Thank you im 13 years old my dad started doing these kinds of things. I think I want to follow along when I'm older also and I'm trying to read books now and watch videos about this business and it's starting to help me get the image into my mind of me doing it. just trying to learn early in my life!
You can start with less cash on cash return and over time it increases. I bought a home 5 years ago averaged 10% a year now it does 40% because of rent increases the area went up in value a lot.
Thanks for the info. Right on what I was thinking. 10-15 % CoC or a cash flow that is worth it with the potential of increasing property values. Every deal is different and that makes it fun.
Brandon, thank you for making shorter videos instead of 1-1.5 hr long ones! Appreciate learning about one or two subjects and moving on to something else!
It’s good to invest where you bountifully earn and have access to withdraw your profits without stress and zero labors, I was an investor of stocks but sold all off and invested on forex and I've been doing well With the help and assitance of mr carlos Kingston, I’m very happy and it feels like am the only one enjoying this although there are people still testifying about this platform it’s legit and pays for real, Goto him @Carlos_1uptrades on IG, and tell him I referred you to him ..
Principal pay down is pretty important as I’m still building my portfolio right now. As rents rise and the loan gets paid down, I personally don’t mind a slight cash flow negative position as my primary job can allow me to cover a couple hundred a month.
One thing to remember cash on cash can increase over time. My first duplex only cash flowed 400 a month. With rent increases over a few years the cash flow is double. The rents were below market rate when I got the place as well
First, thanks for the advice! I see deals that meet $100/unit, but not cash on cash return at 10-12%, I see close to 2% that becomes around 10% after 15 years, using 25% down payment . I can’t imagine any of “sterilized” MLS listings could return that much. What am i missing?
Forex trade had help me a lot despite this covid19 pandemic, all thanks to Mr Myron who help me to gain financial freedom through Forex/bitcoin trade, i'm very happy receiving $60,760 after a week of trading. for more info contact Mr Nicholas on Instagram @nicholas__fxtrade.
Hi I have same question? and have you find any answer regarding your question? Because maximum return I was able to research someone getting was 5% CoC
Good information but you’re the second real estate professional I’ve heard this week say stock market only yields 6%-7% annually. The S&P 500 has generated an average annualized return of 10.9% over the past 50 years.
To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game. Risk comes from not knowing what you are doing.
@@shalalala868 It stands for Real Estate Owned. Usually by a bank or government agency. Includes VA FHA HUD, tax lien, or owner death properties. I've also had some success with buying properties from older people who are at end of life and either want to die at home or need to go into long term care until they pass away. I'm also a nurse, so they like that I'm not trying to take advantage of them.
I bought my rental property and paid it off in 15 yrs and was only making $200 extra cash flow. Just paid it off Feb 2019 and now my cash flow is $950 a month free money
200 Bucks? Thats only $50 a week real estate isnt worth it if your making those kind of returns imagine if the furnace or water heater goes that $2400 for the whole year won’t even pay for the repair
@@flacofadez but there is bad investments too many risk factors the whole time you’re waiting for appreciation to be able to go and take the money back out all over $50 a week and if you have tenants in the property things are going to get damaged and break you’ll have to fix and you won’t be doing renovations so you’re pretty munched topped off on equity for a while
@@ellismonroe8857 that’s a worst case scenario though to be honest. 50$ cash flow isn’t what anyone should aim for I agree it’s a lot. Worst case just sell the property cut your losses and whatever closing costs were and find better.
@@ellismonroe8857typically certain percentages of the rental income are set aside for big or small repairs. The cashflow is what's left over after every single expense. Not to mention cashflow is not the only thing being gained here. A debt is being paid down at no cost to the owner and the ability to depreciate the house is pretty valuable to anybody who operates their own business
You have cash - on- cash return, , but there us also debt - reduction. When you pay your mortgage each month you have the principle going down . So there is that to consider.
Not to mention appreciation. In my local market, you're unlikely to cashflow on almost any property that isn't totally rundown. However, historically, you will have outperformed landlords nationally due to higher appreciation.
30-year mortgage loan is usually a way to go for property investments, I would recommend you to check out Graham Stephan's video "Why you shouldn't get a 15-year mortgage".
Hi, Thanks for the video! One scenario: Lets say you have several properties, all refinanced to keep buying. And let´s say the market crashes and rent goes down, so down you can´t meet your payments. What can happen then? What´s the consequence of that? Because in the last crash -at least in Ireland- rent went down 25-30%. Thanks!
Yes this videos are great. Your Top 5 style videos got me in at the start. Now I’ve built some knowledge and these brief informational videos that dive deeper on a topic are exactly what I’m looking for at this stage in my growth! Thanks for all your help!
@@JohnDavis-im1oy Thinking about house hacking before I buy properties. Where do you get a "Sober Living" contract? Any other contracts? Want to quit my scuzzy Walmart job! Live in upstate New York.
Good video. I will say that $200 for a single family home is not really cash flow. Over the next 5 years that $12,500 return will likely go back into the house in maintenance. Whether it's a roof, a septic tank etc. It really needs to make $400-$500 to actually cash flow
Those things are included in the calculation already. If you properly account for vacancy loss and maintenance needs, that 200 a month cash flow is actual cash flow. An investor that doesn't consider these things in determining final cash flow numbers is going to be in a world of hurt.
Great way to look at it. My first property only cash flows a couple hundred per month, but the appreciation I'm gaining in my area makes up for that for sure.
sounds like troubled waters to me as i am Negative 6% COC ROI on my property in Orange County, CA and the only hope here is equity due to property appreciation. I don't know how these folks find 10-15% coc roi deals unless they are full time into real estate investments or are always doing BRRR or buying foreclosures or flipping homes. My other properties are at 2.5% coc roi - so i guess i am not playing the game correctly and soon it will be time me for me to cash out and do a 1031 exchange to re-invest 200k cash somewhere else.
shalalala more important than location, he’s buying the properties too expensively. Especially to be losing that much per month. Needs to do more homework before buying to solve the problems
Absolutely. $100*12=$1200 then $1200/5000 is a 24% COC. That means you’ll get all your money back just from Free Cash Flow in 4 years and 2 months. This is a really good deal.
Thanks a lot for this! I took notes because I often forget stuff like this. Had my property in Zumbly and the good thing is it was already calculated but seeing your videos enlightened me more!
In need of a quick clarification please! Is the 10-12% CoC calculated by using the price of the house or the amount he put down on loan to finance the house purchase?
I’m working on getting my real estate license and actually having my eyes opened to how much more there is in the RE world. Im starting to see the sky is truly the limit to how and what I will do in this industry. I may not focus on the agent part now that I have had my eyes opened to the tons of ways to make far more money than simply buying and selling for clients
He's talking about the downpayment, which is the actual amount you are putting up. After you buy the property, for the most part you don't pay for the rest of the loan balance out of your pocket, the tenants pay the mortgage payment with the rent money. For example, if you bought a million dollar apartment complex, but only put $250K down payment, and made $25K/year from rent (after all expenses including the mortgage payment are taken into account), then your cash on cash return would be 10%. You don't put 1 million in the denominator because you never invested 1 million, you just invested 250K. Get it? This is different than the stock market, in that if you have 100K to invest in the stock market, you typically only buy 100K worth of stock. If you invested in real estate with 100K, you would typically put 100K down payment on a 500K property, which people refer to as leveraging your investment. The upside to leverage is that you obtain a million dollar income-producing rental property by only putting down a fraction of the money as a down payment. The downside to leverage is that you have a monthly mortgage payment, and there is a chance that if the tenants don't pay their rent and lets say the roof needs repair, you might not have enough money to pay the mortgage on your rental property and it could get foreclosed upon. As opposed to the stock market where peopley typically don't leverage their investments, like say you buy 100K worth of stock in Chipotle (or whatever), you don't have a monthly mortgage payment, and Chipotle is never going to call you to say that you have to fix the roof of one of their restaurants, so you don't have to worry about getting your stocks 'foreclosed' upon. Sure, the stocks may love some value, but you will never be called upon to pay out of your pocket for maintenance. Does this make sense?
I bought a property with 2 houses on it for 35,000 and a net operating income of 19,600. Gross 21,600. Literally the best deal I have ever seen. I almost threw up when I found it.
What market are you getting a 12% CoC return? I'm in Sacramento. The occupancy rate is either the best or second best in the Nation, but finding a double digit return is impossible in this market.
I started renting out my first home when we moved into our second home. I’m making ok return ($800 month after all expenses) but the property value has increased significantly since I purchased. Trying to decide if I sell and invest or continue to rent. Would I base CoC on original down payment, mortgage payments, and improvements I put into it over the 10 years we lived in it?
I like Maui - hope you and your family are enjoying! Been away from real estate for several years now, but...thoroughly enjoy you and your info and Bigger Pockets tools. I'll be back:-)
Watching these videos makes me so mad because it is literally impossible to find 10-12% CoC in Europe. Best deals I tend to find are around 4% CoC and 9% RoI and genuinely are student housing which is kinda unreliable.
What are successful real estate investors in Europe doing right now then? Just playing devil's advocate. If there were no way to find CoC of that range in Europe, wouldn't there be no such thing as real estate investing for cash flow there? And I'd wonder, if people are doing that successfully, where are they looking/doing deals? Or maybe they aren't doing cashflow investing - maybe the game there is appreciation. Or commercial. I'd dig more into the situation out there because there are people out there making bank in real estate investing - the trick may just to be figuring out where, how and why, if not via cashflow. Best of luck!
Very nice! Good reminder here Brandon. I'm wondering though, 15% total seems a bit low. If you're getting 12% from Cash on Cash, wouldn't you get well over 15% total after considering mortgage paydown, appreciation, and depreciation?
Aloha Brandon! I’m from Hawaii/Oahu, living in near Gig Harbor, Washington. Just bought your “No and Low Money Down” and downloaded your another one of your books on Audible. Doing real estate investing there on the island is great and its doing amazing here in this state too. Mahalo so much for all your information!
Question: if i get a loan to buy a rental property. Can i still get a second loan to buy another rental property?? Or do i have to wait until the first loan is done 10+ years??
You’re awesome man. I found this looking for a how to for finding good markets to focus in on. The context is that I want to start investing out of state. Im in San Diego and the prices are crazy. I want to find a market to focus on over many years and many investments in order to get to know the place and leverage that knowledge to improve over time. That’s the video I really would love to see. If it’s of interest to others and you too, walk through identifying a market to establish a foothold and build roots to leverage local knowledge and assets and contacts over 5 year to forever time period. You da man Brandon.
I can't follow this, because I don't know what "cash flow" is to you. Does that include expected repairs? I use 1%/yr of the property value as an estimate on annual repairs. Does it include a property management fee? I expect that's 10% of "expected vacancy depreciated" rent. My best guess is to assume you mean cash above PITI alone. There's more to it than that, but I don't want to muddy the water.
@biggerpockets So i'm looking to buy my 1st home, but I plan to use my VA loan. how would you guys calculate cash flow if I put no money down on the property?
How would $100-$200 even cover the maintenance or paint/repairs in between tenants? I understand you are building equity but when do you get to see some cash? You need 100 doors?!
@@turnerbowling1419 Can't vouch for one area in particular. I live in a high income area so I can't afford in my state and the numbers would not work anyway. I am always on the look out for other areas out of state and it's a pain to be honest. I would much prefer to invest in my backyard. That being said I think Cleveland OH is looking good. I own just outside Pittsburgh PA. There are many other areas but people on BP would not approve because they are considered "bad" areas. All I know is I make money.
Great point, as whatever money goes to pay principle is increasing your net worth, which is making you wealthier. Just going by cash flow isn't the entire picture. For example, I'm looking to buy an apartment complex in the next 2 years. Instead of getting a 30 year mortgage and getting some cash-flow from the start, I plan on getting a 15 year mortgage in order to get a better interest rate, and I probably won't have any cash-flow at first given the higher mortgage payment with a 15 year note, and maybe even have to pitch in from my own work paycheck. However, I will be building equity at a much faster rate and in the end will make more money/wealth by doing a 15 year note. I make enough money from my job as a doctor to live off of, and am going to use real estate as a retirement tool, so not really caring about cash flow early on.
@@David-fw4ly I would never invest in anything producing a known loss. The future value of 30-year mortgage payments will certainly be less due to inflation, plus you may sell and do 1031 exchanges many times over on these properties. You sell a house later because it appreciates will kick off stiff capital gain taxes. Buy and hold (or exchange) Best to use little of your own money if you really want to be wealthy.
@@jimross2101 Point well taken. I wouldn't consider my plan as a 'loss' given that I will be building equity. Sure, I won't have cash-flow, but I make 50K/month as a doctor so I frankly don't care if I don't get a couple hundred buck a month as cash flow. Once I have the apartment complex paid off, I plan to sell it and invest that money as a down payment on a larger apartment complex, again with a 15 year mortgage, and repeat until I retire and need the cash flow for my retirement. Your point is valid, but I don't want to wait 30 years to have my apartment complex paid off. Even though I will take out a 15 year mortgage, I actually plan to pay it off in 5 years or so, then sell and put down payment on a larger apartment complex as I stated earlier. I just have a different strategy than you, that's all. Have a nice day.
I don't understand why people don't usually point out appreciation and the fact that someone is pay your darn mortgage. If you had 0% CoC you would still be in a good place as your mortgage would be paid off and the house would have appreciated over the 30 years. Am I missing something?
I can make like 5-600 on my house. But that’s before I pay taxes on the rental income. Idk if that’s good. Part of me wants to try it and the other part of me wants to stay there and pay it off ASAP.
what do you think of the concept that "savers are losers"? I heard it from robert kiosayki. I dont have any money in my savings account but i have a property w/long term tenats that yield me a $600 return in profit. I use that money to help pay another mortg and i cashflow out to the tune of $260 a mo
Tougher. Do you count the initial start up cost and the cash flow varies from month to month. Makes it harder to pin down a true CoC if the income is always changing monthly. Your cash flow is better in my experience.
So what if your taking all your revenue from the rental and put it directly towards principal every month. Say $220,000 condo and rent+hoa is $1900 a month total positive cash flow is $3860. Is it wise to take the positive cash flow and pay it down?
if you have a mortgage on the rental property, taking home the extra $100 likely won't even cover your interest on the loan, so how can this be the minimum one should make every month on the rental property? Can you clarify this. thanks.
what is the annual growth rate of your beard? and what is the BOB (beard on beard) return over 5 years?
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Cryptoniad .com just gave me a hack transfer of $10,000 now i can continue my real estate business?
Real question is why hasnt this dude not responded to such a goated comment🤣
As a beginner, Taking less trade is actually more profitable than more. The more trades you take, the more your chances of losing increases.
Thank you im 13 years old my dad started doing these kinds of things. I think I want to follow along when I'm older also and I'm trying to read books now and watch videos about this business and it's starting to help me get the image into my mind of me doing it. just trying to learn early in my life!
3:35 " just budge alittle bit" solid solid advice , don't cave but don't get caught up in your own boundaries and miss out
You can start with less cash on cash return and over time it increases. I bought a home 5 years ago averaged 10% a year now it does 40% because of rent increases the area went up in value a lot.
great point! this is what I'm hoping to achieve with mine.
City and state please?
@@varunparkash9007 miami fl
Yep. REI gets better over time.
Correct, and depending on interest rates sometimes you can lower your payment (assuming you have a mortgage)
Thanks for the info. Right on what I was thinking. 10-15 % CoC or a cash flow that is worth it with the potential of increasing property values. Every deal is different and that makes it fun.
Brandon, thank you for making shorter videos instead of 1-1.5 hr long ones! Appreciate learning about one or two subjects and moving on to something else!
this is EXACTLY what we need for the quick & dirty 2 second analysis.
EXACTLY
It’s good to invest where you bountifully earn and have access to withdraw your profits without stress and zero labors, I was an investor of stocks but sold all off and invested on forex and I've been doing well With the help and assitance of mr carlos Kingston, I’m very happy and it feels like am the only one enjoying this although there are people still testifying about this platform it’s legit and pays for real, Goto him @Carlos_1uptrades on IG, and tell him I referred you to him ..
So where are these properties your buying for a 12%ish %?
I have two properties. First cash flows a $1400, the second $2200.
And yes they both have a mortgage and are single family homes.
Hi. I can get into the same situation. How is it working for you? Life changing?
Bought one for $110k...loan amount is 83k...renting it out for $1,350 and mortgage and everything is $905...rents are high so take advantage of em
Principal pay down is pretty important as I’m still building my portfolio right now. As rents rise and the loan gets paid down, I personally don’t mind a slight cash flow negative position as my primary job can allow me to cover a couple hundred a month.
Well said. We shoot for at least 15% CoC and $125/door cash flow with PM in place.
One thing to remember cash on cash can increase over time. My first duplex only cash flowed 400 a month. With rent increases over a few years the cash flow is double. The rents were below market rate when I got the place as well
First, thanks for the advice! I see deals that meet $100/unit, but not cash on cash return at 10-12%, I see close to 2% that becomes around 10% after 15 years, using 25% down payment . I can’t imagine any of “sterilized” MLS listings could return that much. What am i missing?
Forex trade had help me a lot despite this covid19 pandemic, all thanks to Mr Myron who help me to gain financial freedom through Forex/bitcoin trade, i'm very happy receiving $60,760 after a week of trading. for more info contact Mr Nicholas on Instagram @nicholas__fxtrade.
Hi I have same question? and have you find any answer regarding your question?
Because maximum return I was able to research someone getting was 5% CoC
The answer is obvious then, you must pursue off market discounted properties
if you're accounting for all expenses appropriately, 12 percent coc is nearly impossible to find on the MLS in the current market.
Spot on! Always calculate your Cash-on-cash! I always do this on all my deals, and I cover it on some of my videos on my channel when I go over deals
Thanks Brandon for telling us more about metrics and how we should use them in order to evaluate our deals
10-12% seems impossible anywhere near Toronto. You're lucky to break even at current prices.
It’s also impossible in many many parts of the world.
Does BP has a Canada portal/page where one can find same tools etc for Canada locations? Thanks!
Good information but you’re the second real estate professional I’ve heard this week say stock market only yields 6%-7% annually. The S&P 500 has generated an average annualized return of 10.9% over the past 50 years.
A lot of people only look at one of these metrics, so important to look at both and understand the relationship they share.
To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game. Risk comes from not knowing what you are doing.
Many new tra-ders face challenges without proper guidance. I found success by learning from James Clark's expertise.
This is why i buy REOs all the time. End up paying about half price on the property. Usually cashflow around $500 per house.
What are REOs?
@@shalalala868 It stands for Real Estate Owned. Usually by a bank or government agency. Includes VA FHA HUD, tax lien, or owner death properties. I've also had some success with buying properties from older people who are at end of life and either want to die at home or need to go into long term care until they pass away. I'm also a nurse, so they like that I'm not trying to take advantage of them.
I bought my rental property and paid it off in 15 yrs and was only making $200 extra cash flow. Just paid it off Feb 2019 and now my cash flow is $950 a month free money
200 Bucks? Thats only $50 a week real estate isnt worth it if your making those kind of returns imagine if the furnace or water heater goes that $2400 for the whole year won’t even pay for the repair
No such thing as bad profit. Yea it’s a lot of effort for a bit of roi but it also appreciates in value. Depends what you value more
@@flacofadez but there is bad investments too many risk factors the whole time you’re waiting for appreciation to be able to go and take the money back out all over $50 a week and if you have tenants in the property things are going to get damaged and break you’ll have to fix and you won’t be doing renovations so you’re pretty munched topped off on equity for a while
Holding the property, paying it down, and getting appreciation is useful for net worth, long run, and future loan collateral.
@@ellismonroe8857 that’s a worst case scenario though to be honest. 50$ cash flow isn’t what anyone should aim for I agree it’s a lot. Worst case just sell the property cut your losses and whatever closing costs were and find better.
@@ellismonroe8857typically certain percentages of the rental income are set aside for big or small repairs. The cashflow is what's left over after every single expense. Not to mention cashflow is not the only thing being gained here. A debt is being paid down at no cost to the owner and the ability to depreciate the house is pretty valuable to anybody who operates their own business
You have cash - on- cash return, , but there us also debt - reduction. When you pay your mortgage each month you have the principle going down . So there is that to consider.
Not to mention appreciation. In my local market, you're unlikely to cashflow on almost any property that isn't totally rundown. However, historically, you will have outperformed landlords nationally due to higher appreciation.
Quick and easy! One question, one answer!
Reminds me a lot of the the amount of research I had to go into before I was able to finally certify ideal worth of certain properties.
What amortization schedule do you use, 15 or 30? To calculate? Seems to alter the return by a lot.
30-year mortgage loan is usually a way to go for property investments, I would recommend you to check out Graham Stephan's video "Why you shouldn't get a 15-year mortgage".
3:39 Two requirements Brandon wants that we should consider:
1) $100/month/unit
2) minimum cash-on-cash return (minimum of 120%).
12.0 percent, not 120.0! That scared me! Lol.
Hi, Thanks for the video! One scenario: Lets say you have several properties, all refinanced to keep buying. And let´s say the market crashes and rent goes down, so down you can´t meet your payments. What can happen then? What´s the consequence of that? Because in the last crash -at least in Ireland- rent went down 25-30%. Thanks!
Mr Heldenberg that’s why you buy right so market crashes don’t affect your rentals at all. Good rentals are not bought at market value
Yes this videos are great. Your Top 5 style videos got me in at the start. Now I’ve built some knowledge and these brief informational videos that dive deeper on a topic are exactly what I’m looking for at this stage in my growth! Thanks for all your help!
I cash flow $375/month on my last rental.
John Davis
That’s before tax income.
John Davis
My 3 rentals were all less than $50,000
thats awesome- you must have this rental in a hot spot booming area?
@@JohnDavis-im1oy Thinking about house hacking before I buy properties. Where do you get a "Sober Living" contract? Any other contracts? Want to quit my scuzzy Walmart job! Live in upstate New York.
Good video. I will say that $200 for a single family home is not really cash flow. Over the next 5 years that $12,500 return will likely go back into the house in maintenance. Whether it's a roof, a septic tank etc. It really needs to make $400-$500 to actually cash flow
Those things are included in the calculation already.
If you properly account for vacancy loss and maintenance needs, that 200 a month cash flow is actual cash flow.
An investor that doesn't consider these things in determining final cash flow numbers is going to be in a world of hurt.
Great way to look at it. My first property only cash flows a couple hundred per month, but the appreciation I'm gaining in my area makes up for that for sure.
sounds like troubled waters to me as i am Negative 6% COC ROI on my property in Orange County, CA and the only hope here is equity due to property appreciation. I don't know how these folks find 10-15% coc roi deals unless they are full time into real estate investments or are always doing BRRR or buying foreclosures or flipping homes. My other properties are at 2.5% coc roi - so i guess i am not playing the game correctly and soon it will be time me for me to cash out and do a 1031 exchange to re-invest 200k cash somewhere else.
@@varunparkash9007 Location, location, location!
@@varunparkash9007 Put that cash to work in other markets.
shalalala more important than location, he’s buying the properties too expensively. Especially to be losing that much per month. Needs to do more homework before buying to solve the problems
Great video, I am going to buy my first rental property this year. I will be watching a lot of your videos for guidance 👍
Yes please more specifics and informational videos like this
Where do you include tax benefits and equity built into a loan? Cash on cash return?
So would you buy a 70k house owner finance at 9% with only 5k down. It cash flow about 100-160 monthly after expenses.
Absolutely. $100*12=$1200 then $1200/5000 is a 24% COC. That means you’ll get all your money back just from Free Cash Flow in 4 years and 2 months. This is a really good deal.
Cryptoniad .com just gave me a hack transfer of $10,000 now i can continue my real estate business?
My properties are all over 20% roi!! I average 325$/month/unit. Sometimes smaller towns get you a better return!!
Yes mines is 24 I average $575 a month
Where n how many units?
Thanks a lot for this! I took notes because I often forget stuff like this. Had my property in Zumbly and the good thing is it was already calculated but seeing your videos enlightened me more!
What can you see in Zumbly? Does it have properties all over the continent?
In need of a quick clarification please!
Is the 10-12% CoC calculated by using the price of the house or the amount he put down on loan to finance the house purchase?
German Benitez amount down between closing costs, down payment etc
my minimum is 300 after everything lol, 12-15% coc and 18-20% roi
I’m with you. I like to see 12-15% COC and 18-22% total ROI
ROI is the same thing as cash on cash return.
Alex Kairoff yikes bud. Hate to break it to you but no it’s not.
@@irainkoolaid well please explain then. I own three rentals
Alex Kairoff ROI takes into consideration principle pay down, tax benefits, and appreciation while cash on cash does not.
Is that including expenses like emergency repairs and broken appliances and things like that. That could wipe out profits
I’m working on getting my real estate license and actually having my eyes opened to how much more there is in the RE world. Im starting to see the sky is truly the limit to how and what I will do in this industry. I may not focus on the agent part now that I have had my eyes opened to the tons of ways to make far more money than simply buying and selling for clients
What are we referring to by cash investment? Are we talking about the downpayment to purchase the property? Or the entire value of the loan?
He's talking about the downpayment, which is the actual amount you are putting up. After you buy the property, for the most part you don't pay for the rest of the loan balance out of your pocket, the tenants pay the mortgage payment with the rent money. For example, if you bought a million dollar apartment complex, but only put $250K down payment, and made $25K/year from rent (after all expenses including the mortgage payment are taken into account), then your cash on cash return would be 10%. You don't put 1 million in the denominator because you never invested 1 million, you just invested 250K. Get it? This is different than the stock market, in that if you have 100K to invest in the stock market, you typically only buy 100K worth of stock. If you invested in real estate with 100K, you would typically put 100K down payment on a 500K property, which people refer to as leveraging your investment. The upside to leverage is that you obtain a million dollar income-producing rental property by only putting down a fraction of the money as a down payment. The downside to leverage is that you have a monthly mortgage payment, and there is a chance that if the tenants don't pay their rent and lets say the roof needs repair, you might not have enough money to pay the mortgage on your rental property and it could get foreclosed upon. As opposed to the stock market where peopley typically don't leverage their investments, like say you buy 100K worth of stock in Chipotle (or whatever), you don't have a monthly mortgage payment, and Chipotle is never going to call you to say that you have to fix the roof of one of their restaurants, so you don't have to worry about getting your stocks 'foreclosed' upon. Sure, the stocks may love some value, but you will never be called upon to pay out of your pocket for maintenance. Does this make sense?
All cash you put into a deal ie downpayment + rehab+whatever = cash investment.
@@treystills Yes, this answer is correct. All the money you have into the deal (down payment, closing costs, rehab, etc). CCR = NOI/Total investment
What about SFR? What is your rule for CoC return
I bought a property with 2 houses on it for 35,000 and a net operating income of 19,600. Gross 21,600. Literally the best deal I have ever seen. I almost threw up when I found it.
When you talk about investment amounts is that only referring to cash down payments or equity down payments as well?
Unfortunately where I am in Arizona, cash flow is negative on a 30 year fixed. Very unhappy about this.
You need to find the right properties, undervalued or in need of rehab.
Going to your calculation. Was that 74,000 they put as a down payment? Or how much the house is worth? Ok thank you!
Excellent and straight forward advice with real numbers. Thanks Brandon.
Does CoC account for principal pay down?
First time coming across your channel. I appreciate your input!
When calculating CoC do you include net cash flow after all costs, tax, interest AND downpayment on loan?
Alexander yes the final $$ in the bank after all expenses 👍
What happens if you get into property for 0 because you cash out refit, how would you base good deal.
Joel Hinojosa The return would be infinite. So good deal if you can do it.
Hey mate just a quick question, does ur cashflow per unit includes the principal payment of your mortgage?
What market are you getting a 12% CoC return? I'm in Sacramento. The occupancy rate is either the best or second best in the Nation, but finding a double digit return is impossible in this market.
Invest out of state in mid-west markets.
What metric should I use if I'm buying a property with cash?
I started renting out my first home when we moved into our second home. I’m making ok return ($800 month after all expenses) but the property value has increased significantly since I purchased. Trying to decide if I sell and invest or continue to rent. Would I base CoC on original down payment, mortgage payments, and improvements I put into it over the 10 years we lived in it?
Is the 74,000 the cost of the house or down payment?
100-200 a month NET cash flow per unit. Cap Rate 12% Minimum. IRR- 15% minimum
Is everyone leveraging with cash out refis/home equity loans to get going/ funding additional properties ?
I like Maui - hope you and your family are enjoying! Been away from real estate for several years now, but...thoroughly enjoy you and your info and Bigger Pockets tools. I'll be back:-)
yea. prolly not doing so well anymore
Do you consider the equity portion of your monthly mortgage payments towards your returns?
Watching these videos makes me so mad because it is literally impossible to find 10-12% CoC in Europe. Best deals I tend to find are around 4% CoC and 9% RoI and genuinely are student housing which is kinda unreliable.
Same here... 1-3 % coc is more realistic
@@frederiktiteca3822 Exactly, so essentially it becomes speculation on property value appreciation rather than "cash cow" investing
What are successful real estate investors in Europe doing right now then? Just playing devil's advocate. If there were no way to find CoC of that range in Europe, wouldn't there be no such thing as real estate investing for cash flow there? And I'd wonder, if people are doing that successfully, where are they looking/doing deals? Or maybe they aren't doing cashflow investing - maybe the game there is appreciation. Or commercial. I'd dig more into the situation out there because there are people out there making bank in real estate investing - the trick may just to be figuring out where, how and why, if not via cashflow. Best of luck!
Same here, most of my Roi comes from tax deductions
Cryptoniad .com just gave me a hack transfer of $10,000 now i can continue my real estate business?
Very nice! Good reminder here Brandon. I'm wondering though, 15% total seems a bit low. If you're getting 12% from Cash on Cash, wouldn't you get well over 15% total after considering mortgage paydown, appreciation, and depreciation?
He's being conservative. All together it can be over 50%
I think he is speaking to the normies
I love the content but when is BP going to have a Canadian version?
SP&500 Did average 10% on average ! Not 5-6% ..
Aloha Brandon! I’m from Hawaii/Oahu, living in near Gig Harbor, Washington. Just bought your “No and Low Money Down” and downloaded your another one of your books on Audible. Doing real estate investing there on the island is great and its doing amazing here in this state too. Mahalo so much for all your information!
Big big Harbour is beautiful.
Born and Raised in Maui! Living in Oahu now.
Question: if i get a loan to buy a rental property. Can i still get a second loan to buy another rental property?? Or do i have to wait until the first loan is done 10+ years??
You’re awesome man. I found this looking for a how to for finding good markets to focus in on. The context is that I want to start investing out of state. Im in San Diego and the prices are crazy. I want to find a market to focus on over many years and many investments in order to get to know the place and leverage that knowledge to improve over time.
That’s the video I really would love to see. If it’s of interest to others and you too, walk through identifying a market to establish a foothold and build roots to leverage local knowledge and assets and contacts over 5 year to forever time period.
You da man Brandon.
Excellent way to look at it! Just what I was looking for... thanks!
Do a video on raising capital please. Discuss how you find investors and what you say to them to get them to invest in your projects
I can't follow this, because I don't know what "cash flow" is to you. Does that include expected repairs? I use 1%/yr of the property value as an estimate on annual repairs. Does it include a property management fee? I expect that's 10% of "expected vacancy depreciated" rent. My best guess is to assume you mean cash above PITI alone. There's more to it than that, but I don't want to muddy the water.
@biggerpockets So i'm looking to buy my 1st home, but I plan to use my VA loan. how would you guys calculate cash flow if I put no money down on the property?
😂
When he talks about aiming for a 15% cash on cash return. Is that in the the first year? Or accumulated over a certain amount of years? Thanks
How would $100-$200 even cover the maintenance or paint/repairs in between tenants? I understand you are building equity but when do you get to see some cash? You need 100 doors?!
My minimum is 24% cash on cash return.
Just curious, have you had much success closing deals with that barrier to entry? Are you like exclusively grabbing foreclosed properties??
@@turnerbowling1419 Yes. No foreclosures so far. I like small multi families.
Myraisins1 in what area, if you don’t mind me asking? 24% COC is certainly worth at least a look haha
@@turnerbowling1419 Can't vouch for one area in particular. I live in a high income area so I can't afford in my state and the numbers would not work anyway. I am always on the look out for other areas out of state and it's a pain to be honest. I would much prefer to invest in my backyard. That being said I think Cleveland OH is looking good. I own just outside Pittsburgh PA. There are many other areas but people on BP would not approve because they are considered "bad" areas. All I know is I make money.
When you say cashflow are you including what goes directly to principle on your loan?
Miguel Terrazas He talking cash in your pocket after all expenses paid. Loan pay down or increased equity is something to consider also.
Great point, as whatever money goes to pay principle is increasing your net worth, which is making you wealthier. Just going by cash flow isn't the entire picture. For example, I'm looking to buy an apartment complex in the next 2 years. Instead of getting a 30 year mortgage and getting some cash-flow from the start, I plan on getting a 15 year mortgage in order to get a better interest rate, and I probably won't have any cash-flow at first given the higher mortgage payment with a 15 year note, and maybe even have to pitch in from my own work paycheck. However, I will be building equity at a much faster rate and in the end will make more money/wealth by doing a 15 year note. I make enough money from my job as a doctor to live off of, and am going to use real estate as a retirement tool, so not really caring about cash flow early on.
@@David-fw4ly I would never invest in anything producing a known loss. The future value of 30-year mortgage payments will certainly be less due to inflation, plus you may sell and do 1031 exchanges many times over on these properties. You sell a house later because it appreciates will kick off stiff capital gain taxes. Buy and hold (or exchange) Best to use little of your own money if you really want to be wealthy.
@@jimross2101 Point well taken. I wouldn't consider my plan as a 'loss' given that I will be building equity. Sure, I won't have cash-flow, but I make 50K/month as a doctor so I frankly don't care if I don't get a couple hundred buck a month as cash flow. Once I have the apartment complex paid off, I plan to sell it and invest that money as a down payment on a larger apartment complex, again with a 15 year mortgage, and repeat until I retire and need the cash flow for my retirement. Your point is valid, but I don't want to wait 30 years to have my apartment complex paid off. Even though I will take out a 15 year mortgage, I actually plan to pay it off in 5 years or so, then sell and put down payment on a larger apartment complex as I stated earlier. I just have a different strategy than you, that's all. Have a nice day.
I have two properties and going to add two more , need help to grow cash flow. I would be thankful if you could help me out
I don't understand why people don't usually point out appreciation and the fact that someone is pay your darn mortgage. If you had 0% CoC you would still be in a good place as your mortgage would be paid off and the house would have appreciated over the 30 years. Am I missing something?
I can make like 5-600 on my house. But that’s before I pay taxes on the rental income. Idk if that’s good. Part of me wants to try it and the other part of me wants to stay there and pay it off ASAP.
Can you expand on how you calculate your average rate of return?
Where do we get more info about the syndication fund you have?
How much cash should you have set aside for repairs
Is it still possible to achieve that 12% cash on cash return in today’s interest environment where you’re going to pay a rate of at least 7%?
I have an appraisal who will determine the rent/cash flow I receive on my property.......
what do you think of the concept that "savers are losers"? I heard it from robert kiosayki.
I dont have any money in my savings account but i have a property w/long term tenats that yield me a $600 return in profit. I use that money to help pay another mortg and i cashflow out to the tune of $260 a mo
Well, it's always good to have a certain amount in reserves per unit you own, for when stuff breaks
interested to see this same concept applied to a airbnb property(short term rental)
Tougher. Do you count the initial start up cost and the cash flow varies from month to month. Makes it harder to pin down a true CoC if the income is always changing monthly. Your cash flow is better in my experience.
Love the beard and new haircut! ❤️
What leverage would you consider to get a 12% CoC
I have a rental and I make 2000 a month
Fully paid off loan for sure right?
Amazingly helpful. Appreciate the brevity.
does BP work the nonprofit affordable housing startups?
So what if your taking all your revenue from the rental and put it directly towards principal every month. Say $220,000 condo and rent+hoa is $1900 a month total positive cash flow is $3860. Is it wise to take the positive cash flow and pay it down?
By “money you put into the deal”...does that only refer to money NOT borrowed?
I am starting my real estate knowledge from u
if you have a mortgage on the rental property, taking home the extra $100 likely won't even cover your interest on the loan, so how can this be the minimum one should make every month on the rental property? Can you clarify this. thanks.