it allows us to collect significantly more premium while also being more selective and more careful on our strike selection because you can sell puts in amazon for below 2 000 right now and still collect a decent amount of premium and in that situation when amazon's 52 week high is i think like 37.73 i wouldn't even mind owning amazon at 1900 or 1950 that would be that would be great yeah yeah i was looking at amazon today at the 2000 put i'm like man you get that much for it i didn't pull the trigger i want to i want to see how it ends up next few days but i was looking at that same potential trade i i think in amazon and i'll post this after they report their earnings but next week i believe that they were reporting earnings so there's probably going to be a decent amount of volatility contraction in that in that um in that option because risk is going to be is going to be taken out um now we'll see maybe you know maybe uh amazon falls 200 when they report earnings and you guys will know that if you're watching this because i don't know that now because it's before um now you touched upon something really important you said it's really vital to protect money can you talk about and i've seen a lot of your videos which i thought were incredibly well done about how to actually get a credit while also protecting your portfolio can you touch upon like some of your favorite strategies and it doesn't have to be like done for net credit it can be done for a debit like you know i'm okay with that especially um especially during periods when you need to increase buying power what are some ways that you use that you like in order to protect your money yeah yeah it's one of the nice things about being an option trader is that i mean you have so many ways you can do it and really there's their situation specific but you know one of the old classics and favorites is well if it's gone against you and has gone below your strike price try and roll it down and out for credit and that's that's always one of my go-to's if that doesn't work then we'll consider you know adding another put if we have if we're under our max position size if it's fallen you know if you have a resistance up here it's falling below there then as we spoke earlier i'll sell some a call option or maybe a bearish a call credit spread maybe if it's a dividend paying stock a of all the ones i trade they are if it is that i'll i'll go ahead and let it be assigned to me especially if they're about to go ex-dividend and i don't see yeah i see that there's probably more financial benefit to letting it be a sign as compared to rolling the put and sometimes those put options they have the dividend already priced into them pretty much but sometimes they don't so just really looking at every angle and look at the situation and on some of them that are non-dividend paying stocks or low low dividend paying stocks and you may be a little uncertain as you know maybe this thing will keep going down well to me that's the perfect spot to switch over to poor man's covered call you get some downside protection by buying that i like to buy leaps a year or two year out if it keeps going down your option doesn't lose dollar for a dollar like that deep in the money put option might as a matter of fact the more wrong you get the more you're glad that you own a leap options compared to being short of put option um so those those are some of the ones that like to use and also you know our position was our overall portfolio was down um value-wise with some positions last year that's when i started selling some call options in spx you know why not the market's so excited and happy and we're at the top of a channel i'll be glad to sell some call options and it makes up for maybe a couple of positions that are down what um do you have a typical days to expiration that you like to target yeah you know i did a video on that weekly versus monthlies and um actually got really good feedback uh really good input on it from people and they liked it and some people just they really like weeklies and then some people really like monthlies i tend to sell more monthly i'm not opposed to weeklies i i try to keep a really diverse portfolio i mean we generally have between 30 and 40 positions on and so we're almost always buying and selling something many days every week we have a new trade that we're doing whether it's selling you want to close out one that's nearly worthless so i generally tend to like the monthlies they tend to have a little higher open interest and be a little easier getting it out of in some of the stocks that we trade in i'm not opposed to trading shorter time things like right now i am still trading the the february uh third friday february i think it's 22 days out right now so that's right at three weeks i'm still trading this because the return is is good if if i'm trading a position that is going to go they're going to announce earnings right after that expiration date i'd rather trade and get out of it before earnings are announced that way we can you know avoid that possible crash on us so somewhere in the 15 to 40 day range is usually what i like to do yeah i i like um i would say similar like 15 or 40 sometimes i will go out like during periods of like high volatility right now um i will go out as far as like 60 to 90 days just because i want to capture that premium now at the same time sometimes if um if the volatility in the back month could actually be lower than the volatility in the front month because there's an expectation that volatility will fall then that also comes into play but generally speaking if i believe that the market like right now if it'll stabilize i wouldn't have a problem going 90 days out and selling a put option on amazon at 1900 or 2000 and then just basically sitting on it and then once volatility contracts i would then close that position now early and maybe i'll end up being in the trade for like 30 days so i think it depends upon the situation my default tends to be around that 30-day mark but depending upon the situation then then i will go further out yeah i like that what um so i understand that you have a lot of experience in real estate as well and i wanted to ask you if someone is really young right now because trading options is great for cash flow but if this person has a really small account even if they earn three percent a month on 1 000 or 2 000 it's not necessarily going to move the needle for them although i do think it's important similar to what you touched upon about building good habits and being very disciplined and and you know you can establish those habits at a young age and that's gonna pay you know that's gonna it's gonna make you very wealthy later on but what are some things that someone can do if they're like 18 and they are really interested in trading and selling options and you know being long undervalued companies but they don't have a lot of money and maybe they are interested in real estate can you give them some advice based upon your experience sure and there's actually a lot of similarities between real estate especially rental property and trading options they both hopefully would generate monthly cash flow for you they both are investments that have structured properly can appreciate over time i think real estate is a great way to generate wealth if if you happen to start from almost nothing real estate is a a really good way to do that um once you have some money or or as you make money i encourage people set some aside just put in your account it'll be amazing be amazed how just putting up 50 100 bucks a week or whatever you can a month it'll slowly pile up and if you make good stable investments then at some point that little that little pile of money turned into a little bit big pile of money and then you have enough to start trading in the somewhat diversified smaller account now one of the things i'm doing with my patreon group is i had several people on there or quite a few that have smaller accounts and they're like randy have a big account you know i don't have that big of a count what do i do and so i actually a lot of my retirement was tied up in real estate until several years ago i had some money in the market always but i had a lot in real estate and so i've sold off some so that i'm more closer to 50 50. and i started a roth account probably two or three years ago and it's getting close to 30 000 things around 27 28 000 and i just been buying stocks uh ones that i thought were you know had the possibility of going up paid a dividend and then this just this week liquidated it and said okay we're going to treat this like a small account here's how you trade a small account but it all came from over the past several years putting that little 115 a week in there and it finally got big enough to trade it so i mean real estate's a great tool and i love depreciation if it wasn't for depreciation um i probably wouldn't be doing real estate now but i do still own rental property i am still buying some buying one on monday but i love ops trading it's just so much this there's just less risk you get a lot of the same benefits you just don't get that depreciation right off so if you're looking to start from scratch real estate's a great way to do it it's something that you should look into read on there's so much free information out there that it's definitely an asset class that i think a younger a person with a lot of energy and a lot of ambition that uh they should learn it because it will do well for them and for people who might not be as like tax savvy or as experienced with real estate when you mention depreciation i assume that you're referring to the tax write-off that you get from the depreciation of the properties and the assets as well is that correct so it offsets some of your profits and then you can depre you can reduce your tax basis by the amount or your taxable income by the amount of the allocated depreciation based upon the depreciation schedule is that correct yeah yes a real simple and easy way to look at it is let's say you bought a 100 000 rental property and maybe a lot of it or almost all that was financed so you didn't really have to come out of pocket really anything to buy it or very little let's say you wrote that thing off over 25 years 700 000 divided by 25 you're writing off four thousand dollars a year well when you figure your net cash flow on a rental property you know that's probably not too far off from what you truly need after management maintenance expenses uh taxes all your expenses you'll probably walk away with four or five you know thousand dollars so basically you're making that four or five thousand dollars tax-free because because you bought that hundred thousand dollar asset you can write off 100 of over 25 years and that's not the true number but let's just say then you can write off four thousand dollars a year against any income that you made to speak and i'm not an accountant so verify this but you can use that four thousand dollars and avoid paying taxes on four thousand dollars of your income so basically instead of your pocketing seventy sixty percent of that four thousand dollars because you had to pay the rest in taxes you pocket the whole thing i mean that you wanna pay raise that's a that's an awesome way to get a pay raise wipe them taxes out legally and you have mentioned when we spoke earlier about you mentioned something that i found really interesting about rental properties where the you said something i don't want to put words in your mouth you mentioned where like you're basically getting paid for your time and they're working do you remember what it was that you told me it was like very it was very powerful yeah so you know if you have a job then the best you can do is a hundred percent of your abilities 100 of your time is the best you can give whereas let's just say you had 10 rental properties you have 10 tenants like our one of our requirements is you have to make three times the monthly rent and income to rent this property what that means is that these 10 tenants that this person this investor has they're working a third of their week for you for the landlord because they're giving you a third of their money and so instead of me working 100 for myself i'm still working 100 for myself but now i have 10 other people that are working a third of their time a third of every day so what is that two three hours a day they're working for me and then you can see the leverage you do that times 20 then 50 and 100 and the numbers get really interesting and fun yeah i think that's great all right um i think that's that's pretty much it i i found this call and this conversation to be extremely enlightening and also extremely valuable and i believe that our audiences will also find it valuable as well and do you have anything anything else that that you want to say anything that i forgot to ask oh thanks i think you did a great job i appreciate the opportunity i appreciate what you're doing i really enjoy your videos and your channel i like listening to intelligent wise and battle proven um option traders like you so i appreciate it and appreciate you giving the opportunity to be with you on here and look forward to continued success and having a great 2022. it's gonna be a fun year
thank you randy so randy randy perez with my life for learning do you have a website you mentioned you have patreon yeah we have a patreon the links in the description of every video at various levels from really inexpensive to on up you get alert as soon as i know a trade goes through you get it i also have a website my life of learning.com but patreon is probably the best way and here on the youtube channel i look at every comment i try and reply to every comment all possible so i'm a day or two behind but do my best to reply and read every comment for me i have an education course and then also a trade alerts product which allows you to follow my trades you can try it out for 19 for seven days and if for some reason it doesn't exceed your expectations then you can easily cancel so it's very low risk and um yeah i really hope that you enjoyed this chat with david jaffee and randy perez our goal here was to add as much value as possible and we appreciate you guys so thank you so much thank you david take care everybody
2022-02-15 11:39
