Beginning Investors Start Here

Where Do I Get The Money?

Money for investing can come from existing savings or other liquid investments such as stocks, bonds and CDs, it can come from equity in your personal residence or other investment property or from certain retirement accounts. 

What Type of Return Can I Get?

Most buildings will return about 5-7% of your down payment during the first year.  This is comparable to your average stock or CD investment.  However, by the 5th year of ownership, the return on your initial investment will roughly double to 10-14%. 

For an investment of $100,000, a first year return would be $5,000-$7,000 and a 5th year return would be $10,000-$14,000.  On average, you should be able to recapture $45,000 in passive income during the first five years of ownership.  And - you still have your original equity in the building. 

Increasing Your Equity

Note that this does not take into account the potential increase in value of the building.  Buildings are primarily valued based on their income, making them less succeptible to market fluctuations in the residential market.  By raising your rents 3% every year, which is about half of the current average rental increase, you can raise your properties value by 16% (compounding the rental increases). 

The Power of Leverage

Because you leveraged your property, the 16% increase in value is not based on the $100,000 down, that you put, it is based on the total value of the building.  If you purchased a $400,000 building, and it increased in value by $64,000.  This is an unbelievable return of 64% on your original investment, plus the $45,000 in cash flow, for a 109% return in 5 years, or an annualized return of 21.8%.  While this may be an optimistic scenario, it is by no means unrealistic.   

Property Management

For those of you who do not want a role in the management of the building, there are many property management companies to choose from and many of the building already have functioning, on-site managers.