If I can do it, you can too.: How to turn $30,000 into $100,000 in 10 years by Investing in Real Estate.

Is it Wise to Invest in Real Estate in today’s HOT MARKET?

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How to turn $30,000 into $100,000 in 10 years by

Investing in Real Estate.

Myth: Cap Rates determine values in investment real estate.

Question: Do you mean todays cap rate, or the cap rate 10 years from now?

Answer: The goal is to get started in investment real estate to realize big returns over time.

Yes, even though today’s prices do not seem like it’s the right time to buy, my years of real estate experience have showed me two things…

1. Prices do not ever go down; they have stabilized but never drop.

2. You cannot find a safer or better return for your money than real estate.

Data shows that home prices over the last 25 years have increased on average 5%

per year and more in recent years.

The average price of a home in the United States 50 years ago was $24,000 and today it is $278,000 nationally and $240,000 in Lancaster county.

Average rental income on a two-bedroom unit in Lancaster: $1091 per month.

What looks like a low return today can turn into a huge profit in just 10 years.

If you are you looking for a safe way to invest your money,

then please see the examples below:

Two-bedroom house on the market for $90,000 with a rental income of $750 month.

At first glance this may not seem like a great investment offering only a 6% cap rate, but after a closer look over a 10-year return, things may look different.

Cost to purchase:

Home Price: $89995.00

25 % down payment: $22500.00

Closing Cost (approximate): $ 5000.00

20-year mortgage at 4% interest for 20 year term: $409.00 per month

20-year mortgage at 3% interest for 20 year term: $375.00 per month

(Lets be conservative and use the 4% interest rate):

Cost to own:

RE taxes $2313.00 per year $193.00 per month

Property Insurance (est) $ 650.00 per year $ 60.00 per month

Management fee 8% $ 720.00 per year $ 60.00 per month

Tenant pays $750.00 per month rent and all utilities – lease ends 5/2021. Current rent is under market value.

Summary:

Monthly Income from tenant: $750.00 per month

Monthly cost to own: $722.00 per month

Positive cash flow: $336.00 per year or $ 28.00 per month

At first glance this deal really makes no sense and this is why most never realize the benefit of owning investment real estate – but please read on.

Here is why this property is a great deal – even with only a $28.00 per month positive cash flow in its first year.

There are many factors that can get overlooked by even the most seasoned investor.

As we mentioned earlier, the average rental income for a two-bedroom unit in Lancaster county is $1091.00 per month.

Remember also that home prices increase on average 5% or more per year.

Taking those two factors into consideration – lets take a look at a 10 year plan for owning this property with a current $28.00 per month positive cash flow and how you can turn your $30,000 into $100,000 profit owning just one property.

Image if you could do this just once every year for the next 10 or even 20 years.

Let us first look at conservative rent increases over the next 10 years.

Current year 1 $750 x 12 = $9000.00 or $28 x 12 = $336.00

Year 2 $850 x 12 = $10200.00 or $128 x 12 = $1536.00

Year 3 $900 x 12 = $10800.00 or $178 x 12 = $2136.00

Year 4 $925 x 12 = $11100.00 or $203 x 12 = $2436.00

Year 5 $950 x 12 = $11400.00 or $228 x 12 = $2736.00

Year 6 $975 x 12 = $11700.00 or $253 x 12 = $3036.00

Year 7 $1000 x 12 = $12000.00 or $278 x 12 = $3336.00

Year 8 $1025 x 12 = $12300.00 or $303 x 12 = $3636.00

Year 9 $1050 x 12 = $12600.00 or $328 x 12 = $3936.00

Year 10 $1100 x 12 = $13200.00 or $378 x 12 = $4536.00

Total positive cash flow over 10 years while your tenant pays the bills: $27660.00

Granted some costs will increase slightly and you may incur some maintenance along the way but at nowhere near the rate of rent increases.

Plus, you will realize the appreciation of the home and profits from the sale – see more below:

Current Home Value: $90,000.00

We will look at a conservative 5% a year increase in value, the average for our nation:

2020 $90,000.00

2021 plus $4500 $94,500.00

2022 plus $4725 $99,225.00

2023 plus $4961 $104,186.00

2024 plus $5209 $109,395.00

2025 plus $5469 $114,864.00

2026 plus $5743 $120,607.00

2027 plus $6030 $126,637.00

2028 plus $6331 $132,968.00

2029 plus $6648 $139,616.00

2030 plus $6980 $146,596.00

Mortgage payoff in 2030 if you only pay the original mortgage payment of

$409.00 per month = $43,094.00

Let’s now look at the facts

Original investment $30,000.00

Positive cash flow over 10 years $27,660.00

Equity in home after selling in 2030: $146,596 - $43,094 = $103,502.00

**Your positive cash flow covers your original investment and the sale of the home nets you $100,000.00 in real cash profits.

This assuming a very conservative increase in value and a still under market monthly rent.

Versus earning 1-2 % bank interest on your original $30,000 might equal $6000 total return.

**Your actual results may vary and are not guaranteed.

Yes, there are many variables in Real Estate investing:

1. Location

2. Condition

3. Property management

4. Knowledge of the industry

5. Finding good tenants, etc.

One thing is certain however, hands down real estate has been the number one wealth producer over time and there are professionals that are willing to help you along the way.

If any of the above information seems of interest or value to you, or if you just have questions, feel free to call me anytime. I can help you through the process and help you find the right property for your needs and budget.

Call or text today, I would love to help open the world of real estate investing to you.

Jim Bull – Realtor

Lancaster office: 717.553.2500

Cell phone: 717.951.5620

Home office: 717.584.3296