what could you do with $3,000 per month and passive income for life how would it change your life for some of you it will be a total game changer for the others maybe not but how would it affect your life if you were the owner of a commercial property that produced $3,000 per month for life well I could think of three things right away number one is security and confidence you would have the security in Commodus just in case you were laid off from a job or even downsize you could still afford the basic necessities of life number two is some of you have a very low cost of living some of you live very frugally meaning that the $3,000 a month that you generate could equal your rat-race number and your rat race number is the amount of income that you need per month so that you're out of the rat race on the corporate world so give you choices of perhaps you leave your job maybe you can work part-time do ministry volunteer pursue the desires of your heart or number three how about even working full-time in commercial real estate what now be great that's exactly what I did number three is making $3,000 per month in passive income the process of doing so is a road map to also generating five thousand dollars per month ten thousand dollars per month or twenty thousand dollars per month and passive income for life that's what this video is about hi I'm Peter Harris we're commercial property advisors I am the author of my best-selling book commercial real estate investing for dummies also my new best seller commercial real estate for beginners and we also have the number one rated YouTube station on a commercial estate investing thank you so much it's because of you today's video is about how to make three thousand dollars per month in passive income using commercial real estate as your vehicle I will show you three ways the first way will be with yourself the second way with investors and the third way with creative financing before we get started I am going to assume that you've already watched my other videos where I teach you how to do a basic evaluation of an income producing commercial property if you have it a link will appear on the screen of a video that like you to watch later on is called analyzing commercial real estate quickly and easily so watch that one at your leisure alright let's get started here I have an example I'm gonna use this this example here as the teaching point for to teach you how to make $3,000 per month and passive income in real estate with yourself with investors and create the financing this is the basis of it so watch is very carefully okay alright so let's assume that this is a small office building or 20 unit apartment building and the the purchase price is $1,000,000 okay you're gonna put down the 25% down payment which is $250,000 so after you put down the down payment what's left over is your mortgage of $750,000 right just like buying a house you're gonna pay an interest rate of 5% that's gonna be a 30-year amortization the payments are going to be four thousand twenty six dollars per month right but in commercial estate evaluation we always use a yearly figure so I'm going to multiply this $4,000 per month mortgage by twelve months and it comes out to be forty eight thousand three twelve alright so that is your annual mortgage payment okay your monthly is four thousand for the years forty-eight thousand dollars so just remember that because we're gonna go over here and use that number in this example okay in this small office building or apart between an apartment building the income is one hundred and fifty six thousand dollars per year got it all right I'm going to reduce that income by five percent vacancy factors should always do that because you can't expect to be a 100 percent full for 100 percent of the year right you just that's just not gonna happen someone's gonna move out someone's not gonna pay rent so let's be conservative here and take away five percent that leaves us with a hundred and forty eight thousand two hundred dollars for the year I'm going to subtract thirty five percent of the income as expenses we need expenses for a property management insurance taxes repairs administrative marketing all those things that we need to have subtract expenses so an industry standard is thirty five percent okay so I must subtract thirty five percent of that of this number from this number and it comes out to be one hundred forty eight thousand - the thirty five percent equals ninety six thousand three hundred thirty three dollars three hundred thirty dollars okay very important number okay this is called the net operating income very important number to remember in commercial real estate so again income minus expenses equals in a why they're important number now once I have the NOI to calculate the cash flow I'm going to subtract the mortgage the annual mortgage from this number to get the cash flow so the Noy - the mortgage remember the mortgage we calculate over here the mortgage so nine to six - the forty-eight thousand dollar mortgage leaves you a cash flow of 48,000 and eighteen dollars okay so I will circle the key indicators for this work today right so once you remember this number okay that's the in a why ninety six thousand three thirty I want you to remember the cash flow of 48,000 $18 per year and I want to remember the down payment of $250,000 it's a really important number right think some of you don't have it I have to share with you in a few minutes how are we gonna deal with this all right so let's move on into a section where I show you how you yourself can fund and close on a deal like this I'll see you there I plan to share with you today three ways to take down a deal like this where you're making $3,000 per month in passive income and this is the first way the first way is going to be using your own resources the second way is going to be using investors resources and the third way is going to be something creative some some sort of creative financing again this is the first way so you're gonna use your own cash and how much cash do you need if we recall the few minutes ago you need two hundred and fifty thousand dollars how do you get that many people don't have it that's okay it doesn't matter where you start it can be a small amount of cash or it can be two hundred fifty thousand dollars don't get hung up on that I want you to watch the process okay now you can use your own cash all right two hundred and fifty thousand dollars if you have it but what about if you have an IRA or self-directed IRA you can use it and if you have a 401 K you want to cash in and it's sitting there to stock market doing nothing or you can use your HELOC or your home equity line of credit or some other form of line of credit all right so let's focus on that right so I really like to use the lines of credit and I like to situate the deals where the properties actually pay for the line of credit payments follow me here you're gonna borrow two hundred fifty thousand dollars from your line of credit and then you're the property your commercial will estate that you purchase is going to make the monthly payment on the line of credit follow me here so let's say you borrow $250,000 their payments at you know 5% interest amortized over 30 years is 1342 dollars per month again we need to get a yearly figure in commercial something to multiply this by 12 comes out to be 16 thousand dollars a year so borrowing 250,000 dollars from your home equity line of credit or another form of line of credit that's going to cost you sixteen thousand dollars per year got it so far okay now remember that the property cash flows $48,000 a year remember that all right so so the ultimate cash flow is of the property is $48,000 and you're gonna pay your home every line of credit and what's left over is thirty two thousand dollars per year okay that's after making the mortgage payment on the actual property paying your home aculon and credit that includes all property expenses everything that's what you're clearing per month all right now this does work I'm going to share with you with one of our students has done in and is currently doing really well he used his home in loan and credit to purchase a five unit property right and he bought it it needed some work and then we discovered also that if you were to renovate the two bedroom units they were all two bedrooms that you can raise the rent substantially it took him about eight months of work but guess what he raised their it substantially and as you know as you increase the net operating income in commercial estate the property value goes up and the cash flow in the cash flow goes up so he was able to reduce from this one five unit property seven hundred dollars a month in cash flow right he did that so well he found another one another five unit in the same city and that one produces $600 a month as well now at this point he ran out of money so what did he do he did a cat shot refi on these two properties and then he purchased a six unit that produced $900 above and another 60 minutes that produced $90 a month that equals 31 hundred dollars a month so this student is the example and the inspiration for this video right so this works great example here of him just using his equity sitting at home doing nothing and putting it to work in a very very smart way got it all right so again in summary you can use your cash you can use in Iowa at 401 K or your home economic credit just to get started right so again it doesn't have to be two hundred fifty thousand dollars you can start at a lower level like he did to get your yourself rolling okay that's the most important thing get started get some experience starting small is absolutely okay all right so next I want to move on to taking down a deal like this using investors resources other people's money I'll see you there here is the second way of taking down a deal like this a small office building or a small apartment building and making $3,000 a month and passive income so the second way is using investors OPM other people's money now I do have a video by the way that whole process of using other people's money to buy commercial estate that's called real estate syndication and I do have a video on that and the link will appear for you to watch it and I'll also refer to it in a couple more minutes let's get started here again the property costs a million dollars you need to come with a downpayment of $250,000 and it can reduce a cash-flow $48,000 per year follow me so far okay this the same examples before now the question is how do you get to $250,000 right so again I'm gonna share with you how to do that and again it doesn't matter whether the $250,000 is a million or if it's 40,000 even $20,000 the process is the same follow me all right now number one is your the goal is to obtain $250,000 from investors okay you're gonna pay the investors a rate of return of about 6 to 8% you have to choose one right I to be conservative I'm gonna choose 6% and if we borrow the $250,000 from investors at 6% interest you're gonna be paying twelve hundred and fifty dollars per month but remember that's okay because we're making cash flow in the property $48,000 a year so again again the property is going to pay the expenses it's going to pay the mortgage then it's going to pay the investors as well okay remember that okay so it's going it's going paying twelve hundred fifty dollars per month again multiply it by 12 months is $15,000 per year all right so this is your annual obligation to your investors you have to pay them $15,000 per year okay now if we take the cash flow right to the cash flow of the property which is $48,000 per year and you pay your investors $15,000 you're gonna have left over for yourself $33,000 per year not quite $3,000 a month because it used to be 48 but now it's 33 because you did pay investors but really close again don't get stuck on a number I want you to focus on the process and here now here's two big questions two big questions how do you get investors interested in investing with you so you can produce these type of results and question number two how do you structure deals with investors right so the answer to those two questions are right here so I want you again to watch my syndication video go through it and start applying it got it all right let's move on to one of my favorite subjects and that's creating financing I'll see you there here is the third way of taking down a deal like this you're a small office building your small apartment building and again it's a million-dollar building and the third way that I'm going to share with you is with creative financing and one of my favorite strategies is the master lease agreement okay the master lease agreement by the way I do have a video on YouTube called the master lease agreement for a commercial property or for commercial estate checking out the link will appear right here so after the video go ahead and check it out alright let's get started now I'm gonna start off with this right one of the reasons why we incorporate the master lease is because you don't have a lot of money right so let's say you don't have the $250,000 you don't have investors right and you don't want to deal with banks all right maybe because you have bad credit maybe because you have no experience they won't give you a loan so what do you do what do you what are some of your tariffs the master lease agreement works well in those situations right but with anything to do with creative financing what we have to find out and be patient with and be a very good detective and a very good listener is to find out what the sellers motivations are we structure every thing creative around their motivation what comes out of the mouths their personal situation alright their personal circumstances whatever they're sitting in you have to understand that and get that out of them to know how and which way to structure something creative now let's say that the property owner did not want to sell the property and pay capital gains taxes uh-huh you have a solution you can use the master lease agreement because we can defer capital gains off many many years down the road what if there what if the seller was somehow distressed at the leave town or financial distress or the property was distressed and in both cases the property wouldn't qualify for the best financing but he needs to get rid of it the master lease agreement or let's say that the seller is older and then wants to keep the property but really wants to wants to share some of the income or keep some of the income but doesn't want any of the day-to-day operations responsibilities what do you do master leaves okay so these are great seller motivations that if you can ask these questions and give you some motivations you can structure master lease agreements around them all right again how to do that go ahead and watch my video here the link will appear again and you can go ahead and watch the video and see how that works now let's do some quick math to show you how this works as a default we'd like to start off by master lease agreements with a 10% down payment once we understand the motivations okay so 10% down payments $100,000 right at 5% interest and we're paying interest only on this just to keep it simple that's gonna cost you - so you're gonna put down $100,000 that means your mortgage payment it's gonna be based upon $900,000 this time right right because you start out for the million dollars you're gonna put down a hundred thousand your mortgage is nine hundred thousand and and nine hundred thousand at 5% interest you write per year your mortgage payments going to be three thousand seven fifty per month per month I will multiply that by 12 to get the annual figure the annual figure is forty-five thousand dollars per year alright so in this deal where your to buy for a million for then 100,000 you're going to finance 900,000 died 900,000 and 5% interest interest only it's going to cost you forty five thousand dollars per year alright so that's your your mortgage commitment for this property now how do we figure out the cash flow let's go back here the cash flow is the NY - your mortgage payment and that equals the cash flow something in a why nine to six thousand three thirty let's try not to 96 thousand right so 96 thousand - thousand six thousand - forty five thousand is fifty fifty one thousand dollars per year that's your cash flow but I know some of you are thinking where do I get two hundred thousand dollars from I don't know but I tell you what you have to do you have to find it on a Depot like this you really do right the money flows the good deals so you have to create you know how to create this good deals that's why I want you to watch this video now let's say that you found an investor and you're gonna pay him fifteen percent return on his money that's that's a lot any commercial we want to entice him and make it really attractive for him so if your investor puts in a hundred thousand dollars you will pay him a fifteen percent return that's high but guess what this property can afford it right because let me show you real quick if you borrow $100,000 from your investor and pay them 15 percent that's $15,000 per year yet that you have to pay additional to your investor right so but you're making you're making fifty one thousand dollars a year so you can afford to pay the fifteen thousand dollars so fifty one thousand dollars - the fifteen thousand dollars to your investor equals thirty six thousand dollars a month so you're making $3,000 per month and and passive income after you pay your investor again same as the other two cases as well right got it alright so again creative financing is one of my favorite techniques please watch this video it's video right so I'm gonna stop right here and I wanna wrap this video up by sharing something really quick with you okay and one second let's go there allow me to wrap up this video with a question the question is why are you watching this video what's driving you to learn this material two really important questions and I really implore you to really understand your why because nothing great is accomplished without understanding and knowing the why right so there's a saying that once you know the why and then the how is not too difficult and what I shared here was the how so perhaps your your why is you need security and confidence knowing that if you lose your job that you can still make ends meet or you need a retirement maybe don't have one or is really small or you want to escape the rat race that was me or you want a bit of a legacy for yourself and for your family with commercial real estate that's to be all of us right well I just reassured what I just shared with you three ways to help you with your why that was to start making learn how to make $3,000 a month and passive income for life but with yourself your personal resources with investors or with something creative so that's your house that's how you do it so I'm here to support you so let's go out there and do it alright so again I'm Peter Harris with commercial property advisors if you want more videos like this please go into our website commercial property advisors comm or simply subscribe to this YouTube channel thank you so much for watching and I'll see you at the next video
