“The fastest way to get rich quick… is not to get rich quick” Dave Ramsey

Today I wanted to write about a conservative real estate investment strategy that alone is responsible for the creation of a great deal of wealth in this country. Chances are, you won’t hear much about this strategy because it doesn’t make you an overnight millionaire, and as such, you probably won’t see a spokesperson with a Pepsodent grin mocking you on a late-night infomercial as the most news of succeeding big. .

The investment strategy to which I refer is: The constant and disciplined purchase of rental properties.

Now, before you click out of this article because you “have no intention of becoming an owner,” let me explain what I mean, as this is no ordinary strategy. To illustrate, let me present the following example:

“Jane Wealthbuilder has a full-time career working for a consulting firm and is considering investing in some rental income real estate in the Houston area. Schedule an appointment with a conservative real estate firm in the city and during your appointment they propose a strategy to get started There is currently an opportunity available that Jane is interested in pursuing The property is a bank foreclosure with an asking price of $80,000 and properties sold in that area put their market value at around $100,000 After your real estate agent negotiates the Jane can settle for $75,000 and buy the house with a 10% down payment and a 30-year fixed mortgage at 7.5% After closing, following the On the advice of her agent, Jane purchases a home warranty policy for $350 ($50 deductible) to cover mechanical parts of the house such as air conditioners, furnaces, water heaters, appliances, etc. aesthetics, garbage disposal, etc. Now, when the prospective tenant has a problem (air conditioner not working, stove won’t turn off) they call the 800 number for the home warranty company and fix the problem within one business day. That’s right, no annoying phone calls! And who pays the deductible? According to the lease, the tenant does. Additionally, Jane opens a bank account for her rental property and the tenant will be instructed to deposit the rent check into the bank account within the third day of the month. That way, the tenant has a payment receipt (the deposit slip) and Jane can check her online account to make sure the payment has been made.

The weekend after closing, Jane visits a wholesale flooring store her agent recommended, where she was able to get a great price on upgraded flooring throughout the house (carpet and vinyl). Meanwhile, her agent has scheduled a contractor to bid to paint the interior of the house, and he comes back with a fair price. Two weeks later, the house is ready to be rented, and the whole process cost Jane $4,500 and a trip to the flooring store.

Three weeks later, your agent stops by and brings in a tenant with good credit who wants to lease the house for $1050 on a one-year long-term lease. The lease is signed and the property is now rented. All before the first mortgage payment arrives. Now let’s see the result of this investment for Jane:

Rental Income Property Breakdown

1. Because she bought the property for market value, Jane was able to secure $25,000 in principal.
2. The mortgage payment, including taxes, insurance, and Home Owners Association dues, is $817. That gives Jane a positive monthly cash flow of $233 and an annual cash flow of $2,796.
3. Jane also recoups her loan at a rate of around $600/year.
4. Jane will benefit from a slight property appreciation (5%) at a rate of around $5,000/year
5. Therefore, Jane’s Annual Cash Flow%2B Loan Repayment %2B Appreciation= $8,396
6. Jane’s investment in the property includes down payment %2B Preparation %2B Home Warranty = $12,350
7. That means Jane’s ROI is 67.98%. It’s not bad at all!!

If this investor stays with the property for 5 years, their dollar return on this investment would be approximately $66,980 [captured equity of $25,000 %2B (5 years x 8,396 annual return)]. And we are talking about a single house. Who would have thought?

Let me take the time to emphasize an important point. The idea behind this strategy is not to earn enough monthly cash flow to quit your job and live on so-called “passive” income. This is an investment and long term. We recommend that investors using this strategy employ a consistent and disciplined approach that sees them buying 1-2 homes per year over a long period of time. I once knew a lady who had the foresight to start buying investment rental properties when she was 25 years old at the rate of 1-2 houses per year. She would buy them, she would prepare them, she would rent them before moving on to the next. Now, some 30 years later, she owns about 40 homes with significant monthly cash flow and incredible amounts of equity. Retirement is looking pretty good!

Wealth is best built slowly and steadily rather than loudly and overnight. Think about this for a second: Do you want to be Donald Trump or would you rather be Warren Buffett? The first one spends the whole year talking about all the money he had while the other calmly but surely has accumulated a fortune 15 times greater than Trump’s.

The most real and lasting wealth in America has been built in this way. Get started today!