A couple of things to get out of the way before you read the rest of my layout.
Yes: I can save 70% of my gross income. I’m a minimalist and I require very very little to survive.
No: I’m not planning on having a family at the moment. If I change my mind, I’ll adjust accordingly, but the goal still stands.
Yes: I'm aware real estate isn't completely passive. But I've found multiple deals in my neck of the woods (Michigan) that fit the required criteria of $300 cashflow per single family and $400 per duplex assuming a 7% vacancy, 5% repair l, 5% CAPEX, 10% PM.
My main question is this the best way to get this done? I've tried other formulas but this got me the closest. Am I underestimating the equity I can tap into? I only use 1 cash out refinance or HELOC in this plan. Any issues you see
Goal: $4000 cashflow by 26 years old:
Age 22:
Purchase a $150,000 duplex with a home possible (5% down loan). Investment requires $7500 (down payment), $4000 (closing costs), $3000 (repairs), $1000 (emergency fund), meaning a total investment of ~$15,500. You’ll live on one side of the duplex, rent the other, and have a roomate on your side in hopes of eliminating all housing expenses. Meaning you live for free. When you move out once you have 20% equity this should cashflow $400 ($200/unit).
Summary of Age 22:
Cashflow: $0/mo
Units: 2
Cash reserves: $~3000
Income: $50,000
Savings Rate: $35,000 (70%)
Credit score: 700+
Age 23: Once we have roughly $26,000 saved, we purchase a single family home for $100,000. This will cost us $20,000 (down payment), $2000 (closing costs), $3000 (repairs), $1000 (emergency fund) meaning a total investment of ~$26,000. This house should cashflow $300/mo and we’re assuming (of gross rents) 7% vacancy, 5% CAPEx, 5% repairs, 10% property management.
Summary of Age 23:
Cashflow: $300/mo
Units: 3
Cash reserves: $~12,000 (35,000+3,000-26,000)
Income: $50,000
Savings Rate: $35,000 (70%)
Credit score: 700+
Age 24:
Once we have roughly $26,000 saved, we purchase a single family home for $100,000. This will cost us $20,000 (down payment), $2000 (closing costs), $3000 (repairs), $1000 (emergency fund) meaning a total investment of ~$26,000. This house should cashflow $300/mo and we're assuming (of gross rents) 7% vacancy, 5% CAPEx, 5% repairs, 10% property management. You'll also use an FHA loan 3.5% down on a $180,000 duplex. This will cost $6,300 (down payment), $3000 (repairs), $5000 (closing costs), $1000 (emergency fund) for a total of $15,300. You should live on one size, rent the other, and have a roomate in your side as well. This should cashflow $400/mo when you leave. You'll rent out the previous duplex you occupied and that will start cash flowing $400/mo.
Summary of Age 24:
Cashflow: $1000/mo
Units: 6
Cash reserves: $~5,700 (12,000+35,000-26,000-15,300)
Income: $50,000
Savings Rate: $35,000 (70%)
Credit score: 700+
Age 25:
We purchase 2 single family homes for $100,000. In total both houses will cost $40,000 (down payment), $6000 (repairs), $4000 (closing costs), $2000 (emergency fund) in total this will cost $52,000. You should be able to afford it with your income roughly increasing with inflation and the cashflow from your other rentals. Each should cashflow $300/mo. You'll also use either a HELOC or a cash out refinance in order to purchase another single family with the same parameters as ones before.
Summary of Age 25:
Cashflow: $1900/mo
Units: 9
Cash reserves: $~2000
Income: $50,000
Savings Rate: $35,000 (70%)
Credit score: 700+
Age 26:
We purchase 2 single family homes for $100,000. In total both houses will cost $40,000 (down payment), $6000 (repairs), $4000 (closing costs), $2000 (emergency fund) in total this will cost $52,000. You should be able to afford it with your income roughly increasing with inflation and the cashflow from your other rentals. Each should cashflow $300/mo. We will also pay down our FHA loan and convert it to a conventional. Move out, rent both sides cashflow of $400/mo. You will purchase another duplex with another FHA or conventional loan.
Summary of Age 26:
Cashflow: $2900/mo
Units: 12
Cash reserves: $~0
Income: $50,000
Savings Rate: $35,000 (70%)
Credit score: 700+
