BiggerPockets

Many, many years ago I hit on the easiest, most beneficial strategy I've ever found. I've been lucky enuff to use this for 40 years or 2 full cycles. What is a cycle?

We always talk about buying or owning real estate on here, but most is just talk or ideas,concepts etc. I've always tried to use my past, actual experiences. I've always tried to make it easy to understand.

Many on BP are, young, hungry and newbies looking for answers and plans to achieve a better and different lifestyle. Here is one of the ways.

Awhile back, the avg rate of appreciation, or inflation (averaged for the last 59 years) was 6.39% annually. That has been reduced somewhat, due to the last couple downer years. Taking the above avg. into account, here is what I've done.

1. Buy a single SFR each year for 20 years.
2. Be aggressive in rent increases during the 20 years.
3. As rent passes the monthly expenses, use excess to pay prin.
4. After approx. 20 yrs, 1st home will be free and clear.
5. Continue day job to pay living expenses for the 20 yrs.
6. In year 21, REFI home #1 for 75% LTV.
7. RETIRE AND QUIT WORKING!!!!
8. Use the refi funds to live on.(tax free proceeds of a loan)
9. Refi home # 2 in yr 22 and continue yr after yr.
10. In yr 41, refi home # 1 and continue as above.
11. NEVER SELL AND NEVER PAY CAP GAIN TAXES!!!

Here are some clarifiers. I know that it requires extra effort to have loans on 20 properties. Loan terms change from time to time and will change again. You may still work this plan by building and using relationship formed with a local commercial bank, or do some with owner financing, until loan requirements change again, as they most assuredly will.

When your cost basis is low in relationship to equity/value of property , use a 1031 exchange to defer the taxes down the line, or pass on to the inheritors.
There is even possible way to avoid having to pay the estate taxes on this program. It doesn't even require any special IRA programs, etc .
If you take any 20 year period over the last 59 years, the above program will work for you in ANY average area of appreciation. Remember the 6.39% was AVERAGE. Some areas were more than the avg and some were below the avg. You should be able to figure the highly appreciable areas.

This is just a single, easy to understand program that will lead to financial well being, imo. Good luck. Rich.

Thanks for the votes.
Jon- good questions. The inflation rate actually has no influence on the program overall. As long as the rents are increasing, the loan can be paid off in the 20 years fairly easily.
My sample was VERY conservative. Just buying a normal property at a fair price and just 1 a year. Obviously, buying more properties each year makes the return in the 2oth year HUGE,
Finding the great deal doesn't speed up the process either. It does make the bottom line look like a killer when you go to refi and shows a lot more equity, so your refi funds are considerably more. Fun program.
The 6.59% was given from I believe 1959 or so. Someone computer savvy could fing this by googling the real estate inflation rate. I'm not techie based.
Jon- you already know this having read this chapter in my book. Have a great weekend. Rich in Spokane.

Seems to be working again for the most part. Thanks.

Thanks NC- You're always very kind. Rich.

Thanks crosswind. I sent you a reply on the HML through PM. Rich.

Hi Rich- Great post and I feel that it ties in great with the book you recomended by Eldemen.... I just started so I do not want to discuss too much yet but what about this book did you find so insightful? So far it is pretty straight forward. Make more than you spend.
Save more than you spend...
Beat inflation, don't get beat down by taxes etc... Maybe I should keep reading but I would like to know what you found that gave you that AHHA moment... Thanks..

Dustin in Indy

Nice post Rich.

Owning 1 property a yr for 20 years as long as PITI + maitenance is less rental income.

Getting rich thru rentals is not easy in every area of US (eg Calif) but can be done in many cities.

I love College Towns and good Hospitals.

Keep up the great posting!

Brian :D

Brian- don't diss on CA!! That is where I made my first bundle. I retired at 29 from Orange County, CA. In later years, I made a killing in Pismo Beach area.
In the last35 years or so, I could've dulicated almost the same thing. In many parts of CA, it may be getting close to the time to buy again. Thanks for the nice compliment.

Jon- Unless obama screws up the medical field, hospitals will be a potential good thing. I've talked to a lot of medical people that may leave the profession if the changes go through. Rich in FL, heading to Barcelona manana.

Brian- if you like my post or any other post, acknowledge it by voting for it. You may vote for any post in a thread, not just the first one.

Just Don- same as above comment to Jon. Now, for your suggestion to just live off rents, here are my thoughts.
In the 21st year, only one house is F&C in my scenario. Not enuff to live off. Maybe it is 1K per month. All taxable, so you only see maybe $650 and if obama gets his ways, it may be much less left in your pocket. If you refi the same property, you walk away with 125K tax free, and the new interst payment of 1K is all deductible.

What would you rather have? 125K for the year or $650 for the month more?
Thanks for the nice compliment. I hope to get book online before the end of the year. Rich, very busy in FL.

Hi Steve- as you know the items in the book happened over 30 years ago. Times have changed considerably. I probably acquired over 100 homes each year for awhile. This was in the day when if you could "fog a mirror" you could assume an FHA loan.
Imagine , if today, all these REOS or short sales had a FULLY assumable FHA loan. There would be NO real estate crisis. The homes would be gobbled up in a heartbeat, but unfortunately, can't do it today.
Many of my answers here on BP are oriented to today and what the typical investor can do.
I always bought real estate, where ever I lived. CA, CO, ORE, UT etc. I just did it as a past time rather than aggressively. It is like now. It is almost more work for me currently to analyze and buy property, that the benefits it derives.
I enjoy teaching and helping others learn to do it. That is very satisfying to me. The new loans with Will , will keep me in the game, but I won't be the QB.
I hope this answered your question. If not, ask again, more specifically. Rich