After the houses are paid off, we’ll begin to leverage and acquire more doors to grow our cash flow while still keeping our bulletproof fort intact. The reason we believe these houses are bullet proof are because
- They are paid off
It is very hard for someone to take the property away from us.
And that’s the plan.
- Acquire 6 doors to eventually get to 5,000$ a month in cash flow
- Pay the 6 doors off
- Begin to acquire door number 7 and beyond.
Granted it’s an outline.
Time and thousands of other steps need to be executed until this plan is completed.
There’s thousands of different strategies and tactics. 2 + 2 = 4 and 16 / 4 = 4 and even the equation 2 x 4 / 2
Two different strategies we are leaning on:
- Using banks for leverage
- Buying distressed properties
The banks for leverage are going to allow us to buy 6 properties worth $200,000 each (1.2 million dollars total) with about 240,000$ dollars down. The power of leverage is allowing us to buy 1.2 million in property for only 240,000$ down. It would take many more years to save up that necessary 1.2 million to acquire this goal.
The main benefit of distressed properties is the added equity we can gain on the deal. If we purchase a $200,000 home, put $20,000 into the property to fix it up and it’s worth $250,000 – we just gained $30,000 dollars in equity.
This done across 6 properties could be an added total of $180,000 if we can net that same $30,000 in increased equity from each property. That’s pretty awesome if you ask me because we’re just repeating the same process for all 6 of these properties.
And there’s downsides to each of these strategies.
Leverage leaves us exposed. We are in debt to a mortgagor and owe them their money, regardless if we get paid or not – for the most part. We have to operate the rental so that it is a profitable business because that’s what rental real estate is, a business. We’ll keep cash reserves in place to hedge this risk. 0% interest credit cards could be a last resort
Fixing up a property takes time, it takes the coordination of people, materials, and timelines. This is harder than it sounds because we are dealing with different people in different industries from the realtor, lender, contractor, insurance, and tenants – on top of everything else going on in life. Luckily, we are devoted to this real estate game and use this occupation to make a living. Either way, if someone else can achieve this goal, why can’t we?
The plan sounds simple, because it is simple.
That’s something I am constantly working on, to keep things simple. To have a sole focus.
The plan is simple, not easy though, and most people can’t follow a plan till completion.
Here’s a high level overview of my plan, let’s see how fast we can get this done – doing the best I can all the time maintaining a positive mindset.
Joey DiAndrea 