I’m guilty of it too. I am a busy real estate agent and investor who has limited time to focus on everything. I tend to poo poo away the small expenses and small sources of income. I convince myself, paying an extra $25 here or there won’t make that much of a difference. Or, why bother tweaking and improving an area of my businesses that will save me tens of dollars when I could focus on doing another deal and make tens of thousands or more. Maybe, you are like me and the phrase, “stepping over dollars to pick up dimes” echoes incessantly through your head as well.
Well, if you’ve ever had thoughts like mine or wondered if the small stuff matters as a real estate investor, this book is for you.
I’ve spent most of my professional career analyzing properties. As often for myself as I have for clients and in marketing to find new clients. I can honestly say, I have analyzed more deals than most people will ever analyze in their lifetime. I say this not because I am perfect at deal analysis; I am not. In fact, what I’ve learned from analyzing thousands upon thousands of deals is that I still have a lot to learn. Real estate deal analysis is subtle and nuanced and complicated. And if analyzing an individual deal wasn’t challenging enough, analyzing a group of real estate deals as part of a real estate portfolio is almost unheard of, but more important than most people would imagine.
It is one of the reasons I’ve invested so much time and energy into writing the real estate portfolio analysis tool the Nomad Calculator 3™. With this tool I can look at the impact of small things not just over a single real estate deal, but over an entire portfolio. We can see how increasing rent just $25 will allow us to buy the next property just a little bit sooner, which will allow us to buy our next property just a little bit sooner which will allow us to buy the next property sooner… until finally, we own significantly more and better cash flowing properties than we did if we had ignored the small stuff.
In other words, focusing on the small stuff does have big impacts. The phrase that comes to mind is, “small hinges swing big doors”.
In this book, I’ll start by sharing with you the unusual nature of rent and how it impacts cash on cash return on investment. How you need to work like heck to get above break-even with cash flow, but once you do, almost all your extra rent above your break-even cash flow drops to your bottom line in the form of positive cash flow. This is the basis of why just $25 more in rent on your rental properties can have a big impact.
Then, I will share with you a rule of thumb my father, a real estate agent and real estate investor, taught me as a teen for quickly and easily figuring out how much the monthly payment would be on a property would be. This, combined with knowing what the cash flow and cash on cash return on investment is on a just a single rental property, can allow me to do fairly accurate estimates of cash on cash return on investment of new properties I see while out looking at properties or at cocktail parties to impress strangers (who are not already aware of freakish math parlor tricks). I bet you can’t wait until you too can be a math freak like me!
You get some tips from my Cash Flow Explosion class on how to maximize cash flow on your rental properties. I will give you some practical tools that clients tell me help them improve their cash flow by at least $100 per month on their rentals. If many of them can improve their cash flow $100 per month, you certainly should be able to find $25 per month in there somewhere. It reminds me of the Ronald Reagan story of the overly optimistic girl who wakes up on Christmas morning to find a pile of manure under the Christmas tree instead of presents. Not discouraged, she starts shoveling the manure exclaiming, “with all this manure, there must be a pony in here somewhere.”
You will be reminded of the importance of raising your rents with each lease renewal to existing tenants. Done! Well, actually it is a little more involved than that… I will show you some math behind it to show you the impact.
Then, I’ll go to freaky town with some maths. I’ll show you magical charts and demonstrate that I am truly a real estate agent when I point to the kitchen and say, “and… here’s the kitchen.” Well, in this case I’ll be pointing out stuff on the charts that I consider to be as obvious as a kitchen. You’ll nod and agree, “yes… that is the kitchen, James. Good job!”
In the charts I’ll show you the impact of $25 more in rent on several scenarios like what difference it makes on a single rental property, the difference it makes on buying a second rental property and finally how it impacts you if you decide to do the entire Nomad model and acquire 10 rentals.
I’ll also introduce the idea of rent resiliency and show you what the equivalent of $25 in rent is as if it were an increase in vacancy or maintenance on the property instead.
I am excited to be sharing this with you. So, let’s begin.