YNBA Investment Method for First Time Investors

There is a sense of pride that comes with real estate investing—a land of opportunity, eye-catching numbers, and the lure of a tangible asset that can be used as your retirement fund. A lot of these upsides are brilliantly true! But there is one soft underbelly that gets lost in the optimism—and that’s the added stress of being a landlord.

Leaky pipes that need fixing, the mortgage that needs to be paid between renters. It’s a lot of numbers and cash flow logistics to be jumbling around in your head—and it can be stressful!

Well, at Realty Exchange we can help our clients learn how to keep their finances neatly organized as first time property investors. With our vast amount of agent experience, we are able to help our clients make good decisions when it comes to property investment, how to gain total control of your money, and how to be totally in control of your cash flow for real estate investing.

There are four simple rules, and they’re called the YNAB method. That’s You Need a Budget. This proven four-step method puts you firmly in the driver’s seat for managing your cash flow no matter what tool you use, and allows Realty exchange to provide you with more and more investment opportunities that meet your needs and wants within the St. Louis area.

The YNAB Method:

  1. Rule #1: Give every dollar a job
  2. Rule #2: Embrace your true expenses
  3. Rule #3: Roll with the punches
  4. Rule #4: Age your money

Rule #1: Give every dollar a job

Think of each dollar in your possession like a devoted employee. Each dollar you have right now needs a specific job. Maybe some dollars are meant to pay for mortgages, while others are set aside for utilities. Maybe some dollars are saving up for your next rental. You want the unemployment rate for your dollars to be 0%, so each one is given a job. You get to choose. You’re the boss.

Rule #2: Embrace your true expenses

No more getting walloped by a roof repair, surprised by a water bill, or left out in the cold for the inevitable renter turnover. With rule #2, you plan for non-monthly expenses within your budget. You save for things like maintenance and repair each month, turning your monthly expenses into neat-and-tidy monthly costs.

Rule #3: Roll with the punches

Rigid budgets break. They break on paper, they break your heart, they break your budgeting willpower. So with Rule three; future proof your budget.

You might spend more than planned on a repair—and that’s totally ok. Just move money from another category that’s less important (like the emergency fund you set aside for such a time as this!).

Rule #4: Age your money

Think of it like this: with Rule Four, money comes in and stays in your account for a little while. You use last month’s rental income to pay this month’s mortgages. You’re using “old” money instead of “new” money. As time goes on and you follow rules one through three, rule four is really just a byproduct—your pile of money and assets will grow larger.

Side effects of following rule #4: balances growing plump, and extra cash left over to continue growing y

Budgeting for The New Real Estate Investor

You’re itching to buy your first rental property but it’s hard to know when to pull the trigger. Instead of trying to time the rollercoaster market, allow a Realty Exchange Multifamily Investment Specialist to help you find a property you are financially ready for. After you’ve used the four rules in your own life, you can map out the specific costs it will take to enter the market and start saving. Plus, you’ll know exactly when you’ve hit the target to start shopping for property that fits neatly within your budget. Set aside money for your own personal expenses, and then set a target for the down payment needed on your first rental property. Don’t forget to set it high enough to cover closing costs and repairs needed.

Budgeting for The Seasoned Investor

You’ve got your portfolio amassed, now you just want to optimize your organization system. Your budget could include all the expenses of each property, split out by address. Don’t forget to save for those larger, less frequent expenses in your budget as well. Consider including a Master Funds category group to cover expenses between leases, an emergency fund, and a fund for capital improvements.

You can easily save for your next property as well in this Master Funds category group. Keep an account register of your rent payments and outgoing expenses for easy reference. As you follow the four rules, watch your net worth climb ever higher as your asset-to-debt ratio increases. As you track your spending and categorize your dollars, you’ll also be able to easily see an at-a-glance income statement by month and over time.