Yes, you can do it. You could start with ten grand or less and still do it. It requires the use of leverage or pyramiding the equity in one property to invest in another. There is not a lot of risk, but you do have to have guts and determination.
To make a million dollars in five years you need an investment vehicle that lets you use leverage, and one that has large profit potential. Using rental real estate as your investment vehicle you can reach your goal by pyramiding equities from one deal into another. Investing in rental properties have many advantages not found in other types of investing. Some of these are: leverage, instant equity at purchase, cash flow, inflation protection, depreciation tax advantages, and so on.
You look for properties that you can buy with little down and preferably with seller financing. You want a 10%-20% position equity (discount) the day you buy it. You fix it up a little, raise the rent and as soon as possible you borrow out the equity to do another deal or trade the property for a larger one.
As long as the property has a positive spendable cash flow of $200 (per door) of the rent each month you are in good shape.
So, that is how you do it. You start with one small rental property and leverage it into more and larger properties until you are buying million-dollar properties and making $200,000 or more each time you do a deal. At that rate getting to a million dollars looks more likely each time you do a deal.
Our goal is not necessarily to make a million dollars but rather to have a monthly spendable cash flow of $10,000 a month. Because our goal is spendable cash flow rather than accumulating a million-dollars of net worth, we have the goal broken down into rental units. If we acquire 50 rental units and each one produces $200 a month in spendable cash flow, we will have reached our goal. That number now becomes the standard of measure. A property to be considered must produce a net spendable cash flow of $200 per rental unit or more. These are reasonable numbers that can be achieved.
We do not care if a property is a single-family home, or a multiple unit property. We do want to buy the property at a bargain price. We look for distressed properties where the owner has neglected the maintenance. The rents will most likely be under-market and that fact plus the property’s poor condition allows us to have a potentially large equity gain form improvements as well as the potential for rent increases. Buy it, fix it up, raise the rents, borrow the equity out (up to 70% of the value) and do it again. By the fifth year you are dealing with larger properties and your goal becomes very obtainable.
OK! get started, success comes to those who work for it.
Author: Jim Glasgow
Real Estate Wealth Building Success Seminar