A Case Study - Kinda - Solution To Underperforming Income Property

What the heck is a kinda sorta case study? It’s one that hasn’t happened yet. 🙂 I often admit on my own blog that the calls I get from current or wannabe real estate investors are daily fixes, feeding my addictive need to take folks from where they are now, to significantly greener pastures — or tell them they’re better off just stayin’ put. Either way, the fix is much appreciated.

Gotta recent call from a very smart/experienced real estate investor who’s living off his portfolio’s cash flow. I love this guy, cuz he’s major league OldSchool in his DNA. Gonna change some of the factoids to ensure his privacy, but nothing significant will be altered so as to maintain the gist of his status quo.

Here are his facts.

15-20 rental homes generating $56,500 pre-tax annual cash flow
Current tax shelter is roughly $50,000 a year
Net equity for the portfolio in today’s market is $1.5 Million
Will make major move if improvement is significant

The Plan I’ve constructed for him will accomplish the following:

Increase his pre-tax cash flow by 70-85% — immediately upon execution
Boost his annual tax shelter
Set aside money for future tax free income — another basket
Eliminate 80-90% of his time spent managing property

Of course, there will be more benefits, but you get the idea. He’ll no longer be obliged to find properties from REO departments, buy and fix them up, (he’s a contractor), then spend time doing almost all the repairs/maintenance and general management. After all, the idea of retirement is to, um, well, retire.

This guy is wicked good at what he does, and has a stellar, and hard earned local reputation for successful performance — his bankers love him. However, if it’s possible to go from less than $5,000 in monthly cash flow to just under $82,000 — which in just over seven years will morph into over $10,000 in monthly cash flow — while freeing up your time to enjoy your retirement, who wouldn’t opt to make the move?

NOTE: The $82,000 is actually after he takes out $2,000/month to quickly pay off a couple props he’ll be financing — which will take just over seven years.

Furthermore, in 15 short years, he’ll have the option of almost $2,000 a month in tax free income on top of everything else. This is just a quick look-see into what’s possible for thousands of real estate investors who’re living out their lives, maybe retired already or rapidly approaching it, yet woefully unaware of how much better off they could be with a few simple adjustments to their portfolios.

Without adding a dime to their net equities they could improve their lifestyle/retirement remarkably.

Next week I’ll give a nuts ‘n bolts scenario for a 30-someting family man with three kids, who will be making a change in his current strategy. This change will have a powerful impact both immediately, and for his kids’ college education — not to mention his ultimate goal of a magnificently abundant retirement.

Remember: That kinda retirement happens on Purpose with a Plan.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.