What don’t I get about YouTube “entrepreneurs” & interest only?

[John Mangiameli]

Hey Cats,

New to MF, not new to RE. Still seems like I’m missing something about how the big(er) boys play this game. 

You know the usual suspects for RE content on YouTube. Why is it when they break down their financing numbers on a big’ol TV or blown-out whiteboard (fix your exposure, man) they never seem to account for paying any principal?

Example:

Price: $2,000,000

Down: $500,000

Loan $1,500,000 @ 3.5%

NOI: $140,000

WOW LOOK YOU MAKE OVER $85K - 17% COC HOW CAN YOU NOT BUY MY COURSE?!

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What am I missing?

[Tyler Gibson]

@John Mangiameli Yeah they might count it as profit. Really it is a perception game. Are they making $87,500 in cash every year? no but it is a good looking number and they are selling a system or image or something. I typically find that these guys are using terms like cap rate and NOI to make there deals seem that much better hoping that the people listening don't understand how they got to their numbers and take them at face value. they want people to pay for their training or system education materials. I have a general rule I live by, if the person telling me the number is not a fiduciary working for me then I don't believe a word they say, I run the numbers myself. If they are a fiduciary I believe them and run the numbers to check.