Our Future Property Investment Strategy

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How many of you have considered investing in real estate? Now, how many of you think that you’ll have to take on massive debt in order to do so? This is simply not true. I have developed a plan where my wife and I could acquire more than 10 houses without ever having more than $80,000 home loans.

“How could this be?” you might ask, “…when one single property investment can easily cost $150,000 by itself!”

The answer……T-I-M-E, time.

Property Investment Should Not Be Get-Rich-Quick

There are various books out there that explain how you can get rich quickly in real estate. They have you buying one new property every year and show you how much cash-flow you could have, but somehow they always fail to mention that you’ll owe more than $750,000 to the bank after all of your properties are acquired.

I don’t know about you, but if I owed anyone $750,000, I would not feel as though I were “rich”. Sure, I may own 10 properties, but if I had only 3 of those properties vacant at any time, I’d most likely lose it all!

Our Plan of Attack

I stated earlier in this article that the trick to getting rich with property investment is with time. Let me explain.

Rather than take on 10 mortgages at one time (and paying an insane amount of interest!), why not take things a little more slowly and build yourself an even larger empire!?

The First House

Right now, my wife and I are in “Stage 1” of our overall plan (by the way, this is not our only investment plan, but it is one of the many options for the upcoming years). About 2 months ago, we purchased our very first home. It cost us about $76,000 and we have a plan to pay off the mortgage entirely in less than 4 years.

The Second House

After our 1st house is fully paid for, we’ll quickly be able to save up a down-payment for another property of similar value. For easy numbers, we’ll just say that the property costs $80,000 and will rent out for $1,000 per month. With our day jobs, we’ll be able to put $2,000/month toward the mortgage as well, which totals $3,000/month. Along with the initial down-payment (of $8,000) and 2 years of payments, this house will be completely paid for.

The Third House

Within the first 6 years, we’ll only have 2 properties fully paid for, but this is the point where it all starts to pay off (and the empire begins).

After only a few months, we’ll have another solid down-payment for an $80,000 house. With the rent set at $1,000 per month, we’ll now have $4,000 going toward the mortgage each month. So, this loan will get paid off in less than 2 years (20 months actually).

The Rest of the 10 Properties

By now, I’m sure you see the pattern. With each house, you earn an extra $1,000 a month, so by the time you have that 10th house, you’ll be earning enough money to pay it off in less than a year!

At that point, you can decide whether you keep buying more. Frankly, I’m not sure why you wouldn’t! By that time, you might even consider an overseas property investment! Maybe you’ll enjoy the Bahamas or Costa Rica. When you’re earning over $100,000 per year passively, these options are certainly possible!

What do you think of this plan? Would you rather take on the extra risk and buy a bunch of properties at once?

 

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Housing Money Mortgage Payoff

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

36 Comments

  1. I love the debt free aspect. I’m going to watch and see if you can make it happen because houses tend to cost more than just the mortgage. Loans for non-owner occupied homes also differ significantly, but your numbers don’t make that an issue.
    Brenda recently posted..Bullying-it’s not just kid stuff

    • Yep, houses can be costly sometimes, but I have accounted for it. Our extra $2,000 a month isn’t maxing us out. We’ll still be contributing to the overall emergency fund.

  2. Very interesting plan, and I think almost ANY plan at your age is better than just rolling with the tide. You will, of course, have to adapt your plan to the situation as time goes on and the economy changes.

    Right now as you know, it’s a buyer’s market, so since you really want to have rental properties, you will want to get as many as you can at fire-sale prices, but it is good not to overburden yourself with debt either.

    I think you have a very good plan!
    gharkness recently posted..Do you remember the Low Fat Fad Diet?

    • Yep, it’s a buyers market, but with the inflating home prices, rent should increase as well. So, rather than overcomplicate things, I decided to cancel out potential inflation. We’ll follow our plan pretty closely though! 🙂

  3. I really like your strategy Derek. We made the mistake of buying a fairly expensive home a few years ago and of course it has done nothing but depreciate. We have a limited ability to accelerate our mortgage payments as we are preparing to relocate. We’ll be landlords this time next year, but leveraged a little too much for my comfort level. In retrospect we should have purchased a more modest home to begin our property empire.
    Hunter @ Financially Consumed recently posted..4 Steps To Passing The DIY Test

    • I’m really glad that we started with a fixer-upper! Not only can we mold the house exactly how we want it, but we also have plenty of extra cash each month for additional investments in the future! 🙂

  4. Derek, that is an inspiring plan. My only concern would be the maintenance and management of those rental homes. Do you plan to handle the rental management yourself, or would you outsource that to a 3rd party company, or possible a VA?

    Also, would all of these homes be within a close geographic area? If you had to manage the tenants, organize routine maintenance, and market for new tenants, you would have created a brand new full-time job, that is not passive at all.

    With that said though, I hope to follow in your footsteps!
    MoneyforCollegePro recently posted..Best and Worst Financial Services Jobs

    • I would have all of my properties in the same area. It just wouldn’t make any sense for me to have them all over the place. Also, rather than own 4 houses, I might look into a quad-plex. It would be easier to manage and cheaper to purchase.

      I honestly wouldn’t mind managing the properties myself, and by that point, I’ll hopefully have enough online income to be able to do that! 🙂

    • Real estate can only go up from this point right? It’s much more stable than the stock market.

  5. Where do you find 80K properties that generate $1000/month in rent? This is a huge huge opportunity that doesn’t exist where I live. If it’s true, then I will fly down to your neighborhood and we can start a business together. You find the houses, I will finance and find equity partners … we’ll make it work so that you can make a lot more money and not be personally on the hook for big mortgages.

    Talk to me!
    Alex | Perfecting Dad recently posted..Teaching Kids About Money: 6 Benefits of a Bottle Picking Business

    • Sounds good to me!! Our house was $76,000 and required an additional $10,000 in repairs or so. But, we have a 3 bedroom, 2 bath house right across from the park! Houses near us can easily get $1,000 a month from renters. I’ll shoot you an email.

    • I knew you would like this plan CFM, since you’re investing in real estate yourself!

  6. There is only one flaw in your plan. Home values should not be this low ever again and interest rates will be higher as well. The compensating factor is rental rates will higher too. Your plan of buying real estate is good, but you may not achieve the numbers exactly like you thought. Good luck.
    Krantcents recently posted..How to Ace that Interview?

    • Yep, I thought about home values increasing, but then I figured that rent would increase along with it, so it was a wash. It was best just to ignore these factors to keep everything simple. Thanks for the comment!

    • You got it! Let that income snowball roll! Plus, not only do you increase your cashflow, but you’re increasing your equity in each home as well. With this plan, you can become a millionaire inside of 20 years.

  7. The debt-free aspect is key here, and I like you you’re building toward reducing the payback period on successive houses. Keys here are planning for unexpected expenses (they will likely happen), and any potential increases in home prices. The latter doesn’t seem so likely in the short term, but we just can’t predict the future.

    In any event, it’s the logic here that I especially like.
    Squirrelers recently posted..Emotions, a Mortgage, and a New Baby: What Would You Do?

    • Yep. The numbers may change, and it may take a couple more years, but all in all, the empire will grow exponentially! I can’t wait for that, but first thing’s first — paying off our first house! 🙂

  8. Sounds like you have a great plan. I only wish the housing prices at where my live is as good as where you live so I can adapt a similar plan but there is no chance that will happen. My 15 year old small 600 sqft condo cost just under 3x the price of your house and there is nothing fancy about it.
    That Thing Call Money recently posted..Step 2: Vision for Retirement!

    • Now I’m interested to know where you live! Sounds like Cali to me. Regardless, there is still opportunity wherever you are. I bet you could find some deals nearby that would make sense for a rental. First thing’s first though, pay off your condo! 🙂

    • It sure does! We will learn a lot along the way too, you’re right! Thanks for the comment.

  9. Derek,

    I’m envious like Alex. I simply could not find an $80k home where I live that would generate $1,000 in rent. The spread between the mortgage payment and rent is just too great. Even a 15 year fixed rate mortgaeg would be a little over $600 per month before PMI, taxes, and insurance.
    Hank recently posted..Four Ways To Save Money At The Grocery Store

    • I guess I’ve got it made! No excuse not to capitalize on this opportunity! 🙂

  10. Great plan! My father has a buddy who did this plan. He was a cop and was out after being shot. He bought one single family house, used the equity to purchase a multi-family and so on. He now owns multiple high rises in queens, new york – probably has a couple hundred tenants in total.
    Evan recently posted..It is Probably About Time to Grow The Fuck Up

    • Sounds like a man that I need to talk to! Maybe you could interview him and do a write-up on your site (or maybe you already have?). I would love to read it!

  11. I like the sound of this plan. My main problem with investing is that my interests are pulled in many different directions. I’d like to get into real estate but I’m also excited about dividend investing and maxing out my 401k in mutual funds. It’s hard to do all these things quickly so could be best to choose the option that most excites me, learn all about it have laser focus on making it happen. Good luck in your quest for a real estate empire!

    • I think you’re right PFS. Go with the one that excites you the most and focus much of your energy there. I don’t know of anyone that can juggle 3 or 4 different investment ideas profitably.

  12. Don’t forget, if you’re collecting rent of $1000 a month, very little of it will actually go to the mortgage. You’ll need a ton of it for property taxes, insurance, water and trash, maintenance, and (if you’re too busy to drive to the house 3 times a day to do showings) property management.

    I own a rental property, and these operating costs take a HUGE bite out of my rental income.
    Paula @ Afford Anything recently posted..How I Make $70 Per Hour Working From Home

    • Good point Paula. I’m sure there will be extra expenses that I don’t know of at this moment, but I also plan to have a greater job income at that point as well, which will allow us to pay more toward the mortgage. Thanks for the comment!

    • Is it an option for you to pay down the mortgage? That’s definitely the best way to go in the long run.


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