In part one of my plan to purchase 100 rental properties by January of 2023 I discuss the mindset I need to reach my goal. In part two I will discuss my plan on how I will purchase the properties, get the money to purchase the properties, possible road blocks and strategies to remove those road blocks.
Breaking down the goal
I have broken down other goals in my life, but I have yet to break down how I will purchase 100 rental properties by January 2023! I am going to work through the goal while writing the blog and see where I end up in 9.5 years. One reason I wanted to write this article was to help myself and motivate with the goal. I wanted to walk through it on paper, motivate myself and convince myself it is possible. What better way to do that than to write an article about it!
I need 93 more houses in less than ten years and right now I am on a pace that may reach 3 houses a year by 2014. That leaves 91 houses to purchase in 9 years. I want to break down each year to see what I have to do to reach my goal.
Year One 2014
I can purchase three rentals off my current savings from my income as a Realtor. I should be able to do a cash out refinance on at least one rental property and get enough money to buy another property. I am also counting on my new attitude and work ideas to create enough extra income to purchase one more rental property. I also just acquired a HELOC on my personal residence for $60,000. I think that will allow me to purchase one more rental. New goal for 2014 is to purchase 6 long-term rentals.
I will have 15 houses total with about $9,400 in monthly cash flow coming in. That is $112,800 a year all going toward paying off mortgages on my properties. I will have paid off one house at the beginning of 2014 and will pay off one and a half more in 2014.
Year two 2015
I should be able to purchase four properties from income and savings from 2014. I should be able to do another cash out refi and purchase another rental. I also believe my continuous improvements will allow more increases in income either through listing houses or flipping houses allowing me to add another rental and the HELOC should help get one more. I am hoping the addition of my friend will be bringing in more additional income from his Real Estate activities and that will allow another purchase. Goal for 2015 is to purchase 9 rentals.
I will have 24 houses with about $15,200 in monthly cash flow coming in. That is $182,400 a year all going toward paying off mortgages. I will pay off the other half of one property and two more rentals in year two for a total of four properties paid off.
Year three 2016
I have upped my income and savings now to be able to purchase 5 rentals. I have 24 rentals now and I should be able to refi at least two of them. That will allow two more purchases and the HELOC is still there and should add the flexibly to add another rental. I am still planning on adding to my income every year. This year I see a big jump with my friend being around for his third year and our new marketing and listing techniques taking off I see three more properties from new income. Goal for 2016 is to purchase 11 rentals.
I will have 35 houses with about with about $22,200 in monthly cash flow coming in. That is $266,400 a year all going to pay off mortgages. I will pay off four and a half more properties for a total of eight and half properties paid off.
Year Four 2017
From my current income I will be able to purchase eight rental properties. I will continue to refinance two properties a year and that will allow at least two more purchases. I also am going to use the HELOC to buy another and I am still planning on increasing my income. I am going to stay conservative and assume enough income to buy one more property this year. Goal for 2017 is to purchase 12 rental properties.
I will have 47 rental houses at this point with about $31,400 in monthly cash flow coming in. That is $376,800 a year all going to mortgage pay off! I will pay off the half from 2016 and 5 more properties in 2017 for a total of 14 properties paid off.
Year Five 2018
From my current income I will be able to purchase 9 rental properties. I will refinance two more properties this year and use the proceeds to buy two more rentals. I may not have enough money in the HELOC this year so I won’t count on that, but I will count on my income increasing enough to purchase one more rental. Goal for 2018 is to purchase 12 rental properties.
I will have a total of 59 rental properties with a monthly cash flow of $41,000. That is $492,000 a year all going to mortgage pay off. I will pay off seven and half more properties in 2018 for a total of 21.5 properties paid off.
Year Six 2019
From my current income I will be able to purchase 10 rental properties. I will refinance two more properties and use those proceeds to buy three more rentals this year. With inflation and appreciation I should be able to refinance for more than in previous years. I will not use increased income to buy another property. If my income increases I am using it for fun stuff like vacations or cars! Gola for 2019 is to purchase 13 rental properties.
I will have a total of 72 rental properties with a monthly cash flow of $51,600. That is $619,200 going toward mortgage pay off. I will pay off the half mortgage from 2018 and 9 more properties in 2019 for a total of 31 properties paid off.
Year Seven 2020
From my current income I will be able to purchase 10 rental properties. I will refinance two more properties and use that money to buy three more rentals. I won’t count on any more raises in income since I don’t need it at this point. Goal for 2020 is to purchase 13 rental properties.
I will have a total of 85 rental properties with a monthly cash flow of $63,400. That is $760,800 a year going towards mortgage pay off. I will pay off 11 more properties in 2020 for a total of 42 properties paid off.
Year Eight 2021
From my current income I will be able to purchase 10 rental properties. I will refinance two more properties again and purchase three more rentals with that money. Goal for 2021 is to purchase 13 rental properties.
I will have 98 rental properties with a monthly cash flow of 75,600. I will have $907,200 a year going towards mortgage pay off. I will pay off 14 more properties in 2021 for a total of 56 houses paid off.
Year Nine 2022
I only need to buy two more properties to reach my goal! I made it ahead of schedule and when I started writing this article I wasn’t sure how I would be able to reach 100 properties by 2023. I don’t need to refinance any properties at this point and I can start using my income how ever I want or I could retire!
I will have 100 rental properties with a monthly income of $82,400. I will have $988,800 a year going to whatever I want it to go to at this point. I can stop paying down mortgages if I want too or I could always keep buying properties if I get bored. I came really close to the figures I estimated at the beginning falling just short of one million in income from my rental properties, which was more than I thought and just shy of 60 properties paid off.
You may be wondering how I came up with my figures. To be honest I used very basic figures to make things easy on myself.
- I assumed $600 in monthly cash flow per property. I am making between $600 and $700 per property now.
- I assumed each mortgage I paid off would increase monthly cash flow by $400.
- I don’t assume any inflation because that would cause my brain to work way too hard!
- I assume my portfolio lender will continue to lend on as many properties as I want. At the peak I will have 43 houses financed.
- I assume I can continue to do cash out resonances with my portfolio lenders.
- I assume interest rates will not increase significantly
- I assume rental rates will not go up
Those are a lot of assumptions and one or more of them may not work out as I plan. However, there are other factors that may help me do even better than I planned or balance out any road blocks I run into.
- New ways to find properties: I am going to start direct marketing to off market owners. This should allow me to buy properties even further below market and I may even find a few owners who will finance down payments.
- Private money: One of my goals is to find new sources of private money that will allow me to finance more repairs and down payments. This would allow me to put less money into properties and buy them faster.
- New income sources: I have no idea what the future holds as far as opportunities and money. I may find a gold mine that will allow me to buy properties for cash and not have to worry about financing at all!
- I assume I will not do anything with the houses I pay off free and clear, but if needed I could easily get a line of credit or refinance one of these houses to bring in enough money to buy a few new properties.
What will I do in 2023?
I have many things I would love to do if I did not have to work. Here is a list of a few of the things I would love to do with one million dollars a year coming in and no job!
- Start a pizza restaurant
- Start a car dealership
- Travel the world with my family
- Donate time and money to those less fortunate
- Play in the World Series of Poker
- Attend a Superbowl
- Play golf all over the world
I have a much longer list than this and many of these things I hope to do before 2023. I know for sure I will have time, money and the freedom to do these things at that time.