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A Simple Five Year Investment Plan Using An Innovative Investing System

While saving money, as a time honored tradition, is a noble goal, it is important to remember that one can never ‘save’ their way to financial freedom, nor can they ‘save’ their way to wealth. The nature of monthly expenses, unforeseen costs, and other life based events dictate that a nest egg can be depleted at any given time, with enough unexpected pressure and spending put on it. In today’s world of ever increasing monetary inflation due by The Federal Reserve, the need for perpetual income streams is even more important.

Earning vs. Asset Accumulation

Having a job and being employed carries some level of security, if not of freedom. However, if one desires wealth, then building wealth must become a daily activity, and even more, become a mindset which guides all financial actions in one’s life. For the purposes of this discussion, we will consider asset accumulation as a strategic path to financial freedom.

The accumulation of assets allows wealth to be created. There are, of course, various types of asset classes – precious metals, jewelry, securities, classic cars, etc. Some, like Gold, are tangible. Some, like stocks and mutual funds, are intangible. The fact that you are reading this illustrates that you are interested in real estate, which not only happens to be tangible, but also happens to be the greatest wealth builder in history. Real estate accumulation is a noble and desirable pursuit, and with global demand being put on housing due to population rise, one can generate wealth and serve society simultaneously by providing clean, safe, stable housing with affordable market rents.

Tactical Accumulation

Discount Property Warehouse has always strived to provide properties which are fully renovated and ready to rent, at below market value. We are a wholesale real estate investment brokerage which focuses fully on customer satisfaction and, in doing so, we create long term relationship with our clients who, through a successful investing experience, tend to want to grow their portfolio over time. Our goal is to be a part of that process every step of the way.

The process we encourage our customers to implement looks something like this:

Acquire – purchase an investment property using a variety of financing options, from Cash to Fannie Mae financing to private lending options. Use a financial instrument which best fits your current monetary situation.

Institute Income: By acquiring a qualified renter who pays your note every month. Using a management company(we can provide several highly qualified choices for you) can help to set you up for success with a qualified tenant.

Mortgage Retirement: Pay off any debt on the property using a predetermined timeframe which is a component of your strategic wealth building plan. Remember, when you are buying in Memphis, Tennessee you can pay homes off in as little as 5 years due to low price points and high per square foot rental incomes.

A Simple Acquisition Plan

Suppose Discount Property Warehouse has a rental property for sale, and the price tag is 50k. Also, for the purposes of this exercise let’s assume you have 50k you want to invest.

You can:

  • Pay Cash
  • Use Fannie Mae Financing (20% down + closing costs)
  • Use private flex financing offered through The Short Term Retirement Program®

What is the best way to do it? Which method makes the most sense? While there are no concrete answers and everyone’s situation is different, most investors will try to maximize their purchasing power by trying to accumulate as many houses as possible. Let’s look at each situation.

Method 1: Cash

Assumptions

House rents for $850

50k Price Tag Includes Renovation Costs

Income Information – Monthly

Monthly Rent $850.00
Management Fee – 10% $85.00
City Taxes $25
County Taxes $25.00
Insurance(Estimated) $40.00
Monthly Cash Flow $675.00
Cash on Cash Return 12.48%

Financing Information

Purchase Price $50,000.00
Down Payment(DOES NOT INCLUDED CLOSING COSTS) $50,000.00
Loan Amount $0.00
Interest Rate 8.99%
Loan Terms(in months) – 10 Year 60
Monthly Payment(P & I) $0.00
Monthly Net Positive Cash Flow $675.00
Cash on Cash Return 16.20%

Method 2: Fannie Mae Financing

Assumptions:

House rents for $850

50k Price Tag Includes Renovation Costs

Borrower must qualify for the Fannie Mae Lending Program, which requires a W-2 or 1099 two year employment history, specific debt ratios must be met, and cash reserves are required. Also, Fannie Mae limits the number of homes an investor can have, between 4 and 10(max), depending on the lender and borrower qualifications.

Income Information – Monthly

Monthly Rent $850.00
Management Fee – 10% $85.00
City Taxes $25
County Taxes $25.00
Insurance(Estimated) $40.00
Monthly Cash Flow $675.00
Cash on Cash Return 12.48%

Financing Information

Purchase Price $50,000.00
Down Payment(DOES NOT INCLUDED CLOSING COSTS) $10,000.00
Loan Amount $40,000.00
Interest Rate 4.50%
Loan Terms(in months) – 30 Year Loan 360
Monthly Payment(P & I) $202.67
Monthly Net Positive Cash Flow $472.33
Cash on Cash Return 56.68%

Method 3: Flex Financing Using The Short Term Retirement Program®

Assumptions:

House rents for $850

50k Price Tag Includes Renovation Costs

Assumes aggressive payoffs, borrower wants home free and clear in 5 years.

Flex financing carries a negotiable down payment, and DOES count as a financed property for Fannie Mae purposes. Home Equity Lines of Credit and Primary Homes which are financed ALSO count as a financed property.

Income Information – Monthly

Monthly Rent $850.00
Management Fee – 10% $85.00
City Taxes $25
County Taxes $25.00
Insurance(Estimated) $40.00
Monthly Cash Flow $675.00
Cash on Cash Return 12.48%

Financing Information

Purchase Price $50,000.00
Down Payment(DOES NOT INCLUDED CLOSING COSTS) $18,000.00
Loan Amount $32,000.00
Interest Rate 8.99%
Loan Terms(in months) – 5 Year Loan 60
Monthly Payment(P & I) $664.11
Monthly Net Positive Cash Flow $10.89
Cash on Cash Return 0.73%

As you can see, using this flex program you can pay houses off in as little as five years. While there is very little cash flow for the first five years, the debt burden is retired aggressively, and early – using today’s dollars. This leaves a retirement income stream for you starting in month 61. While each client has unique and specific needs, the most important idea we stress to our investors is to accumulate, accumulate, accumulate! Large swaths of paid off investment homes can be extremely profitable and very favorable from a taxable standpoint(see your CPA for details).

One idea that needs to be emphasized is that having the tenants pay off your mortgages is a strong and viable wealth building principle. Even if you have very little investment capital today, just starting with one house and paying it off in five years can be a powerful weapon for long term financial freedom.

Consider what happens when an investor is able to purchase, and pay off, five homes in a five year period.

The Programs Power Unleashed!!!

Accelerated Paydown Examples: The Short Term Retirement Program’s Power Unleashed!!!

In these examples to the right, we see what The Short Term Retirement Program was TRULY designed for – income replacement on a MASSIVE scale, whether an individual wants to leave their job or provide for short term (or long term) retirement income. All of these examples are based on the same 50k property we used in the above examples, and puts 20k down on a 50k property.

Assume an investor invests 100k, and purchases 5 properties in Year 1. The investor’s goal is to have all 5 properties paid off in 5 years.

NOTE: Some rounding has been done for simplicity – assume a purchase price of 50k instead of $52,900, for example. All other numbers remain the same. FOR INFORMATIONAL PURPOSES ONLY!

Remember:

Each home nets $675/month when there is no mortgage on it.

Each home is worth roughly 65k, Fair Market Value.

Each home will SELL in these examples for only 50k, allowing for quick sale, liquidity, and reinvestment.

There is NO FACTORING for compounding of monthly cash flow in these examples.

These examples ASSUME NO APPRECIATION.

These examples ASSUME NO INCREASE IN RENTAL VALUES.

Each home in this program is offered in a completely turnkey context.

This also does not factor in VACANCY, MAINTENANCE, UNFORSEEN OR CATASTROPHIC LOSS.

Conservative Example:

Investing 100k to Purchase Five Investment Properties, Specifically For Passive Income Purposes.

Goal:

Uninterrupted Residual Income in Five Years

Month 1:

Investor Invests 100k into Five investment homes.

60 Months Elapse

Month 61:

All Five properties are paid off and paid for themselves, the positive cash flow having been reinvested and attacking monthly principal.

Result:

The investor now owns five properties without encumbrance, in the clear.

Monthly Cash Flow:

$3375

Annualized Net Cash Flow:

$40,500

Total Equity: $325k
All from a one time, 100k investment.

Moderate Example:

At the end of Year 5, the Investor Sells Two Properties and Keeps Three Properties. Each Property Sold Nets 50k for a Total of 100k, Which Buys 5 New Homes. After 10 Years, He Owns 8 Homes.

Goal:

Uninterrupted Residual Income in Ten Years

Month 61:

Investor Invests 100k into five MORE investment homes.

60 Months Elapse

Month 121:

All Five properties are paid off and paid for themselves, the positive cash flow having been reinvested and attacking monthly principal.

Result:

The investor now owns eight properties without encumbrance, in the clear.

Monthly Cash Flow:

$5400

Annualized Net Cash Flow:

$64,800
plus positive cash flow*

Total Equity: $520k
All from a one time, 100k investment.

Aggressive Example:

Investing 100k to Purchase As Many Properties As Possible Over 15 Years, Without Investing Any Additional Capital.

Goal:

Uninterrupted Residual Income in Fifteen Years

Month 1:

Investor Invests 100k into Five investment homes.

60 Months Elapse

Month 61:

All 5 properties are SOLD and the money reinvested (250k) to buy 12 homes(12 x 20k/ house)

60 Months Elapse

Month 121:

All 12 properties are SOLD and the money reinvested(600k) to buy 30 homes(30 x 20k/ house)

Month 180 – Result:

Investor owns 30 properties in the clear

Monthly Cash Flow:

$20,250
plus positive cash flow*

Annualized Net Cash Flow:

$243,000
plus positive cash flow*

Total Equity: $1.95MM
All from a one time 100k investment.

Real Estate: The Greatest Accelerator of Wealth in History…
Historically, Real Estate investments have performed over time, and been the greatest indicator of wealth. Why? Because investment Real Estate pays you in FIVE DIFFERENT WAYS:

POSITIVE CASH FLOW

– the money left over after you service your debt, pay your taxes, etc.

EQUITY PAYDOWN

– The tenants pay YOUR mortgage.

TAX BENEFITS

– Investment real estate has a sheltering effect on your tax liability.*

INSTANT EQUITY

– Present when you purchase properties at wholesale prices as opposed to retail prices.

APPRECIATION

– The value of real estate has increased, historically, over time.

Stop Putting Your Money At The Mercy of Others…

A former colleague of ours once worked at WELL KNOWN FINANCIAL INSTITUTION as an investment advisor. 21 years old, fresh out of college. He was broke.

Is this the type of person you want managing your retirement? Of course not. But many ‘investment advisors’ are salaried employees who hustle for commissions so they can make the new Mercedes payment. Is this a good a use of your money? In this situation, do you even have a choice?

The Short Term Retirement Program Was Designed For You – Regardless of Age, Profession, or Income.
It Was Meant To Purchase Real Estate.

The days of institutional security, whatever that means, are over. Putting your money blindly into a mutual fund ‘meant to diversify and mitigate risk’ are over.

It Was Designed To Create Wealth.

Owning virtual paper that someone tells you has some value, after they take substantial fees, is over. Historically, real estate is the best performing asset.

It Was Made To Give You Freedom…

Your boss will be a distant memory soon. Stop socking away portions of your income into DRIP’s and let your money work for you. Take this job and shove it!