Hey everyone, and welcome to Passive Real Estate Investing. I’m Melissa Nash, your guest host jumping in for now. Let’s dive in. Everywhere you look right now, people are blaming interest rates for why they’re not investing. Rates are too high, it’s impossible to cash flow. Maybe I’ll just wait for the Fed to lower them.
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Now, let me stop you right there. Interest rates are not your problem. And in today’s episode, I’m going to show you why high interest rates are just an excuse and the real problem that’s holding you back from financial freedom. Now, here is the myth. High interest rates make cash flow impossible. And I know that sounds logical, but it’s just not true. Yes, rates are higher than they were just a few years ago, but that doesn’t mean that the math doesn’t work anymore. Now, every single week, I see off market properties that hit my desk that are newly renovated or new construction.
They are tenant ready and already have a local property manager in place, and they are cash flowing. And then the next thing somebody will say to me is, oh, it only cash flows $250 a month. It’s not worth it. Well, here’s what I say to that. You need to set your expectations and you need to think about what’s actually happening with these properties. Okay? So first of all, you didn’t fly out to the market. You sat there on your sofa or at your computer and you let somebody like myself handpick a property for you in an already vetted out market. You didn’t hire a realtor or have to negotiate a deal, you didn’t have to manage contractors or even handle a single renovation. All of that was done for you. So that alone literally saves you thousands and thousands of dollars and even more valuable, it saves your time.
So let’s do some math. Say you put down 20% on a rental property. So that’s about, let’s say on this property, I’m gonna give you an example of it a little bit later. It’s about $30,000 down. Now this property cash flows $250 a month after all expenses. So that’s $3,000 a year. Now remember that $250 a month, that is after all expenses are paid. So let’s do some math. Say you’re gonna put 20% down on an investment property, and I have a particular client who just did this on a property that we’re pulling this math from, and that was about $30,000 down. This property cash flows about $250 a month after all expenses. Again, that is the profit, and you did nothing. You sat on your couch and bought this property. So that’s about $3,000 a year.
So now what you’re gonna wanna do is take that $3,000 and you divide it by your down payment. That 30,000, this is a 10% cash on cash return. So let me say that again. This is a 10% return on the actual money that you invested. So you literally took that money out of your savings account, bought a done for you turnkey rental property. And so this is a return on the actual money you invested. So what if you had just left that same $30,000 sitting in your bank account? I mean, if it’s Wells Fargo like what I have, you’ll be making what 0.01% interest, basically nothing. So when people complain, oh, it’s only $250, they’re looking at it completely wrong because that is just the cashflow piece. And cashflow is only the appetizer. The main course is everything else that real estate gives you loan pay down.
Your tenants are building your equity appreciation. The property grows in value over time, tax benefits, depreciation, write-offs, and incentives that put money back in your own pocket. And then of course, the last one we have is inflation. So we know every single year your money is going down in value, the longer it sits not being used. And by the way, if you’re listening to this and wondering, how do I start building a portfolio, here’s your next step. You are going to schedule a free strategy call with myself or someone from our team. We will walk you through the markets, the numbers, and how to get your first or next rental property. We do a handful of these free strategy calls. So grab your spot now, go to noradarealestate.com or just click the link in the show notes below.
So if rates aren’t the problem, what is? Well, the problem is your short term thinking. Most investors only look at year one. What is my monthly cash flow right now? And I get it, we need to look at year one. We need to double check that we’re making a good investment. The property’s gonna cover itself, and we’re gonna get a little bit of padding. We’re gonna get a little bit of cash flow in our pocket. But real wealth is built over 5, 10, 20 years, and it’s built through multiple profit centers working together. It’s like I always say, it is time in the market not timing the market. So if you’re only looking at interest rates, you are the fact that, A – the mortgage is literally being paid down by someone else. They’re buying you a free property. Again, the value of the property is climbing over time, and you’re legally paying less taxes.
All thanks to real estate. That is how fortunes are built, not by obsessing over a single number that over time doesn’t really matter. And by the way, if interest rates drop next month, next year, three years from now, guess what? You can always refinance that property and get a better interest rate. And then you’re gonna cashflow even more. So in the example I gave you above, one of my clients literally almost passed on that deal. Now, in that example I gave you just a few minutes ago, one of my clients, we were analyzing this property for them and they almost passed on the deal because they literally said that, Melissa, it’s only $250 a month cash flow with today’s interest rate. That’s just not enough. Well, I had them run the five year wealth calculator that I use, and what did we see? Using very conservative numbers. That same property would add over $90,000 in equity and loan pay down in just five years on top of cash flow, they bought it. And guess what? They are collecting rent today while other investors are still sitting on the sidelines waiting for rates to drop.
Here’s the bottom line. Interest rates aren’t your problem. Short-term thinking is, and if you’re ready to start running your own numbers and looking at the big picture, we would absolutely love to help you book a free strategy call with myself or another member of our team today. You’re gonna go to noradarealestate.com or just click on the link in the show notes to schedule your call. We will walk you through step-by-step, your goals, your budget, and help you map out your first or your next rental property. Thanks for listening and we can’t wait to help you.
Thank you, Melissa, for delivering such a concise yet valuable episode. We hope today’s discussion provided meaningful direction to support your investment journey with greater clarity and confidence. If you haven’t subscribed yet, make sure to do so to stay informed about upcoming episodes. We appreciate you joining us. Thanks for tuning in, and we’ll catch you in the next one.
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