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So lets start here…this is where it all begins:
Add up ALL of your expenses. Then come up with an average number that you NEED to replace in income every month. Here’s your challenge: For the next 4 months, TRACK EVERYTHING you spend money on. Your goal AT FIRST should be to earn enough rental income JUST to cover your NECESSARY expenses.
Next, save up a down payment of about 10-20% of the properties purchase price.
And in terms of saving this amount of money, you NEED to make it a priority. If that means you cut back on vacations, take up a part time job, or scale back on your expenses just to save a little more – do it.
Now once you’ve got that down payment saved, the second step is to buy a 2-4 unit building that you can move into yourself.
Here’s why this step is so important:
When you buy a property as a PRIMARY RESIDENCE – meaning you’re going to move in and personally live there – you can qualify for what’s called conventional owner occupant financing. This means you’ll get a lower interest rate and you’ll qualify for a lower down payment, compared to buying an INVESTMENT property. The ONLY requirement when doing this is that you MUST live in the property for 12-24 months. After that, you can do whatever you want with the property – and meanwhile, you’ve locked in a low interest rate and a low down payment.
Third, IDEALLY you should fix up the property.
Any time you’re looking to not only increase the properties value, but also increase the cashflow…fixing it up is the way to go. My favorite places to buy are just the ones that look a little out dated. For someone just starting out, I don’t recommend you take on too big of a project. This should be something that would take any handyman or contractor under one month to do, from start to finish.
So now, what do you do once you’re done fixing it up? RENT OUT THE OTHER UNITS!
This is where the cost of the other units should ideally cover ALL of your property expenses…this includes your mortgage, property taxes, insurance, repairs, maintenance, and anything else that comes up.
You’re now going to do what’s called a CASH OUT REFINANCE.
This means your bank will give you a NEW loan, based on the new, HIGHER value of your property after you fixed it up…and you profit the difference in CASH.
This means you now can use that money to find ANOTHER place to buy because you have your money back!
The GENIUS with this concept is that if you just keep taking this extra rental income, and re-investing BACK into more real estate, you can start to see these numbers grow VERY, very quickly. Because now, in addition to re-using your own equity to buy more properties, you’ll have extra rental income every month to invest in EVEN MORE REAL ESTATE. This is just compound interest working on a very extreme level.
The ONLY requirement on your end, is to save up the initial down payment and renovation budget…NEVER spent the rental income while you’re re-investing it back into your portfolio, and put in the work to do this consistently until you’ve made enough rental income to cover your expenses.
So as you can see, this is such a great method for retiring early…as long as you decide to dedicate ONE DECADE of your life to doing this part time, you can be set for EVERYTHING after that, just by this!
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com