These are the three ways you can make money owning Rental Real Estate, and exactly how to calculate your cashflow and profit - enjoy! Add me on Instagram / Snapchat: GPStephan
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c
So lets start here…the three ways to make money in real estate:
The first is net cashflow. Anytime you calculate cashflow, you have what’s called the “gross rent.” This is the TOTAL amount of rent you receive. So if you rent out your house for $2000 per month, that $2000 is the “gross rent” - it’s before all of your expenses. And unfortunately, anytime you own real estate, you have recurring expenses - for instance, you have property taxes. Insurance. Repairs. And at some points there will inevitably be vacancy when the house isn’t being rented, but it’s still costing you money to own. These are inevitable.
So the first step when calculating your net cashflow is to DEDUCT all of those expenses from your total rent. So even though you might get paid $2000 per month, after all of those expenses eating into your money, you might now only be left with $1200. Any time you see real estate returns calculated, it’s usually like this - and this is often referred to at the “net operating income.” Total rent, minus all expenses = net income. So you’ll need to understand what property tax rates are in your area, how much insurance roughly costs, how much you can realistically get for rent, and how quick you can generally rent out a unit.
One thing not generally included in those calculations is the mortgage payment. This is because mortgages numbers can vary wildly from person to person depending on how much money you put down, how long of a loan you get, and at what interest rate. But, in almost every situation, your mortgage will be an additional expense in addition to the total rent you receive.
The second way to make money in real estate is by equity. This means that the value of the property increases because of something you’re doing to it - and there are two ways to make money this way:
1. The first and the most common is by paying down your loan. In most situations, your loan is broken up in two categories: principle and interest. Any time you pay down the loan every month, part of it pays interest on the total balance of the loan, and the other part pays down the balance - that second part is equity in the property.
2. The second way to make money with equity is by actively increasing the value of the home. Often this means remodeling the home or adding square footage. And your equity is the difference between the amount you spent, and the new value of the home after renovations. Doing this is also generally pretty predictable. You can see other properties and what they’re selling for, and as long as you make yours similar to that, all things considered, you should get about the same price - and that’s profit.
The third way to make money in real estate is through appreciation - this means that over time, the value of the property goes up in value. This one is highly location dependent - some areas will go up as fast as inflation, just given the cost of materials to build a house get more expensive over time. This is fine, because it means your money doesn’t really lose any value - it’s simply a preservation of wealth. But other areas will go up substantially more depending on the demand for the area, and how much space is available to build.
Using a combination of these three can often give you a much, much more accurate idea of your total rate of return much beyond cashflow - and this is how you calculate your returns and evaluate a good deal while owning rental property!
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c
So lets start here…the three ways to make money in real estate:
The first is net cashflow. Anytime you calculate cashflow, you have what’s called the “gross rent.” This is the TOTAL amount of rent you receive. So if you rent out your house for $2000 per month, that $2000 is the “gross rent” - it’s before all of your expenses. And unfortunately, anytime you own real estate, you have recurring expenses - for instance, you have property taxes. Insurance. Repairs. And at some points there will inevitably be vacancy when the house isn’t being rented, but it’s still costing you money to own. These are inevitable.
So the first step when calculating your net cashflow is to DEDUCT all of those expenses from your total rent. So even though you might get paid $2000 per month, after all of those expenses eating into your money, you might now only be left with $1200. Any time you see real estate returns calculated, it’s usually like this - and this is often referred to at the “net operating income.” Total rent, minus all expenses = net income. So you’ll need to understand what property tax rates are in your area, how much insurance roughly costs, how much you can realistically get for rent, and how quick you can generally rent out a unit.
One thing not generally included in those calculations is the mortgage payment. This is because mortgages numbers can vary wildly from person to person depending on how much money you put down, how long of a loan you get, and at what interest rate. But, in almost every situation, your mortgage will be an additional expense in addition to the total rent you receive.
The second way to make money in real estate is by equity. This means that the value of the property increases because of something you’re doing to it - and there are two ways to make money this way:
1. The first and the most common is by paying down your loan. In most situations, your loan is broken up in two categories: principle and interest. Any time you pay down the loan every month, part of it pays interest on the total balance of the loan, and the other part pays down the balance - that second part is equity in the property.
2. The second way to make money with equity is by actively increasing the value of the home. Often this means remodeling the home or adding square footage. And your equity is the difference between the amount you spent, and the new value of the home after renovations. Doing this is also generally pretty predictable. You can see other properties and what they’re selling for, and as long as you make yours similar to that, all things considered, you should get about the same price - and that’s profit.
The third way to make money in real estate is through appreciation - this means that over time, the value of the property goes up in value. This one is highly location dependent - some areas will go up as fast as inflation, just given the cost of materials to build a house get more expensive over time. This is fine, because it means your money doesn’t really lose any value - it’s simply a preservation of wealth. But other areas will go up substantially more depending on the demand for the area, and how much space is available to build.
Using a combination of these three can often give you a much, much more accurate idea of your total rate of return much beyond cashflow - and this is how you calculate your returns and evaluate a good deal while owning rental property!
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
Chase Sapphire Reserve - https://goo.gl/sT68EC
American Express Platinum - https://goo.gl/C9n4e3
Did you have to move into the duplex it when you pulled out money on it?
Wow wow wow wow good
I doubt you remember Carlton Sheets. He was the Grant Kardashian of the 1990s. When he spoke about vacancy, he said that is when your ASSET BECOMES AN ALLIGATOR. Ouch. I usually calculate around 20%/ year. That gives me time to get the old tenant out, clean&repair, and screen tenants.
the equity part at the end totally confused me. can someone explain this in depth?
That was really good, I wish I knew about your channel back in 2018 when you were making really good real estate videos. It's a little hard to find the really good ones nowadays because they get buried under all the new videos.
Stephan, I received my real estate license three weeks ago. I need help making my initial money for my first place.. can you help me and guide me? I am watching your videos and I live in South Florida.
Gold
Don’t kid yourself, if you are lucky enough to afford rental property you are reeling in money. Sure it’s not always easy to be cash flow positive and have real estate as your only income source, but the equity you gain each month is insane, no other investment compares.
That bitconnect clip is gold 😂 you must bring it back 😂😂😂
I want to have a real estate empire, anyone else?
Normally halfway through the video you would have asked for me to smash that like button! Fortunately, you didn't have to because this video was amazing!!! And boy did I smash that like button! Thanks Graham!
Hi Graham, not sure if you will see this comment on such an old video but, you said you would link other videos you had done on topics such as refinancing but I don't see any links in the description. I am trying to learn and understand how to leverage cash out refinancing but most videos are very confusing and was hoping you would have one that might help me better understand.
Graham, am I able to work with you, or at least have you as a mentor to get where you are now?
Trading as a beginner was very difficult due to lack on trading experience, this resulted in losing my funds though I've been able to recover all that I lost, all thanks to Mr Charles_forex09 on Instagram , i never knew good trader still existed till I come in touch with him__.
Why is “WAYS” all caps?
I thought one of your tenets was to never, ever, every go cash flow negative on any properties. This deal, you are losing $580 / month.
Dope.
I only need one property that generates enough cash flow to pay half my rent.
Definitely not in California.
I been looking in Las Vegas, run the numbers and most of them have cash flow, not a lot but hey $200-300 cash flow is still free money and like Graham said it’s building equity long term.
Graham Stephen deserves our likes not only because he has a unique and funny way of telling us to smash the like button but also because he posts the script of the video in the description. Thanks bro!
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I smashed the like button
Really like the real world example. Thanks!
Who pays for the utilities ???
Graham Stephan
what happens if u pay full cash on a house (what benefits do u get)