The One Thing Every Real Estate Investor Needs
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The One Thing Every Real Estate Investor Needs


The one thing that every
real estate investor needs. That’s today’s video. Let’s dive in. Hey, everybody. I’m Clayton Morris. I’m the founder
of Morris Invest. And today we’re going to
talk about the one thing that every real
estate investor needs. Now I’m in my office. And you’d think that
it would be just filled with tons of clutter. And, granted, I do have
some Star Trek stuff in here and some other fun
science-fiction stuff in my office, and
some pictures from my kids that they’ve drawn. But there is one thing
that every real estate investor needs. Now, of course, you
start on a journey of learning and education. You’re going to go
down that process. Fine. Once you stop being stuck
in analysis paralysis phase, there is only one thing– anytime a deal comes
across your desk; any time you’re thinking
about taking action and buying your first rental property– literally, the only tool
that you need is this– here it is. It sits right on my desk– a little, cheesy
Staples calculator. I have done hundreds
of thousands of dollars in deals using
this little, dinky Staples calculator. Because any time a deal
comes across my desk, all I care about knowing
about the property– other than where it’s
located and, obviously, some of the basics– but what I want to look at, most
importantly, are the numbers. The numbers. What is the ROI? And, of course,
you remember I’ve got another great
video that walks you through how to figure out ROI. Just click on the little card
here and you can watch that. But this is really
the only tool. And what I’m trying to– the point that I’m
trying to drive home with you is that I don’t
want you to become– or fall in love
with real estate– to fall in love with that
adorable little bungalow. You’re not going
to be living there. Focus on the numbers. That’s the only
thing that matters. So let me show you exactly
how I would use this. Let’s take a look at exactly
how I would use this calculator. So what am I going
to figure out here? Well, let’s say that the
property rents for $700 a month. That’s the potential. We’ve talked to the
property management team. Or we know that that’s what
the rent is going to be. So I want to take $700. And I want to multiply
that times 12. OK. That’s $8,400 for
the year in rent. OK. Now, what’s the
overall price tag going to be on the property, right? What’s the overall
price tag on this house? Well, it looks like it’s
going to cost us about $30– well, let’s just say
flat numbers here– it’s going to cost us $40,000
to buy this house, all in. OK. That’s our all-in price. OK. Great. Now let’s go back to
how we figure out ROI. So we said it was going
to rent for $700 a month. So 700 times 12 gets me 8,400. Now here’s the trick– I want to take out 40%. I want to be super
conservative in my numbers. So I’m going to take out 40%
for vacancy, repairs, expenses. So now I’m going to
multiply this times 0.6, because that will get
rid of that 40%, right? Multiply times
0.6 equals $5,400. That’s my net cash flow for
the year on this property. Now I want to divide that by the
total all-in cost of the house. Divide by 40,000 equals– that’s a 12%– almost 13%– ROI. That is phenomenal net
cash flow, net ROI. Can’t get that in
the stock market. And if you like to see where
the decimal point is moved, you can just multiply
that times 100. If you’re– boom. So when someone sends me a
deal, that’s what I look at. So there you go. So when someone sends
me a deal, or I’m looking at deals that we’re
acquiring in the office– maybe we’re buying a package
of, you know, 30 properties; we’re going through
and having to figure out the numbers; what’s the
potential rent; what is it all going to shake out to after I
rehab the property, if I spend $20,000 on the rehab– I get out the handy calculator. Someone wants my
answer on a property– so, I mean, I obviously don’t
have to do that much anymore because my team does
it– but the point is, this calculator,
that is all you need. So when someone
sends you a deal, don’t fall in love
with the photos, don’t fall in love
with anything else. I want you to fall in
love with the numbers, and grab your calculator. This is the one tool that
Batman, as a real estate investor, should keep
in his utility belt. We have tons of other great
videos here on the channel. I hope you take
advantage of them. You can just go right
into the playlist here, right on the videos. You can click on the
playlist, as well as subscribe to my channel. We have videos that we
publish every week right here on the channel. Thanks so much, everyone. We’ll see you back
here next time. Now I’m going to do some deals.

20 Comments

  • Aaron Christopher

    Forgive me for my ignorance here. I understand that economic situations are different across the country, but a mortgage on a $40k property would likely be half what you charge for rent. Why not just buy it? Do they just lack the upfront cash? I'm leery of a working class population that can't afford a 40k home. I don't mean to call you into question, I'm just genuinely curious about these markets. I love your podcasts and these videos though! I've been considering booking a call.

  • Awuramma Parry

    Hi Clayton,
    l pulled money from my Roth IRA and 401K to buy my first property in the amount of $30k.

    But my real estate agent says the proof of funds statement must reflect the name of the LLC l am buying the property in. l just registered that company and l have no funds in it.
    What should l do?

  • sogerc1

    Hehe, but I come from the world of computers, that's where I made some capital, so can I use a perl one-liner instead ? 🙂

    perl -le 'print 700*12*.6/40_000*100'

  • Edward G

    So you talk to the property management company to figure out the monthly rents and market and such prior to buying a rental?

  • Timber Creek Mill

    You mentioned in many of your videos about having a management team. How much would it cost to have a property management company manage rental properties?

  • MrJules

    I've recently started watching your videos and the are full of great info, therefore i thank you. From watching your video, something came to mind and I hope you don't mind my inquiry

    Do you plan for the rehab in your overall 40k price or what???

    If not, then dosen't it mean that when you add the price for rehab, your ROI will generally be lower?? (This came to mind, so I was curious to know how you'd deal with or do you consider the cost of rehab when dealing with your properties…)

  • Hanoy Con

    Question , i live in florida , daytona beach , you say i have watch a lots of your videos ,you always say you spend around 40k in a 3/1 family home … now i have been searching for over 4 month now ,cant find anything close to that price range… im ready to invest , can you help me find a rental for that price ? Thank you for your time

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