How To DOUBLE Your Money In Real Estate In One Year

there's four benefits to rental property there's appreciation mortgage reduction benefits and cash flow now in my master real estate analysis spreadsheet in fact here's another bonus if you email me markup Mark J Kohler and type in the subject line real estate analysis spreadsheet I'll send you a pretty elaborate spreadsheet I use to even analyze my own real estate deals and I send it out to clients on a regular basis I'm going to make sure and ask that you subscribe to my newsletter and my social media to stay in touch with me but I'll give that to you for free now in my spreadsheet I have these four calculations to figure out what your Roi return on investment or cash on cash return is going to be with a rental property so you should be able to knock this out so let's just do it quick let's say I buy a hundred thousand dollar property I put down ten thousand in cash that's my down payment here's PP my purchase price and I get a mortgage for 90. all right you can add zeros to this or whatever but this is the concept and I have lots of clients that buy hundred thousand dollar rentals not in Southern California by the way all right so I've got this ninety thousand dollar mortgage ten thousand cash down and a hundred thousand dollar purchase what's that property gonna go up in value over time National real estate um National Association of Realtors and we've seen this across the board over the last 50 years real estate appreciation outperforms S P 500 real estate grows in value now there's ups and downs I lived through the 2015 crash or sorry 2009 crash I've been there it's it brutal I got I get it but we we know that it's going to go up in value so if I can just give up five percent and there's markets that have done 10 or greater every year if I say the property is going to go up by five percent what is what's my return do I get five percent on the cash or five percent on the property well if I buy a property for 100 grand now next year should be worth 105. now I'm not dealing with taxes or sales cost of sale but that property went up by five grand went up by five I invested ten so I divide the 5 by the ten I just made a 50 Roi I invested 10 I made five and that's tax deferred maybe even tax free mortgage reduction someone's paying the mortgage for me it's called p-i-t-i principal interest taxes and insurance oh there we go we're okay that just fell we stole a good sign okay sorry we had that on a little stand there um principal interest taxes insurance if my tenant can pay Piti then I break even on that property now yeah you want to reserve vacancies damage HOA fees property management and all that in my spreadsheets I like to analyze that but if I can at least cover these that property the values going up and the mortgage is going down let's say the mortgage goes down by two thousand dollars in a year because most of the payment's going to go to interest so if the mortgage goes down by two look what happened I made more money and and appreciation and the mortgage went down I'm building equity and I didn't put any more money in so a two thousand dollar benefit of more Equity turns into two thousand divided by ten twenty percent ROI then tax benefits the sexy part this is where we're going back to this page this is what we're going to come back to this page because of this quadrant I got to put it in perspective for you rental real estate loses money on paper even though we're cash flowing even though it's appreciating I'm losing money on paper and why it's the big b and I don't mean Dallas don't mean divorce I mean depreciation I love depreciation so I'm going to be writing off here's a building on this piece of property and I'm going to be writing off this building on this property in 27 and a half years I may even do a cost seg and I can really ramp up the depreciation plus I get to write off the interest that the tenants paying since insurance cell phone travel dining entertainment oh not entertainment anymore what a bummer all these write-offs are going to be playing out here the average rental loses six thousand dollars this year we'll do over 3 000 rental properties on tax returns with an average loss of six grand 30 tax bracket 25 fed five State and 30 percent of six grand means I got a six thousand dollar write-off so I'm gonna pay taxes less taxes of 30 of that that means I just saved two thousand in taxes people this is important buy a rental Pay Less in taxes is that crazy it's because the pass-through losses offset our other income if you qualify as a real estate professional it can even be better but in the self-rental and Airbnb and variety of strategies I can get a full write-off for this loss against my other income that's the beauty of this strategy so two thousand divided by 10 I made twenty percent wow now cash flow let's say just this thing cash flows an extra 100 bucks a month just a hundred bucks a month of cash flow that I didn't have before a hundred bucks that's a thousand a year let's say I'll even round down a thousand dollars a year in extra cash flow divided by a hundred grand a ten thousand dollar investment I made ten percent so people in the first year I made 50 20 10 20 50 60 70 80 90 100 return a hundred percent ROI in the first year and I'm just getting started so the more effective we can be with this strategy the better and we as advisors and as Real Estate Investors want to know how can I take advantage of this quadrant because I want tax-free cash flow tax-free cash flow and I want mortgage reduction with no extra money out of my pocket and that appreciation I can take advantage of down the road we're going to come to those strategies so on this right side when it comes to the losses because that's what I'm talking about now you say well Mark don't I get a write-off of all those losses you just told me it depends on the type of rental property you own if you own a long-term rental I have to be a real estate professional a real estate professional is a three-part test it's not just two I have to if I don't if I'm not a real estate professional in my Trifecta all those rental losses they go into a bucket and they carry forward if I'm a real estate professional all of those losses are deductible against my 1040. real estate professional means I work 750 hours a year in real estate now I could be a full-time dentist or doctor and do 750 hours that's 13 hours a week doing real estate but I also have to be in the primary occupation of Real Estate and managing a tree farm I don't think is all the regs I've read doesn't qualify as a occupation in real estate so primary occupations real estate and then this is also I have to materially participate meaning I have to be involved in the real estate to some degree and there's seven tests to qualify under here so those are the three ways that if I'm a real estate professional I unlock all those losses now if I don't unlock them it's okay so many people go yeah my accountant said I don't get the losses so I don't do the real estate this bucket will grow and anytime you sell any rental property you can dump out these losses even if the losses came from property two three and four I can use the loss against property number one

Channel: Mark J Kohler

Views: 18,876

Keywords: tax, legal, entrepreneur, asset protection, wealth building, cpa, attorney, lawfirm, Mark J Kohler, Mark Kohler, Crypto, Bitcoin

Id: 5-DTnLUb1eo

Length: 8min 34sec (514 seconds)

Published: Wed Aug 23 2023