Real Estate Investing – Income & Expenses Calculating Real Estate Investment Returns

Real Estate Investing – Income & Expenses Calculating Real Estate Investment Returns


hello everyone and thanks for tuning
into the financial investor channel my name is Brent and today we’re going to
be going through the income statement for 2018 for my very first real estate
investment property so we’re gonna be going through the income statement I
purchased the property in September 2018 we’re gonna go ahead and go over the
numbers for October November December and in January I got my first check I
started getting those in I made a video going over my rental check either for
January February once my duplexes were all filled in I
made a video going over how much I was actually getting for all three of my
properties but in today’s video we’re gonna go over my first property what the
numbers were as far as the rehab cost and how I’m actually paying myself out
of the gross income some of it goes towards the expenses and then I take a
portion of it for myself and just pay myself as a member distribution from my
LLC to myself so we’re gonna go through that in today’s video so if you are
brand new to the channel tab not yet subscribe hit that subscribe button
below if you do enjoy the video finai helpful hit the thumbs up and if you
have any comments questions going for anything in today’s video drop it on the
comment section below I was appreciate all your guys feedback
as well those thumbs up and let’s go ahead and get into it I’m gonna go ahead
and flip the screen around here and begin sharing this so we’re not going to
start off with the calculator we whoa Bo you go in through the BiggerPockets
calculator here with the Boro calculator with the numbers but first we’re gonna
be taking a look at the income statements so this is for the period
range from January 2018 until December 2018 now I made a video in September or
October somewhere where I had done a walkthrough of the property going over
what I had wanted to do you know paint the walls replaced the flooring
how’d it get a new water heater had to do some you know painting I believe I
already mentioned that but you know fixing fixtures fixing the bathroom and
all that was completed here so during the month of October you know I closed
in September believe like the 21st 23rd somewhere in
that range so I had a 21-day 21 days to close and made him a cash offer 95
thousand I believe was a right locked in came back with my repairs because when I
did my walkthrough I noticed that the carpet had patches that were just ripped
up because the previous owner had a tenant that had a dog or a cat in there
they had tore that up there were issues with the bathroom the water heater was
old and when I had it checked it was not working so I put all these calculations
and I came back with my repairs they dropped the price down to ninety
thousand so I said okay that’s a little bit better than 95 so I went ahead and
accepted it made the Buy in October I put fifty three five thousand three
hundred and eighty-five dollars into it and then November the second month our
continue the rehab here you know three thousand six hundred and ninety five
dollars in labor labor costs a lot it’s really not two materials it’s the labor
that you are paying heavily for when you guys go in in there and they’re working
at twenty to forty dollars an hour that can really start to stack up so a lot of
roadside investors who go into this they’re doing this all themselves or
going in there they’re putting sweat equity into it by doing their own floor
and they’re doing their own paint jobs they’re doing their own trim pulling out
the the fixtures and such around the stuff for replacing the water here
learning how to do electrical learning how to do plumbing and all of that they
can save a lot there in maintenance but again it’s not you can’t write off your
time so what is more important going you know can you make more than you would
actually be able to you know it’s gonna take you months to finish up a project
would you rather pay for it that you know you can recoup those costs get the
job finished quicker get it rented out and have a cash flow faster or you know
do you want to put time into it take three six months in order to get it
fixed up you may be saving on those maintenance cost but it’s costing you
time as far as now you’re paying for taxes you’re paying for utilities you’re
paying for time away from your work or your you know you’re putting an extra
in a day to get all this done and at the very end of the day you’re not having a
tenon in it and there’s no cash flow there so you’re just kind of you know
you got to pick and choose which one you want to go there and then December if
everything was basically wrapped up by December it was fixed up and it was
already on the market rented in December December’s fees were believe there was a
water freeze the wider pipe froze so we decided to bake a box put it on the
pipes here in the backyard somewhere there was a little pipe that stuck out
that needed to be covered and we also paid for some cleaning in there in
December and a few other miscellaneous things here that had to be fixed so
December was a very low month there seven hundred and fifty three dollars
and 32 cents for my total rehab from October till December until I got that
tenant in there in January it cost eleven thousand two hundred and seventy
three dollars and 82 cents so that is how much I put into it spending it on
maintenance spending on material spending on dumping fees stock materials
equipment rentals to get this property having brand-new flooring had you know
carpet I’m sorry it was a vinyl composite tile we painted all the walls
we put in new fixtures we placed a water heater pull the wall out of the bathroom
how to replace the whole tub there in the bathroom and trim the trees outside
had to do some yard work so there’s a lot of stuff that went into it to kind
of get this property up and into a nice rentable status now jumping over to the
actual calculator now I purchase this for ninety thousand after a pair of
value I estimated very low ninety-eight
thousand I thought I would have overshot a little bit higher the appraisal came
in a little bit lower we went ahead and just kind of I got a loan for what was
it will go through here so I put in that after a pair of value was gonna be about
98 thousand one hundred and five thousand I believe somewhere in that
range I just kind of kept that now my
purchasing closing costs were very low I paid for this in cash so purchasing
costs were very low my estimated repair caused
it was not an estimate this is exactly how much I paid I paid 11 273 so I just
bumped it up 11 274 this is a complete cache purchased it took me three months
to so estimated rehab time and months that’s actually three months of rehab
time and then I actually took four months to refinance so once I got a
tenant in place in January I went to the you know I work at a credit union so I
went downstairs and said hey I got this property I have a tenant in place I
showed them the lease we went over the paperwork I locked in a rape and I went
ahead and refinanced it so when I refinance it I took a loan of 69
thousand oh it was actually seventy three thousand five hundred bucks but
like a clown this is something you do not want to do you do not want to wrap
your closing costs and lender fees into your loan you know I did not do this
correctly you’re supposed to pay all of this out-of-pocket that way it’s a
deduction at the very end of the year you pay off your closing costs out of
your LLC you account your banking account out of your lender you know you
pay your lender fees out of your own checking account on the spot when you’re
closing and that way it’s all deductible at the very end of the year versus
getting wrapped up into your loan if I had actually wrapped this into my loan
sorry if I had not wrapped it into my loan I would have got to check a direct
deposit into my bank account of seventy three thousand five hundred bucks and
you know I used that to go pay off the HELOC but in this case I would have had
an extra four thousand bucks there to kind of do whatever what I need to do
and it also be a deduction against my w2 income
so my next refinance with my duplex I am going to be making sure that I pay my
closing cost that I pay my lending fees lender fees out of my own business
checking account so this is not a interest-only account and it includes
Pia it doesn’t actually does not clued PMI I put 25% so this is actually
incorrect so I don’t have any property mortgage insurance private mortgage
insurance and it was one of and it’s amortized over 30 years so the
next step I won over my income so this specific single family unit rents out
for 1,200 bucks I do pay water sewer and trash so the
water bill actually comes out pretty low on this unit this one I believe my water
bill for the first month was about eleven bucks second bill up seven second
month was about eighteen dollars so I just estimate hi you know some months
you’re gonna be high some ones you’re gonna be low I put in thirty dollars for
my water and sewer garbage it’s about twenty bucks a month forty bucks every
two months or so and so I put that in there as twenty bucks a month my monthly
insurance I got this from my quote how much I’m paying per year divided by
twelve that’s 75 bucks a month for this specific unit so right there my total
monthly fixed expenses is about a hundred and seventy four dollars and 42
cents now vacancy where I bought this property when I talk to my property
manager vacancies are basically one percent in this area but I put in five
percent just to be you know I didn’t put it away not six hundred or sixty by
twelve that is six hundred and actually seven hundred and twenty bucks right
there just getting stashed away for you no extra mortgage payment for a month
you know it’s gonna basically cover e mortgage payment for in that year
timeframe I put away five percent for repairs and
maintenance five percent for capital expenditures management fees I pay ten
percent to my property manager so I put in the property management fees they’re
my income growth that’s actually a little bit probably high will bump it
down to three percent the annual you know how much do you expect your value
of your property I don’t speculate here so I just put in two percent with with
the inflation rate two percent annual growth two percent annual expense growth
sales expenses if I were to sell this property off I would account for six
percent for realtor fees and three percent for closing costs being covered
for a total of about nine percent of the property sell price now when I calculate
these results based on all of what I had actually put into it
so during the initial rehab period here let’s see if I can zoom in just to be
here for all of you on those mobile devices so purchase price $90,000
closing costs 386 estimated repairs that is actually what I paid for my repairs
prior to getting it rehabbed and rent it out my total project for this specific
home was a hundred and one thousand going into it my after repair of value
I asked submitted it that ninety thousand I probably could have got up to
about a hundred and fifteen hundred and twenty but I would prefer to take a
smaller loan here I didn’t need the cash out I wanted you know I left some
obviously into the home about 20-some thousand dollars and that allowed me to
have a very low mortgage still be able to cash flow very nicely here after the
refasten refinance here which will kind of take out so during the initial rent
period here without the loan I had $1,200 coming in my monthly expenses
without a mortgage was four hundred and seventy four dollars and 42 cents this
was putting 60 bucks away for vacancy 60 bucks for capital expenditures 20 bucks
for carbage a hundred and twenty bucks for management fees repairs sixty bucks
off to the side I was covering water and sewer putting that on my credit card
that is a deductible on my own plus he gives me cash back for my business
builds up credit business as well plus I included that in my monthly income so
normally what this property would rent for is about eleven hundred bucks in the
area but because I included water sewer and trash I said hey what do you think I
could get extra for including these and the rent and they said you can probably
bump it up by a hundred bucks so I did bump it up to a hundred bucks and that
hundred dollars is covering my water my sewer and my garbage and sometimes I may
go over sometimes I may go under you know for the most part I believe I
should get some of that you know a hundred bucks and I’m only paying out
fifty bucks per month so 50 bucks 50 bucks over a few months will kind of
help offset some maybe some months where there’s a leak
a leak there hopefully there’s not too many leaks I’ll have those checked out
right on the spot because those do get expensive insurance 75 bucks a month and
property taxes pay about 50 bucks in property taxes a very low area right now
I believe property taxes for this is right on that $600 range so very
inexpensive so I did end up getting a loan for seventy three thousand five
hundred bucks I ended up wrapping up loan fees into this loan of three
thousand six hundred and fifty six dollars so again I ended up with a check
of around sixty nine sixty eight thousand dollars back to me there’s a
total of 28 thousand one hundred and sixty dollars wrapped up into this
specific property and my mortgage right now is actually about 523 this is
showing principal and interest at 423 but because I also include property
taxes into that specific loan as well as insurance the actual bill that I pay
every month is about five hundred and twenty dollars within that range now
this is refinanced now so because I do have a mortgage and I’m still putting
away all these expenses here my cash flow does drop you know I dropped from
725 to now about three hundred and two dollars and forty eight cents so with
the refinance I’m still putting away four hundred and seventy four dollars
and 42 cents for expenses this car vacancy again capital expenditures
garbage management taxes repairs water and sewer insurance and property
principal and interest there so all of that is still being covered I’m now
covering my mortgage of four hundred and twenty three dollars and eleven cents
and you know the extra there of three hundred and two dollars that’s just
monthly cash flow and that is what I take a cut from so every month I pay
myself a member distribution because I you know I could let it sit in the
account but I’m not making any deals right now I’m looking for
property survived in the meantime I don’t really want it sitting in my
business account because my business account does not earn very much interest
I could pay myself 300 and $2.00 as you know that that covers everything else
has already covered my expenses my mortgage all of that is covered with the
rent I’m paying myself three hundred and two dollars as a member distribution I
take that three hundred and two dollars that I’ve paid myself I move that into a
high-yield savings account over at Marcus or over at some other high-yield
savings account where that three hundred dollars can make me an additional you
know what what’s that I don’t know how much that is you know two point three
five percent or two point two five percent of three hundred bucks there but
if I do this every month just paying myself $300 $300 when I have a deal that
I want that I’ve made an offer that I’ve locked in at I can okay I take me money
move it into my own personal checking account and then I make a member
contribution to my business record it as a member contribution and now my
business has that equity it’s made interest yes I have to pay taxes on the
interest but now I didn’t just leave it sitting in a business checking account
sitting stagnant I moved it into my personal account making a member
distribution had some interest made off of it because it’s my money that the
business paid me for my cut moved it back in as a member
contribution and it’s all sort of going forward from there so that is basically
all I wanted to kind of cover them in this video so the return on investment
so the cash on cash return on investment for this specific property even with
twenty eight thousand dollars left in this property I’m cash flowing three
hundred and two dollars and forty eight cents every month of monthly cash flow
with my expenses covered in this property that gives me a cash on cash
return on investment of twelve point eight nine percent so I would say
anything over ten percent is a win here you know when you’re doing invest in a
stock market you can get a seven and ten percent on average here I’m cash flow
and twelve point 89% plus I’m having principal pay down
from having a tenant in place I also have cash you know I have what else is
going on deductions I’m able to deduct the property the expenses per year able
to take a deduction from the homes worth and such so that is basically all I
wanted to cover in today’s video going over my first real estate investment
property do I feel I made a good choice here in this property you know right now
it’s looking very good it’s rented out has a tenant a married couple in place
it’s you know doing what it needs to do and I’m currently looking for my third
deal and I’m going to be refinancing my duplex here
mortgage rates have been coming down so I am looking for somebody who can
actually loan my my business my LLC a loan versus having to take a loan out in
my own name and then having to title the note back over into my LLC because that
creates a lot of paperwork it also costs money there to do all of that so that is
it thank you all for tuning in if there’s any other sort of questions drop
them in the comment section below I read and reply to all your guys’s comments if
you are brand new to the channel enjoyed this real estate investor video let me
know hit that thumbs up and subscribe to the channel and I will see you guys next
time have a great day bye

4 thoughts on “Real Estate Investing – Income & Expenses Calculating Real Estate Investment Returns

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  2. Very great idea my man! I’m starting to get into real estate as well. Think it can be a great investment to diversify and cashflow 😉

  3. Love how thorough you are with your calculations!

  4. Quick question… So basically you invested a total of $28k and now get $300/mo? I like that level of return, but a bad renter can wreck those returns. Be very careful who you rent too. Good luck and great video!

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