If there is one thing I've learned over the last 7+ years that I've been a Realtor, it's...
Don't trust Realtors'......
I'm not saying to NOT trust Realtors...
I'm saying NOT to trust trust there numbers, (well, some you can trust)
This is because when you are looking to invest in real estate, and your Realtor, or possibly the Realtor whom is marketing a property to sell, provides you numbers on an investment property, many tend to make the numbers look VERY GOOD!
Here is a perfect example of an email I received from a Realtor recently, promoting a duplex that he just listed.
As you can see, the numbers on this property look amazing right!
$730 cash flow per month.
That's almost $9K per year.
However, when you do your own analysis, and I highly suggest you ALWAYS do your own analysis, you realize that no way in the world would this property put $730 bucks in your pocket each month.
Why not you ask?
For one, where in the world is the repairs and maintenance that will occur at the property and needs be included in the analysis which will lower the monthly cash flow?
What property doesn't have any sort of repairs or maintenance.
There are always lawns to be cut, driveways to be shoveled, grounds to be cleaned, repairs within the property to attend to.
I don't think I've ever had a month at any of my properties where I didn't pay some small repairs and/or maintenance fee.
In fact, I'll be going more in depth on repairs and maintenance at properties in an upcoming video, so stay tuned, so you can really understand why you need to include repairs and maintenance in your projected analysis.
Another thing to note, no property management fee?
Sure, you might manage your own property in the beginning to put more money in your pocket, but for how long?
When I began investing in real estate, for the first 2 years, I managed all my own properties.
However, when I got to over 12 units, it just became too much, and I decided to hire a property management company.
Before I purchased any of the properties I owned though, I made sure to include a property management in my analysis, so that even if and when I did pay hire one and would have to pay this expense, I had already factored the cost into my analysis before I purchased it, which affected how much I paid for the property, because I needed to make sure the property produced the ROI I wanted, based on the price I was willing to pay.
By not including this fee, you might think you're making $730 per month, but when the time comes to hire a manager, this shrinks, which results in less money in your pocket, and a lower ROI.
Another thing that sticks out, insurance!
$100 per month!!!!!!!!!?????????????
This might or might not be accurate, but with the experience I've gained over the years, I know that this is most likely not accurate, as it is way too low, so I would get a quote from my insurance broker, to confirm the actual cost of the insurance for this property.
Lastly, this Realtor didn't even include a vacancy expense into their analysis.
Let me tell you, it's not going to be all unicorns and rainbows and your going to have 100% occupancy.
Their will be non paying tenants, their will be tenants whom move out and it takes a month or two to fill the unit again...
And there will be tenants whom just fall behind, for months, if not years, always promising to pay back that $200 they still owe you from two years ago.
All of these costs, are costs you will incur when you invest in real estate, which will reduce the amount of money you put in your pocket each month.
So, ALWAYS ALWAYS ALWAYS, run your own numbers on a property.
And if you're not sure how to run your own numbers, then enroll in my FREE REI bootcamp, where I'll show you how to analyze a property, as well as how you can start investing in real estate right away.