Real Estate Investing: The 3 WAYS to make money owning Real Estate

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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

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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

Comments

JDM Viking says:

Graham! could you give me some thoughts on my plan?

the city next to mine is starting to blow up and become the next big town in my region, im thinking of purchasing a house there with a basement that can be rented out (Very normal to rent basements in my country) and live in the mainfloor. The rent from downstairs will pay most the mortgage and as it does I will build up a new equity for a similar property in the same town, move into the main floor in that house, rent downstairs and also rent out the main floor in the first house and then keep doing that, does this sound like a good plan?

William Haskins says:

Sure you don't make up the rules lol make sure you subscribed remember it's the rules. Thanks for another great video! Put in my offer on 2 4plexes yesterday plan on owner occupying one and investment on the other.

Juanco_"C.E.O." says:

Lmao min 9:00. Also just be careful with that equity thing, in a strong market is great, but she shit hits the fan that equity is worth kaka, until the market picks up again. So yea, really risky stuff with rentals.

MyGoldenMonkey says:

Hey Graham, I wanted to ask your thoughts on Grant Cardone saying "don't buy single or two door properties and instead buy multiple units if you are going to invest in real estates because you never getting cash flow 365 days out of the year so once that one or two people who rented moves out of your property you run out of cash flow." Also on what Kevin O'leary said during this interview https://www.youtube.com/watch?v=rAUFVjjO1tQ (pretty much saying don't buy condos aka shoeboxes) because I feel like they are both smart and successful in their own game and they contradict each other when it comes to real estates. Or maybe there is something I'm not getting because I'm just so new to real estate.

Ye Boi Pav says:

I want to drop ship on eBay but can’t get my stuff to sell what do I do? By the way I’m only 13

K0ua says:

Graham with the market is leveling off right now and as a beginner in RE investing, would you recommend looking at REO and HUD homes to fix up or buying a duplex to rent out the other half of the unit?

cindy asare says:

Wow thank you so much for explaining clearly how to figure out your net profit. So happy to learn this today. Thank you Graham this is very helpful

Abitamim Bharmal says:

Realtors are parasites

Aidan Woodsworth says:

My name is Aidan Woodsworth and I am a 15 year old viewer of your YouTube channel who was very inspired to become a real estate agent and was looking for advice where to start now at my age?

Zidane Steiner says:

I don't think LA home prices will rise. It's a massive bubble. I'm seeing shitty homes in shitty neighborhoods go for 700k. And they go fast, but these homes are way overvalued.

ChanceFlores says:

Boi my watch cost your than all your rent combined 🔥🔥😤😤

Ryan Walsh says:

Real estate is awesome!

Cruz Moreno says:

Can i rent out Cardboard boxes to people? For 30 dollars a month? They can pay for my subway sandwiches

Marty Summers says:

One of the biggest factors you did not talk about is the percentage of tax benefits you personally get from owning a real-estate business. So you are making a lot more than the NOI you mentioned to your viewers.

alex bob says:

House hacking or multi family? I wonder what's easier for the youngs ones to get into.

Jay L says:

Hi Graham do you have any tips on choosing a realtor?

timo says:

Keep up the great videos Graham 🙂

Michael Dwyer says:

Don't forget that even appreciation at the rate of inflation is a source of wealth building if you have a mortgage. 2% appreciation on a property with 20% equity is really a 10% return on your investment.

keaten israelson says:

how have you only gotten 6k views so far, man this is good stuff

Mac Ten says:

Can you do a video on you thoughts about owner financing real estate investing? Oh… and you videos are awesome!

Cody Camp says:

Hey Graham lets say you have 250k starting out in real estate investing. Would you use all of it to outright buy a property or would you still get a loan and then rent it out?

Jack Cutt says:

how many properties do you own and how much do they rent for?

Joe Smith says:

Graham – how do I schedule a one on one call with you

TravisB says:

Is it me, or are your "Dislike, Unsub" segments starting to sound more and more like Cartman from South Park? All the same those parts are hilarious! Keep up the good work.

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