A recap from a couple weeks ago...
We talked about a deal on Property 123 Abc Street
You bought this suited property for $330,000!
You rented out the basement suite and you lived upstairs in this 3 bedroom 2 bathroom legally suited upstairs space for $78 dollars a month! How? By renting out the basement for $900 and living upstairs with 2 roommates plus you rented the double garage to either your upstairs or downstairs tenants@$200 for a combined monthly rental income of $2,200. (Rooms rented at $550 x2 = $1,100, garage rented at $200 plus the basement suite@$900 = $2,200)
Listing price, $330,000.
Down payment:$16,500
Property type- Legally suited house
Property taxes: $2,400 ($200 per month)
Mortgage: $1,477 per month
Insurance: $100 per month
Utilities $500 per month
Total EXPENSES= $2,278 per month
Total rental income = $2,200 per month
Total cost of living= $78
In my last blog post, I write out a detailed explanation of this: http://bit.ly/Homeownershipfor78dollars.
Right now I am going to assume you are paying rent somewhere, for around $550 to $1,600.
If you bought this 123 Abc property you are paying off your mortgage approximately $816 per month on your mortgage for signing a 5 year locked-in interest rate!
You are now paying only $78 every month out of pocket. At the end of 5 years that is a $55,320 savings in real cash that you'd have had to pay in rent somewhere else. Even if over the 5 years you saved $17,000 or $18,000 to buy another house, this home allowed you to save money to help you purchase your next home but that’s not all it does... Once you move out of your first home at 123 Abc Street, you can rent out the upstairs to one tenant and have cash flow coming from your basement suite, upstairs and garage all being rented out.
Instead of it costing you -$78, you now cash flow +$172!
Therefore, saved rent PLUS Mortgage pay down of $816 per month, for 5 years = $49,000 EQUALS cash savings of $55,320.
Getting excited yet?
Time to purchase house #2!
Purchase price $340,000
(The basement suite was new! You can now rent it for $1,000)
Down payment: $17,000
Property type- Legally suited house
Mortgage: $1,531 per month
Taxes: $200 per month
Utilities: $500 per month
Insurance: $100 per month
Total EXPENSES= $2,331 per month
Total Rental income = $2,300
Total cost : $31 per month
BUT WAIT!
Now 123 Abc is rented out and you have moved to house #2.
Total Rental income from 123 Abc Street = $2,450.
Total rental income from 456 Xyz Street = $2,300.
Total combined expenses= $4,609.00
Total rental income = $4,750.00
Total living cost in your 2nd property, $0 (actually less than 0)
$4,750 - $4,609 = $141.00 You now live for free and have cash flow!
Plus you have $49,000 in mortgage pay down on 123 Abc street & now you have #2 being paid down and you still aren't paying rent anywhere SO there is another $53,200 in savings. That savings is based on $1,000/month being your rent. If you are currently a roommate paying $550 you'd only get $28,320! (You get the idea)
Too long? Didn’t read the whole blog?
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Here is the short and sweet: TLDR.
Buy a legally suited 3 bedroom property with a double garage with 5% down payment. Rent out the basement suite, rent the garage, rent out 2 rooms and live upstairs. Save $28,320-$55,320 in your own rent you'd be paying elsewhere. Use that money to buy house #2.
Live for free in house #2 while your mortgages are being paid by a combination of roommates and renters. Keep saving with your sights set on #3 and #4 and just like that...you'll be a millionaire!!
Don't wait...Give me a call and lets get you started now!
Bryce/Penny Kander
Realty Executives Alberta Elite
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I like it, maybe consider doing a separate post on the costs associated with being a real estate investor and landlord. I know you have the experience already, it would be cool to hear what your actual experiences and costs have been in another series:)
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