{"id":74162,"date":"2015-08-01T12:00:16","date_gmt":"2015-08-01T18:00:16","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=74162"},"modified":"2024-02-23T16:21:27","modified_gmt":"2024-02-23T23:21:27","slug":"2015-08-01-pain-free-way-build-wealth-real-estate","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2015-08-01-pain-free-way-build-wealth-real-estate","title":{"rendered":"The Pain-Free, Proven Way to Achieve a 200% ROI, Build $1.5M in Wealth & Earn $300 Per Hour"},"content":{"rendered":"

I\u2019d like everybody to meet Joe. Joe is a pretty average guy earning $50,000 per year and has a little over $10,000 in savings<\/a>. Joe has also recently begun to take a deep interest in his personal finances and has wisely decided to look into building wealth by tackling his\u00a0largest single expense<\/a>:\u00a0his housing. Joe is not a fan of seeing almost a third of his income go towards his rent, and he wants to carefully consider ways to reduce that expense while minimally impacting his personal life.<\/p>\n

Joe has already decided where he wants to live — he\u2019s a young yuppie and wants to live near the nice part of town so that he can be near all the fun things his city offers, his work, and of course, good schools. Within his target living area, he spots an opportunity. A duplex has come on the market, and remarkably, it\u2019s available either to purchase or <\/i>to rent.<\/p>\n

Now, in Joe\u2019s day job, he crunches financials for a well-known real estate investing company — he projects costs and expenses by building spreadsheets. Joe wisely decides to do what no one else in the working world ever seems to do and creates a spreadsheet analyzing the cost of his own<\/i>\u00a0housing expenses.\u00a0Crazy, I know.<\/p>\n

Joe’s Financial Model<\/h2>\n

Joe maps out the financial impact of three different ways, three cases<\/i>, in which he could live in his favorite part of town and in this duplex. In the process of doing so, Joe realizes that this study is applicable to almost anyone deciding whether to rent, buy or “<\/span>house-hack”<\/a>\u00a0(buy, then rent out part of the house to others). Joe does his best to think through all the costs, rents and other financial factors that might come into play under each scenario. Again, his goal is to see how he can live for the lowest cost, but still reside in his favorite part of town.<\/p>\n

Joe thoughtfully built the spreadsheet in a way that others could easily follow and posted his spreadsheet with all his assumptions to the BiggerPockets FilePlace (click here to download the spreadsheet!<\/a>). In fact, he even highlighted in bright yellow all of the assumptions<\/b> that he made specific to this property that he was considering, so that anyone else who downloaded the spreadsheet could change<\/b> those<\/b> inputs<\/b> and see if his conclusions have any relevance to their own situations!<\/p>\n

No, people looking at his spreadsheet don\u2019t need to be Microsoft Excel wizards to play around with the numbers, so long as they only change the numbers highlighted in yellow!<\/em><\/p>\n

With that, let\u2019s talk about Joe\u2019s three choices, or cases.<\/p>\n

Case #1: Joe rents half of the duplex as a tenant.<\/h3>\n

Joe is currently a renter, so this is no big change for him, just a little bit of an upgrade in location.<\/p>\n

Joe\u2019s Renting Assumptions:<\/i><\/strong><\/p>\n