Real estate gives you more leverage than the majority of investment vehicles that are available to most people. When you do real estate investing the right way, you can leverage your way to financial freedom within five to 10 years.
Here are the basic steps to building your real estate cash flow machine:
- Get your funding in place. Develop a relationship with a bank. Know what it takes to purchase investment properties. Save your down payment.
- Learn real estate language and numbers. Become a pro on the various strategies, terms, opportunities, and pitfalls.
- Build relationships with realtors and others in your area who can help you search for new properties.
- Build your team. If you’re doing fixer-uppers, you need a team to do the work. Or this may just mean securing a property manager.
- Buy your first property.
- Continue buying properties, using the leverage of your existing properties.
- Make your income stream more passive. Don’t do all the work yourself—hire experts to do the work for you. Otherwise, you’re just creating another job for yourself.
During the early years you will need to put a lot of effort into research, buying, and managing your property. When your rental cash flow, with your other streams of passive income, reaches what you need to maintain the lifestyle you want, then you can hire a property management company to take over the day-to-day management and free you to fully live your 5 Day Weekend.
Use Leverage to Grow Your Portfolio
Unlike traditional retirement plans where you have to continue contributing to your nest egg out of pocket, a real estate portfolio can leverage and multiply itself. Do whatever it takes to get your first property, and that property can multiply into a large portfolio—all without coming up with more money out of your pocket to purchase additional homes. Each additional home is purchased from the equity growth of the previous homes.
In other words, just one good real estate deal could literally be the catalyst that creates your 5 Day Weekend.
To illustrate this, let’s look at a couple real examples.
Here’s a property that I purchased in Indianapolis in 2016:
Duplex in Indianapolis, Indiana
Purchase Price: $80,000
Loan Amount (80% LTV): $64,000
Down Payment (20%) plus Closing Fee of $2,800: $18,800
Building Size: 2,164 sq. ft.
Price/Unit: $40,000 (Per Unit Price)
Anticipated Gross Annual Income: $12,512
Operating Expenses: $2,912 (utilities, property taxes, insurance, maintenance)
Annual Mortgage Payment (80% LTV): $3,360
Total Expenses: $6,272
NET ANNUAL CASHFLOW: $6,240
NET MONTHLY CASHFLOW: $520
It all begins to add up to steady cash flow.
In my next post, I look at what you do when buying your second property.
In the meantime, I’d love to hear what you think about putting together a real estate deal. Do you at this point in your 5 Day Weekend planning, have the wherewithal to purchase that first property that could be the catalyst that creates your 5 Day Weekend lifestyle? Thank you for sharing.
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