It’s Never Too Early, or Late, to be a Millionaire

By the age of 24, I owned three investment properties and wish I would have started younger.  On the opposite side of the spectrum, Harland David Sanders, or “Colonel Sanders,” the founder of Kentucky Fried Chicken didn’t open his first franchise until 1952 when he was 62 years old!

One thing we can’t do in life is turn back the hands of time. The only thing we have control of is what we do moving forward.  When it comes to achieving a Long-Term goal, the key is making a plan and sticking to it.

I am going to share with you my 10 year plan for investing. Real estate strategies are by no means “One Size Fits All,” however if you are able to follow these same exact guidelines, I am confident you will become a millionaire at the end.

My Simple 10 Year Plan:

  1. Buy ten rental properties in 10 years
  2. Become a millionaire in 15 years
  3. Become financially independent because of it

Scenario*

$60,000 Yearly Household Income

  •   $25,000 must be set aside to buy an investment property
  •   $12,000 will go to taxes
  •   $23,000 goes towards living expenses and spending

*These are example figures, adjust accordingly

Goal #1 (Year 1) – Become DEBT FREE

  1. Pay off everything: No school loans, no credit card debit, no auto loans……. put every penny into becoming debt free.
  2. If you have an expensive car you are making payments on, sell it and buy a 3 year old Honda base model Civic cash for $12,000.
  3. If your rent/mortgage is more than ¼ of your monthly net income, move into a cheap house to rent with roommates.
  4. Only take one inexpensive vacation a year, or little weekend trips.
  5. Make a budget to live by.

Goal #2 (Year 2) – Buy 1st Rental Property

$60,000 Yearly Income

  • $25,000 to buy an investment property (20% down)
    • Produces $2,400/year positive cash flow
  • $23,000 to live
  • $11,000 income tax

Yearly Real Estate Savings: $3,400

  • $1,000 tax savings from rental property
  • $2,400 in rental property income

Total Savings in Account:

  • $3,400

Goal #3 (Year 3) – Buy 2nd Rental Property

$60,000 Yearly Income

  • $25,000 to buy another investment property (20% down)
    • Produces $2,400/year positive cash flow
  • $23,000 to live
  • $10,000 income tax

Yearly Real Estate Savings: $6,800

  • $2,000 tax savings from rental property
  • $4,800 in combined rental property income

Total Savings in Account:

  • $3,400 + $6,800 = $10,200

Goal #4 (Year 4) – Buy 3rd Rental Property

 $60,000 Yearly Income

  • $25,000 to buy another investment property (20% down)
    • Produces $2,400/year positive cash flow
  • $26,000 to live
  • $9,000 income tax

Yearly Real Estate Savings: $7, 200

  • $3,000 tax savings from rental property
  • $7,200 in combined rental property income
  • (Added $3,000 to living expenses, subtract from savings)

Total Savings in Account:

  • $10,200 + $7,200 = $17,400

Goal #5 (Year 5) – Buy 4th Rental Property

   $60,000 Yearly Income

  • $25,000 to buy another investment property (20% down)
    • Produces $2,400/year positive cash flow
  • $26,000 to live
  • $8,000 in income taxes

Yearly Real Estate Savings: $10,600

  • $4,000 tax savings from rental property
  • $9,600 in combined rental property income
  • (Added $3,000 to living expenses, subtract from savings)

Total Savings in Account:

  • $17,400 + $10,600 = $28,000

Goal #6 (Year 6) – Buy 5th and 6th Rental Property

$60,000 Yearly Income

  • $50,000 to buy two investment properties (25% down each)
    • $25,000 from employment income
    • $25,000 from Total Savings
    • Produces $4,800/year positive cash flow
  • $26,000 to live
  • $6,000 in income taxes

Yearly Real Estate Savings: $17,400

  • $6,000 tax savings from rental property
  • $14,400 in combined rental property income
  • (Added $3,000 to living expenses, subtract from savings)

Total Savings in Account:

  • $28,000 + $17,400 – $25,000 = $20,400

Goal #7 (Year 7) – Buy 7th and 8th Rental Property

  $60,000 Yearly Income

  • $50,000 to buy two investment properties (25% down each)
    • $25,000 from employment income
    • $25,000 from Total Savings
    • Produces $4,800/year positive cash flow
  • $30,000 to live
  • $4,000 in income taxes

Yearly Real Estate Savings: $20,200

  • $8,000 tax savings from rental property
  • $19,200 in combined rental property income
  • (Added $7,000 to living expenses, subtract from savings)

Total Savings in Account:

  • $20,400 + $20,200 – $25,000 = $15,600

Goal #8 (Year 8 ) – Buy 9th and 10th Rental Property

$60,000 Yearly Income

  • $50,000 to buy two investment properties (25% down each)
    • $25,000 from employment income
    • $25,000 from Total Savings
    • Produces $4,800/year positive cash flow
  • $30,000 to live
  • $2,000 in income taxes

Yearly Real Estate Savings: $27,000

  • $10,000 tax savings from rental property
  • $24,000 in combined rental property income
  • (Added $7,000 to living expenses, subtract from savings)

Total Savings in Account:

  • $15,600 + $27,000 – $25,000 = $17,600

Goal #9 (Year 9) Increase your cash reserves

Total Savings in Account: 69,600

  • $17,600 previous years savings account
  • $18,000 earned income savings
  • $10,000 tax savings from rental property
  • $24,000 in combined rental property income

Goal #10 (Year 10) – Reward Yourself, You’ve Earned It!

                                   Make your Next Set of Goals

  • Take a $5,000 vacation
  • Say thank you to the Honda Civic for getting you here and then kiss it good bye! Get the car you’ve always wanted and use your passive income to pay for it!
  • Set More Goals: Maybe it is buying one property cash every other year for the rest of your life. Maybe it is to take one year off of work and travel the world. Maybe it is to pay off all of your properties in the next 5 years and retire. Maybe you want to partner with a local non-profit to fund a new program for them.  It’s up to you; you are in the driver’s seat and have built your road to financial independence!

 This plan can allow you to become financially independent with a household income as small as $60,000 a year.  Most importantly this shows how goals will get better and better if you continue to achieve them.

It is those early investments you make that will yield the best potential return over time. Seek advice from those who have achieved the goals you are trying to accomplish and be wise in making your plan.

Lastly, please consult with a CPA or Tax Professional so that you are well aware of your personal tax situation. Each person is different when it comes to how they will be taxed and how rental properties will affect their tax situation. We used a unique example that may differ from your individual standpoint. Make sure you work with a tax professional who understands the many different tax write-offs that rental properties provide.

 

 

 

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