At August Property Management, we are all about numbers:
Making $3 Million from an initial $50K investment is no joke, actually its kind of a big deal! For example, the red line on the chart above shows the expected gains from someone who invested the same amount into the stock market at a generous 10% annual gain. Because we know everyone would rather have $3 million, we are going to walk through just exactly how you can this amount of wealth through Passive Real Estate Investing. Our data is centered around Kalamazoo, MI for this analysis.
Timing of Purchases
For any rental investor it is important to understand their scalability, meaning how fast they can purchase more property. Without any additional contributions past the initial 50K, a Passive Real Estate Investor can expect to purchase more rental properties at the below purchase schedule. This schedule includes all expenses (i.e., Management Fees, Taxes, Insurance, Utilities, Structural Reserve and Maintenance).
Year 1 - Property 1 & 2 for $100,000 each. (20% down payment)
Year 3 - Property 3 at ~$109,272.70 (adjusted for inflation)
Year 6 - Property 4 at ~$119,405.23 (adjusted for inflation)
Year 8 - Property 5 at ~$126,677.01 (adjusted for inflation)
Year 9 - Property 6 at ~$130,477.32 (adjusted for inflation)
Year 10 - Property 7 at ~$134,391.64 (adjusted for inflation)
Year 11 - Property 8 at ~$138,423.39 (adjusted for inflation)
Year 12 - Property 9 at ~$142,576.09 (adjusted for inflation)
Year 13 - Property 10 at ~$146,853.37 (adjusted for inflation)
...and here is the data to back it up
What does it mean to have equity? Is it the same as cash?
Equity is the amount of value you have in a home. So at the end of a 30-year loan term, if you had made all of your payments, then you would have 100% equity in your home. If you sold any time prior to paying off your mortgage, the bank would receive the remaining balance to clear the loan before you would receive your cut. So if you've paid on a mortgage for 20 years you can still expect a pretty good payday, but not as much as if you had fully paid off the loan.
So, why don't more people invest in Real Estate?
There are many factors that go into how each of us invest our money. We are all familiar with financial advisors and trust many of them with the majority of our savings. However, most people don't realize that a property management company can offer opportunity. One BIG myth about Property Management Companies is that they simply cost too much. In actuality, a good Management Company takes over every aspect of rental home ownership and decreases overall expenses with proactive repairs and low vacancy rates. A good management company can work with you in much the same way as a financial advisor to help you invest in rental property to achieve your wealth goals. At August PM, we can develop and implement an individualized plan to help you grow. The above plan is just one example, but we can create a plan that works best for you.