In this unscripted YouTube conversation, Christian Osgood and Cody explain a straightforward, repeatable formula for creating a million dollars in equity through rental property investing. They begin by defining the market cap rate as the expected cash‑on‑cash return for a cash‑purchase, which provides a common yardstick for valuing properties. Using simple arithmetic, they show that increasing a property’s net income (primarily by raising rents) directly adds value, because the new income divided by the local cap rate yields the additional equity. They emphasize that raising rent typically does not increase most operating expenses, especially when using flat‑fee property management. The core insight is that scale matters: a modest rent increase across many units generates the required $5,000 /month (or $60,000 /year) needed to create $1 M of equity in a 6 % market. They illustrate this with a 38‑plex example where rents were lifted from $380 to over $900, staying below market while generating substantial cash flow and equity. The duo also discusses refinancing properties after rent upgrades, using the increased valuation to pull out cash for further improvements and rent hikes. Finally, they give practical steps for finding local cap rates (contacting large brokerages) and identifying properties with below‑market rents that can be raised by at least $100 per unit. The overall message is that the math is simple, the strategy repeatable, and the path to a million dollars achievable through disciplined rent‑increase and scaling tactics.
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Hey YouTube, this is Cody. Christian is here with me today. We're talking about how to make your first million dollars when you're starting out with zero real estate, the math behind it, and what it really takes to actually go repeat that, make it happen over and over and over. But before we get into that, there's 3 things that you really should know before we start talking about, okay, how do you make money in real estate?
And disclaimer, we're going to talk about a little bit of math here. Usually we'll do a presentation or a whiteboard. The math is so simple. As long as you have a piece of paper, you can absolutely follow along. Very simple. We're going to roll into it. First, every investor in any given market has a return that they expect when they invest. If you invest money in anything, you expect money to come back out.
What? Yep.
In real estate, we call that the market cap rate. Based on the transaction history in any market, It's determined an investor will expect a return of X number, the cap rate, if they paid cash, if they paid cash for the property. Now the reason we have this is so everyone's— that's variable. We want to be able to compare one property to another, apples to apples, using the same numbers. That's all a cap rate is. If there's been mystery to that for you, it's that simple. If they paid cash, it is the return an investor expects to get on their money. That's your cap rate. The first thing you have to know, what is that return number? Cody, what do we look at next?
Well, the next thing we need to know is that if you can make something earn more money, it's worth more to the next investor. If it pays more dividends, then all we have to figure is, okay, if it makes more money as an investment, it's probably worth more to the next person. And we can find value by taking the new increased dividends and dividing it by the local cap rate, the local return that people would expect if they paid cash and that's going to come up with a new value. Because if it makes an extra $12,000 a year on a 6% return, all you have to do is take the $12,000 divided by 0.06, 6%, and you come up with $200,000 of new value. So if you remember that if you can make it— the investment earn more money, it is worth more to the next person because they can pay more than you did and get the same exact return.
And when we're adding new value The cool thing is when you raise rent— Cody, when you raise rent, say $100 on any of your units, did your taxes go up?
They didn't.
Awesome. Did your insurance go up?
No.
Utilities?
No.
When you increase price, expenses don't go up. There's one exception. Sometimes property managers will base their fees on the rent that you're getting.
They'll do some sort of percentage, and what we've found is And some people say, "Oh, you're incentivized." They're incentivized to raise your rent 'cause they'll make more money. We don't operate our property management like that, so our expenses don't actually go up when rent goes up, because the reality is property managers should own real estate, and their benefit should be their rents go up as well.
So that's been our model, flat fees, so that when you raise rent, you really don't have any new expenses. That being said, for the most part, you raise rent, expenses don't really change much. So when you increase the income on the property, That is just new income into the property. It goes straight from top line into bottom line revenue. It makes more money, which means the property is worth more. Cody, what does the math look like if we're trying to make our first million dollars in real estate? How would that feasibly work?
Well, I guess math is a little bit important because we did promise you we'd show you how to do this. The math behind it, if you think about, okay, someone wants to make a return on their money. We want to make $1 million in equity, meaning we want to add $1 million of value to whatever we purchase. So if we figure we're in a 6% cap rate market— if you need to review that, go back to the very beginning of this video, 3 minutes ago— but $1 million of equity, let's say 6%, we need to increase the property's dividends on an annual basis by $60,000. Now, if you're writing this stuff down, All I did there was I took $1 million in equity we want to create, I multiplied it by 6%, 0.06, and we came up with $60,000. Well, we don't have to make $60 grand a month, we have to make $60 grand a year. So we're going to divide that out by 12 months. We take the 60 divided by 12, and we have to produce an extra $5,000 a month in new net income. So we just have to do the math. If that's one unit, you got to raise rent $5,000. Well, that's not Very feasible.
Probably not going to happen.
That's not going to happen. Duplex, $2,500. Well, that's probably not feasible either. So we need to multiply this out, and this is why scale matters. If you had a 50-unit apartment complex, well, now all you have to do is raise around $100. If you had 25 units, you'd have to raise rent $200. And our goal is not to take rent above market. If market rent's only $1,000, we don't want to take it to $1,250. What we want to do in that situation is find a place that's only rented for $500 and maybe take it to $700 or $750 or $800. And there are opportunities like that in any market in the United States.
All you have to do is find enough units and find some properties where rent could be increased. There are a lot of people who have held a property for a long time. That owner might not even have an idea what market rent is today. If it's paid off, Turns out it's just cash flowing pretty much at any rent. I mean, there's very low expenses to overcome. So if they've held it a long time, there are properties, I promise you, where you can raise rent $300, $400, $500. We bought a property, we're raising rent $400 per unit.
And it's a lot of units. And we're still $200 below market rent. You can do this anywhere. And that's why our qualifying criteria when we're buying real estate is how do we buy it and how do we never lose it? Some people are going to say, well, you're overpaying for something today. Maybe it's not a great deal. Maybe it's not going to cash flow day one, but there's got a huge opportunity. The 38-plex that we bought was a huge opportunity, and we were able to take rents from $380 to over $900. And there are one-bedrooms around that area that are running over $1,100. We're still below market, but we had huge bumps. It took it to cash flow profitability. It took over half a year But we were able to get it there and we created a lot of equity in the process.
I know there's a lot of people online who talk about, this is exactly how you make a million dollars. One of the most important things to us is that if you're listening to information, it's from someone who is leading you somewhere they've already been. Cody, realistically, how can we tell people how to make a million dollars in a year by buying enough rental properties and increasing rent?
Well, Christian, we took you from 2 units to 77 units, so all you have to do, if you raise rent You got 75 units in last year. Mm-hmm. If you raised rent $100, you would make an extra $7,500 a month, an extra $90,000 a year. If you want to do the math behind that, divide that by 0.06 and see how much equity that's been created in that portfolio.
And we've actively done a lot of it already in our existing portfolio. Between the two of us, we've had those rental increases through the last year. We've seen this work. The math works, the fundamentals work. We're now in the process where we're refinancing some of these properties. And what we're finding is the bank is agreeing with our valuations, which is a full proof of concept. It's not just, we raised rent, I know we're worth more. We're actually able to pull real money out of these properties, which we're using to improve the properties and yet again, increase rent. This is something that anyone can do. And the math is really that simple. You find the market return, create new income, and that is now new value that you add to the building. It's that simple.
Yep. Just keep in mind every market has a different return. You have to know the return based on the market. If you're investing in Seattle and Detroit, the returns are probably going to be a little bit different. You also have to remember that if you increase the income, the expenses don't just magically go up. Utility bills don't just go up. And on the top of that, if you can make it make more money, it's worth more.
If you're looking for where to find market cap rate, best place to go is just find a big brokerage. There's usually some big names that have a lot of the listings. Just give them a call, let them know that you're an investor in the area and you're trying to gauge what market cap rate is today. It's been a very volatile economy, it's a normal question. You can find that number. Once you have that, All you have to go out and do now is find properties where rent can be increased at least $100.
Yep. So keep it simple. If it's not simple, it's not as repeatable. So keep it super simple. Go out there, make it happen. And if you have anything you want to see next week for Whiteboard Wednesday, drop your questions in the comments below.
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We're going to tell you how to do everything that we've done, unscripted and unedited.
