$200k short-term rental that generates as much as a $1M property

[@theboringchannel2027]

While you are oorrect your net cash flow is lower, your net profit percentage is higher with the 1m property. You consider the mortgage an expense, its actually profit that is turned into long term savings. Add this into your calculations and you will view things differently

[@LivingOffRentals]

It's a good point that the entire mortgage payment isn't an expense, but the net profit percentage is definitely higher on the lower cost property. Principal pay down is a factor I didn't discuss and does work like long term savings, but still would take the lower cost property that produces the same cash flow (or more) and here's why. Suppose you buy a $1m property with a DSCR loan with 25% down, at 8%, which are pretty common terms these days. You need to come up with a down payment of a quarter million dollars (which is almost the entire cost of the lower priced property in my scenario in the video). So your loan is $750k and if it's amortized over 30 years (which it commonly is) your monthly payment is $5,500. It's correct that part of this is principal reduction, which essentially is money going into equity, but of the $5,500 payment only $500 is principal reduction and the rest is interest expense. This will increase over time, but not by much for quite a while. Furthermore, that $500 of principal reduction isn't money I can use to live off of today, so if the goal is freedom from a W-2 job from real estate cash flow, it's not helping me until I can one day refinance or sell the property way down the road. In the low cost scenario, the cash flow per dollar invested (net profit percentage) is substantially higher (and I'm still getting some principal pay down), so I could do three different $300k deals for less than the cost of the $1m deal, and for most people, that would create enough cash flow to be financially independent.

[@theboringchannel2027]

@@LivingOffRentals from the standpoint of cashflow, I agree with your comments.

[@matthebert51]

Listeninh on a headset. background music is annoying.