How do you achieve financial freedom? It's not as hard as you think. Try this. Take every expense you are currently paying each month, put them in a column and add them all up. Then take twenty percent of that total and add it on (this is your "enjoying yourself" money), making a new total. This new total is your financial freedom number.
For example, let's just say the total of your monthly expenses comes to $3,000, and this includes your rent or mortgage payment, car payment, insurance, car insurance, groceries, electricity, cable, gas for your car, internet service, your phone bill, you cell hone plan. And adding on $600 (the 20% enjoyment money) the new total, the financial freedom number, comes to $3,600.
Do you realize that even a modestly successful multi-family purchase would result in a $5,000 monthly cashflow? So, if you want to, you can spend the next 4-6 months finding, buying, and turning around a multi-family property and then quit your job, spending the rest of your life doing things you enjoy.
How would you actually do that though? The first step is, locate an apartment building 100 units or more in size. Now, I know the mere mention of a building this size triggers off thoughts of "are you crazy? ... there's now way I could do that!". Well, you are going to have to trust me; I am not crazy, it is very possible to do this, and you absolutely can do it. So let's take a 100 unit block of apartments in Indiana where the units rent for $790 a months.
With all the units rented out at the market rent levels, the scheduled gross monthly income is $79,000. Take out a 5% vacancy factor and all of the fixed and variable expenses and you have a Net Operating Income of $37,000. From the NOI, take away the mortgage payment, the property taxes and insurance payments and what you are left with is a net monthly cashflow of $10,000.
These are the numbers but how do you bring it into reality? Well, we need to be able to get a property cheap so we look for situations where the current ownership is not doing a good job and the property is under performing. Look for buildings at least 100 units in size, that have thirty percent or more of their units vacant, where the property is not in good condition, and the rents haven't been raised for a few years.
The income a multi-family property produces is what determines it's value, so when you have a lot of vacant units, the property produces less income and thereby has a lower value. We purchase the property in its under-performing state it's low value, then we rehab the property, make it gleaming, shining and attractive, then fill it up with good tenants happy to pay top rent for "nice" units.
But where does the money come from to do all this? The money comes from private investors. These are people with idle capital who are looking for higher than market rates of return. They see that you are creating a large increase in the value of the property, that this is an opportunity for profit, so they place their money with you so they can participate in the profit with you. Where do you get the money to buy the property, to do all the repairs, to pay all of the fees? Private investors; all of the cash needed to buy the property and put it back into top condition comes from your private investors.
When the property is turned around and fully occupied, you then refinance and pay off your investors. What you are left with is the scenario we outlined above. What was the monthly net profit again?
Ten thousand dollars. You only need $3,600 to hit your financial freedom mark though didn't you? Well yes, I guess multi-family property provides more spending money than first think.
For example, let's just say the total of your monthly expenses comes to $3,000, and this includes your rent or mortgage payment, car payment, insurance, car insurance, groceries, electricity, cable, gas for your car, internet service, your phone bill, you cell hone plan. And adding on $600 (the 20% enjoyment money) the new total, the financial freedom number, comes to $3,600.
Do you realize that even a modestly successful multi-family purchase would result in a $5,000 monthly cashflow? So, if you want to, you can spend the next 4-6 months finding, buying, and turning around a multi-family property and then quit your job, spending the rest of your life doing things you enjoy.
How would you actually do that though? The first step is, locate an apartment building 100 units or more in size. Now, I know the mere mention of a building this size triggers off thoughts of "are you crazy? ... there's now way I could do that!". Well, you are going to have to trust me; I am not crazy, it is very possible to do this, and you absolutely can do it. So let's take a 100 unit block of apartments in Indiana where the units rent for $790 a months.
With all the units rented out at the market rent levels, the scheduled gross monthly income is $79,000. Take out a 5% vacancy factor and all of the fixed and variable expenses and you have a Net Operating Income of $37,000. From the NOI, take away the mortgage payment, the property taxes and insurance payments and what you are left with is a net monthly cashflow of $10,000.
These are the numbers but how do you bring it into reality? Well, we need to be able to get a property cheap so we look for situations where the current ownership is not doing a good job and the property is under performing. Look for buildings at least 100 units in size, that have thirty percent or more of their units vacant, where the property is not in good condition, and the rents haven't been raised for a few years.
The income a multi-family property produces is what determines it's value, so when you have a lot of vacant units, the property produces less income and thereby has a lower value. We purchase the property in its under-performing state it's low value, then we rehab the property, make it gleaming, shining and attractive, then fill it up with good tenants happy to pay top rent for "nice" units.
But where does the money come from to do all this? The money comes from private investors. These are people with idle capital who are looking for higher than market rates of return. They see that you are creating a large increase in the value of the property, that this is an opportunity for profit, so they place their money with you so they can participate in the profit with you. Where do you get the money to buy the property, to do all the repairs, to pay all of the fees? Private investors; all of the cash needed to buy the property and put it back into top condition comes from your private investors.
When the property is turned around and fully occupied, you then refinance and pay off your investors. What you are left with is the scenario we outlined above. What was the monthly net profit again?
Ten thousand dollars. You only need $3,600 to hit your financial freedom mark though didn't you? Well yes, I guess multi-family property provides more spending money than first think.
About the Author:
Learn how to buy profitable multi-unit buildings with Lance Edwards Multi-Family Success program.
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