The world’s richest people have traditionally made their wealth through Real-Estate such as; Rockefeller, Donald Trump, Sam Zell, Zhang Xin and many other billionaires are on that list too. You do not need to start with millions of dollars to become successful in Wealth Building through Real-Estate; it can take just a few Residential Properties to set you up for life!
Consider an average 3-bedroom 2-bath single-family property that sells for $150,000.00. If you own the property outright, any rental income is added to your bottom line, after reducing for repairs and maintenance costs.
Typical rents are approximately one percent of the property value, if it is mortgaged. So let’s assume a mortgage of $120,000.00 at an interest rate of 5%. So the mortgage payments would be approximately $740.00 per month. If the monthly rent is equivalent to one percent of the value of the property that would be $1,500.00 per month. The difference of $760.00 can be applied to maintenance costs, reserves, taxes and insurance.
Are these figures realistic? Yes, they are. Insurance and property taxes account for approximately two percent of the home’s value, in this case, $3,000.00 a year or $250.00 monthly.
These calculations demonstrate that even if you hold a fairly large mortgage on your rental property, you would still come out ahead when renting it out. You are then in a position to apply any positive cash flow to reducing the principal on your mortgage, eventually letting your tenants “pay” the mortgage for you.
Of course, owning a property outright dramatically increases your income flow, but the idea is the same. If you apply positive cash flow toward acquiring additional properties, your wealth can thus grow exponentially with each house.
Make a plan that is attainable, starting with one residential property purchase, per year, increasing as finances permit. Within a span of 10 years, you could retire in style.
As a wealth creation company, we can guide you through the sometimes confusing maze of property ownership. Learn more about Property Investments through our Investment Workshops or personal meetings with one of our experts. Contact us for any questions, or to review these figures and see how they might fit in with your plans.