I am often asked, what’s the secret to making money in real estate?
Many will point to push button solutions or cutting edge ideas. The harsh reality is real estate has been around for a long freakin time. But it’s about time someone actually broke it down to the brain dead simple.
(Not that I am suggesting that someone who is brain dead could do invest successfully. And actually if you’ve ever heard me speak you know I believe that my results aren’t typical and that no one ever makes any money in real estate except me so you should really stop reading this and just go find an old high school girlfriend on Facebook or some other way to pass your time.)
Ok, but if your still here I’m am going to share what I have discovered are the 2 most simple questions, the 2 golden nuggets of real estate investing excellenceness.
Before I give it away let’s make this interactive, which is a little tough in the middle of a blog post, but we can try.
What do you, without looking at the rest of what I’ve written THINK are the 2 keys to real estate investing, 2 things you must have. Enter them below.
Now you can read what I’ve found are the 2 most valuable keys to successful real estate investing.
After coaching students on over 200 deals and working over 100 myself I have found the number 1 key your investing should have is…
Sure, I know you have a good heart and aren’t just in it for the money. But remember your real estate investing business isn’t a “Non-Profit” Organization. Let your charity work be charity work and your business be business.
So, where does Profit come from in Real Estate? There are actually 2 places we get profit.
1st is from equity.
Equity is calculated by subtracting the debt or acquisition cost of the property from the ARV or after repaired value of the property.
Equity can be captured in three ways.
1. Existing equity due to principle pay down by the owner, or large original down payment at purchase.
2. Equity that is created. There are multiple ways to create equity where it doesn’t exist before most commonly we use short sales, repairs to the property, or repositioning of the property.
3. The third way to capture equity is through offering terms. In this method the equity is being created not from a discount in the acquisition but rather from an increased value due to the greater demand provided by easy to acquire terms.
Cash flow is the second way in which we profit in real estate transactions.
Cash flow exists very simply in properties where the amount of the mortgage and all other expenses are less than the amount of the monthly payment received from the occupant.
For you to have true cash flow you must be sure to include all maintenance expenses on the property. We often call this mailbox money cause it used to come in the form of a check each month from your tenant to your mailbox. Today we should probably just call it extra ducket’s direct deposited.
Profit is necessary in any business and especially a growing and thriving one. Pay close attention to your profit and you will outlast the competition and others who spend to focused ranting about how hard they work in their business.
The 2nd key is coming soon…
However if you’d like to register for an upcoming webinar and learn more of my strategies for rapid growth real estate investing click here.
Leave your feedback below. Which do you prefer Equity or cash flow?