How To Invest In Real Estate: The ULTIMATE Guide to Calculating Cashflow (EASY)

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

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Brandon Turner from Bigger Pockets video: Calculating Numbers on a Rental Property [Using The Four Square Method!]

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.

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.

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!

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[ZacharyLaid]

Who needs a course when you have Graham consistently releasing these bangers for us

[alejandrosantos]

Went to a real estate seminar today and you taught me more than they did in 90 minuets 😂😂

[neilgeorge]

Graham is pumping these videos so that you can't make any excuses to start investing in real estate

[micaiah]

I got more out of this 13 minute video than the last 30 real estate videos I’ve seen. Well done again, Graham!
Like button: SMASHED.

[FreshNuts]

Every time I hear the word Avocado, I think of you. This is not good.

[ghostmane]

i bought a condo for a really good price and while the HOA is absurd, using this chart I got an absolute money making steal. thank you for this info!!!

[graywilliams_.]

Real estate investment losing money is music to my ears. They are a major reason why the real estate market is the way that it is now.

[HawksNestYT]

damn i love real estate lol. These kind of example videos excite me so much. Just need to get my credit up and income history (only 19 rn) so I can qualify for a loan and get started.

[robert_iacob]

Graham I spent 37 minutes this morning watching the video you made about your worst tenant ever. Haha that is such an entertaining video. Really I just wanted to point out that I gave you 37 min of watchtime

[motorhedvonmetal]

Thank you! My wife and I are planning on buying our first rental property this year, a single family home, and your videos are not only helpful but inspirational. Keep up the great work!

[Danny...]

Great video Graham. I would add 1 more thing. Real estate is my side job so because of all the deductions, depreciation etc I save another $2-3k in taxes on my full time job increasing my ROI to 15-16% (not including property appreciation over time).

[LivingOffRentals]

Every home buyer should be required to watch this video prior to purchasing. Great stuff! If more people understood the math behind property purchases (even if they aren't investors), everyone would be way better off!

[SwitchandClickOfficial]

I made an excel sheet for this, makes things a lot easier!

[WhiteBoardFinance]

I created this exact video months ago. Except Graham gets 2342342342 views per minute while I'm over here eating Government cheese! WTF! lol

[tamekamanning]

Great video. How do you figure out the market rent for tenants? How much do you on average leave in the bank account for the repairs as the money grows each month? And how much can you spend for yourself as cash flow money.

[Chadisms]

Thanks Graham for taking my suggestion. This was cool. I foolishly never considered how I could make higher ROI if I had payments with less down. I just hate debt. I loved when you were showing the calculator and you said click here and don’t forget to click that like button. So F’in funny!

[AllenHulvs]

Thanks Graham!!! I been needing to see something like this 💪🏼💪🏼💪🏼

[exiquiodelamora]

Graham you are working tough putting out 3 quality videos a week!

[serg_lupescu]

Another banger! Thanks for consistently dropping these informative videos

[Bruh-fftw]

Man, I’ve watched a crap ton of real estate investing videos from a bunch of different sources, but damn, yours are always the most well edited and easiest to follow. Not to mention your personality/ energy is unparalleled.