Here is EXACTLY how to calculate and analyze the cashflow of a rental property anytime you invest in real estate…and make as much passive income as possible! Enjoy! Add me on Instagram: GPStephan
70% OFF FOR A LIMITED TIME: The Real Estate Investing Blueprint - Complete Guide To Investing in Real Estate:
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Brandon Turner from Bigger Pockets video: Calculating Numbers on a Rental Property [Using The Four Square Method!]
https://youtu.be/T_7vhsSBi7c
This is probably THE MOST important step anytime you’re looking for an investment…this one single calculation tells you EVERYTHING you need to know about the property….it’s going to tell you how much money you’re going to make, it’ll tell you how much a property is worth, and it’ll tell you how much you should offer on the property to get your ideal ROI.
Anytime you’re evaluating a property, you’re going to have to calculate the GROSS INCOME. This is the TOTAL amount of income the property will be generating, BEFORE expenses.
In addition to rents, it’s important to calculate any other income that property generates.
For example, I’ve seen some properties that have laundry unit income
I’ve seen some that charge separately for storage.
Some that charge separately for parking.
Now we need to go to the next step: EXPENSES.
Anytime you own a property, you’re going to have FIXED EXPENSES NO MATTER WHAT - this means that even if you bought the property outright IN CASH, NO MORTGAGE, you’re still going to have these expenses…they’re fixed, and there’s no way around it.
These expenses include:
Property taxes - that’s unavoidable
Insurance - you better have insurance
If there’s an HOA - I don’t like HOA’s
If you pay utilities for the tenants - make sure they save water
Normal upkeep - like a gardener, pest control, etc.
Repairs that need to be done
If there’s any management fee
And vacancy when inevitably a tenant will move out and you’ll be missing out on that rental income
After that - we’ll need to calculate our NET RENTAL INCOME. Subtract EXPENSES by GROSS INCOME and this is your net income. From this, your can calculate your CAP RATE:
Divide the NET rental income by the purchase price, then multiply that by 100, and what you have left over is your percentage return.
Next, we need to calculate the Mortgage Payment. Use http://www.MortgageCalculator.org to calculate your mortgage payment.
From there, subtract your mortgage payment from the NET RENTAL INCOME and that is your return!
But then we also have the RETURN ON EQUITY. Remember, every month you pay down your mortgage, part of that payment is interest on your loan balance, the other part is EQUITY towards paying down the loan…because remember, after 30 years, you’ll have no more mortgage and you’re owning this out right. So every month that goes by gets you closer to that goal.
In order to calculate how much equity you’re paying down, lets go back to MortgageCalculator.org, look under “calculate” where it says “show amortization schedule.” Then click “show annual amortization.” Then hit calculate.
So now, we add this back into our income, and that becomes your TOTAL ROI.
And that’s exactly how I calculate the cashflow of a property. With this entire formula, you can pretty much just plug in your own numbers and spit out the expected return!n!
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
Favorite Credit Cards:
Chase Ink 100k Bonus Point Offer - https://www.referyourchasecard.com/21/ZVSGGIXM8U
American Express Platinum - http://refer.amex.us/GRAHASOxHd?XLINK=MYCP
70% OFF FOR A LIMITED TIME: The Real Estate Investing Blueprint - Complete Guide To Investing in Real Estate:
https://the-real-estate-agent-academy.teachable.com/p/the-real-estate-investing-blueprint/
Join the private Real Estate Facebook Group:
https://www.facebook.com/groups/therealestatemillionairemastermind/
Brandon Turner from Bigger Pockets video: Calculating Numbers on a Rental Property [Using The Four Square Method!]
https://youtu.be/T_7vhsSBi7c
This is probably THE MOST important step anytime you’re looking for an investment…this one single calculation tells you EVERYTHING you need to know about the property….it’s going to tell you how much money you’re going to make, it’ll tell you how much a property is worth, and it’ll tell you how much you should offer on the property to get your ideal ROI.
Anytime you’re evaluating a property, you’re going to have to calculate the GROSS INCOME. This is the TOTAL amount of income the property will be generating, BEFORE expenses.
In addition to rents, it’s important to calculate any other income that property generates.
For example, I’ve seen some properties that have laundry unit income
I’ve seen some that charge separately for storage.
Some that charge separately for parking.
Now we need to go to the next step: EXPENSES.
Anytime you own a property, you’re going to have FIXED EXPENSES NO MATTER WHAT - this means that even if you bought the property outright IN CASH, NO MORTGAGE, you’re still going to have these expenses…they’re fixed, and there’s no way around it.
These expenses include:
Property taxes - that’s unavoidable
Insurance - you better have insurance
If there’s an HOA - I don’t like HOA’s
If you pay utilities for the tenants - make sure they save water
Normal upkeep - like a gardener, pest control, etc.
Repairs that need to be done
If there’s any management fee
And vacancy when inevitably a tenant will move out and you’ll be missing out on that rental income
After that - we’ll need to calculate our NET RENTAL INCOME. Subtract EXPENSES by GROSS INCOME and this is your net income. From this, your can calculate your CAP RATE:
Divide the NET rental income by the purchase price, then multiply that by 100, and what you have left over is your percentage return.
Next, we need to calculate the Mortgage Payment. Use http://www.MortgageCalculator.org to calculate your mortgage payment.
From there, subtract your mortgage payment from the NET RENTAL INCOME and that is your return!
But then we also have the RETURN ON EQUITY. Remember, every month you pay down your mortgage, part of that payment is interest on your loan balance, the other part is EQUITY towards paying down the loan…because remember, after 30 years, you’ll have no more mortgage and you’re owning this out right. So every month that goes by gets you closer to that goal.
In order to calculate how much equity you’re paying down, lets go back to MortgageCalculator.org, look under “calculate” where it says “show amortization schedule.” Then click “show annual amortization.” Then hit calculate.
So now, we add this back into our income, and that becomes your TOTAL ROI.
And that’s exactly how I calculate the cashflow of a property. With this entire formula, you can pretty much just plug in your own numbers and spit out the expected return!n!
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
Favorite Credit Cards:
Chase Ink 100k Bonus Point Offer - https://www.referyourchasecard.com/21/ZVSGGIXM8U
American Express Platinum - http://refer.amex.us/GRAHASOxHd?XLINK=MYCP
😂 don't do that 😂😂
In what state would that property tax be realistic? I think it's a little low. It's very very low.
that was really knowledgeable video
Thanks!
There could also be bonus equity if the value appreciates. Maybe 2-7% which by the way is more like 8-20% on invested cash.
Bruhhh I was wondering why it was virtually impossible to find deals with good 12% ROIs… Wasn't factoring in amortization.. Rookie mistake, thanks Graham.
FR this feels illegal to know with this you pretty much could do this with any property and do it. And if it gives good return and you save enough you just get rich. What do you guys think?
Why wouldn’t you mention buy downs on interest to increase monthly cash flow?
Thank you ❤ very helpful
Thanks for this. I cant believe I didn't understand this before. Thanks!!
Great breakdown just one question.
How is the $4249 you paid down in the first year counted as income? If that is money that you paid the bank how is that Income? I see how it gives you a bigger percentage but how is that income in the first place?
Wow wow wow wow good
I'll forever be thankful to you you've changed my whole life continue to preach about your name for the world to hear you've saved me from a huge financial debt with just little invstmnt, thanks so much Mrs.Damaris Diaz.
Ticker. Nile bitnile stock
How only 365k views ? This is like his best video ever.
venturing into the Bitcoin without an adequate orientation with a professional broker for accurate signals. you might lose all your hard-earned money
theres an extra mortgage obligation fee and lock fee and broker fee, i paid 15k for my 450k house, so the cost has to add it up. I think it's the main reason im gonna reconsiderring refinance
How to destroy the housing economy with this one EASY trick!
I appreciate you daily
Graham, you could have done your photoshop graphic in MS Paint or Powerpoint in minutes rather than hours given it's simplicity (I shed a tear for you here) BUT ANYWAY Loved the content, so nice to see expenses properly calculated for once, and the graphic while simple was easily to follow – thank you so much for sharing LIKE.
Good video
Great Video Stephen, would you mind to share what banks you prefer to work on your mortgages?
Hi thanks for your videos. I notice nobody add other tax than property tax. Is there any tax for renting a property ?I mean do I have to pay any % of my rent ? thanks
Your numbers don’t add up $3200-2600=$600 a
Month how do you get $800 a month
More like this
Can you do a video on how you decide how much to budget for renovations?
Wait there's more lol like an infomercial
Much better explanation than BPs video.
Anyád 👍👍👍👍👍👍👍👍👍👍👍
Graham is the best
Great video Graham…I learn this stuff super easy then any other videos. I saw 30 video approx but the way you explain is awesome.
I am looking to buy my first investment property and now I get idea how to evaluate the investments. Thank you again and keep posting knowledge videos.