Property Management Blog

10 Year Investing Plan and Strategy

Wednesday, July 20, 2011
Atlanta Property Management Blog

When considering a career in real estate investing, many people are primarily concerned with short term gains; that is, how quickly they can see a return on their investments. In order to be successful as a real estate investor, though, you’ll need to develop a long term plan.

Ideally, an investor’s strategy should cover a ten to 25 year period. If you correctly plan your real estate investment strategy, you should be able to reach millionaire status within a 10 year period depending on your financing terms.

To get started in your ten year plan, you will need to purchase two homes in the first year. Until you get to 4 mortgages, you should have the ability to finance the purchases of these homes primarily through traditional lenders, rather than investing large sums of your own money in the properties. Once you have more than 4 mortgages, you will have to look at other ways to finance your investments. However, we are here to tell you that it can still be done, it just is a little more complicated and the interest rates are not typically as low.

Once the homes have been purchased, it’s essential that you find quality tenants that are willing to rent the properties for an amount that exceeds your monthly mortgage payments. This will serve two purposes: First, it lets you immediately profit from your purchases; second, it gives you the income you’ll need to purchase additional homes in the coming years. Lenders will consider a portion of your rental income as an offset to your mortgage debt, and will be more willing to lend money for the purchase of additional homes.

Repeat this process every year for ten years, continuing to fill your properties with tenants and charging rent that exceeds your mortgage payments.

To look at this in realistic terms, let’s consider this example: Let’s say that during your first year as a real estate investor, you purchase two homes for $100,000 each, and your mortgage for each home is $600. You then rent out these homes to two tenants at $1,000 per month, giving you an income of $800 per month from these properties ($400 per home).

That’s not a lot of money, but during your second year, you repeat this process. You now own $400,000 worth of real estate, and are bringing in $1600 per month in rent. If you continue to purchase two homes every year, then at the five-year mark, you’ll own $1,000,000 in real estate, and earning $4,000 per month in profit. After ten years, your portfolio jumps to $2,000,000, and your monthly rental income will reach $8,000.

At this point, you have the option of selling some of your rental properties, or continuing to bring in rental income while you invest in additional properties. By this time, you have likely paid off the mortgages on some of your properties, so you should have the financial leverage to begin investing more aggressively to meet your next set of investing goals.

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The Broker providing this data believes it to be correct, but advises interested parties to confirm the data before relying on it in a purchase/rental decision.