# Calculating Numbers on a Rental Property [Using The Four Square Method!]

## 100 thoughts on “Calculating Numbers on a Rental Property [Using The Four Square Method!]”

• Vaughan Starr says:

Buying for 200 K and renting for 2 K a month?!!! In my neck of the woods you would lucky if you got half of that! So by your sums I would be out of pocket to the tune of \$600 a month!

• Bryan Hadaway says:

Why do you include the mortgage payment as a renting expense? It is not necessarily an expense you are losing the money and gaining that same value in real estate minus the interest you paid. The investment of buying the house itself should be seen as a separate investment then renting the house out.

Your cash on cash ROI has all sorts of flaws. Down payment is you paying money that you will eventually get back once you sell the house. Why is it considered an expense like closing costs are? Closing costs are truly costs that are lost, a down payment is putting money into an investment that you will get back and might have a return. Rehab budget is also paying money that you will get back because it is actually raising the value of the house.

Your cash on cash return is your yearly income divided by a bunch of one time costs in which some are actual costs and some are paying into equity? How are you going to use that number in the future?

• Tank S. says:

Where to find \$200k property that can charge \$2k rent? I look at famous places for rental property, and all yearly ROI is negative. Surely, I don't want to buy house in a dessert that I can't even find a renter.

• Ruben Rice says:

I like your strategy on calculating numbers on rental property, much like that of my Real Estate Investment Expert, Ethan Collins…but I must confess Brandon, I prefer his

• RPG TV says:

I really don't think you can get a 200k property and rent it for 2k a month, in reality, more like 1.2k-1.4k, but if you able to that's rare deal and may need a lot of extra refurbishment cost.

• Kristiana Beard says:

I used to talk this fast. Everyone, mainly clients, told me to slow down. Now I Feel why! LOL My head Hurts trying to listen fast enough to keep up. Only videos I’ve ever watched that sent me off to try to find an Adjustment feature on Speed at which video plays! 😂 Guess this means I’m officially old. 😀😀😀

• bloui1033 says:

coc roi

• preeeby says:

Thanks

• AMIT MEHROTRA says:

You have to also include the equity component of the \$860 mortgage payment. So the 9.36% is actually greater when you include the equity build up every month. Also you should mention that the 9.36% is probably tax free (or at least in large part tax free)…given you can deduct depreciation. So the equivalent return for bond or dividend-based investment would have to be higher to reflect the 9.36% return on real estate.

• Jesus Belandria says:

Are you wearing pants Brandon?

• Dickson K says:

This is so educative, i just downloaded your book ultimate rental property for beginners

• Sui Caedere says:

\$200 a month for a property manager? I don’t understand this.

Can someone please explain it?

I thought a property manager is like an on site manager that will answer tenants needs 24/7.

• Luis Esquijarosa says:

Cool

• Redbull357 says:

Any tips for cash investors?

• Bob Sieburg says:

Home inspector

• Jeff Huffman says:

You wasted the first 10 minutes of your video babbling on, get to your point, Time is money!

• Julio Lopez says:

Love the step by step process, knowledge is power. Thanks for the video.

• Chris Dobrinski says:

Jesus dude, you could of abbreviated all that crap and cut some time off the vid. About the only thing you abbreviated was ROI. Good info, good vid.

• Carl Schleicher says:

This gave me a lot to think about that I didn't consider. Thank you.

• Graham Smith says:

Great video. Just a heads up. What you call income is actually revenue. What you call cash flow is actually income.

• Tien De Great says:

thank you for sharing

• Pedro Videira says:

What about the money you have to pay for the mortgage fees?

• Jonathan Bendickson says:

14:24 "budget" = "but shit" – closed caption fail

Seriously though, awesome information. I downloaded the shit, I mean the sheet. Thank you.

• Bernadeau Charles says:

Guys/gals,

There is a 40 unit multi complex investment deal in the works right now, if anyone is interested in investing some capital into a piece of real estate. let me know. thanks!

• Anzu Animates says:

Why is the mortgage payment not included as an expense? Then there would be a negative cash flow.

• M G says:

thanks for your explanation

• Jim Ross says:

Just calculate the capitalization rate.

• Be Cu says:

Now i see how it works. Really nice.

• F L says:

12:44 Let's get right to the point

• 0000 Smith says:

What did you just say????

• ThePhalanx10000 says:

Wonderful content, you have earned my sub 👍

• THIS IS #MAGA COUNTRY says:

You forgot rebuilding costs when they turn it into a meth lab.

• Tim Riehm says:

In the Midwest here. Anyone looking to network shoot me a message! Keep grinding everyone💪💪💪

• MrBuckeyeRon says:

I know he touched on it a little near the end of the video, but appreciation and mortgage pay down is the icing on the cake.

• X Smart says:

Thumbs up, I see 8 squares (rectangles) though 😀

• habibm19 says:

This is a terrible terrible example….no property at 200k will have 2k income…missing a lot of expenses…total bs video

• Sheik Louison says:

I'm starting a real estate salesperson position at the end of July. And, I wanted to know what's an easier to understand the percentage of the total cash on cash ROI? What is a percentage that is worth fulfilling since 9.36% is high for a 200,000 Property establishment?

• Honor4OP says:

Lol, I think he got "analysis" wrong so he just put a box to cover it…

• PAP3RMAN 732 says:

Best video to follow the number structure

• Alex D says:

Typically the homeowner pays the water bill forgetting about what if your residents use \$100 of water each month. And you are forgetting a few other things

• Caroline I says:

Thank you. I’m new to property stuff but I’m learning a lot here in your channel. New sub here. More power! 😊

• D Jason says:

\$50,000/\$ 4680= 10.68 years. So, it is going to take more than 10 and half a years just to recuperate your initial \$ 50,000 investment! Don't forget your real estate could depreciate too.

• Kevin K says:

He takes forever to get started. Here is where the video actually starts 1:32

• Paul JAY C says:

Not accurate….you forgot the most impotant things like tax savings for your write offs like depreciation, closing costs, management fees and more. How about principle paydown of the mortgage and property value appreciation. +or-.

• rmt3589 says:

What if you're househacking and are living in one of the sections?

• GILL CARGILL LANDSCAPES LLC says:

Thanks Brandon, the information is very helpful. I am not a real estate agent but have money I want to invest into real estate. Your break down is clear and to the point.

• PJ says:

Do landlords in the US pay for all the expenses on a rental property? It's usually just rental income minus mortgage payment…?

• Deacon Blues says:

Some people just sound so retarded when they ramble and ramble on like they’re speaking to a bunch of 3rd graders.
Forget the like and subscribe bullshit just get to the point and then I’ll decide to like and subscribe, you don’t need to beg me to like and subscribe., Usually I just click off the video because if the 1st thing I hear is like and subscribe the video, usually that person doesn’t have a fucking clue of what they’re talking about, they’re just trying to bullshit you into watching the video all the way through while getting absolutely nothing out of the video.
If I were a true businessman I wouldn’t have time to make YouTube videos. LOL 😝, just saying. NUFF SAID.

• Ferdous Jalil says:

Filter your video…there's a lot extra unnecessary talking!

• Mike Davis says:

Why not just use mutual funds you can easily make more then 10%

• Cecilia Moncada says:

Try to find the house for 200,000 to rent for 2,000 is a needle in a haystack in 2019.

• Jim Scholten says:

With stocks u mostly have around 5% maybe? Idk i dont do stocks. But if i look at my cryptocurrencies my investment went 300% 🤣 how many cash on cash ROI is good to beat that. 😉 good video .

• John MDM says:

If you learned anything from this video, you have no business investing in anything more complicated than your piggy bank.

• Kelli rostvold says:

You’re writing ✍️ is getting smaller….which is amusing……my eyes aren’t that good. But your advice is spot on. It’s easy to jump when things are selling fast. I was going to buy a duplex which came on the market while I was on the MLS and went under contract before I got off. So it’s a balance and it’s best to know your market well…..then you can jump on it with confidence.

• Dee M says:

This also teaches us to get tenants who are responsible and keep them by being a good landlord and make sure you take care of the properties not just collecting the money.

• Albert Davila says:

10 years of profit gone for a 20k roof?? Isnt that what insurance is for??

• grozenyku says:

can't create account with Google account

• Luv Pastures says:

BiggerPockets, can you PLEASE SLOW DOWN! Big distraction, can’t follow your wisdom because you are talking WAY TOO FAST (:

• John House says:

What about paying taxes on the rental income, how do you factor that in?

• L W says:

My grandma got married at 14. First child at 15. Had six kids. Never went to high school. Made millions by saving enough to start buying rental properties.
Some of this is just discipline, hard work, and common sense. Don't really need four boxes to estimate expenses vs. profit.

• Darren Greene says:

Thanks a lot mate!

• Veritas Vincit says:

Shouldn't it be called the 4 rectangle method? Because I'm seeing 4 rectangles, not 4 squares. What is this world turning to?

• monkeemash says:

Four square? Hmmm… sounds like something I learned when I worked selling cars… well, for a minute that is.

• JW40001 says:

Be warned! This video does not discuss factoring in the purchase price! Making it way more complicated than it needs to be. Just google how to calculate real estate CAP RATE. And you can do this whole method much quicker by simply using the 1% rule of thumb. I own multiple rental properties, some cash some mortgaged…and I’ve never calculated my ROI just off what my down payment was. Purchase price needs to be calculated into your ROI.

• chetty909 says:

Now how does that Cash in Cash ROI looks after paying your taxes on rental income ?

• Chatter Formerly Known As John Smith says:

Don't you need to pay taxes on your income?

• Life of a CEO says:

You are amazing.

• Imran Ahmed says:

BTW, does anyone know any tool out there that would basically tell me which property has the highest and quickest potential of being rented not possibly go vacant ever as a rental investment when I plug in location, rent, zip code and and some info about renter I am targeting say single, couples, single family , student etc?

• Wannabe Healthy says:

Information here is worth a fortune

• Robert Linton says:

Boring boring boring

• alistairo79 says:

Am really curious about the \$860/month mortgage, and how that figures into ROI in this video. At 160k at 5% for 30 years gives \$858/month (rounded to 860 here), where from that 858, (in the first month): \$666 goes towards interest on the mortgage, and \$192 goes towards principal. Shouldn't the mortgage expenses be the interest-only? Principal is essentially paying yourself, so is NOT a cost in my figuring. Is that wrong? As interest reduces over time, its hard to nail down an actual figure which can be applied to all months, but I believe the ROI here is higher than the 9% which was concluded at the end of this calculation, as it considers the entire mortgage payment vs only the interest. Is my reasoning off?

• Escape D'ratrace says:

Though one can do it in another way but this one is organized. It is great!

• Anton James says:

calculation pretty cool …all of it mostly correct … however my two cents comment : he did not make it clear whether the mortgage payment was an ' interest only mortgage ' or a 'traditional mortgage ' ; ( made up of a principal and interest portion )… Rental income is taxable …. the CRA or IRS will expect income taxes on the \$4680 CF PLUS the principal mortgage paydown on the mortgage …. ( said another way , "cashflow" is not the same as " net income " )

• Filmon Kibrom says:

The stock market has averaged about 10%

• stephen abernethy says:

Dont forget about taxes, Cap gain vs rental income

• FILIPPO LOSCHI says:

What if nobody rent it for months?

• Iuliu Mesesan says:

so 12 years to get your investment back , and after another 8 years , you will have gained a total profit of 8 years worth of rent profits + the value of the property itself
so you are looking at couple of years of savings to get the mortgage setup and get the house , and then after 20 years you get that 5 times , your investment back
In the meanwhile you can invest in other things aswell , untill you deplete all the options
at some point if you get good at it , you can live off this , but this will take years of comitment , saving money and good investments.
The main thing is , the responsability of owning , and taking care of your investments never stops , there is only one way , forward becoming a job in itself
whereas you can just get a job , suck at it , or atleast ,be mediocre at it , no pressure , things go wrong change jobs , rent a place ,own a savings account
that can buy your proverbial bullet and casket , and enjoy life.
same sh*t , different smell . the real question is this : Do you want to be responsable and own things , or live peacefully and enjoy the little things ?

• inertiaforce says:

Where the hell are you getting \$2,000 a month rent with a property value of only \$200,000? I'm renting a condo right now to a tenant worth \$600,000 and I'm only collecting \$2,750 per month rent.

• MissMiia says:

Tbh I don't know why I'm here. I'm broke and struggling.

• Clint Jensen says:

This would typically work, but housing prices are far too high now in 2019. I'll be waiting for the next housing crisis to hit, then be ready to jump on foreclosed properties like many investors did after the crash of 2008. Even a small condo in my area would be impossible to make any money from due to the extremely high prices, I don't understand how people do it in this market?

• Sneaker Reviews says:

Why isn’t interest by the bank that’s required to be payed up front calculated into the equation?

• GIboy1990 says:

Buying rental properties is a long term play. Small roi upfront. Huge gains in 30 years.

• INnover says:

💮

• Mr. Smiley says:

You also forgot the IRS cost. Remember that when you make a profit past \$300, Uncle Sam wants his cut.

• Paul R. says:

https://www.biggerpockets.com/files/user/brandonatbp/file/analyze-rental-properties—four-square-method-worksheet

• Mr.B says:

.. and it's 0.9,3 think about it for a sec …. that is bs , it's under ,almoust, 1percent but if the stock market makes you 3percent it means this ideea it sucks… because this is 0.9 and the market makes you 3.0 ….

• Sahil Saini says:

First of all, your video made very good sense throughout the chart.
I would disagree with 2 points:
1. I have to be more that lucky to get rent \$2000 per month by spending \$200000 on a property. Chances are 5%
2.ROI mentions that you gonna recover money in roughly 10 years depending on the rent we are getting. I wonder thaat \$50000 invested today will lose its value to \$25000 in 10 years. Best could have been applying index the way banks apply on ROI

• Gabriel Aponte says:

Gotta save for a new ruff/ rough

• Leea Robinson says:

This is very easy to follow thank you

• Katy Walden says:

Thank you! Fantastic video!

• Walter Weller says:

I really like the breakdown but you forgot to account for inflation…

• Patrick Pham says:

Stocks is 8% and recently even higher. At 8% you could put in \$5000 into an index add \$830 per month. If you start in your 20s and retire at 60 you’d walk away having invested \$400k pull out ~\$3.5mil. Just something cool to keep in mind 🙂

why do real estate OR stock? Do both, the strategy above is 0 maintenance, just keep tossing money into the bucket and let it grow. If you hold an index for 25 years your chance of loss goes to 0 percent. And you’d have an additional 15 to keep growing worse case scenario

• Pamgaming101 says:

A old one story house is 1 millions in Surrey

Finding cities which are making incentives to upgrade older rental property. Anyone know of them are about how to find out?

Part 2. Example:Long Beach California

• Hilda Zolezzi says:

Great video, finally I'm understanding, thank you

• DMC says:

But brandon we take 400\$ on rental, 600\$ at most, and cost of buying realestate is about 70k – 100k, in iraq, will i benefit if i do rental realestate ?

• Ronie Larmore Shackelford says:

Thank you Brandon!! 👍🏼 Great vid!!

• William Enzweiler says:

Yes