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I like to buy fixer-upper rental properties.

It can be a great way to build serious equity up front, as well as take care of most of the “cap ex” expenses before the property is ever rented out. And, of course, nice houses tend to attract nice people.

However, it can be tough to calculate the value of those improvements on a “return on investment” level.

For example, you might buy a fixer-upper property and build $50,000 of equity into the deal — but not get the greatest cash flow because of that.

Does that mean the deal is bad?

Not necessarily. Your total return on investment is based on more than just cash flow — it’s also based on any appreciation you get (whether “forced” or “natural”) and the loan being paid down over time. I’m not suggesting you buy a bad deal just because you think appreciation is going to increase. However, it can be helpful to look at more than just the cash on cash return.

Let me give you a quick example:

Let’s say you bought a house for $100,000. You put 20% down ($20,000), paid $5,000 in closing costs, and spent $50,000 of your cash rehabbing the property. So, you’ve now spent $75,000 of your money on this property. Now, let’s say that the property produces $4,000 per year in “cash flow” for you, after all the expenses have been paid.  Therefore, you could say that your “Cash on Cash Return” is 5.3% because $4,000 / $75,000 = .0533.

Is that a good deal?

Related: The Top 8 Real Estate Calculations Every Investor Should Memorize

Well, it depends.

After all, what if, after the property was fixed up, it’s now worth $300,000? That changes things a bit, doesn’t it? What if it’s worth $500,000? Or $1,000,000? Yes, that’s probably absurd, but it illustrates a point: Cash on cash return isn’t everything, especially when you are dealing with fixer-upper rentals.

Furthermore, let’s say that you rented that same property out to some tenants for 10 years and then sold it. During that time, the value went from our original $300,000 all the way to $400,000 — but the loan that we had for $80,000 was paid down to $65,000. We now have a pretty massive amount of equity in this deal — over $300,000!  BUT we still might only be getting that 5.3% cash on cash return if rents did not increase. Someone who ONLY looks at cash-on-cash return might never have purchased that property because it didn’t meet their cash-on-cash return requirement. And they would have missed out on potentially $300,000 in profit.

Introducing: “The Annualized Total Return”

This is why BiggerPockets just introduced the “Annualized Total Return” option on the Rental Property Calculator. This simple change has made it easier for you to include any appreciation (forced and natural) that you might receive on the property AND the loan principal being paid off over time.

When running a calculation on the Rental Property Calculator, you’ll now see an option on the bottom of the third page that asks for the “Sales Expenses.” This is the percent of the total sales price that would be required to pay if you sold the property. Essentially, this number is the closing costs you would pay when you sold the property, including agent commissions. I typically use 9% or 10%, knowing that in my area, agents typically keep 6% of the sales price, my county keeps 1.5%, and the title company gets another few thousand dollars.

(Click to read on BiggerPockets…)

How to Retire in 3 Years Through Real Estate InvestingPreposterous!

Farcical!

Absurd!

That’s probably the response most people had when they read the title to this post. Retire in three years? Sure, maybe if the person was 99.9 percent of the way there. But there’s no way the average person could retire in just three years using real estate… is there?

Well, that’s the question I was asked at last week’s weekly BiggerPockets real estate investing webinar — and I took on the challenge. Here’s the gist of how I answered.

(By the way, did you know that every week I host a free online webinar to teach folks about various real estate topics? We’ve talked about how to invest while working a full-time job, how to invest using no money of your own, how to use fixer-upper rentals to make six figures, and so much more. Sign up for the next free webinar by going to www.BiggerPockets.com/webinar. This week we’ll be talking about How to Use BiggerPockets to Become a Rockstar Real Estate Investor. It’ll be awesome!)

OK, let’s get on with this discussion, because you’ve got three years until retirement and time is ticking. Here we go.

Let’s Make Some Assumptions About Retiring in Three Years

First of all, let’s make a few assumptions because I don’t really know anything about you.

I’m going to assume that you don’t need six figures to retire.

We’re not talking about buying a yacht, drinking Cristal, and swimming in cash like Uncle Scrooge. We’re talking about retirement — being able to pay your bills with passive income. So, for today’s assumption, we’re going to use $54,000 per year, or $4,500 per month.

Now, if you need more than that, that’s OK — keep listening and you can adjust these numbers on your own later.

So, we now have a concrete goal of making $4,500 per month in cash flow from real estate within three years.

I’m a strong believer in turning lofty, undefined goals (like “I want to retire”) into tangible, specific goals (like “I want $4,500 per month in cash flow from rental properties within three years”). Now that is something we can go after.

buy-hold-retirement

Related: Want to Escape a Soul-Crushing Job, Reclaim Free Time or Retire Early? Here Are 3 Feasible Paths to Take.

Breaking Down the Big Goal Into the # of Units

Now that we have our big goal clearly defined — $4,500 per month within three years — we need to break that down even further. What does that even mean?

Well, for me, I like to look at that number and ask the question, “How many rental units (houses or apartment units) do I need to hit that number?”

Of course, that’s going to depend on the deal. A lot of people buy real estate, and they lose money every month. We don’t want that. We want to buy real estate that is cash flow positive. That means that after all the income has been received and all of the expenses have been spent (and I do mean ALL of them, including vacancy, repairs, CapEx, management, utilities, the mortgage, and more), we should have a positive number.

How positive?

For me, I like to see between $100 and $200 per month, per unit. That’s just my target that I aim for and have been able to get most of my career.

So let’s use a number smack dab in the middle of that: $150 per month, per unit in cash flow.

So, to all the math geniuses out there, let me ask you a question:

If you needed $4,500 per month in cash flow and each unit gave you $150 per month in cash flow, how many units do you need?

Anyone? Anyone?

Bueller?

Bueller?

Right! Thirty units.

So, now we’ve taken this big crazy goal of retiring in three years and condensed it down to a goal of buying 30 units that average $150 per month in cash flow each.

Now we’re getting somewhere — but we’re not done yet!

We need to make a plan to get those 30 units.

Making Your Plan Toward Retirement

So, how do you buy 30 units over the next three years? Well, of course, you could shop around and find a 30-unit apartment complex, and BAM, you are done.

But that would make for a slightly boring video, so let’s get a bit more creative.

You could also buy 30 single family houses, but that’s a lot of work — so let’s work on a plan that meets somewhere in the middle — small multifamily properties like duplexes, triplexes, or fourplexes.

Additionally, I want to break up our goal of 30 units into three mini-goals, one for each year.

We could say that we want 10 units per year for three years — but I don’t think that’s as realistic. I say that because people tend to start a little slower and speed up over time. So I want to set our goals to reflect that reality.

So rather than 10 units per year for three years, let’s set a goal of buying just five units the first year, 10 units the second year, and 15 units the third year.

Related: How Much Do I Need to Retire?

So, we’ve taken this big, lofty goal of “I want to retire in three years” and now, to be on track to hit that, we just need to buy five units this year. Think you could manage that over the next 12 months? I don’t see why not.

But plans are useless without action — so the final step in this goal of retiring in three years is to take the action required to meet your goal each year.

(Click to read on BiggerPockets…)

6 Critical Lessons Every Newbie Needs to Know About Real Estate Investing

Six months ago, one of my rental property tenants burned down part of his home as he was moving out.

Whether it was intentional or not, we’ll never know — but the end result was the same: $60,000 of damage to the kitchen. (Thank God for insurance!)

Within 24 hours of the fire being put out, I called a local fire-restoration contractor to handle the rehab of the property. This week it’s finally getting finished… six months, almost to the day, after the fire.

If I were to ask you how long this restoration project took, you would likely say “six months.” However, did it really take six months? Or did it actually take far fewer days, spread out over a six-month span?

If you guessed the latter, you’d be correct. The actual work done to restore the home took about 20 days of actual work. Those 20 days, however, took place over six long months.

I tell you this story today not because I want to convince you never to buy rental propertiesbut because it perfectly illustrates something that has been stewing in my mind for quite some time; a business principle that, if applied to your life and business, will help you accomplish significantly more in drastically less time. I call it: Dead Space.

If you want to accomplish more in your life at a rate faster than you’ve ever imagined, you can. You have to kill the Dead Space. Here’s how.

Dead Space: the silent killer.

Most tasks in life are significantly easier than we’d like to believe. In fact, nearly every goal you have is really just made up a series of small decisions followed by short actions. However, it’s the in-between that consumes the most time. That’s the Dead Space.

For example:

  • When it takes you three months to read a novel — did it really take three months? Or did it take three hours spread out over a three-month period?
  • Or for those looking to write a book — does it really take two-years from conception to publishing or just a few hundred hours spread out over a two-year timeframe?
  • Or for those looking to raise money for their startup — does it really take six months or a dozen meetings over that six month period?

When you break apart a large task, how many actual physical hours of work are needed to accomplish this task? Probably not a lot. So why do tasks take so much time?

Because of Dead Space. It’s all the waiting that lives between moments of action or decision.

Dead Space could manifest itself in numerous ways, such as fear, uncertainty, lack of focus, distractions, limiting beliefs, waiting on other people, or even physical restraints. It doesn’t matter what form this Dead Space takes, nor does it matter who caused it. The cause could be 100 percent your fault or 0 percent your fault — but if you want to accomplish significantly more in far less time, the solution is 100 percent on your shoulders.

Supercharging productivity.

Dead Space is the real reason you aren’t accomplishing your goals. It’s the real reason that the latest John Grisham novel is still sitting on your nightstand, why your half-written book manuscript is still sitting on your desk, why your startup is six months from running out of money.

So the simple truth to accomplishing more, faster is this: when you reduce the Dead Space, you reduce the time needed to accomplish your goal.

Dead Space is the reason why Parkinson’s law exists. Parkinson’s Law, if you are unfamiliar with it, is the adage that “work expands to the time allotted for its completion.” When you have less time to complete a task, you subconsciously decrease the Dead Space and knock it out quickly. When you have more time — you fill almost every moment.

Think of it: the last time you had a looming deadline, did you stop to check your Facebook every five minutes? Did you take a break to read the newspaper? Did you wait a week for a phone call back from your company’s legal department? Of course not! You got it done, no matter what it took.

So how do we reduce this Dead Space? It’s easier than you think.

Three steps to reducing Dead Space

(Click to read on BiggerPockets…)

6 Critical Lessons Every Newbie Needs to Know About Real Estate Investing

I was 21 years old when I bought my first investment property.

I’d like to pretend everything went smoothly — but that would be a lie. Sometimes it was downright messy.

Why?

Because I didn’t really know what I was doing!

That’s the story for most newbies. It’s a scary thing venturing out into the world of real estate when you don’t have a lot of experience. I still remember the fear, the uncertainty, the excitement — it all comes with the territory.

It’s my goal here at BiggerPockets to help you avoid the mistakes that I made in my real estate journey and to help you find your own path toward success. Therefore, let me share with you six critical lessons that every newbie (and advanced investor, I suppose) needs to know about investing in real estate.

1. You won’t get rich overnight.

Sorry, it’s just not going to happen.

You will likely get rich someday if you stick with it. But that’s the key: sticking with it. Ninety percent of those reading this article won’t.

So when things get tough, will you lose your passion? Or will you fight through?

2. No one is going to learn for you.

You can’t hire someone to do your pushups for you. It doesn’t work that way. In the same way, you can’t just start buying properties hoping that other people (your agent, your spouse, your mom) is going to make it work out.

The responsibility is 100 percent on your shoulders.

So take your education seriously!

Stop listening to the radio — you’ve heard those songs a thousand times. It’s time to turn your car into a mobile university. Listen to audiobooks about real estate, business, and productivity. Listen to real estate podcasts, like The BiggerPockets Podcast, and glean wisdom from the guests who share their stories. Get an Audible subscription and start listening to audiobooks like The Book on Rental Property Investing.

Pick up books from your local library, Amazon, the bookstore, or BiggerPockets.com/store — and then actually read them!

Attend local real estate meet ups and clubs and get to know people who are doing amazing things with real estate — and listen to them!

Remember, no one is going to do your learning for you.

(Click to read on BiggerPockets…)

4 Tips for Finding World-Class Tenants for Your Rental

I once bought a rental house that came with an existing tenant. Things were fine for a few months — but then she started paying her rent late.

Then she stopped paying entirely.

She decided illegal drug use was more fun than paying rent!

Soon after, she was evicted — and she left me thousands of little cockroaches, a death threat note, and the worst smell you can imagine.

Sometimes being a landlord is such a joy.

On the other hand, I’ve had dozens of incredible tenants who pay rent on time, take great care of the property, and are helping me build wealth and financial freedom in a spectacular way.

So, how does someone find more of the great tenants and fewer of the bad ones?

If you want to succeed as a landlord, you must do just that. You must learn how to discern which are world-class tenants to avoid renting to scumbags.

How?

Well, today I want to share four tips for attracting word-class tenants.

4 Tips for Finding World-Class Tenants for Your Properties

1. Think like a funnel.

In business, a sales funnel is the idea that you want to get a lot of leads coming in, knowing that only a few will ever buy from you. For example, 1,000 people might see an ad for a pair of socks in the newspaper, but only a few dozen of those will go to the store, and maybe just a couple will buy a pair of socks. That’s a sales funnel, and it’s found in almost every industry — including landlording.

Your job as a landlord is to use this exact funnel to attract tenants — a lot of them.

Think of it this way — if you get just one person to call about your vacant property, what’s the chance they are going to be a great tenant? It’s kind of a gamble. But what if 1,000 people called about your property. Could you find one that is going to be perfect? I would hope so — or else you probably need to move towns.

The point is, the more people you can put in the top of your funnel, the more picky you can be to get the one ideal tenant at the bottom.

So how do you do this? You need to have an advertising system that’s going to bring you qualified leads. This could be Craigslist, Zillow, Postlets, the newspaper, a sign in the yard, a post on Facebook — or, if you are like us, you could do ALL of these. The more marketing we do for tenants, the greater chance we have of finding that needle in a haystack.

(Click to read on BiggerPockets…)

How to Become a Millionaire

So you want to learn how to become a millionaire.

Great. Good for you.

I want six pack abs.

I want an Oreo cookie right now.

I want my feet massaged each night by a female body builder. (What? They get sore!)

But it’s not enough to want something. As Michael Jordan says, “Some want it to happen, some wish it would happen, others make it happen.”

Wanting is never enough. Especially when you want to know how to become a millionaire.

A lot of people want to become millionaires. It’s the epitome of the American Dream. It’s a solid, tangible number that most people believe will classify them as “rich.”

Yet so few ever make it to that point in life. In fact, of the 7 billion people on earth, less than 20 million are millionaires. That’s far less than 1%.

This is absurd given one simple truth: Becoming a millionaire is simple. This article will prove that.

Becoming a Millionaire is… Simple?

Simple? Really?

Yes.

BUT… not easy.

There is a difference.

  • Running 50 miles is simple — but not easy.
  • Staying up for 60 hours is simple — but not easy.
  • Avoiding that chocolate cake is simple — but not easy.

Simple means there are not a lot of steps; it can be understood.

So becoming a millionaire is simple, not easy.

  • You don’t need an MBA.
  • You don’t need to go to Harvard.
  • You don’t need to come from a rich family.
  • You don’t have to be exceptionally smart.
  • You don’t have to know the right people.

So are you ready to learn how to become a millionaire?

Good — because I have one goal with this article:

I want you to read this and become a millionaire.

I want a million people to read this and have their lives rocked to the core.

I want a million people to share this post on Facebook with their family and friends — because this stuff changes lives.

This is about to change YOUR life, if you’ll allow it.

Becoming a Millionaire

The One Thing That Qualifies Me to Write This Post About Becoming a Millionaire

Now you might be wondering, “Why is this kid telling me how to become a millionaire? He looks like a bearded Justin Bieber.”

So besides my beard — why am I qualified to talk about this?

One reason:

Because I did it.

I don’t talk about my net worth very often, but I crossed the $1,000,000 net worth level about the same time I turned 30 years old.

Related: 4 Powerful Ways Real Estate Can Make You a Millionaire

I didn’t start out with a rich family. I never went to an Ivy League school. I didn’t win the lottery.

I simply (and correctly) used The Wealth Tripod.

If you want to learn how to become a millionaire — you, too, must correctly set up The Wealth Tripod.

The Wealth Tripod: 3 Things Needed From You to Become a Millionaire

In order to fully understand how to become a millionaire, you need to know what’s stopping you from achieving that status.

I know you are thinking, “Duh, Brandon! My lack of money is stopping me!”

False.

Your lack of money has NOTHING to do with you becoming a millionaire.

Sure, over the long run, if you never begin collecting money, you’ll never become a millionaire, but that’s not stopping you today.

It’s not the balance of your checking account that’s stopping you. Or the balance of your investment accounts. It’s not your heritage, your skin color, your location, your intelligence, your lack of innovative ideas, or your bad luck.

Want to know what’s really stopping you?

It’s you.

In order to become a millionaire, you must change who you are. As Les Brown said, “To achieve something you have never achieved before, you must become someone you have never been.”

Specifically, there are three things about you that you must change if you want to become a millionaire. I call this “The Wealth Tripod” because without all three, you’ll never become wealthy. All three steps are required if you want to build and maintain wealth. Like a camera tripod — if one of the legs is broken, the entire tripod will fall down.

So, what are the three legs of The Wealth Tripod?

  1. You must believe wealth is actually possible for you.
  2. You must learn how wealth is built.
  3. You must live out the steps needed to make it happen.

Let’s spend a few minutes and talk about each of these to make sure you fully understand the importance of mastering each.

1. You must believe wealth is possible for you.

A friend of mine recently remarked, “God must have known I would be bad with wealth, which is why He never saw fit to give me any.”

While I don’t believe every person should become a millionaire (money often causes more problems than it fixes), I do believe every person has the ability to become a millionaire. This is especially true if you live in a capitalist society where the government doesn’t dictate how high you can rise.

As I said earlier, it has nothing to do with your skin color, intelligence, location, or any other excuse you might have for not building wealth.

Like my friend’s comment suggested, many people believe that because they do not currently have wealth, they do not have the ability to gain wealth.

The fault in this thinking, however, is made clear in this simple quote:

Who you are today is the sum of all the choices you have made up until this moment. 

Think about that for a second. Reread it a couple times. Everything you have, everything you believe, and everything you are is a result of the decisions and actions you’ve made previously.

  • If you are overweight, it’s because you made poor food or exercise choices.
  • If you are too busy, it’s because you took on too many commitments
  • If you are broke, it’s because you spent more money than you earned.

While that might sound depressing, that’s actually some of the best news in the world! Because although this principle reveals the source of all negative aspects of our life, it also reveals the positive changes that can happen if we only change our choices going forward.

Think about it:

  • If you are overweight because of poor food choices, you can choose RIGHT NOW to change your diet and exercise.
  • If you are too busy, you can choose RIGHT NOW to say no to things that monopolize your time.
  • If you are broke, you can choose RIGHT NOW to change your earning and spending habits.

A total life transformation won’t happen overnight, but it will start to slowly take shape with each choice.

Think of a rocket blasting off into space. A course correction of a single degree can mean the difference between landing at the International Space Station and colliding with the sun. In the same way, a course correction in your life, starting today, can result in a massively different future than before.

Therefore, understand that just because you aren’t a millionaire yet doesn’t not mean you can never become one.

Because…

(Click to read on BiggerPockets…)

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