HOW TO CALCULATE NUMBERS ON A RENTAL PROPERTY. The 8 categories you need to include.
Channel: Darren Voros
Date: 2020-04-21

Learn how to analyze a rental property and calculate cash flow properly to make sure your next rental property investment has POSITIVE cash flow.

In this video Canadian real estate investor, Darren Voros shares with you the step by step real estate investing method for determining the monthly cash flow on a rental property. 

Calculating the numbers on a rental property doesn't need to be difficult but novice investors often aren't including all of these categories and therefore their properties end up in NEGATIVE cash flow.

Why is it important that we can calculate numbers properly? There are 2 reasons.
1. We can identify if we have positive or negative cash flow
2. We can compare properties against one another

Sophisticated investors generally calculate their numbers using the method laid out here so if you’re not analyzing your deals or properties in the same way, you may think you’ve got a great property when in reality it could be far from it.

Darren walks through all of the categories he uses when analyzing numbers on a property and he'll also show you how much you should be buying a property for based on the cash flow analysis.

What is positive cash flow? Positive cash flow is when your monthly revenue is more than all of your expenses combined.
Why is positive cash flow important? Positive cash flow is so important to the equation. If you’re purchasing properties in negative cash flow (you're putting money in every month) you are banking on one element of the real estate market and that’s appreciation. The market is always going to go up. This is called real estate speculating not real estate investing. It’s also important because positive cash flow protects against rising interest rates, vacancies and unexpected circumstances such as the global pandemic we are currently going through.

Novice investors often only use these 4 categories when calculating cash flow on a property: Mortgage, Property Tax, Utilities, Insurance.

There are 4 categories that are missing from this equation. You'll need to include Vacancy, Property Management, Repairs and Maintenance and Tenant Gifts at a minimum.

Here’s the beauty of calculating this way. If you're setting aside money every month for these items and you don't need them, this is extra money in your pocket. If you do need them you've allowed for them and you won't be out of pocket for these expenses.

Darren will break down how much you should be allowing for each of the categories and how you can also figure out how much you should be paying for a rental property based on the cash flow numbers.

DISCLAIMER:
WITH ANY AND ALL INVESTING YOU SHOULD ALWAYS OBTAIN INDEPENDENT LEGAL, TAXATION AND FINANCIAL ADVICE FROM A LICENSED PROFESSIONAL BEFORE INVESTING ANY OF YOUR OWN MONEY.

Website
https://www.darrenvoros.com

Instagram 
https://www.instagram.com/darren.voros/ 

Facebook
https://www.facebook.com/REIbyDarrenVoros/