Acceleration & Turbo-charging your Investment Portfolio
By Dani Beit-Or
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“I’d like to have a monthly net income of $10,000 in 12 years”
There’s no other saying I have heard more from my real estate investors in the past year. While this is a clear goal do you really know how to get there?
To have “$10,000 in 12 years” we need approximate 15 free-and-clear properties.
The good news are it is possible! But accomplishing it requires several things, mainly it requires a plan, discipline (focus) and time. The more time the better.
The Challenge
To accomplish this goal we need to tackle two main elements. First, we don’t have enough cash to buy 10-15 properties in the coming years. Second, time - we are always short on time.
Long-term vs. Short-term
As an active investor I have had this mind-conflict for a long time: “Long-term rentals are better. No. short-term fix-and-flips are better. No. Long-term rentals . . . “ After going about it for many years I have have came to the obvious conclusion: it is not one or the other! It should be both!
Each approach, buy-and-hold rentals and fix-and-flips has its advantages, disadvantages, and carries a different level of risk-rewards.
Done correctly the combination of the two can be very powerful.
Combining The Two Strategies
The Basic:
The basic buy-and-hold approach is to buy the property with a mortgage and pay it off in 30 years OR sell it in future.
Accelerating:
The first and simple technique we can do to get to 15 free-and-clear properties is to start paying off the mortgage, i.e. extra principal payment (EPP). Simply write an extra check each month. For example if our monthly mortgage payment is $500 we can pay an additional $150 each month towards our principal. If we have invested correctly these funds should come from the cash-flow.
Paying extra principal payment (EPP) will both bring us sooner to a free-and-clear property and will save on interest.
Turbo-charging:
EPP will only helps us with paying down the mortgage. It won’t help us acquire multiple properties. Actually it will eat into our cash-flow.
If we assume each property we would buy under this program costs about $100,000, it means we need about $25,000 to buy one property. Saving $25,000 every year from your job will only allow you to purchase one such property every year.
To expedite your acquisition, to turbo-charge it, you should incorporate short-term fix-and-flips into your overall strategy. Doing two to three such flips every year can save you an additional $25,000 or another property as I like to call it. By doing so you have just doubled you buying power and should be able to get to 15 properties in half the time.
Fix-and-flips are not the enemy! Not all flips are gone bad as seen on TV. Establishing the right teams and systems and going after non-adventurous flips can result in success.
Summary
You should have two main engines helping you to build your portfolio. A long-term engine and a short-term engine. When done correctly the short-term engine can feed the long-term one and helps you turbo-charged your portfolio formation.
Once you have reached the desired amount of properties (15?) you should not stop with the the short-term engine. At that point of time this engine will help you pay off the properties, hence reaching your goal X (10, 15, 20 . . .) number of properties all free-and-clear.
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Simply Do It / Dani Beit-Or
Cupertino, CA
Phone: 60-440-5544
Web Site: www. simplydoit.net
Properties: www.connectrei.com
Copyright 2012 Simply Do It / Dani Beit-Or, All Rights Reserved.
The foregoing article constitutes general information only and should not be relied upon as advice.
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