During my daily conversations, one question keeps coming up…

People want to understand how much income they can really earn with rental properties. This is especially true of people who are new to real estate investing.

For me, that means investing in multifamily properties. That also means my overall operating expenses are going to be higher than in one single-family residence (SFR) or even a set of SFRs. But my per-unit expenses will be far lower than what you would experience in one SFR.

In this short video that I made while on vacation in the very cool Pyrenees Mountains not long ago, I write out the formula to help you determine what money you will actually earn in your rental properties:


You don’t get to keep all the money!

Think about how you are paid at a job.

Do you get to keep all the money? No, you don’t. Taxes and such are taken out of your paychecks and you get what’s left. (Yeah, bummer.)

It’s like that when you rent properties to tenants, too.

To make it really easy, let’s say you earn $1,000 per month per door in rent. For me, about half of that would go to my operating expenses. Your operating expenses might be higher, but I have multifamily properties, so (again) the expenses are lower per door!

What’s left is my Net Operating Income or “NOI”.

If you’re like me and you raise private capital to purchase properties so you aren’t stuck with a mortgage (a.k.a., debt service) you get to keep that $500 NOI.

However, you may not be like me YET. In reality you might have to pay a mortgage if you got one to pay for the rental property. Maybe that’s $250 a month in debt service (in this very simple mathematical example), leaving you with $250 in NET income. That’s the income after all of your expenses and debt service on that property.

More about expenses and debt service…

Revenue comes in many forms.

You can earn it from a business or, in my world, from your real estate investments. (I want you to join me in this world, because you will love it!)

Here’s the truth… no matter what you do in business you don’t get to keep all the income you earn  – Tweet  . You will have expenses. For example, when investing in multifamily properties, here are some of the expenses you may be looking at:

  • Property taxes – You simply can’t get out of paying property taxes. The good news is that they can be escrowed into the monthly mortgage payment. That’s up to you. Either you get hit with a tax bill twice a year (in most counties in the U.S.) or you pay it out over time. But you will pay it and it is your responsibility  – Tweet  .
  • Insurance for your property – Ah, yes. This one is critical. You MUST have homeowner’s insurance. Your tenants should have renters insurance, but they don’t always have it. But when something big happens, whether your tenants did it or a tree falls on the roof, the damage can be covered with a good insurance policy. In properties where you also create a business, such as a short-term rental or group home, you will take out additional coverage or coverage that replaces the homeowner’s insurance.
  • Utilities – Sometimes your tenants pay their own utilities, but often you will entice tenants by including them in the rent. If so, guess what? You get to pay the utilities. If you have a property that is used for short-term rentals or any group home experience, you pay the utilities.
  • Legal expenses – You may not need a legal team at first, but as your portfolio grows it’s a sure bet you will. For me, I must have one. In fact, I have two. The rules are different in Europe and the States, so I need two legal teams to help me with paperwork and keep things above board.
  • HOA (Homeowner’s Association) fee – With an apartment building you won’t have an HOA to deal with, but smaller multifamily properties and certainly SFRs often are located in an area where the association’s rules dictate what you can and cannot do with your property. You get to pay a monthly or quarterly fee for this “service.”
  • Property management – Unless you are nearby and are willing to actively participate in managing your property, you need to hire someone to do it for you. It’s called delegating. For me, it’s called imperative. I’m in Barcelona; my properties are in the U.S. (I have a great and proven team for property management that lets me sleep better at night.)
  • Maintenance – To keep your property running in tip-top condition, it need regular maintenance. You get to pay for that. (It can pay off big if you go on a regular maintenance schedule.)
  • Repairs – Things will break and tenants will break them.  – Tweet  . Sometimes things just break. Either way, you get to pay to fix them.

While the list can be more extensive than this, the list above is typical for a lot of investors. You also have debt service when you use a mortgage to pay for the property over time.

Because I was asked to explain this a little further, I made another quick tutorial. Give it your attention:

As you see in the video, your debt service includes the principle (the true amount you owe) and the interest (what the bank is charging to let you use their money to buy your property).

If you like information like this, you’ll want to subscribe to my You Tube channel. If you click into the METRICS playlist, you see more powerful tutorials where you will learn how to make money in real estate investing!

Here’s the link to that playlist:


When you’re done and you’ve taken notes, keep going with the rest of my videos in the other playlists. You are sure to learn a lot. Plus, I will be releasing more videos soon. In fact, I will be releasing new videos every week. (There are several that have never been released to the public, and it’s time they see the glow from your computer screen!)

I’ve also begun creating videos for the sole purpose of educating you on different aspects of the deal. If you haven’t taken it already, go grab this incredibly low-prices educational series of four videos now. They are yours to keep forever so you can always refer back to them!


You can also check out my latest podcasts and collaborations here keeponcashflow.com/podcasts/