Mortgage Calculator

How To Calculate Rental Money – Big Miscalculation Most Traders Make





How do you estimate your rental property cash flow? There is a good deal of grey space, and some blunders that folks make. So let’s very first look at all the variables of calculating rental property cash flow, and then examine the most significant blunder most buyers make.

Funds Movement and Fairness are why we are carrying out genuine estate. This matter is a have to for achievement in genuine estate.

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38 comments

  1. Dont forget about property taxes. Property taxes put a dent in your net profit as well.

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  2. Can you get a 3% down payment on a investment property if it is your first house

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  3. What about insurance? Like Pmi or landlord insurance?

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  4. Okay so if i find a house worth 100k and buy it for 75k, i have the 25%. Why would I be able to sell it for 100k ? And make that 25% in equity

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  5. Nobody ever talks closing costs for getting the property. Include that in your calculations if you really want to be realistic, especially in the first years. That's not equity…that's all the fees associated with the transaction. Likely at least $5k on a $100k mortgage

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  6. What about Taxes & repairs!!!

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  7. This is really helping me get started….. in learning the basics! Thanks a lot!!

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  8. Who pays the utilities?

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  9. Forgot to add repair costs, insurance, and property taxes. 3 major costs that eat into your returns.

    Rule of thumb says that 1 percent of the purchase price per year, should be set aside for maintenance and repair costs. In this instance, $1000. Divide that by 12 = ~ $80 a month.

    Assume 1% for insurance every year = ~$80 a month

    Assume ~1% for property tax = ~$80 a month

    That’s $240 a month x 12 = $2880. Minus that from the annual returns in the video ($1700 per year) and we’re looking at a cash flow negative property here by $1180 a year.

    Now, none of these numbers are 100% accurate but it’s important to calculate everything into the equation before making a purchase. Food for thought!

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  10. That bookshelf on the background was so fake, need a better video editor and lighting

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  11. do you need a realtor license to buy and sell homes?

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  12. Your cash flow would not be $300. It would be negative. You would have to pay for a property manager, home insurance, maintenance, annual vacancies or late payments, property tax on the house, etc. You would likely lose $300 a month. Right Kris?

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  13. Insurance cost?

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  14. No repairs, capital items or pm or leasing fee? This is misleading…

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  15. What about insurance and property tax? Can't forget the T and I in PITI. I personally try to look for 12% annual cash on cash ROI as a typical Vanguard index fund that tracks the S&P500 averages 8% returns.

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  16. Also,
    I just want to have return on equity as passive income , immediately from day 1
    So meaning perhaps investing into some propriety , get the regular tenants, and get the money.
    Any advice on that? txs a lot

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  17. Very valuable info.
    To calculate the return, why do you take the equity and not just the purchase price?

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  18. this only works in places where rental is more expensive than mortgage.. not the case where i live 🙁

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  19. I'm looking at a tri and trying to figure out if it makes sense for me to house hack! How accurate is the estimates on Zillow for mortgage, down payment and property value?

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  20. Awesome, thanks! What about property taxes? They can be quite significant but I dont recall them being mentioned.

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  21. The ROI numbers are faulty because no 100k property generates 1,000 rent. Unless you bought that property in extreme recession in an area with higher rent. So a perfect scenario.

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  22. change this irritating music please

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  23. how do you buy a house with a $100,000.00 value for $75,000.00?

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  24. After I left my last comment, below, I really started thinking about the numbers. I think when you do your calculations in terms of "net", it really confuses things. I think the better approach is to calculate the expenses annually. $1000 a month rent times 12 months is $12,000 annually. But with one month of vacancy, your annual income is reduced to $11,000. Regardless of the vacancy, you still have to pay $700 a month for the mortgage. That adds up to $8,400 annually. $11,000 -$8,400 leaves $2,600. Now you would subtract the $1200 a year in property management fees. But, because, you were vacant for a month, the annual property management fees are really $1,100. That reduces your annual income down to $1,500. Note that this figure ignores property taxes, homeowners insurance, and any repairs that have to be made to the property throughout the year. So now the figure is actually a little worse than the $1,700 annual income that you calculated in the video. And to be clear, this is calculating cash flow, not taxable income. If we were calculating taxable income, we wouldn't be taking the $700 mortgage into consideration. We would only be taking into consideration that portion of the $700 mortgage which relates to interest (and property taxes and homeowners insurance, if it is escrowed). Sorry to be so anal about this, but I was mistaken in my earlier comment and I wanted to correct the record.

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  25. I’ve noticed you really reply to your viewers so I have a question for you. I’m a college accounting and finance student and eventually I’d love to specialize in real estate. However, what would you do in my shoes after accruing a down payment? Would you buy a primary residence home for yourself so you’re no longer in an apartment or buy your first rental?

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  26. You're not putting dates of when you bought and when you got the appraisal to determine the market value. And you're not putting how much the the rent is going in that area.

    If the property you bid was $75k but the market is $100k at the SAME TIME you made your bid, why did that person pick $75k as their listing price? Why not $90k? That's still a deal for anyone. So the value is $100k and you bid $75k, no one bid above you up to $90k???

    You would guarantee get out bid since it's below market, so why would the seller pick the bid with the least profit and on top of that sell below. So I don't get how you came up with these numbers.

    So the seller knew their home is valued at $100k and sold it to someone for $75k. And the seller had to pay commission. Taxes maybe. I guess if the seller bought it less than $75k. But still, why sell at a low price when you can easily get a bid of $80k. I mean you're not the only one with money. If I'm a seller I won't open up for bids at below market just to hit close to market if there is a bid. I'm gonna bid at market a least.

    Even if the seller got into an emergency and can't pay the mortgage, I would offer market value of $100k and put that I'll pay for the closing costs. That's still better than selling at $75k. I'll pay inspection, closing and termite is still better than $75k.

    Plus if you can get cash flow in renting it, why didn't the seller do that too. Since no one will sell below market or below their purchase price because that's just stupid, then I'm assuming this owner bought it for less than $75k. Let's say $50k with a mortgage of $400 a month. So he could rent it for $1000 and bank $600.

    Your video doesn't make sense. All you're doing is I bought a valued home of $100k but I made a bid for $75k which is under market value and got it. . and after I take out all expense I profit whatever amount from renting it, I have cash flow.

    That scenario is so rare. I mean this guy could of had a HELOC and bought another place. I mean this guys equity is more than your equity cause he has principle equity from paying it down. You're from $100k-$75k equity but this guy is $100k – $40k.

    The sellers equity would be more or equal to your bid.

    You're video just doesn't make sense.

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  27. Hi Chris, is your calculation based on an interest only loan?

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  28. What about property taxes?

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  29. Kris, I love your content, but this is grossly misleading. What about:
    – maintenance & repairs
    – big expenses like roofs and water heaters (I know you like to pass the property on before major repair costs are immanent, but not accounting for it at all seems a tad optimistic)
    – insurance
    – property tax
    – fees like sewer, water, garbage etc
    – and, finally tax on what is left?

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  30. Wait if you sell the house. You still need to pay tax to the profit

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  31. Chris,  Good Morning.  What do you think about Debt Weapons (DW) Is good to have when I buying multiple properties and use them as my down payment?  If so, which ones should I get?

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  32. what if you get no tenants for few months? you get zero income!!!

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  33. Kris, have you or have you ever thought of investing in a storage warehouse? wouldn't you make a pretty big return since you would collect monthly payment for every single unit?

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  34. Is there any way of doing a rental CMA? I'd like to see if the area I'm interested in buying a home is a good location for renting.

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  35. Best real estate channel ever !

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  36. How do you decide what you should charge for rent?

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  37. Great video Chris just what I needed. Hope there will be a part 2.

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  38. Great video, but the audio quality is a bit lower than other times

    Reply

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