Achieve 1 Million in Annual Cash Flow through Investing in Real Estate

The interesting thing about investing in real estate is that you have many options for achieving your big income goal. As one of our millionaire investors put it, "There are many roads to Rome." For the purposes of this discussion, let's narrow our focus to single-family residential investment homes and attack the issue from four distinct angles:

1. How much real estate would an investor need to acquire today to receive $1 million in annual cash flow now?

2. How much real estate would an investor need to acquire today to receive $1 million in annual cash flow in the future?

3. How much real estate would an investor need to acquire over time to receive $1 million in annual cash flow in the future?

4. How much real estate would an investor need to acquire over time to receive $1 million in annual cash flow and equity pullout in the future?

In all four models we'll work with the understanding that an average single-family home costs about $170,000 with a gross monthly rent of $1,360 (based on our conservative 0.8 percent of market value formula). To account for vacancy and other expenses we used a conservative figure of 40 percent for our calculations, and where appropriate we used mort gage interest rates of 6.97 percent for 15-year loans and 7.43 percent for 30-year loans.2 Rent and the value of our properties will appreciate at 5 percent annually, which is slightly below historical averages. Finally, we'll work from the assumption that properties are acquired at a 20 percent investor's discount with a 20 percent down payment.

Don't forget that your choices and your abilities can improve the results with all these models. If you choose to reinvest cash flow to acquire more real estate or pay down debt, you may achieve your goals faster. If you consistently achieve higher rent rates, lower your expenses, or reduce your vacancies, you'll be accelerated along the path to your net income goal. With that in mind, let's look at the first way to receive a million in real estate.

"Make sure you understand what you want your portfolio to look like at the end. My future portfolio will be 250 houses. If all paid off, that would be $1.4 million in annual gross rental income, and when I'm 60 or 65 I can sell them and hold the notes. You want to get to a point where you have a business."

Marshall Redder Millionaire Real Estate Investor Grandville, MI

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