10 Principles To Make Millions In Real Estate: Cash Flow

Welcome back friend. So, we’re continuing
this conversation of how do we make millions of dollars in real estate. You
got to understand 10 core foundational principles. And today, I’m going to talk
about the foundational principle of cash flow. You watch any of my videos. It’s a word I
use all the time. And you might be thinking, I don’t know if I understand
exactly what Kris means when he talks about cash flow. I’m going to give you my
very technical understanding of that. I’m going to talk about why it’s important. And
again, it’s one of the 10 principles that you need if you want to know how to
make millions of dollars in real estate. So, this is the principle that got me the
most excited about real estate in the first place. Because cash flow is tied to
residual income. Cash flow and residual income are not the same thing.
Cash flow is a leftover by-product. Which I’m going to explain to you. And residual
income is money that comes in no matter what. They’re closely linked. Check this
out. We’re buying a house. And let’s just say
for all intents and purposes that this is a house that we’re buying for $100,000. I know some of you live in parts of the country you’re
like, “I can’t buy a house for 100….” That’s okay.
Connect with me and my team. Get involved with us. I’ll actually give you access to
the markets where this stuff is real. So it’s not just hypothetical. Some of you
have backyards like in LA and New York where you should not be investing. Should
not. You shouldn’t buy be buying things above the national median. So, if we have
a house that we can get for $100,000. And let’s just say for
a moment that when we buy this house, we’re buying it in a specific market.
Where we’re less interested in discounted equity. And we’re more
interested in maximizing cash flow. Let’s say that this particular house has a…
Once you buy it for $100,000 we’re going to put a 20% down payment which
is going to be $20,000. So now, the house, regardless whether it’s
worth 100 or 120, we owe 80 on it. And that mortgage of $80,000 is going
to have a payment associated with it. Let’s just say that that payment on that
mortgage… We’re going to refer to that mortgage as P-I-T-I. Principal and
Interest, Taxes and Insurance. All 4 of those things come into making up what
your real payment is going to be. So, your principal and interest of your total
payment might be $500. But then you’re like well taxes are $2,000 a year. So if I back that up and divide that out and add in
my insurance… Let’s just say for this example that with principal interest,
taxes and insurance my payment actually becomes $650
a month. But let’s say this is a house that you can rent out for $1,000 a
month on rent. If this house is rented out and I have a true cost of 650 a
month, what’s left over? Well $1,000 minus
650 equals a byproduct of $350
a month cash flow. Now, cash flow means the difference between what’s owed
and what I’m getting. Residual income means I’m getting it without working. So,
let’s say I own this out of state. Let’s say I have a property manager managing
it. Let’s just say I do nothing but collect the money. Now, that’s a true
residual income. So right now, the average millionaire has 5 streams of income.
They don’t just make all their money at a job and that’s it. They have multiple
streams of income. You now have a new stream of income because maybe one
stream is from a job and now another stream comes from the property that you
own. Now the $350 a month, if you take a look at
that, think of some of the bills that you have in life. I remember when my first
car had a payment of 340 dollars a month. That house would actually buy my car. So,
I could be driving all around town and enjoying this car. And the reality is
it’s actually being paid for by my house. It’s not me trading dollars and hours.
And this is really the goal of cash flow. You have got to stop trading dollars in
hours. This is what so many people don’t understand. When my wife and I bought our
first house, we were living for free. Because the basement we brought in the
cash flow covered the whole mortgage. And we still got to live in a part of the
house. My second house had a $600 month cash flow. So, living for free and getting
$600 a month on the third month of owning that, my wife who was terrified of
investing and totally skeptical. Finally, she said, “Kris, I keep getting this left over
$600. What is this?” And I said, “Honey, that’s called cash flow.” She’s like, “Okay,
what do we do with it?” She was trying to do the budget and the balance sheet and
couldn’t figure out where to put the money. Because it didn’t come from my job.
I said, “Honey, we now have 2 streams of income. Job and now we also have our
investments.” And I asked her. I said, “What have you been doing with it?” She’s like,
“I’ve been paying off the credit cards.” I’m like, “How does that feel?” She’s like, “I
love it.” So after
conversation, you know my wife said? She said, “Kris, we need to buy more real
estate.” That’s when we dreamt of producing a cash flow of $10,000. Now, we reverse engineered. If you know how much money that you want to
make that will buy your freedom then you got to ask the question. How much, how
many homes do you need to buy to meet that? For us, we knew that we needed 25
homes. And that if we could find a way to buy 25 homes, then we would have $10,000
a month. And I’ll tell you that by the time we got to 25 homes, it wasn’t 10,000 a month. It was actually $12,000 a month. And that’s when I quit my job.
And I realized, “Oh, my gosh. I’m free again.” Like I’m off a financial life-support.
Like I can live life the way I want. I can live life on my terms. It was so
exciting. That’s why you need to understand this principle. $350? You might look at that and say, “Kris, that’s not a lot.” No. This is
the magic number. How many homes do you need? And then you start saying, “But Kris,
I don’t got the money to buy 25 homes. I don’t even have the money to buy
one.” And that’s why you need to learn how to buy homes with OPM –Other People’s
Money. That’s why you need to learn how to be resourceful. It’s not about how
many resources you have. It’s about how resourceful you are. And I’m going to teach
you how to be resourceful that I’ll show you how to get your hands on deals, how
to get your hands on money. Marry the 2 and get deals done. And neither have to
be yours. So, understand that the goal here is to buy properties with good cash
flow that makes sense that can ultimately help you achieve your goals
and achieve your dreams. My friends, that’s the principle of cash flow.
There’s a lot more to teach on this, there’s a lot more to share. And I’m just
reminding you that if you want access to the real, to my personal 10X course, I’ve
made it crazy affordable. It’s actually one of the products I designed for
everyone on YouTube because just like my young daughter, I want to give everyone
access to the baseline information for the 10 principles you need so you can
have a foundation. When you have a foundation, you can build wealth on that
foundation. And so if you click the link, you’ve got full access to it. Otherwise,
make sure you are a subscriber because one of my next upcoming videos is going to
be part three in this series. Which is going to be me sharing and enlightened
one of the next 10 principles that can help you go from nothing to Millions.

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