Christian OsgoodCEO, Multifamily Strategy · CEO at Multifamily Strategy

When the Math isn't Mathing

2 Nov 2024 · 1 min

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0:44

Speaker B mocks a $1,000 cashback reward from $100,000 in spending. Speaker A counters with real math: buy a $1 million apartment building with 10% down, raise rent $100 per unit, and gain $201,000 in property value through a cap rate calculation.

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Hey, let's do the math, okay? You know how you get $1,000 back from Discover? You spend $100,000! How does spending $100,000 to get $1,000 back ever make you rich? Where did you take your math class? Really, this is absolutely ludicrous.
Let's review, shall we, Dave? 6% cap rate market. You buy a 10-unit apartment building worth $1 million for $1 million. You have 10% down, seller finance, perfect. You've now bought an asset. You raise the rent of only $100 on this bad boy for each unit, which is $100 times 10 units times 12 months a year. You're going to go to $12,000 per year additional income created, divided by 0.06, we have $200,000 of new worth created in the asset. You made $201,000 on this investment. That is the math that we are doing today.