People think it’s rocket science when it comes to building a property portfolio. In actuality it’s not. You just need the right plan of action and the determination to succeed to back it up.
Listen a bit here how easy this game is. I just can’t understand why more people aren’t doing this !
Let’s imagine that today you have 20 paid for Rental Properties. They’re worth $50 000 each, so $1m in total.
They bring in $500 p.m., so that’s a total of $10 000. p.m.
That works out to 12% p.a. return.
Don’t forget that you also own the annual average increase in the value of the properties.
But on average the capital appreciation should never be below inflation. Simply because of 3 factors: building costs increase by at least inflation, so that will invariably increase the price of existing properties. Secondly, the population is increasing, and urbanization is a fact of life across the globe.
So let’s get back to your rental income.
If $10 000 is more than your FF level, then you’re in the pound seats. After expenses such as property taxes, maintenance and provision for vacancies, you should still be left with well over $8000 per month.
More good news: The rental income increase with inflation every year! So you are automatically covered against the ravages of inflation, or the loss in buying power of your currency. (the biggest risk and problem for retirees, by the way).
‘But I don’t have 20 paid for properties’, I hear you say.
YES, but you have a pay slip, don’t you?
Then find a property and buy one!
As soon as you have a tenant in place, find the next property!
Use the rental Income and ADD it to your salary to qualify for the next bond.
Yes, I know. You might have a shortfall because costs, including the monthly bond repayment, is higher than the rental income.
No problem!! The banks will take it all into account. Your liability is not the full bond repayment as it was when you qualified for the 1st bond:
It’s only the shortfall now! And if you’ve paid a deposit and wait for a year or two, that shortfall will have disappeared already.
So now you just repeat the process until you have 20 properties.
THEN, you let the tenants pay off the bonds! Remember that because of annual rental increases, shortfalls disappear eventually and change into overages.
Then you use these overages to pay off the bonds faster!
After about 10 to 12 years your bond is zero, and you have a paid off property!
Now if you did this 20 times, and you started 12 years ago, chances are good that you’ll have an after expense rental income of $8000 p.m. today.
MR GP IS!!!
20 of them!!
And why stop with 20!!
You think this is all BS?
It’s EXACTLY what I’ve done.
In 2006 I attended a TREOC property conference in PE. Get the link to their excellent weekly Newsletter in the show notes of this episode.
My bonds are not all paid off, but it’s mainly because I didn’t stop with 20 properties. I keep on adding a couple every year.
So let me spell it out for you again:
Find properties with a rental return, in todays money, or $500 per month.
Do you think that’s difficult? Off course not! There are billions op people in the $500 per month rental pool. It’s the sweet spot for the best tenants. Cheaper: more trouble. More expensive? Lots more trouble.
A $500 per month rental property will cost you anything between $40000 and $60000.
Search for a good buy in the right place (we cover what to look for and where in a separate podcast), and put in an offer.
Apply for a 100% bond.
As soon as you have a tenant in place, start looking for the next property.
Repeat 20 times, and whala, in 12 years you’re F free.
Yes, it worked for me.
No, I don’t know you, nor your circumstances will be different from mine.
I’m not a F Planner nor a professional in any field.
But I share with you my knowledge and experience.
There’s a lot of detail involved that we cannot possibly cover in the limited time of this podcast.
Till next time: Go out there and TAKE ACTION.
I am not a Financial Advisor, Attorney, Accountant or any other Professional, and never WANT to be. I’d rather be FREE. I share MY experience and knowledge. I don’t give advice.
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