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.
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:
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.
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.
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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