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Life is hard enough as it is. Wouldn’t it be nice not worry about money? To receive a check automatically every month? The term retire is used very loosely, you could continue to work if you wanted. The stress of coming up with ends meat every month just wouldn’t be a concern. All it takes is some dedication, and about seven to ten years of your life to build your real estate portfolio. Property is one of the best assets to invest in, because it usually appreciates in value. Real estate is also a great source of passive income.
Calculate your expenses for three to four months. Figure out where you can cut, and how much is essential for survival. How much are your necessary expenses? Consider going out to eat less, negotiating your bills down, and saving wherever else you can. Your first goal is to replace your bills, and housing costs with rental income.
This is where the most effort takes place. In order to purchase a property you’ll need a 10-20 percent down payment. This is the most important part of the process. This money is your seed to make endless amounts of wealth. Make saving a priority. Short term loss, results in long term gain. The sacrifice is worth it. Once you purchase a property in the next step, and rent it out, you’re already eliminating your housing expenses, and having your renters pay down your mortgage.
Purchase a two to four plex, and live in it. You must live in the property, because it allows you to qualify for conventional owner occupant financing. This means you get a lower interest rate compared to buying a traditional investment property. The only requirement is that you must live in the property for 12-24 months. After that time period you can do as you please, and congratulations, you’ve locked in that low interest rate.
A quick note on getting the absolute lowest interest rate possible. Shop around at several banks, and get approved for a loan. Take that interest rate, and take it to another bank, and see if they’ll beat it. If they do, continue to use that offer to negotiate an even lower one. This will not lower your credit because hard inquiries all count as one inquiry if done within the span of 30 days.
Fix up the property. When buying, look for houses with small cosmetic issues, new carpet, paint, etc. When you make these small cosmetic repairs, you’re increasing your properties value and cashflow. (Nicer properties rent for higher).
You’re looking for something a little dated, but avoid a total rehab. You do not want to bite off more than you can chew on your first deal.
Once you have fixed up the property, it’s time to rent out the remaining units. The profit should cover your remaining property expenses, (insurance, mortgage, repairs etc.
The next step you’re going to take is what’s called a cash out refinance, which means the bank will give you a new loan based on the higher value of your property, because of the improvements you did on it. Guess what the best part is? You profit the difference in cash.
Reinvest, use your profits to buy another property. Repeat the process, and continue to build more and more wealth.
Now you’re not only relying on your job income. You have your extra property income to save for more investments, and you have cash equity to continue to reinvest. Compound interest is on your side, and working at an extreme level.
In order to achieve your goal of replacing your job income, and building wealth for your future and family, you have to dedicate yourself now. The initial investment is the biggest requirement on your end, but with some determination this process is very doable. Relying on a paycheck, and job security just isn’t viable anymore. You’re responsible for securing your own future.
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