The most fundamental piece of determining whether an investment makes sense can all be boiled down to one subject: math. Before you start having flashbacks to your high school algebra teacher and your desk with the gum stuck to it, fear not. The math you’ll be doing is a simple formula to see if your property will cashflow. Here is the formula you’ll want to follow for any deal you’re considering: income minus expenses equals cashflow. That’s it. Simple, right?

In the video below, I itemize the main expenses you’ll need to know. A lot of the numbers you’ll need can actually be found on Zillow, including the estimated mortgage and property taxes. Obviously, I want you to dig into these numbers and verify them, but they’re a useful starting point. If the numbers don’t work on the initial calculation, then it isn’t worth your time.

I frequently have people asking me if a certain property is a good investment. Basically, they are waiting for my blessing, which is not an empowered strategy for your investing. You have to be able to run the numbers yourself, or you could be pushed into a bad investment by someone. I see this happen to people all too frequently who have misplaced their trust into investing “gurus” who are only trying to get low dollar investors. 

Do your own footwork. If the numbers work, then it’s time to double-check the expenses and the rental income and do the rest of your due diligence. But don’t get discouraged: in this hot market, most listings don’t work. That is why it’s up to you to always be looking for new listings and running your own numbers on those leads. Doing a little math now can spare you a lot of wasted time and money in the long run.

How to find out if a property cashflows in minutes

2 Responses

    1. Vacancy is the amount of time a property sits empty in between being leased. In this video, Ken Calculated one month of vacancy. To really understand what your vacancy number is you need to call around to similar landlords and ask them what their vacancy number is. How long does their unit sit in between tenants? One month is a good starting point when in a high-demand area. You can’t assume your property will be leased back to back with no gaps in between tenants.

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Ken McElroy has lived and breathed real estate for his entire adult life, learning from the ground up. He shares his insights and experiences on his podcast, “Real Estate Strategies with Ken McElroy,” and on his wildly popular YouTube channel. Ken is passionate about educating others so that they too can experience financial freedom through real estate investing.
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