13.3 Years to Build $1M in Real Estate Assets

Here is how you can make $1,000,000 in exactly 13 years and 4 months without having to work and earn enough passive income to never have to work again.

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Case Study

Let’s take a look at a case study. Mr. and Mrs. Smith are a couple in their mid-40s earning a combined annual income of just under $200k with available liquid capital of about $400k, in addition to other investments (stock, life insurance, emergency funds etc.). They want to invest this hard-earned capital in quality real estate using a long-term strategy. Here’s what they would be able to accomplish:

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Step By Step

  • STEP 1 : Purchase nine investment properties @ $150k per property = $1.35M of Asset Value.
    52 Properties can help you find turnkey investment properties in this price range. Just email us!
  • STEP 2 : Put down 25% of the purchase price plus an additional 2% for loan costs = $364.5k Capital Invested.
    The 2% for loan costs is an assumption. You can easily get loans at $0 cost. This is about $40,500 down per property.
  • STEP 3 : Take out conventional loans for 75% of the asset value purchased = $985.6k Total Debt.
    This would constitute a loan of about $112,500 per property.
  • STEP 4 : Finance the debt for 15 years at 4% interest fixed over the loan term.
    Today’s rates for 15 years are actually lower so you wouldn’t need as much capital.
  • STEP 5 : Amount of Principal paid down after the first year = $48,699 (this goes up every year).
  • STEP 6 : Additional positive cash flow generated annually = $8,100.
    It may be tempting to spend this money, but our focus here is for the long term.
  • STEP 7 : When cash flow is used to accelerate the debt payoff, the entire portfolio is free and clear in 13.3 years.
    At this point Mr. & Mrs. Smith are in their late 50s and have the option of early retirement.
  • STEP 8 : At zero appreciation, that’s $1.35M in free and clear real estate after a capital investment of $364,500!
    Planning + Real Estate Smarts = Money in the bank.
  • STEP 9 : At 3% annual appreciation (the current rate of inflation), that’s $2M in free and clear real estate.
    Note: This is a conservative appreciation rate. It’s amazing how just $400k can grow to $2M in real estate.
  • STEP 10 : Bonus: Each free and clear property also yields $11-12k/year in positive cash flow for a projected income of $100k/year.
  • STEP 11 : Double Bonus: This assumes no increase in rental rates in the 13.3 years. In actuality, if rent increase at 3% annual appreciation, it would yield around $145k per year.

Conclusion

As you can see, with some careful planning and smart real estate purchases, the Smith family can retire early and live a life of abundance and fulfillment.

Don’t have $400k sitting around? No problem, this model will work with $50k, $100k, or $200k; however, the total assets and passive income will be less. Don’t have it in cash? No problem, you can use 401k/IRA to buy properties. Email us and we’ll show you.

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We hope you have found this blog post on real estate investing to be useful. Feel free to comment below or email uswith any questions.

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