Let’s say you make $60,000 a year. In 25 years, with an annual inflation rate of 3%, you will need approximately $125,000 to have the same comfortable lifestyle. Taking tax deferral plans into account, you will have to invest $1,100 every month at 10.5% interest for the next 25 years. Yikes! To retire at 65 and draw $125,000 annually, you will need $1.8 million in capital invested at 7% interest per year.
Stream of income
What kind of return on investment are you looking for? “Leverage is what makes real estate the most powerful investment of all time” -David Chilton, noted investment expert and author. You invest in an $80,000 condo with a down payment of $20,000. You initial investment would grow to $167,000 with a growth rate of 3% per year over 25 years. Even after the tenants have paid off your mortgage, they will continue paying your rent. Which means if you start out with a tenant paying $800 monthly, assuming an annual increase in rent of 3%, in 25 years, the rent would be $1670. Assuming ongoing operating expenses to be approximately 40%, you’d still be left with over $1,000 per month income.
Now image having 6 or 7 such properties paying you a monthly income of over $1,000 each.
