There are 7 things Cardone Capital looks for in rent roll in real estate:

• Gross Potential Income — what’s the maximum amount you can achieve?

• Effective Rents — what’s the gross potential minus vacancies?

• Market Rents — what are your neighbors renting things for?

• Occupancy — how many people are actually living there?

• Lease Term — how long tenants are there for?

• Other Income/Utilities/Concessions/Etc. — what are the tenants paying for?

• Unit Type (# of 1bd/2bd/3bd/etc.) — how big are the units?

These are just some of the things you must be asking when looking into a new property! Rent roll analysis is an important stream under the study of real estate.

When did the tenant agree to the lease?

When does it terminate?

What are they paying?

Who lives there?

What do they do?

Did they make a deposit?

How are they paying each month?

Remember, buying a property requires a lot of due diligence. Don’t rush into something.

At Cardone Capital, we take our time before investing in a property, and we only pull the trigger when we know everything about the property and know it’s a good deal.

Be Great,

GC

How many units are you looking to buy? The more, the better.

Real estate is a business sitting on a property—and the more units you have, the bigger your business will be.

Top 7 Signs You Have a Great Deal – Grant Cardone Capital

In addition to the number of units you’ve got, what else signals a good deal?

#1 Positive Income

#2 Banks need to be interested in your deal

#3 Your manager needs to be happy about the property and well paid

#4 Unsolicited buyer interest

#5 Stable and growing job growth in your market

#6 Salaries 3X or greater than the rent

#7 Location

What does that even mean?

P=Passive Income

E=Earned Income

You want your P greater than your E, right?

But most people want their passive income so they can forget about their earned income—I’d suggest you need both!

And that means you need to start finding a great deal even as you continue to work.

The problem is, deals that are easy to buy are hard to sell.

So, when you go looking for a real estate deal, you need to look for the right kind of deal.

But what happens when you find that diamond in the rough? What happens when you find that GREAT deal you know is going to make you a ton of money?

You need to write an offer.

The mistake most rookies make is they start negotiating over price before they even get to the write up.

Don’t negotiate price before the write up.

Here are 3 quick tips to keep in mind:

#1 Ask: Simply ask the seller if they are willing to sell. Of course if a property is on the market you know they’re willing to sell—but I’m talking right now about hard to get deals, the kind of deals that aren’t on loopnet.com or on sale at your local broker’s list. If you see a property you want, ASK the owner if they’re willing to sell even if it’s not on the market!

#2 Price and Terms: Find out what are the acceptable price and terms. Why, because you can’t get anywhere without a starting point! Plus, you need to know what kind of numbers you’re going to be dealing with.

#3 Confidence: You must express to them that you’re the buyer. You need to have confidence in YOU. The more confidence you have in yourself as the buyer, the more confidence the seller will have that he or she will close the deal with you!

Be great,

GC

By dividing 72 by the annual rate of return, you can know how many years it will take for your investment to double.

The rule of 72 with compound interest was great back when interest rates were higher.

But today you need a new vehicle that allows you to:

1. Protect your capital 2. Give you at least a 6-10% return 3. Gives you the possibility of appreciation in the future 4. Gives you tax advantages

The bank is for people who don’t trust in themselves. You need to be doubling your money quicker than what the banks will give you. The house is about protecting money, but it doesn’t give a return or a tax advantage.

Average rate in US banks is below .05% which means it would take you at least 144 years to double your money. Do the math. You can’t compound at the bank!

I’m seeing doubles in 3 years, 4 years, and 5 years investing in multi-family apartment buildings.

This is the new compound interest.

Don’t wait until you are 90 years old for your money to double!

The average return in my real estate holdings is north of 12% before appreciation. Without any appreciation money doubles in 8.3 years while protecting your capital.

Ignore your money and it will ignore you!

“The new compounder of the 21^st Century is multifamily real estate” …but not just any apartment building.

Rents are going to go higher for class B for any other types of apartments.

There are 4 main types of properties:

Class A: $1,500 to $3,000 rents

Class B: $1,100 to $1,500 rents

Class C: $800 to $1,100 rents

Class D: $500 to $800 rents

You need to be in A or B in select markets.  Don’t get started in C and D, that’s a management nightmare. Detroit will never be an A market. California will be C and D markets in future.

You can buy junk—or you can buy great property.

At Cardone Capital, we don’t do junk. We invest in quality properties that cash flow and wait for appreciation—and this is the compounder of the 21^st century.

Be great,

GC

But a single-family home is usually not a good investment—it’s a liability.

Here’s the true cost of buying a home:

Down payment + size of mortgage + all the interest payments + all the taxes + all maintenance + opportunity cost of time

The opportunity cost is the biggest cost of owning a single-family home.

It doesn’t cash flow if you live in it, but if you do rent it out for cash flow and that person leaves, you’re back to being 100% vacant!

You want to have multiple doors to rent, that way even if 5 or 6 people leave you’re still 85% full.

You don’t want just one McDonald’s—you want 50 of them.

Why does network marketing work? Because you’re not dependent upon one person, you got hundreds and thousands of people.

With single family homes, even if you rent them out, you just can’t scale. You can’t have the economies of scale unless you buy the whole neighborhood, but then you have the whole neighborhood calling you.

And what happens to single-family homes if interest rates go up?

The 10-year treasury rate is currently 2.69%

I’m borrowing money right now at 4.29%

That’s a 1.60 spread.

Let’s say interest rates go to 6%.

There will be 4 areas off the top of my head affected by this:

#4 Credit Cards 

Will have a minor effect.18% will still be 18%.

#3 Federal Government  

How much money do they owe? If their rate goes from 2.69% to 6%, this country is over. And if we’re over, China is over.

#2 Auto Industry   

Autos will get crushed if interest rates go up. Interest rates are not paid by consumers, interest is paid by the manufacturers to subsidize the rate. Have you ever seen commercials like “0% interest for 72 months!”?  That’s auto subsidizing.  They might borrow money at 2.69%, but it’s not free!

#1 Homes   

Single-family homes will be first to be hit when interest rates spike. Homes won’t sell anymore. Homes will literally stop.

So, the bottom line is I’d rather be 90% occupied in multifamily than 100% occupied in single family.

Many doors are better than one door.

And that’s why we do multi-family here at Cardone Capital.

Learn more about how you can get involved in our funds HERE.

Be Great,

GC

There have been more people made wealthy through real estate than any other avenue…and there are specific reasons for this.

Real estate isn’t rocket science, but for many—especially if you’re just getting started—it seems complicated.

But I want to make it simple for you!

Here Are 5 Simple Reasons to Invest in Real Estate:

#1 Capital Preservation: Paper assets are a risk. Your dollars are not even accessible at the bank — it’s turned into electronic digits. Bitcoin and cryptos are a risk. Stocks are risky. As a hard asset, real estate has meaningful value in ways other “investments” don’t. If my real estate burns down, insurance covers it. Real estate does not have red and green days like the stock market, which is important because you never want to lose money!

#2 Cash Flow: Cash flow secures the assets — meaning the income provided by renters should exceed the cost of operating the property leaving enough cash to pay debt and provide investors with a positive return on their equity (cash). This provides a regular income stream that is significantly higher than the typical stock dividend yield!

#3: Tax Advantages: The US Tax Code benefits real estate owners in a number of ways, including unlimited mortgage interest deductions and depreciation accelerations that can shield a portion of the positive cash flow generated and paid out to investors. I sold a property recently that made $14 million profit and all of it was reinvested into another property deferring ALL income taxes until a later date!

#4 Appreciation: Over time, inflation, which is considered the hidden tax, enters into the economy, reducing your purchasing power. You can make the same amount of money today as 20 years ago and see you have less money left over. However, the right real estate investments have historically provided excellent appreciation in value because the property value is based on rents increasing not just property values!

#5 The Mystery Multiplier: Want to know the 5^th reason why people invest in real estate? Pick up a copy of my new book How to Create Wealth Investing in Real Estate. I’ll give it to you FREE!

Be great,

GC

I used to use this in car deals to help people buy a car. They would always focus on one thing – the wrong thing. They would tell me, “I need the best price on a truck.” And I would say, “Of course. I can get you the best price on a truck. No problem. But there’s more things involved in a car deal than just the best price on the truck.”

In a car deal, there’s the price you paid for the truck. There’s also the down payment you put on it. Then there’s a monthly payment and also the trade-in.

Those are the four parts of a car deal. And they’re the same in real estate. Price, down payment, cash-on-cash and NOI.

In real estate, you have price. You’ve got a down payment. And, by the way, there’s no such thing as no money down. Zero is money down because zero is enough. If you don’t respect zero, you don’t respect dollars.

Zero money down means there’s an obligation to something. And if he gives you or she gives you something for no money down, there was something paid in one of these other quadrants, okay?

When one of these numbers goes up or down, if it influences the rest of the quadrants of real estate.

All the quadrants matter. Don’t make the mistake that they don’t.

And speaking of mistakes, when people are starting to invest in real estate the first mistake they make is that they don’t know their market. And number two, they get fixated on one of the quadrants.

These investors say, “I can only buy so much. I only have so much money down. I must have this. And I have to have this cash-on-cash.”

In investing, the cash-on-cash return is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage. It is often used to evaluate the cash flow from income-producing assets.

Some of the best deals I bought had the lowest cash on cash. I’m looking at deals right now that might only pay me five percent, but there’s a reason I’m buying that deal. Trust me because I think somewhere down the line I’m going to make a lot of money off the property.

Why? Because I took less in a specific quadrant. When one quadrant goes down, something else has to be adjusted. That’s called the market. The market will adjust. Something goes down here. Something’s got to go up there. Unless everything’s terrible on the deal – then you wouldn’t do it anyway.

So first quadrant is price. I’m not going to negotiate the price. If you have to negotiate the price to buy the deal, it’s the wrong deal. I’ve said this over and over again.

Pay attention to the cash on cash quadrant. I call it the super box because even when the market pulls down, when there’s a recession that hits. The number of units are still the same. During a recession, no one is building anything. Those units become more valuable and are still paying you.

Another important factor is Net operating income. NOI is a calculation used to analyze real estate investments that generate income. Net operating income equals all revenue from the property minus all reasonably necessary operating expenses

You gotta know your market, know your market, know your market, know the comps, know what’s in the neighborhood. Know what a good deal is. Know what a bad deal is. Know your four quadrants. Keep it simple.

If you look at the top ten percent of the wealth in this country, over half of it is because of real estate. So why is real estate so lucrative for people? Why do people love investing in it?  Here’s eight quick reasons why.

The number-one reason you would want to invest in multifamily apartments or any kind of real estate, , is to provide cash flow. Again, this doesn’t pertain to owning a home. The dumbest move people make, by the way. Owning a home doesn’t make you any money. It doesn’t provide you with monthly cash flow. People would try and argue that you can have equity in a home, but that value is locked to your home. You can’t get it out and use it for yourself unless you sell your house.  Taking a home equity loan is just that, a loan. A scam by the banks to make more money off the dream of home ownership that they sold you in the first place!

2. Multiply Your Money

Number two, you want to multiply your money? Buy real estate. Investing in real estate is the only time that you can buy something of greater value without putting all your money down. For example, if you want to buy a million dollars in stocks, you have to have the entire million dollars to do that. Buying a million dollars of real estate, you only need four hundred thousand to do that – or less!

3. Low Cost to Debt

Commercial real estate, property owned to produce an income, has access to amazing funding opportunities. Many times, you can get interest only loans and other incentives that you can’t get when asking for a residential loan.  Your loan on multifamily is based on the income the property produces instead of the income you produce like what is used to qualify you for a primary residence mortgage.

4. A Hedge Against Inflation

Money sitting in a bank is basically decomposing. It’s not making you anything, and in fact is costing you. It costs you because the paltry amount that it earns in interest is far outpaced by the current rate of inflation which makes your money worth less than it is now. The goal of money is to get rid of it as soon as possible. Convert it to something that is a real asset and can appreciate in value.

5. Physical Asset

Real estate is real. It’s not a piece of paper. It’s not gambling on something that may or may not happen. It won’t disappear or be destroyed. It’s tangible.  Even if the property on top of the land is gone, the land will be worth something.

6. Tax Benefits

There are so many benefits. When you sell your property and reinvest the proceeds your tax is deferred. You can keep doing this for all time.  The amount of deductions and depreciation you can claim is also astronomical. The commercial real estate deductions are far superior to what you can deduct on your taxes for your one mortgage.

7. Asset Appreciation

There is a chance that these assets will go up in value. Now, the way, the reason I believe multifamily is the best investment in the world today is because I think rents will continue to appreciate and if they continue to appreciate what that means is the value of the property will go up.  Again, this is very different from a home appreciating in value because that is dependent on neighboring homes, not the income the property produces.

8. Ownership

You actual own something. It is yours to control. When you buy stock in the company,  you don’t control how they run the company, what they set their pricing at, how they market it – you are at the mercy of the board of directors and the CEO. When you buy real estate, you run the show. You decide the rental price, you decide on what improvements you want, you decide all of it.

You should be investing in real estate. Everybody should be doing this thing. It’s going to be the best investment in the next 25 years. Everybody should be in the game. Take the time to do it. Set your money aside. Don’t give that money to the bank. Prepare for that money to grow.

For over twenty-five years, I’ve been taking the surplus money I’ve earned from my many businesses and has been shopping and studying real estate.  In fact, I’ve shopped hundreds of thousands of apartments in that time.

I have over 5,000 units under management and am going on 10,000.

Since I’ve been doing my podcast and weekly webcast Real Estate show, I would say one of the most misunderstood things that people fail to fully grasp is cash flow. I get questions about it all the time.

Cash flow is how you should determine if you buy a property or not.  If it doesn’t’ produce cash flow, DON’T BUY IT.

This includes your home.

Cash flow is what will get your property through the tough times, and it will pay you and your investors.

For example, Cardone Capital selects properties that produce at least five to six percent positive cash flow on current operations when starting to search for investment properties.

Then if we like the cash flow, we look at location, value add, any other possibilities and the future – looking at the five and ten-year horizon.

Another question I hear all the time is about how big of property I should look at to invest in.

I have to say that along with cash flow being the most misunderstood topic, the number of units is the most important number in real estate and the most overlooked.

The number of units will determine the cash flow, give you protection with vacancies, determine your exit and allow you to leverage debt on property.

And it’s amazing the amount of people that believe that all debt is bad.  All debt is NOT bad. But, only have debt on properties that have positive cash flow.

When discussing debt, there are many, many factors and terms you’ll need to know.

• You need to know LTV – Loan to value
• You’ll need to know LTP – Loan to purchase price
• Or DCR – Debt Cover Ratio

These terms are just the tip of the iceberg.  You’ll also need to do research on the financials, the environment of the property, debt, exit strategy and on and on.

The underwriter of the debt will do a lot of research for you and will really be a partner with you on the deal so make sure that you choose your bank or finance institution wisely.

Along with using debt to your advantage, you must have an exit in mind when selecting property.  People ask me all the time what I mean by having an exit in mind when I look at a property.

If you plan your exit strategy thoughtfully you’ll make money.  We don’t sell our portfolio to people who don’t have money, we are selling to large corporations that have all the money, these big institutions, with half a trillion dollars – they need to buy property.  They will be buying real estate no matter if market is down, stays the same or goes up.

So what do I look for when I walk a property? A property, for me to be interested in it, has to have the following:

– I have to love it. It has to feel good at first sight.

– The “logics” need to make sense.  Can people see it from the road? Does it have curb  appeal? Is it in a convenient location? If people can’t see it, that means I’ll need to spend money on advertising and I need to factor that in to my operating costs.

– And, the money needs to work!

So once I walk a property, I make my selection based on the answers to these questions:

– Do I Love it?

– Does it cash flow?

– Can I get debt on it?

– How do I exit?

There are so many questions in real estate and starting out can be hard. I’ve been doing it for over twenty-five years. I’ve made my share of mistakes but now I know and am doing the big deals.  I can help you with how to buy, how to shop, how to find it, following up on the owner about it, selling it, how to negotiate it, how to get debt, how to improve value, get enforced appreciation, determine cash flow, increase cash flow and how to refinance.  If you don’t have the time, or don’t want to do it on your own. Invest with me at Cardone Capital.  To learn more about real estate, check out my real estate program here.

The bottom line is: find a great partner to do big deals with.

Our offerings under Regulation D Rule 506(c) are available to accredited investors only.

With sales inventory shrinking and the lack of affordable real estate, knowing how to pick your market is critical. I’ll share the six things you must know to select a winning market.

How to decide which market to buy in is a critical part of the real estate investment process.

Boston? Phoenix? Miami? Houston? San Diego? How do you choose?

After twenty-five years of learning, studying, researching, shopping and walking markets I’ve organized the data you need to know down into six classifications.

I’ll give you a brief overview of these classifications and why they are important to your investment process.

I shop many different markets so I can see what will happen in the future to the markets I’m invested in.

The data you study is going to tell you where to buy and the type of property (size, classification, location, etc.) to buy.

Think of this, one-third of all rental stock in the U.S. is single-family homes. These deals don’t produce enough revenue on their own and will be the first to be victims of any market downturn or adjustment.

Multi-family real estate is the better deal. Storage units have been overbuilt, retail is susceptible to downsizing and are subject to much higher volatility.

16-32 units in the price range of $1.2-$1.6 million with 30% down is the kind of deal you want to be looking for. Again, this size has the power of scale and will allow you to weather a temporary downturn in appreciation, help you with vacancies, give you an edge on amenities to attract renters and gives you wiggle room on improvements to increase property value.

Here’s the six things you must know to select a winning market.

1. AFFORDABILITY

Are the units affordable in the market? Determine how they compare to other rents in the market. Do you have room to raise them if you improve the property? A rule of thumb is three to one or four to one. This means if rent costs $1,000, people need to be earning $3,000 per month or if it’s four to one, they must earn $4,000.

2. JOBS

Does the market have a healthy economy? Are there companies coming into the market and creating jobs? What kind of companies and what kind of jobs?

3. MIGRATION

Are people moving into the market or out of the market? What are the ages of people moving? Where are they moving from? Why are they moving? Jobs? Retirement?  These are huge differences and these renters are looking for very different things.

4. STOCK

What type of inventory and how much of it is present. Be careful if there is a current shortage of units. Are they a lot of builders building so you’ll find yourself in a glut of multifamily when you are looking to sell?

5. EXIT STRATEGY

You should know who you want to sell to and who you buyer is when you are ready to sell. You should know this when you buy. Determine where the market will be and what your leverage and appreciation will be when you are planning on exiting.

6. DISPARITY

Determine the gap between buying a house and rentals in the market. Is housing affordable? Will people want to buy a house or rent?

You can lose money in real estate so you need to do your homework. Learn more about investing in multi-family real estate so you can become an informed investor – no matter if it’s your first deal or fiftieth.   

Not comfortable going it alone? You can invest with Grant Cardone through Cardone Capital, join his Real Estate Investors Club, sign up for his Real Estate Program or pick up his book, “How To Create Wealth Investing In Real Estate”.

GC, Cardone Capital.

How many units should it have?

What should you pay for it?

How much debt should you have?

What should the CAP rate be?

Let me show you an example of what an ideal deal looks like and how that deal can double your investment.

Your ideal first deal should look something like this:

AROUND THIRTY-TWO UNITS

You want a unit number that is large enough to produce cash flow to cover your debt and pay you each month. You want a number that can weather economic cycles to ensure that you will come out ahead when you exit. You’ll also want to pay attention to the number of units so having vacancies doesn’t tip the scales and ruin your investment.

ABOUT FOUR MILLION IN COST

This number will fluctuate of course based on geographic area and other factors. Four million puts each unit at $125,000 which means that it is in a good market, in good condition, etc. This is a guideline that I explain more in my book, “How To Create Wealth, Investing In Real Estate”.

Putting one-million dollars as a down payment so you finance three million.

This is gives you a good debt ratio as well as allows you to aim for an interest only loan. If you can’t invest this much, go in with an investor who is doing larger deals. Small deals will sink you and are always the first to be foreclosed because there is not enough margin to keep it afloat if something changes like vacancy, improvements needed, insurance, etc.

SIX PERCENT CAP RATE

Remember, this number helps evaluate a real estate investment. The CAP rate determines the net operating income (NOI) of the current market value (sales price) of the asset. So if a property is at a CAP rate of six percent it means that it is earning $240,000 per year in net operating income (income from rent). Six percent of four-million dollars is $240,000.  The lower the cap rate, the worse the property makes in rent.

Now, let’s look at the magic and power of real estate and controlling an asset that produces cash flow.

On the deal above with paying one-million dollars down on a four-million-dollar property leaves a three-million-dollar debt. Keep in mind, the only out of pocket is the one-million dollars that was put down.  So, what you want to double is that amount to two-million dollars.

Paying interest only on three million is $136,500 per year. We’ve already calculated the CAP rate of six percent so we are making $240,000 per year. Minus the interest, we are left with $103,500 in cash flow. That’s ten percent cash flow rate.  In five years, you would have made half your one-million-dollar investment back. Now that doesn’t take into account any property management or improvements you make. Doing anything with each of those two areas, would mean you could increase rent thus increasing your cash flow.

So following this simple math, in five years if you sell the property for $4.5 million you’d have doubled your original investment of one million to two million. And this would be a non-taxable event.

Increasing your cash flow is going to increase the value of your property. The most obvious way to do this is by increasing the rent. That’s one of the things to look for in your deal is the ability to raise rent.

There’s a few ways to raise rent. You can just because. This would be a generic cost of living increase. You could raise rents due to exterior improvements to the property like landscaping or paint. Give tenants something in return for increasing the rent like washer/dryers, ceiling fans, better lighting, countertops, etc. Don’t overcomplicate it though. For every dollar you spend, you want a 25% return.

Investing in real estate is investing in a real asset that will inflate in value and will produce positive cash flow and double your investment if you do it right.