IRR or Internal Rate of Return is the most important formula for running the math on a rental property.
📞 Ready to buy your first fully done for you rental property? Book a free call with us: [ Ссылка ]
📺 Watch Next: How to Create Your Personalized Path to Financial Freedom: [ Ссылка ]
🏠 What's Your Freedom Number? Download our free PDF to help you determine how many rental properties you would need to achieve financial freedom: [ Ссылка ]
💵 Ready to get your finances in order? Download the FREE 90-Day Financial Empowerment Bootcamp: [ Ссылка ]
🎓 Want to learn more about creating your individualized plan to wealth with a proven system? Join us in Financial Freedom Academy: [ Ссылка ]
-----------------
In the real estate business, there's a lot of talk about ROI, or return on investment. But ROI is just one way of running the math on a rental property. If you work with a turnkey provider, that is one of the first metrics you're going to learn about. This is because most turnkey companies are not able to offer financing on their properties
Experienced investors are looking for a IRR or Internal Rate of Return. So, what is an internal rate of return?
IRR is is the annual rate of growth expected on an investment.
There are three streams of income to review in an IRR:
1) Cash flow - what is your annual net cash flow return on this investment? This is how to determine how much cash ends up in your account at the end of the year.
2) Next is the principal reduction - let's dive into some details on this for a minute. You used financing for this investment, each month you need to make a mortgage payment. However, you are receiving rent each month from your tenant, this money is actually paying down your mortgage.
3) Lastly - Appreciation - let's use a conservative 2% annual appreciation on your rental property
Let's look at this example on leveraging your money to purchase 3 new construction properties using financing. (Run through the visual - this part doesn't really need scripting, I think just running through the visual will build out this bulk part of the video)
The important number you should focus on is the IRR of 18%!
In a cash-based purchase model, ROI is the most important metric, and you've probably even heard me say that before. But now my company is happy to offer multiple financing options that allow you to leverage your money for bigger returns - IRR is a more helpful metric, and I hope this helped you gain a better understanding.
-----------------
DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning, at NO additional cost to you, I may earn a commission if you click through and make a purchase and/or subscribe. However, this does not impact my opinion. We recommend them because they are helpful and useful, not because of the small commissions we make if you decide to use their services. Please do not spend any money on these products unless you feel you need them or that they will help you achieve your goals.
