7 years to 7 Figure Wealth: Revisited

This post is inspired by Bigger Pockets ebook Seven Years to Seven Figure Wealth by Brandon Turner. Which lays out a road map to building $1 million in equity from a $20,000 investment. The plan starts with a 4 unit multifamily property, financed with a $20,000 download payment, and scaling up to a 75 unit apartment building.

I first got interested in real estate in 2016 as a way to supplement income and help Detroit communities from losing their homes. I stumbled upon Bigger Pockets after a real estate google search. There is a treasure trove of information on there. I searched through some blogs, started listening to podcasts and attending Brandon's weekly webinars. The first webinar he talked about how to find and analyze a multifamily property. Which he made it seem so easy. But of course my fears held me back from pushing through. I always want to know as much information as possible.

One of the webinars he shared a link to his ebook, "Seven years to Seven Figure Wealth". In this book he lays out the plan how to build up a $1,000,000 in equity. It makes so much sense! I now have something to follow! This plan is super useful. It emphasizes that one can become a millionaire in real estate and that success won't happen overnight. This plan can be lengthened if you want to start with single families or if you don't want to scale up to multi-families or apartment buildings. Or shortened/scaled up if you want to invest more money. It also highlights why 4% in net operating operating income or return on investment in apartment buildings is acceptable (because it's all about cash flow!).

Now let's talk about the process. A big thing Brandon preaches is buying right, and the plan also emphasizes the point. A part of the reason the plan works in 7 years is due to the fact that all properties purchased are 'bought right'. Meaning you want to purchase property that has built in equity of ~20%, or that is 20% discounted. The plan is to start off with the purchase of one 4 unit multi-family property for $80,000, that's worth $100,000, financed with a $20,000 down payment. Cash flow is saved up for 2 years to purchase another 4 unit multifamily. Cash flow is saved up for a year to purchase a 3rd 4 unit multifamily. Notice the ability to grow faster with more properties. Cash flow is then saved for to 2 years, so the small 24 unit apartment building can be bought at the end of year 4. The 24 unit is held for 3 years, so at the end of the third year the 75 unit apartment building can be purchased. Voila! You now have an equity of $1.2 million in an apartment building valued at $3.4 million. This all started with $20,000 and no additional money added.

The only thing I would do different is to keep the multifamily buildings and 24 unit apartment building and take out equity lines of credit in addition to the loans to help build up my business credit. The equity line of credit allows you to pull a total of 90% loan to value out of your property. Which would take me longer to build up wealth, but I'm hoping that will also allow for more deals to happen with the business credit lines I'm able to open. I've re-created Brandon's tables to help me get a better feel of the numbers. The numbers show why scaling up from multifamily to apartments is the way to build wealth despite the drop in net operating income and return on investment, although net operating income isn't calculated in my tables using the cash flow saved/equity ratios give an idea of the percentage drop. My numbers aren't the same as Brandon's. I increased the down payment on the 24 unit and 75 unit to 25% because that's what I found to be the minimum commercial lenders require for down payment. I've added the interest rates and loan pay down table to make it easier to play around with the numbers by changing the interest rate, amount paid, and the cash flow at the top of the tables to get an idea of how deals you find plan out. Below are links to the Bigger Pockets book and my Google Sheet.

Seven Years to Seven Figure Wealth E Book

https://www.google.com/url?sa=... years to 7 figure wealth

https://docs.google.com/spreadsheets/d/1rMmQY0c8PsWsb_m7B4CYKJQBrf0hs12Tew6lxmJgOVA/edit?usp=drivesdk

My Tables 

Multifamily 1Purchased atfor0.055559800004 unit200/m/unit (cashflow)Year EndValueLoan AmountEquitySaved Cashflow0$100,000.00$60,000.00$40,000.00$0.001$110,000.00$59,200.00$50,800.00$9,600.002$114,400.00$58,354.41$56,045.59$19,200.003$118,976.00$57,460.62$61,515.38$9,600.004$123,735.04$56,515.89$67,219.15$9,600.00 Multifamily 2Purchased atfor5.555900%$80,000.004 unit$200/m/unit (cashflow)Year EndValueLoan AmountEquitySaved Cashflow012$100,000.00$60,000.00$40,000.00$0.003$110,000.00$59,200.00$50,000.00$9,600.004$114,400.00$58,354.41$55,245.59$9,600.00 Multifamily 3Purchased atfor5.56%$80,000.004 unit$200.00/m/unit (cashflow)Year EndValueLoan AmountEquitySaved Cashflow0123$100,000.00$60,000.00$40,000.00$0.004$110,000.00$59,200.00$50,000.00$9,600.00 Year End TotalsYearsValueDebtEquityTotal Cashflow SavedCash Flow/Month0$100,000.00$60,000.00$40,000.00$0.00$0.001$110,000.00$59,200.00$50,800.00$9,600.00$9,6002$214,400.00$118,354.41$96,045.59$19,200.00$9,6003$328,976.00$176,660.63$151,515.38$19,200.00$19,2004$348,135.04$174,070.31$172,464.74$28,800.00$28,800 Purchased atfor6.382580%$850,000.0024 unit$4,000/m (cashflow)Year EndValueLoan AmountEquitySaved Cashflow4.9$1,000,000.00$637,500.00$362,500.00$0.005$1,100,000.00$630,214.28$469,785.72$48,000.006$1,144,000.00$622,449.71$521,550.29$96,000.007$1,189,760.00$614,174.79$575,585.21$144,000.00 Year End TotalsYearsValueDebtEquityTotal Cashflow SavedCash Flow/Month4.9$1,000,000.00$637,500.00$362,500.00$0.0005$1,100,000.00$630,214.28$469,785.72$48,000.00$48,0006$1,144,000.00$622,449.71$521,550.29$96,000.00$48,0007$1,189,760.00$614,174.79$575,585.21$144,000.00$48,000 Purchased atfor6.382580%$2,750,000.0075 unit$15,000/m (cashflow)Year EndValueLoan AmountEquitySaved Cashflow7.9$3,400,014.84$2,062,500.00$1,337,514.84$0.008$3,740,016.32$2,038,928.57$1,701,087.75$180,000 Year End TotalsYearsValueDebtEquityTotal Cashflow SavedCash Flow/Month7.9$3,400,014.84$2,062,500.00$1,337,514.84$0.00$0.008$3,740,016.32$2,038,928.57$1,701,087.75$180,000$180,000 Value and Equity RatiosYearsDebt/ValueEquity/ValueSaved CF/ValueCF/mo/ValueSaved CF/EquityCF/mo/EquitySaved CF/DebtCF/mo/Debt060.00%40.00%0.00%0.00%0.00%0.00%0.00%0.00%153.82%46.18%8.73%8.73%18.90%18.90%16.22%16.22%255.20%44.80%8.96%4.48%19.99%10.00%16.22%8.11%353.70%46.06%5.84%5.84%12.67%12.67%10.87%10.87%450.00%49.54%8.27%8.27%16.70%16.70%16.55%16.55%4.963.75%36.25%0.00%0.00%0.00%0.00%0.00%0.00%557.29%42.71%4.36%4.36%10.22%10.22%7.62%7.62%654.41%45.59%8.39%4.20%18.41%9.20%15.42%7.71%751.62%48.38%12.10%4.03%25.02%8.34%23.45%7.82%7.960.66%39.34%0.00%0.00%0.00%0.00%0.00%0.00%854.52%45.48%4.81%4.81%4.81%10.58%8.83%8.83%