I Made $385K from One Rental – Here's How!

In 2006, when I was 26 years old, I house hacked a four unit building in my hometown. I bought it, fixed it up, moved into unit number two, and then rented the other three units to help me pay my housing bills. It was a fantastic way to live, basically for free at 26 years old. I lived there for a few years, including when my wife and I got married, and then we kept it as a rental after we moved out. Now, 18 years later, I decided to do a deep dive analysis of the numbers to see whether this investment was really a good deal, and also whether I should keep this investment going forward. I'm going to let you look over my shoulder during all the analysis in this video, so let's get started. Welcome to the podcast, Real Estate Investing with Coach Carson. I'm your host, Chad Carson. You can also call me Coach, and this is a show to help you get out of the financial grind so you can spend your time doing more of what matters. I want to begin by telling you the story of how I actually found this property. And like many good real estate investing deals, the story begins with a vacant property. No one was living there. In fact, it had Merry Christmas spray painted across the front of it. It also had, in unit number three when I walked in, a chalk outline of a body. Now, I'm pretty sure it was a joke and somebody was just playing a joke on us, but the place was rough. It had been vacant for a while. And the question is, why was it vacant? Well, the owner of the property was actually a local bank, and so they had foreclosed on this property. And I don't know the whole story behind who they foreclosed on. I just remember discussing with them eventually. There was a landlord, an investor, who never really fixed the property up, and eventually the property was vacant. They couldn't get it rented, and the bank had to take the property back. And the way I found out about it, there was no sign in the yard yet that it was for sale, was my friend and a mentor, and eventually someone who did some private lending with me on this particular deal, his name was Louis Stone. I called him Dr. Stone. He was a professor of mine in my last year at Clemson when I started taking some business classes. We just stayed in touch, and he was out always riding around, as many entrepreneurs do, and he's looking around in neighborhoods. He noticed the property. He told me about it, and then I looked it up and found out that there was a local bank who owned it, and I just basically reached out to this local bank. And this bank was called a savings and loan, so there's different types of local banks, but they actually had probably two branches at the time, and I just reached out and started cold calling the bank, and eventually got to the person who was in charge of the foreclosures, and was able to talk to them about buying the property. Now, as I'm talking to this banker who is very experienced, and I'm a 26-year-old, I wanna talk about my mindset a little bit at the time. I was definitely nervous having this conversation, but I did have a little experience under my belt. I had been investing in real estate the last two years, basically flipping properties. So the thing I did have going for me was I had been looking at a lot of properties, I understood how to estimate repair costs, because we had flipped a few properties, and I had some contractors on my team who I could call, and I also had some financial backing from a local bank and a private lender, Dr. Stone, Louis Stone, who I just talked about earlier, and I'm gonna show you in just a second how I got the money to buy the deal. But in this negotiation, the initial asking price of this banker was $100,000, and I knew I was way off from the $100,000, but I made him an offer, I think, of 55,000 to start off, and they said no at first, but I followed up, which is a thing I like to do when I'm buying properties. Ultimately, we went back and forth, and he got approved a price of $70,000 that I could buy the property for. Now, sometimes when you get a yes on a contract, you start off excited, all right, I got the deal, but then you think about it, and your heart kinda sinks, and you're like, oh, wait a minute, I gotta find the money to buy this deal and to fix it up. How am I gonna do that? Luckily, I did have a plan there, and it came with two different financing tools. Number one, we had worked with a local bank, and what I mean by a local bank is the part of a bank that makes commercial loans. So they make loans to businesses who are renting properties and have inventory. They also make loans for fixer-upper properties, new construction, and in this case, I built a relationship with this banker, had bought a couple of fixer-upper properties with a partner who was more experienced, and then we paid the bank back multiple times, and so I had a relationship that I'd proven myself a little bit with this bank, and they were willing to loan money. In fact, they were willing to loan 100% of the purchase price, those are the good old days, 2006, but $70,000 from this local bank, but I still had to have the money to fix this property up, and where I was in my career, I was just getting by. I did not have enough money to do all that. I had about 5,000 bucks that I could use to invest in this deal. So the second financing tool I used was something I learned early in my career and helped me a lot, was to use private lenders who had smaller amounts of money, but was more flexible, and so this comes back to Louis Stone. Louis was a long-time rental investor. He had developed properties, but one tool he didn't realize was that you could actually use your retirement account through a specialized custodian. He could move some of his money from a traditional custodian to a self-directed custodian, and he was able to make a loan to me in second position behind the bank, and the bank knew about that. They were okay with it. In fact, they were happy that he was loaning money in second position, so he made a $40,000 loan behind the $70,000 loan from the bank. So when you combine 70 plus 40, that gave me at about $110,000, which was about what I estimated I would need, and then there's also gonna be a little bit of closing costs and holding costs, which I would come out of pocket for the rest of it. So I had a plan to finance the deal. Now I could buy it. Now I wanna fast-forward the story a little bit so that we can get to some of the longer-term analysis, but long story short, we got the property fixed up. I did some of the cleanup work myself, but I hired out a lot of work, things like installing heating and air units, painting the interior and exterior of the building, installing new decks on the back of the building. We had new flooring, carpet mainly, and some vinyl. We also put in new windows and new doors. So we freshened up everything, including doing some landscaping, and I wanna say a little bit that I didn't talk about earlier about why this building was interesting. It turned into one of the better buildings on the street. There was another street of other duplexes, fourplexes, sixplexes, all of this in a college town. So one of the reasons I liked the building, and even though it had the chalked-out line of a body and had Merry Christmas spray-painted across there, was this is on the bus line to Clemson University, called the CAT bus line. It was also about 1 1⁄2 miles from campus. So my target audience, which I had not rented to before this, but I thought I would rent to grad students and people who wanted an affordable rental. They could hop on the bus. They could have a landlord who takes care of their property, and I felt like there was an audience out there. There were tenants out there who had rent this property, and I just liked the general location. It was a place that I was willing to live, so I figured I could find other people who were willing to live there, too. So that location component is a big aspect I learned over time of having a good rental property, and this one turned out to have a good location that was getting better, and we helped that by fixing the property up. So if you're familiar with real estate investing and buying fixer-upper rental properties, you might have noticed that I'm following a little bit of a playbook, the old BRRRR strategy, which wasn't named at that point. Thanks, Brandon Turner, for naming that eventually, but I was basically following the BRRRR strategy on this deal. I bought a fixer-upper, I remodeled it, and then I got it rented out, which I'll talk about in a second what the rental numbers were, and then because I got it rented out, because it was remodeled, the new value of the property, instead of being worth what I paid for it, is actually worth $155,000 based on the rent, based on what other properties were selling for in the area. So if you're keeping track here, I had just under $120,000 invested, about $117,000 if you add up all the repairs and holding costs and things like that, so I was able to get a new loan for under 80% of that full value. So for $120,000, I borrowed money, and at that point, it was at 7.5% interest rate for 20 years, but the good thing was, I was able to pay off the bank loan, the local commercial loan, I was able to pay off my private lender, I was able to get back some of my money, or all of my money, the $5,000 and a little bit of extra holding costs I had, so I had no cash in the deal, and I was able to pay for the closing costs. Really good deal for a 26-year-old who wants to move into a place and doesn't have a lot of capital. But the reason this is even better was that I rented the other three units out, so each one at that point, the rent goes up over time, but it started off at $350 per month, I just wanted to make sure I found good tenants, so 350 times three was 1,050 per month, and then I lived in the fourth unit, so I wasn't getting any rent on that one. And the total mortgage payment on my property was $819 for the principal and interest, so the portion I was paying to the bank, and then $265 in an escrow account. Basically, they were collecting extra money to pay for my taxes and insurance. So all that together was $1,084 per month. Had 1,050 coming in, 1,084 going out, so a little bit of a cost to live there, and as my rents went up over the next couple years, things got better and better. I was living super cheap compared to what I would've been living for, what my friends were living for, paying 750 or 1,000 bucks per month in their apartments. This was a great place to be with an asset that I could then hold for a longer period of time. So now hopefully you have the story and you have a clearer picture of how this deal started, I wanna dig into the actual numbers. So I had to dig into my QuickBooks, to my bookkeeping over the last 18 years to figure out how much rent we actually collected, how much money we spent, and so this first spreadsheet I wanna show you is a year-by-year analysis of that income and those expenses to show you the trends over time. And if you wanna see the details of this spreadsheet and kinda dig into them, either follow along with me or to have just as a template to use for your own rental properties and do your own analysis, you can get a free copy of this if you look in the YouTube or the podcast description below. Click on the link and I'll email you a free copy. So the first thing I like to look at in this kinda long-term trend is how the rent is doing. So you can see this top kinda green line, we collected about $312 per unit. Remember the market rent was about 350. I lived there the first few years, so I charged myself a lower rent or I assumed I had a lower rent. I also let my brother live there for a year or two when he was working with me, he paid a little bit lower rent. So we didn't exactly pay market rent, but you can see over time, the kinda average unit monthly rent went up and was kinda in the right trend line. And I'm gonna show you how much that actually went up here in a second. And then the total rent I collected went up. But the interesting part, probably kinda the surprise that was a lesson for me was looking at some of the other expenses. And I like to do a couple things with this type of spreadsheet. One is I wanna see the operating expenses. So this is all your expenses, not including your mortgage payment and not including any like big capital expenses like replacing heating and air units, roofs, things like that. And so if you just look at your total expenses, one thing I like to do is sort of a shortcut is to look at the percentage of my rent that I'm collecting that I pay out in these operating expenses like taxes, insurance, maintenance, management, things like that. And so it gives you just a little bit of a rule of thumb for this particular property that you might be able to use if you buy another property nearby. And for me, it was about, started off at 30%, but kinda hovered between 30 to up to 55% in some of the high years. But really averaging around 40% over the long run, 43%. So all that tells you is that before you make your mortgage payment, if you collect $1,000 in rent, you'll have about $430 in operating expenses on average every $1,000 you collect. That's something I like to see, but I also like to look at the raw numbers and the really kind of big takeaway for me here. You can see that the first couple of years were negative cashflow here at the bottom, kind of the bottom line. I lost 6,500 bucks the first year, 6,500 bucks the second year. Part of that were these upfront continued capital expenses that I had to make. I had to pay for some appliances in the first year, had to invest in some other things just to kind of get them ready to rent. Also had some refinance costs in the second year. So all of those things are kind of front-loaded. When you have a new investment, especially a long-term rental property, you don't always make as much cashflow in those first few years while you're getting it stabilized. But it did get better over time is that we had positive cashflow in year three, four, five, six, seven, eight. It got negative again, though. This is kind of a downer for us. In year nine, 10, and 11, we had negative cashflow primarily because those brand new heating and air units we installed up front, we probably didn't hire the best contractor, probably didn't use the best materials, maybe we didn't maintain them well, but they started going out at year nine, 10, and 11. So by year 11, we had to replace, we'd replaced all four of the heating and air units. So those were big capital expenses. Those are negative cashflows that put us in the negative for those years. Then it got back positive again. So it was kind of a rollercoaster. This is what I really wanted to show you on a year-by-year analysis. This is not just a straight line, always the same. You gotta have a little bit of cash reserves. That's been one of my strategies. If you have those negative years and you're depending on that to pay your mortgage payment, you'd have to borrow it from other rent on other properties. So sometimes if you have multiple properties, that can kind of stabilize them all out. But even if, what if you have big capital expenses on all your properties at one time, you gotta have some cash reserves to sort of fill in those gaps because you'll have good years, you'll have down years, and you gotta smooth that out. But then the cool thing about looking at this long-term trend is you can start seeing what the real numbers were. And for me, the maintenance and the capital expenses, the fact that they were really large on this property was kind of the eye-opener. This has been a trend on other properties that I've analyzed here on the channel as well. When I buy these old properties, they tend to wear down and break. And there's just things that we didn't fix up front, old plumbing systems, old roof systems. There's just a lot of stuff you have to keep working on. And so to give you a perspective, I tracked the total cost per year in maintenance. It's about $4,200 per year, 4,271. Or per unit, that's 1,068 per year. Or if you're thinking about it like per unit per month, which is sometimes how I think about it, it was about $89 per unit. So there's four units here. So $89 each unit is how much maintenance we spent. And just to give you some perspective, our average rent over those 18 years is a lot higher at the end, was just under 500 bucks. So we're spending about 18% of our rent during those years on maintenance. That's before you pay anything else, management, taxes, insurance, mortgage payments. That's a pretty high number. And I point that out because I do run a lot of numbers with people out there on rental properties. I often see people putting 5%, 10%. And in some cases, like with a higher rent property, like my rents were pretty low here in Clemson. So the cost of maintenance might not be that much different in a place where you can get $1,000 in rent. So these percentages might not be exactly like this, but look at the raw numbers here. $89 per unit in maintenance, and then also about $77 on average per unit per month in CapEx. That's about 160 to 170 bucks per month that I averaged over the last 18 years spending on maintenance and capital expenses over the long run. So if you're looking at these numbers, those are historical numbers, but if you're a lot less than that on a per unit basis, then you might want to rethink that. Because if you don't analyze this upfront correctly, then you'll be doing what I did. You have to kind of learn from the school hard knocks and you got to kind of have negative cashflow for a while to realize how much cashflow there actually is. So that is the cashflow spreadsheet. I now want to go to kind of another big picture you might be interested in, is what was my total return? Like how much profit, how much wealth did this thing actually make? It kind of sounds negative when I'm talking about the maintenance, but was this thing even worth it? Let's take a look at it. So before I give you the total return, I want to show you something I found really interesting, which was tracking the value and the growth of the value and the growth of the rent on this property over time. Like how much did it actually appreciate? You always hear people talking about, oh, here's the appreciation rate for this area, but this is, I want to look at what this property actually did. And so I was missing some years in the middle when I didn't have values each year, but I started off with this property being worth about 155,000 back in 2007. And then if you fast forward all the way to 2024, I just looked at, there's a very, very similar property, just one property down. It just sold for 405,000 in December of 2023. So it was the interest rates were already a little bit higher. So a very comparable market. Clemson has a lot of parents who buy multi-unit properties and their student lives in one or people who just have an affinity for Clemson. So people pay pretty good rates for the amount of rent. I was surprised, pleasantly surprised. I thought maybe 350 to 400,000 would be about the value. And it might still be a little bit less in the end, but 405 is today's values, what my estimate is on the top end. And that would, if that's the case, it'd be about just under a 5% growth rate from the time that I bought the property and fixed it up to today, 18 years later. So 4.92%. My area on average, just to give you some context, is about 3% kind of in the whole upstate of South Carolina, which kind of tracks with long-term inflation. So this is a little bit above average. We've done better in our market than the surrounding areas. But I'm also curious to see about the rent. So remember we started off with about $1,400 on market rent for this property in 2007, and it's grown to about 2,880 total, which means about $720 per unit. Even that might be a little bit under rent. I think we could probably get 750 or so, but I like being a little bit under. And that's a 4% growth rate. What I find interesting, if you look at this in a graph, I do have year-by-year statistics here. Rent tends to go up over time and in a good location. Doesn't always, no guarantee there, but it tends to go up. But it doesn't go up consistently. And what I found fascinating was looking at, you know, you're flat for a few years, particularly kind of in the middle there. I was 2007, eight, nine, grew a little bit, but then I had some flat years in 2012 to 14, and then grew a lot in 2018 to 2019. Rents went up a lot. And part of that was me maybe just catching up with what the market rents were. Part of it was the market rents were actually going up, and they've kind of gotten flat over the last few years. Maybe we need to up a little bit, but these things go in like plateaus, and then they run up and they go in plateaus. And so sometimes you have to be a patient investor to buy and hold, to benefit from these rising tides of appreciation. It doesn't happen in a straight line. You've got to be a patient buy and hold investor. So now we're at the point that I promised earlier where I can give myself kind of a scorecard of how well did this deal actually do over time. And one way of measuring that is just to look at the total return. Like how much money, how much wealth did I make, both in terms of cashflow, which I'll show you, but also on paper, like how much wealth is this property worth if I were to sell it? And so it kind of comes down in three categories, cashflow, debt paydown, and price growth. Those are the three different areas. And what's interesting when you look at it on a graph, you can see the big blue section is the amount of price growth. And that's surprising to me. It probably shouldn't be, but in retrospect, I bought this property thinking it was more of a cashflow property at $120,000 total purchase cost. And the rent was $1,400 starting day one. I thought that would lean towards more being, hey, we're gonna make more money in cashflow and hopefully the price goes up. And if it does, that's just gravy, that's just extra. Well, the way it turned out, and maybe some of this is just good fortune, but I also think there's a strategy here of investing in locations that have population growth, that have good things happening. That's a big part of my strategy, which I'll go over at the very end of this video, give you kind of a five-step strategy for 2024 to use some of the lessons I've learned in these properties over time. But the point is a big chunk of the overall wealth this deal built, which is $358,000 total. So 285,000 of that is the difference between the 120,000 we paid and the $405,000 that it's worth today. That's a significant amount of money. And the $53,000 in cashflow and the $20,000 in debt pay down that we've had over the last 18 years are also great, but 80% of that total came from the price growth. So every deal is gonna be a little different. I've had some deals that are more 50-50. Like if you, I'm gonna show you in just a second, if I were to have paid cash for this property, it would have been a little bit different. But using leverage, this is very typical that I've seen on my properties, 60 to 80% of my wealth building total on a deal comes from the price growth. And so important to note, cashflow is great. You should always buy with cashflow so that you have a positive cashflow so you can afford to hold these properties, but don't ignore the fact that you wanna buy in locations that are growing because that's how you can build a lot of money. Now I wanna show you one other similar graph, and this isn't what actually happened with me, but this is what could have happened if I had not had debt to buy this property. The reason I wanna show you this is some people will give the argument like, oh, real estate makes a lot of money, but it's just leverage and it's very risky. And you can't really compare that to stocks or something else where you don't use leverage. Well, it's an interesting objection. So let's look at it. Like if I had bought this property for $120,000, I didn't have 120,000 in cash back then, but somebody did. Somebody could have bought this property and not used any debt on the property. What would that have looked like? Bought it for 120, and they would have made $205,000 in cashflow over those 17 years. They would have made that money because they wouldn't have had a mortgage payment. They would have made more money than I did because they would have just basically self-funded, would not have had to get a bank loan. So they made money in cashflow, and they also made the same amount of money in growth. So they would have bought it for 120, and it grew to about 405. So still the $285,000 in growth, but because they made more money in cashflow without having debt on the property, it would have been a little bit more of like an equilibrium, about 58% from price growth and for about 42% of the total return from cashflow. And I find that really interesting because I often now, in 2024, I'm in a different place in my career. I like to pay cash for property sometimes, and I get pushback saying, no, no, that's not a great deal. Why would you do that? Well, the question is, would you spend $120,000 to make $490,000 over time? And of course, it depends on how much time. So I wanna analyze this, and we're gonna go to the next spreadsheet here with a metric called internal rate of return. Because this is what helps you look at numbers like this, $490,000, or my other kind of graph here of 358,000 and say, how good of a return on investment was that? Because then you can compare that to other investments you could have invested in, the stock market, bonds, other pieces of real estate, to compare apples with apples and say, was this a good opportunity cost investing in this property instead of those others? If you're not familiar with the formula internal rate of return, which is summarized sometimes as IRR, check out another video I did where I went into depth and showed what it is, why you use it, why it's helpful. But I'm gonna just jump right into it with this video. I like the internal rate of return sort of as an all-encompassing formula to tell me how I did over time, because sometimes it's a little complicated to think about. Like, if you make $100,000 10 years from now, is that the same as $100,000 today? And if it's not, how much should I discount it? It just, this takes a lot of those different cash flows. And you can see the spreadsheet here, and you can borrow this, by the way, if you download this free spreadsheet. But it takes all the cash flow, both positive and negative, over a 17-year period. And I'm actually gonna assume that I sell this property in 2024 at the end of the year. And it just summarizes all those and say, here's what your annual, your yearly rate of return would be given those cash flows. And in my case, the assumption I made is that actually we had zero cash invested in this deal up front. So if I had not had any negative cash flow, that would have been a really, really high return, because I didn't have any cash flow up front. But I did have some negative cash flow those first two years, 6,500, 6,500, negative for the first couple years. And then I made positive cash flow for a while, negative cash flow for a few more years. You can see it kind of seesawing back and forth here. But then if you go all the way to the end, I make an assumption that I sell the property for 405,000, that I had 6% sales cost. So I paid a realtor some fees, I paid some closing costs. So when that's at closing, I would come up with about $380,000 left over after selling it and paying those fees. And then I also have to pay my mortgage off $100,000. So the amount of money I would put in the bank pre-tax, not gonna talk about that for this second, but pre-tax, I'll put $280,000 or so into the bank. There are also some potential taxes, which I'll go into here in a second. But my assumption here is that I maybe reinvest this money in another property doing 1031 exchange, something like that. What would my return look like if I did that? In this case, taking all those cash flows and assuming I resell it, I would make a 26% return. That means this negative cash flow that I had to invest in the property made about a 26% return. Now the question is, that seems like a good return. That's better than the stock market. That's better than average. I did have to take some risk using leverage. So that's not quite as good, right? So this just gives you information. This just tells you what this cash flow looks like. And you can then take and do what you want with that. Like if you had not wanted to do this deal, if you would not have wanted to use as much leverage, maybe you would have preferred, you have a lot of capital and you just wanted to pay cash for it. Well, what would that have looked like? Well, I got another formula for you. If you had not wanted to use leverage and do what I did, then you could just assume that you didn't borrow any money. You could do the same calculation. So if you had not invested with debt like I did, then there's another very similar calculation you could do, but you would just assume that you didn't have a loan on the property. So that's what this version of the internal rate of return looks like. And again, I like doing both of these with leverage and without leverage because it tells you different pieces of information. And my overall return, if I had not borrowed money, would have been 12.6%. Also for me, at least, a pretty good number. I would have been willing, even today, if I bought a property like this, that I thought reasonably I can make about a 10% return. It's kind of comparable to maybe a little bit better than what I thought I could do in the stock market. That would be how I personally make a decision. You've got to decide for yourself how you would make a decision. You have to be conservative with your numbers. You got to make sure your assumptions are right. But in this case, if I put $120,000 in year one, then I made a series of cash flows for 17 years, and then I sold it for $405,000 minus all these other expenses, then I would have made about a 12.6% return. That's what an internal rate of return tells you. There's some assumptions in there, like I talked about with taxes. You could probably make a lower return if you just cashed out and paid the taxes on that. So that's something to know as well. But you can play around with the spreadsheet yourself, do what you want. The thing I wanted to share with you here is as I'm analyzing this, I was like, was this thing worth it? Should I have bought it? In my case, hands down, yes. This is the deal that got me started. It was a house hack. I was able to live very cheaply for a few years, even though I had some negative cash flow. I was buying an investment essentially, and that made me a lot of money. It built wealth, wealth that I can now take, and either I could sell the property and use it to buy something else, or I could just live off the cash flow. And so what I want to share with you now, one final spreadsheet that I think will be helpful for you. We looked at the history of this property. What I want to round it up with is, here I am today in 2024. Should I sell the property? Should I keep it? Should I, you know, is it going to be a good investment for me going forward? And that's the final thing I want to make a guesstimate about for the next 10 years, what will it look like, and help me make an informed decision about whether to keep it or to sell it. So we're back to a spreadsheet of cash flow over time, but in this case, we're looking forward. I'm assuming, I had to make some assumptions, but I'm going to start in 2024, and I'm going to go 10 years into the future to 2033. I'm going to ask myself the question. I'm going to have to make some guesses on a few things, saying, if these things pan out, how much cash flow will I make? And then I'm also, in just a second, going to analyze how good of an investment would it be for me to keep this property, using the same tools that we've already used here in this video. So the first thing I'm going to look at is the rent. And I basically took the rent from the prior year. And in all these cases, I'm just applying like a growth factor to this. So I'm going to say, hey, I think the rent's going to grow at 4%. I also think the insurance is going to grow at 4%, the miscellaneous expenses, which for me are licensing fees for the city, the property taxes, the maintenance, the capital expenses. So I'm assuming we're going to have some kind of inflation on all of these things. So I want to try to be a little realistic with that. And then importantly for the maintenance and the capital improvements, I took about an average of what I had on a lot of those over the last five years. And that's what I started with for these. So I could be more precise, figuring out my capital expenses. I could actually like project it out and say, I'm going to replace a roof probably in five years. I'm going to have to replace heating and airs again in this year. That would be a more accurate way to do this. I'm just trying to get a rough idea and this is what I've got. So when I do all of that, the rent again is going up over time. The expenses are going up as well, but my cashflow is tending to go up. So I start off at 9,000 per year or so. And by the 10th year, it's about 14,000 per year. And so that's one important thing to think about. We can get all the return numbers and all that, but ultimately at this stage of my career, I'm trying to live off cashflow. I'm using cashflow and I know this property. I'm pretty familiar with all the good things and the bad things about it. So I can ask myself, is making $765 per month or $9,000 per year in cashflow pretty good? Like, yeah, it's a pretty good place for me to be, but I might have an opportunity cost. I probably could do something else with this money. So what I want to look at next is I start off with this cashflow sheet. I want to go back to this internal rate of return idea. And in this case, I'm going to do, instead of going in the past, I'm going to make some of those assumptions and look forward. And I have to do something a little different is that I'm assuming I'm basically buying this property today. And this is a mentality that when I analyze whether to keep or sell a property, if I decide to keep it, it's as if I bought the property for what I could have made, with the profit I could have made if I were to sell it. Because there's an opportunity cost. I could sell this property today and I could go out and buy another property. And so if I want to be honest with myself, I have to look at that amount of money I would have made and say, I'm basically choosing to invest that money in this property. Is that a good deal or is not a good deal? And so what I did was I assumed that we sold the property for 405, we paid off our mortgage, and then we also paid taxes. I assume in this case, we had a capital gains tax, which I approximated here, and we had a recapture depreciation, which we've been paying for a while now. And so those are some taxes I would have had to pay. And the net amount of money I would have made after all that was 210,000 bucks almost, 209,987. So that is what I'm looking at is my initial investment at the end of 2023, if I were to invest for the next 10 years. That was essentially my equity in the property, net equity. And so I take the cashflow I'm predicting I'm gonna make, and then I have to make an assumption that I think in 10 years, the value is gonna be more. Is it gonna be the same? Is it gonna be more? Who knows? We're making a guess here, but I'm gonna assume again, 4% appreciation. And you can play around with this number in the spreadsheet to say, well, what about if it was 2% or what about if it was 6%? You can do various assumptions. I'm gonna go with 4% for now. I'm gonna assume I had to pay sales costs again. I'm gonna assume I'm gonna have to pay the mortgage off 10 years from now, which is still $100,000. And then I'm also gonna pay taxes and insurance if I were to sell the property in the future. So if I did all of that, the cashflow plus that net sales price in the future gives me an internal rate of return of about 9.5%. That's good information. That's just for me to look at and say, all right, I could sell the property and go invest this money and pay my taxes, go invest the money in the stock market. That's one thing I could do. I could do a 1031 exchange and buy another property. In that case, I would have probably more money to invest on the front end. And I could go buy another property with that, but maybe it'd be a little trickier to find a good deal when I do a 1031, that can often be a challenge. So there's a lot of factors here. But what this tells me is I have to just look at this number and say, given those assumptions, do I feel like keeping this property given the amount of cashflow that we can make over the next 10 years and what I know about this property, what I'm expecting, what I'm expecting of my region of Clemson University? All of that kind of goes into this factor of saying, do I keep, do I sell? And at least for us at the moment, we're not in a hurry to sell. We kind of have other properties similar nearby. We're happy with the property manager. So this confirms for me, we're probably gonna hang on to it for a little bit, but there's a, in the back of my head, I'm thinking, we could probably sell this property and do a little bit better buying some other properties. So if opportunities come along that I see and I can compare them to this opportunity, I might choose to make some moves. We'll see, but I hope this process of looking at all the spreadsheet has been helpful for you. Remember that you can download the spreadsheet. You can use it for yourself and you can play around with it. Give me some feedback. Let me know what you think about it. A link to the spreadsheet you can get for free is in the podcast or the YouTube description below. So in this video, I went into a lot of depth with that spreadsheet, showing you the numbers historically on this rental property and also looking forward. But one thing I didn't really dig into a lot was taxes. So if you ever wondered when you sell a property, remember I kind of talked about taxes a little bit, but I just kind of skimmed over it. How do you figure out how much taxes you actually pay when you sell a rental property? And the short answer is, it's gonna be a lot more than you probably think it is. But what if you wanted to calculate that exactly? I've got another video for you, how I calculated how much I owed in taxes on a rental property when I sold it. I include a spreadsheet with that video as well, so you can download it for free and do that calculation yourself. So if you liked this video, you're gonna love that next video. Check it out. There'll be a link above me here in the thumbnail, and there'll also be in the podcast in the video description below a link. You can click on that and check it out as well. See you in the next video.