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Want to quit Your Job? Here’s How To Retire On Real Estate

Want to quit Your Job? Here’s How To Retire On Real Estate

By Jeff Vasishta September 1, 2016
Photo courtesy of contentmarketingup.com

Rags to riches. It’s a real estate cliché. How on earth do people go from having nothing to amassing a fortune? The idea clashes with another business maxim: You need money to make money. So how can you make money with very little or no money? If you have your sights on being a landlord with a rental empire, unless you start off with a trust fund, in cities like New York or San Francisco it’s a seemingly impossible task.

Related: 5 Insider Rules For Flipping A House

But, in other US cities, with discipline and determination, it is possible. With some patience, you can amass a sizable rental portfolio that could over time, cover your kids’ college education and your retirement over time with as little as $50,000 in startup capital. I know, it sounds too good to be true. But it’s not. Check this out:

As Pittsburgh generally tops most lists as one of the most affordable cities in the US, we’ll use that as a template. In the Steel City, it’s quite reasonable to purchase a 4 bed, 2 bath duplex (2 beds per apt) generating $1200 in rent for$50,000 in a decent neighborhood. Let’s say after taxes and insurance and other monthly expenses (grass cutting etc.) it nets $750/month. For the sake of repairs, vacancies and convenience of calculation we’ll assume the year has 10 months not 12. So in the first year you will amass, $7500. Now, to be even more conservative (and based on years of experience), when you first purchase a house there are a lot of unforeseen expenses. So let’s assume that your entire first year’s profit goes back into repairing your house. Yikes! No income! I know. It looks crazy. Bear with me.

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Photo courtesy of www.zillow.com

In the second year you’ll make $7500 profit. In a city like Pittsburgh where the appreciation is gradual, by year six or seven, assuming you don’t touch any of your rental income and let it accrue, you will be able to able to buy your second rental for a similar price as the first. Using this philosophy, your first and second property will pay for the third within another 3 years—and your three properties will pay for a 4th in another 2 years. If you continue to invest your net income buying new properties within 12-13 years you will have purchased 5 properties through one investment property. By using this technique for 16-18 years you would be able to 12 investments properties which at today’s rents will generate approximately $100,000 in net income per year—all from one relatively small cash investment.

Now I know what you’re saying: That’s a perfect world scenario. What about an increase in prices, vacancies, vandalism? Yes, what’s laid out is a basic template here. Just as prices are likely to increase, so will rents so there will be a greater income. 18 years seems like a long time to wait and requires incredible discipline. This is not a get rich quick scheme. It’s a gritty, long term, roll up your sleeves philosophy but ultimately it works. In this current market with record low interest rates, it’s also possible to work a variation upon this theme by getting 15 year mortgages. Of course, the greater the initial investment, the less time it will take to reach your goal of $100K a year passive income. If you have enough cash to start off with four investment properties your trajectory to six figures is faster.

Many cities, particularly in the Midwest, fit this model and is a reason why investors priced out of the coastal markets are investing in there in droves. So what are you waiting for? Your early retirement awaits. You can thank me later.

Jeff Vasishta

ABOUT THE AUTHOR Jeff Vasishta

ABOUT THE AUTHOR Jeff Vasishta

Jeff is a writer, husband and father but not necessarily in that order. As a music journalist he counts Prince, Beyonce and Quincy Jones amongst those he’s interviewed. He's also owned and flipped homes in Brooklyn, NJ, CT and PA.

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