I want to share with you a story of one of our past cash flow academy students (before there was a cash flow academy) who came to the TUSD Real estate investment class not once but 4 times and just bought his first investment property.
He bought a duplex out of state for $125,000. The gross income is $1700. The expenses are $602 per month leaving him with $1098 per month. (He paid cash but we are going to fix that – read on).
So what s his return? Let’s do some easy-does-it-math…
$125,000 paid in cash for the property plus $4000 for closing costs = $129,000 total invested
$1098 x 12 months = $13,176 per year.
$13,176 per year in income divided by the amount invested $129,000 = 10.2% return.
I pointed out to him what leverage could do for him.
Get a mortgage of 75% of the value ($125,000 x 75%) = $93,750 left over equity/invested dollars in the property = $31,350
At 5% 30 year fixed = $503.27
What’s his return now?
$1098 – $503.27 payment = $594.73 per month x 12 = $7136.76 per year
Punchline: $7136.76 in yearly income / investment of $31,350 = 22.7% return
Less money invested = higher cash on cash return!
Can I get a wowza?
If you would like to become one of my students and learn more about generating cash flow through investments, make sure to sign up for my training course to start earning today!
