Teaching a TEENAGER how to make BANK

i want to introduce you to my new friend my future real estate investing partner okay my name is trenton mick and i have the dream to own a duplex one day and i wanted to start from there and work my way up we've never met before about 40 minutes ago right so tell them i'm i'm at the starbucks he walks up to the window of my car my daughter's inside and you walked up and said what to me i said hello grant cardone my name is trenton mick i'm 14 and i had a question about underwriting because it went completely over my head how many of you have a question about underwriting so what i'm going to do is i'm going to have trenton underwrite a deal for us right now okay we're going to make up the deal okay this is this is fantasy real estate let's say four units okay you want to do four units yes so man he's upgrading himself already he gets around me now 2x just being in his presence look these rents are going to be let's do a thousand dollars a month you're not going to be able to rent anything for so what i'm doing is is is what do i need to know to underwrite a deal i don't know anything about the deal all i know is how many units there are and then i plug in the rent and then i know there's four thousand dollars a month so look we're going to go 12 months here that's 48 000 a year now you your mom and your dad are probably going to manage this place 48 000 a year in income right now what are the expenses of this property going to be taxes are going to be the number one i got taxes i got electrical i got insurance gas water let's say the cost to operate this thing is 40 so i'm gonna call somebody that does four units in this houston market trenton and i'm gonna say hey what do you think i can operate this thing for he's gonna be like oh man you can operate this thing for about 40 what we're going to do is we're going to flip it i don't really need to know what the 40 is all i'm concerned about is the 60. so i'm just going to skip this part right here give me 60 percent of 48 000. 28 800. okay so that is what the n-o-i is this is the number that i need to get to to determine what i can pay for this property i'm gonna take this noi number twenty eight thousand eight hundred dollars and then i'm gonna start figuring out what i want from this deal okay for you guys that want a six percent return this is your cap rate cap rate is a fancy word for how much does he want to earn on this deal can you guys calculate what he can pay for this deal to ensure that he gets a six percent return 28 000 do this take that number divide by .06 and that says i could pay 4 40 480 000 for that deal okay which is 120 000 a unit this guy will actually make a bunch of money on this deal at 120 000 a unit in that little town he was talking about so i might be overpaying for that deal okay so the first thing i'm gonna do is i'm gonna take this price six percent return i can pay four hundred and eighty thousand dollars when i see that number the first thing i do in my underwriting is divide by the number of units this is just a little check you don't have to do this one thousand two hundred yeah twelve hundred twenty thousand 120 so now that's a hundred and twenty thousand dollars a unit i'm gonna go back to find out when the last time this guy bought it i'm gonna call my buddy robert up and say hey robert what does the uh the report say uh co-star say about when this guy bought it this guy bought this in 1980 1982 and paid 20 grand a unit he's about to make a bunch of money but so am i by the way i'm cool i don't care if he's making a bunch of money on it guys you guys understand you want to write this down you want your seller to make money on you there's nothing wrong with them making a bunch of money i don't care man i don't care i just want to know i can make money on this deal so let's say he's gonna go to him and say look man i'm gonna i can i can pay you 480 000 a unit on this deal i know you bought this deal in 1982 you guys paid 20 grand for it would you be willing to make a hundred thousand a door you understand what i just did yes sir okay so so so this this how did i come to this number do you know you could tell me what to write i got how many units do we have four units four units okay what is the rent on the four units a thousand dollars that's right we looked at it we said man we called the place up and they said hey the rents are a thousand dollars but ain't nobody there's never a vacancy you called over there and they're like never a vacancy tara's going to leave the property when you buy it and you're probably going to move these rents 200 bucks and they're probably gonna stay there for another 200 because their next choice is to go to two grand a month okay so how much is that a month four thousand four thousand dollars a month okay now i'm not going to keep this for one month so we're going to go ahead and find out what it's going to make me in a year per year so i multiply this times what 12 12. man you're getting good at this dog okay how much is that 12 times 4 000. 48.48 000. okay 48 thousand dollars okay boom that's my gross income everybody with me gi gross income total rental income look i'm going to tell you that the expenses on this property are 40 okay okay i gave you guys that little little cheat how many like this little okay i don't need to use the 40. what am i going to use the difference to figure out my income okay so you could do the 40 right 40 of 48 000 is what 19 200 bucks is that right i think it's right do 48 000 either minus 19 to or do the quickie version 48 000 times .6 06.6 28 800. same number i came up with last time 28 800. now that number represent what net operating income okay so he's going to go to the guy he's going to go to his dad and say dad if i can find something can we do a deal dad says i'll fund the deal he finds robert as a seller on the deal i want you to divide this number by 14.14. rather than a 10. 205 714 so if we go for a 14 cap how much 205 thousand dollars and 75. he just underwrote that deal and said i can pay 205 000 i want you to divide the number 28 800 by 0.10 that's a 10 cap you said 28 000 divided 800 this number right here divided by uh uh 10 10 288 okay divided by i want you to divide it by zero eight that's an eight cap an eight cap when they say an a cap it's point zero eight you just go divide that twenty eight thousand eight hundred dollars by point zero eight three 360 000 okay all right everybody with me if i do .06 what am i going to come up with the number that we did a few minutes ago 480 000 okay now here's my little guy right here never bought a piece of real estate before and he now knows one i can pay 205 and get 14 of my money i can pay 288 get 10 of my money i can pay 360 and get eight percent return i could pay 480 000 he don't give a he ain't got any money any of these work for him everybody agree now this is where you become an investor because what you need to do is find the difference between what you can pay for this deal and what you can get someone else to accept on this deal is where you make your money okay so if you can get this deal in a 14 cap i'm good at 360 because 3 percent pays him an 8 return right everybody with me i'm going to show you a couple different ways to slice this deal and the kid the kid negotiates the deal at 205 and by the way robert might sell the deal for 205 okay because he's 40 000 what is that a door that's 50 000 a door what did robert pay for the deal y'all remember the first story 20. so he's making two and a half times on his money all right like there's not going to be a bunch of money made here see the guy's either going to make a couple hundred grand on the deal or he's going to make you know 80 000 bucks on the deal i don't have to pay this i don't get it for cheap okay i'm at 350. he negotiates the deal to three hundred fifty thousand dollars three hundred fifty thousand dollars i got four units how much is that a door eighty seven thousand five hundred eighty seven thousand five hundred dollars okay so i know i'm i'm in the money here now i'm gonna go to get a loan on this deal remember my noi everybody remember my noi do twenty thousand twenty thousand times one point two five remember that dcr one point five two one point two five all right yeah good so so i know this deal can handle at least 20 000 worth of debt take 28 800 divided by 1.25 i can handle 25 000 worth of debt on this deal principal and interest that tells me the max amount of principal and interest this deal can fund because i'm going to take his dad's returns rather than taking 280 000 from his dad i'm going to show his dad how to get a loan on the deal and take his returns from eight or nine percent to 12 or 14 and so that he can do this 10 times and end up with 40 units rather than four so we're paying 350 for the deal okay 25 000. so divide that number by .0625 i could borrow 400 grand that's true i i i don't need 400 grand okay okay we're going to put 50 grand down we're going to finance 300 dollars i need to figure out what the principal and interest rate is on three hundred thousand dollars the loan's probably going to be can i get money at five percent on this deal five and a half okay five and a half so i want you to multiply this number times .07 twenty one thousand dollars what was my noi again twenty eight thousand eight hundred dollars and i don't have a rent increase yet okay now i want you to take the seven thousand and i want you to divide by the money that your dad put down oh 7 800 sorry 78.80 divided by 50 000. 15.76 return i told you i'd get to a 14. we're going to increase the cash flow the current cash flow is 7 000 a month a year which is 15.76 percent return now we're going to raise these rents 200 bucks how many units we got four four how much is that 800. 800 times 12. 9 600. i'm going to increase my cash flow i'm going to double my cash flow with the 200 rent bump you guys online right now i hope you guys are tracking this information this is simple this is a 14 year old kid doing this how much is that sixteen thousand six hundred fifteen thousand six hundred dollars how much money did his dad put down in this deal divide that sixteen thousand six hundred by the fifty thousand pops put down three three two three thirty three point two percent return on your money [Music] anybody can do this folks okay thank you man appreciate you okay okay let's go get your dad to show you that bag son

Channel: Grant Cardone

Views: 244,235

Keywords: grantcardone, grant cardone, 10x, money, finance, business, sales, motivation, yt:cc=on, WeAre10X, 10XNation, 10XStrong, 10XLife, 10XEverything, real estate investing, investing in real estate, money advice, advice about money, how to make more money, kids making money, millionaire, billionaire

Id: RAY4Ri5fMHA

Length: 12min 2sec (722 seconds)

Published: Wed Aug 10 2022