Oooh, I do miss this. It's been a while, but I still get that "soon-to-be-free" feeling whenever I start writing.
I think I need to expand on something I skipped over in my “Property #5: The Get” blog post. When Chuck told me that I could refinance Property 4 to buy Property 5 and have at least $10,000 in cash, I paused for a second. In June of last year, I wrote the post "Ahkenaten Speaks", listing all the reasons why the purchase of Property 4 was a failure. $60,000 out of pocket. Single family home. $900 rent. Only an 11% return annual return when I could have used all that cash for a down-payment on a bigger property with more units. That post was brutal and it really forced me to re-examine how I see myself as a real estate investor. These are all facts. So let's take a look at Property 4's numbers:
Purchase: - $45,000
Repairs: - $15,000
Rental Income to Date: + $8,701.46 (after taxes and repairs)
Return on Investment: 14% (-$51,298.54)
So at this point, I’m in the red $51,298 from an initial $60,000 investment. But now comes the purchase of Property 5, for which I decided to refinance Property 4:
Refinance: + $52,000
Total Return on Investment: Over 100% (+$701.46)
Not only did I make 100% of my investment back in less than two years, but a good portion of that money is going towards the purchase of a property that will eventually make at least $1,000 a month in rental income. That’s an increase of over $450 a month. And, as long as the new mortgage for Property 4 is decent, I should still get a respectable profit from the place. And it gets even better.
Let’s say that Property 4 becomes more trouble than it’s worth and I want to sell it. With a mortgage of $52,000 I can make a decent profit off the sale as long as it goes for at least $65,000.
See, this is why people say the best investment is in real estate. There are so many ways to make money as long as one is knowledgeable enough. What I first thought was my biggest mistake in real estate turned out to be one of my most profitable ventures. 100% return plus an almost 50% increase in rental income (Property 5 vs Property 4).
I think I need to expand on something I skipped over in my “Property #5: The Get” blog post. When Chuck told me that I could refinance Property 4 to buy Property 5 and have at least $10,000 in cash, I paused for a second. In June of last year, I wrote the post "Ahkenaten Speaks", listing all the reasons why the purchase of Property 4 was a failure. $60,000 out of pocket. Single family home. $900 rent. Only an 11% return annual return when I could have used all that cash for a down-payment on a bigger property with more units. That post was brutal and it really forced me to re-examine how I see myself as a real estate investor. These are all facts. So let's take a look at Property 4's numbers:
Purchase: - $45,000
Repairs: - $15,000
Rental Income to Date: + $8,701.46 (after taxes and repairs)
Return on Investment: 14% (-$51,298.54)
So at this point, I’m in the red $51,298 from an initial $60,000 investment. But now comes the purchase of Property 5, for which I decided to refinance Property 4:
Refinance: + $52,000
Total Return on Investment: Over 100% (+$701.46)
Not only did I make 100% of my investment back in less than two years, but a good portion of that money is going towards the purchase of a property that will eventually make at least $1,000 a month in rental income. That’s an increase of over $450 a month. And, as long as the new mortgage for Property 4 is decent, I should still get a respectable profit from the place. And it gets even better.
Let’s say that Property 4 becomes more trouble than it’s worth and I want to sell it. With a mortgage of $52,000 I can make a decent profit off the sale as long as it goes for at least $65,000.
See, this is why people say the best investment is in real estate. There are so many ways to make money as long as one is knowledgeable enough. What I first thought was my biggest mistake in real estate turned out to be one of my most profitable ventures. 100% return plus an almost 50% increase in rental income (Property 5 vs Property 4).
Money is beautiful... but becomes sexy when it actually works for you and generates a profit. Soon I'll have my 5th property and will be able to generate enough income to finally quit this damned security job. And it was all because of my successful little failure.
P.S.: You know, it's funny. Every time I tried to refinance Property 2, banks would hassle me about my bad debt-to-income ratio and deny me. But for Property 4, they never asked about it. Even though Property 4 was paid off, I'm still a bit surprised that the term debt-to-income never came up.
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