7.4% Closer to Becoming a Net Worth Millionaire with Rentals

[Vince Russell]

I wanted to share a quick note on our first rental property. My wife and I have done several flips but this was the first deal we turned into a rental. We bought this property in May of 2018 for $45,000 and were all in with refinancing for around $92,000. The rehab was pretty extensive, even for an 809 sq ft property. It needed EVERYTHING! New roof, new plumbing, new electrical, new subfloors, new floors, new kitchen, new bathroom, etc etc. The bones of the house & the windows are the only thing original. It appraised at $120,000 and we were able to secure a 30 year loan at 5.625% at 75% of the appraised value. So our out of pocket expenses were minimal. 

It’s currently rented out at $1,100/month. We all know the great thing about rental properties is your tenant is paying down your mortgage, thereby increasing your equity position. Along with that, you’re also cash flowing the difference between the mortgage, rent, and property management fees monthly, which in our case is $280/month. You also get to enjoy appreciation as most markets see an average of 3-5% appreciation annually (in recent years, DFW has seen even greater numbers). Meaning, in about 5 year’s time, our equity in this house should be approximately $57,000. Add the $16,800 in cash flow collected over 60 months (not factoring in rent increases), and our net worth will have increased by approximately $74,000 in 5 years if we don’t touch the cash flow. That ain’t bad! This means we would only need 13ish properties identical to this to become net worth millionaires IF we only stuck with single-family homes identical to this scenario. 

My focus has shifted big time since beginning in real estate investing in mid-2017. I'm now on the path to building long-term wealth through buy and holds. I'm also getting into each new deal with $0 out of my own pocket. Currently in the process of buying 3 other properties that will be rentals (1 of which will be Airbnb) with–you guessed it–ZERO $ out of my pocket (Thanks, @Brandon Turner!).

This is only the beginning!