Hey guys, it's Ken McElroy here and as you guys know, I grew my career
on finding properties that cash flow so that I personally could become financially free.
And of course I’ve taught people how to do that over the years. The question is is can we still
find cash flowing properties? I decided to do a short video on how to find cash flowing properties
in minutes and I did this in minutes guys. And I did it all on the internet from my desk
and so we're going to get right into it. So obviously you guys have all heard of Zillow.
It's really evolving into all kinds of stuff and so are a lot of other platforms, so these are
available to you and you guys can do all of this from home. And so I started to find properties
that were low priced that had big rents and so the number one thing that I want you to know
is that what you're trying to look for is a large gap between the rent and the mortgage.
And how do you know where the mortgage is? And so that's the big question because a lot of
people they don't know. And so here's the cool part- this is actually the best part- so Zillow
actually shows you right here the estimated payment for this house at $110,000 is $499
a month. The estimated mortgage payment. So you already know this, you already know that with 20%
down, your estimated payment based on today's rates is 499 a month. There are some steps
you have to do later to verify this information, but this is a great example of a property it's a
three-bedroom, two bath, 1320 square foot home. So this property isn't particularly beautiful okay?
So as you guys can see it needs landscaping, it needs some basic TLC that's for sure, but it is
for sale for $110,000. So now let's take a look at what Zillow thinks the estimated rent would be
on this particular property based on the rental value, this property rents for about 1200. Now,
you have to verify this yourself okay? But this information is on the internet. I found it
in one minute. I found this property and it was all on there. $110,000 for the house, 100- $499
for the mortgage payment, and $1200 for the rent. Now let's take a look at the house itself.
There's a couple things I liked about this house. It has new wood floors, new wood burning stove,
upgraded gas cooktop and oven, new flow toilets, vanities in the bathrooms, new light fixtures,
upgraded cabinets, it still needs flooring in the bathrooms, the kitchens. That's good to know,
but also in 2018 they put on a new roof. One of the things that can kill you in real estate is all
that capital work after you buy something. Look at this property. It's not bad. The kitchen's nice,
you know, the living room's nice, it's decent, it's a rental. Don't get don't get
too concerned about the way it looks from the outside because you can clean that up with just
some basic landscaping. But here's the point what we're trying to do is look for a large gap between
the rent and the mortgage, okay? We know the mortgage is 499 and we know the rent is 1200.
Obviously you have to verify both of those, but this is a very good start. The difference between
499 and 1200 is 700, so you have a $700 window to work with that is potential cash flow. Now
it's not going to all be cash flow because there are expenses. We're going to go into that net. So
here's another thing on Zillow. They gave me this this monthly cost principal and interest is 380,
property taxes $81, home insurance $39 a month. Now again you got to verify it. No hoa - that's
good, utilities are paid by the tenant, okay? So so they give you a breakdown and that 499
to my surprise is actually includes property taxes and homeowners homeowners insurance etc, so that's
even better. So now you gotta now you got to take a look at, okay, what are the other things that it
might not consider? All right so we know that the rent's 1200, but you got to add some vacancy in
there. And this of course is going to be market to market and based on the demand for the property.
And this might kill it. So in other words there might be 50 vacant in that market. You would want
to stay away. But there might be 100 occupancy too. This is something that you need to check but
for purposes of this video I did one month over 12 months of vacancy, 12 months at 100 is 1200,
so 100 a month. So I added a vacancy in there of $100 a month. I took the principal and interest
of taxes insurance, just 499 or 500 a month, I added a hundred dollars a month for repairs and
I said you know what? I can manage this one myself. It's just one property. If you don't,
you need to add that in. So with repairs and vacancy I cash flow about $500 a month or $6,000
a year. Okay? This is on the internet right now. I’m not going to obviously buy this property
I’m just trying to show you how to do this now. There might be other expenses, there might be
other capital work, that's why I showed you that there was new roof, new flooring, new appliances,
etc because those are things that can kill you here because those are real costs. But somebody's
already done that. There is some carpet and stuff that needs to be done and maybe that's a thousand
or two thousand but regardless, you're gonna cash flow let's let's say somewhere about $500 a month,
$400 a month, $300 a month, still good. These are positive cash flowing properties. I found this
guys in less than five minutes on the internet. All I was trying to do is find a big gap between
the rent and a big gap between the expenses and find a big cash flow. That's all I was trying to
do. And so if I can do this you could do this too. And I just did it for the video for you.
This property cash flows six thousand dollars a year so now you're at the next step,
you know, that this might be a good deal. It might not be a good deal, you got to check is that a
true rent number? Is there more- are there more operating expenses? Is this cash flow correct? All
those things you got to check, but this is super encouraging. You got almost $500 a month cash flow
on this property that's $110,000. So now we go to the next step. Now you know this is the potential-
this is a potential property that will cash flow. So the key is here is that you want to find 8 or
10 or 20 of these deals so that you- if you find 10 of these deals you're going to find $60,000 a
year of cash flow. That's what we're trying to do here. We're trying to create financial freedom for
you. Now let's go into the next scenario because a lot of you are saying, “I don't have the money,
I don't have the money for the down payment, how am I going to buy $110,000 house I’m out of
a job?” I’ll show you how. So the first thing you want to do is you want to make an offer.
Now here's the cool part- also on Zillow is you've got a history of this property. The estimate for
the property is 108 here and this is where the property's been bumping around in 2012, 14, 2016,
2018 it's gone up. Now it's gone down from 2020, but the point is at some point guys not very long
ago it was around 70 grand. That's the point of real estate investing. Now, the rents were lower
here too but the rents have gone up and the prices have gone up so don't get too concerned about this
chart, just know again you make your money when you buy. In this particular case, I like this
deal because it cash flows $500 a month - at least that's what I think it will right now. And so you
may want to offer less you may not want to offer less. Honestly for me, I would probably just offer
the full price because if it does cash flow $500 a month I don't really care about that extra $1400
difference in the in the value. So we know we know that this property is $110,000
and so the question is how do we buy it if we don't have any money at all? The first thing we
do is we make an offer for 110k and then we find the money. You can do those simultaneously. In
other words, if you go to an investor and say, “I think I found a property that cashflows $500
a month,” you're going to raise their interest. They're going to say, “Show it to me.” And you're
going to walk through the numbers just like I did, and then you're going to make that offer with
a lot more confidence because you maybe have a financial backer. That's how we do it today. Now,
once you get rolling you can put these things in escrow and then go back to your group of investors
that you might have. You can use other people's money (or OPM) or you can use yourself, it doesn't
really matter. Point is, you need to find the money next in order to buy this for $110,000
and there's only two things that you need: One is the debt and the other is the equity. So the
down payment we know twenty percent of a hundred and ten thousand is twenty two thousand dollars,
and you know that you're gonna need a loan of about eighty percent,
the difference between the twenty percent for about eighty eight thousand dollars.
Now again Zillow’s already done this work for you. If you go look at the Zillow estimate and
you can get pre-qualified, you're going to get your payments pretty darn close to that $500
a month for the principal and interest, the taxes and the insurance. All that's kind of
wrapped up in here. I’ll let you guys go do that on your own, but you get the point. Maybe your
rate's two and a half percent, maybe it's three and a half percent, maybe it's four percent,
that's all going to cut into your cash flow. That's all it is, but the point is you just
got to go find the money for the down payment and you got to find the loan and honestly the loan is
pretty easy because now you have a property you take to a mortgage broker or a bank and you say,
“I want to- I want to buy this property,” and then they start to work because these people are in the
business of putting loans on real estate. That's what they do for a living. And so then you have
to negotiate the rate and the terms and all those kinds of things. The only thing you really got to
do is find this down payment and the truth is guys you can get 22 people at a thousand dollars each,
you can get one person at $22,000, you can take money out of your retirement account,
you can take a small piece of refinance out of something that you own, so the next piece
is to say, okay what kind of return is that going to be? This is what investors look for and this is
what you should be looking for. What is the return on my money? If you convince somebody to give you
that 22 thousand dollars and they invest in that property, they want to know is my money secure and
what's my return? Because they're taking it out of a stock market, they're taking out of the bank,
they're taking it out of something and they're giving it to you for some reason. That's if you're
raising money, but even if you aren't raising money you should be super clear on what the return
on that money is. So in this particular case if we have six thousand dollars of cash flow and a
twenty two thousand dollar down payment, that is a 27% return on your money. That's cash on cash. Now
this is how you raise money. This is why you don't need money to make money because all I’ve done
in five minutes is find a property on Zillow for $110,000, get all the information off of Zillow.
I still need to verify the expenses, I still need to verify the rent, I still need to make sure it
doesn't need a lot of capital repairs because that can all eat away your cash flow. In five minutes,
I found something that was six thousand dollars a year on a twenty-two thousand dollar down payment
that produces a twenty seven percent cash on cash return. Who doesn't want that? There's
no way you guys are getting that sitting in a bank account, there's no way you guys are getting that
in the stock market, there's no way a lot of people are getting these kinds of returns, so when
you're looking for your $22,000 down payment what you do is you show them that there’s six thousand
dollars in cash flow. Who's not going to invest in that when they know that they can make 27%?
That's how this is done. You guys don't need any money and so what you do is you cut a deal
with the investor. You say, “Listen I’ll give you 20%, I’ll give you 10%, I’ll give you 15,
let's do a 50/50 deal, whatever it is you cut a deal but you know you have $6,000
to play with and all you need is 22. So if you don't have the 22 you got to pay your investor
and they got to pay you for all this work and that's how you cut your partnership deal
right here. But you do it with the real estate itself, you do it with the cash flow itself,
you don't need the money you just need a great deal with a great return.
And that's how you find cash flow properties on the internet in minutes. You still need
to verify all the information of course but this is how you raise money on a property-by-property
basis and investors love this stuff and this is what they're looking for. If I can do this,
you guys can do this. So good luck. So if you guys like this video and you like what you saw,
just hit a thumbs up so lots of people can see this information as well. Thanks.