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How To Turbo Boost Your Retirement Plan By Taking Advantage Of This Little Known Real Estate Secret

What if there were a way to grab an additional $25,000 per year, after taxes, and put it away for your retirement?

Well, there is if you take advantage of these government programs that are available for everybody willing to use them.

How To Turbo Boost Your Retirement Plan By Taking Advantage Of This Little Known Secret

Little Known Secret You Can Use To Speed Up Retirement

Anybody who has ever taken out a mortgage to purchase a home has likely been introduced to the concept of government sponsored entities in the home loan business. Organizations such as Fannie Mae, Freddie Max, The Federal Housing Administration (FHA), and even the Department of Veterans Affairs for those current and past service members who qualify.

When most people talk to a mortgage lender about an FHA loan or a VA loan, they assume the programs exist solely for single family homes.

But did you know that both of these loan programs also allow the borrower to use them for multi-family homes? Take a look at the simplified case-study below to show how a borrower using one of these loans can buy a home with very little money and turn that home into a $25K+ per year savings plan.

Case Study - Buy A Home For Retirement

For the purpose of this example, we are going to examine a buyer purchasing a property and financing it with a VA loan. This is a great loan product and is available to many buyers in the Tallahassee real estate market. If you do not qualify for this type of loan, then you very likely can qualify for an FHA loan and a similar real estate transaction can be worked out for your behalf.

Before getting to the numbers, here is the overall plan.

Our buyer is going to buy a quadraplex with a VA loan. Now here's the cool part when using the multi-family version of both the VA loan and the FHA loan .... the buyer will qualify for the loan and CAN INCLUDE the rental income from the additional units towards qualifying for the loan. You see, the buyer is going to live in one of the units and will rent-out the other three to tenants who will pay market rent to live there. After living there a year or so, the buyer has the ability to move out and rent the fourth unit to a tenant, or merely stay and live there as long as the buyer desires.

In other words, if our borrower qualifies for $250,000 for a single-family unit, it is very likely the same borrower can qualify for much, much more on a multi-family unit due to the fact that tenants are going to pay rent to live there and thus raise the borrower's income.

Ultimately, the safest and easiest way to make money in real estate is "leveraged appreciation," where a small amount of money is used to buy a large asset that, over time, appreciates in value.

The following is how we have run the numbers to determine how to save $25,000 per year towards retirement. We do not explain the numbers in detail, but you can gain a better understanding of our calculations by reading this article, or this article, or by dropping me a note

How To Turbo Boost Your Retirement Plan

Any time we run numbers, we have to establish a set of assumptions in order to calculate rates of return.

Assumptions:

  • Property Type: 4 Flat (Quadruplex)
  • Purchase Price: $700,000
  • Monthly Unit Rental Rate: $1,500
  • Vacancy Rate: 5%
  • Buyer's Federal Income Tax Rate: 30%

The numbers in our real estate stack below have been annualized for simplicity. 

VA Loan Case Study     rate 4.50%
Revenue  $        54,000   rent  $    1,500
vacancy 5%  $          2,700      
Expenses  $          7,800      
NOI  $        43,500      
         
P&I  $        42,562      
Taxes  $        11,760      
Insurance  $          4,000      
         
Cash Flow  $      (14,822)      
         
Taxable Income        
NOI  $        43,500      
Less T&I  $      (11,820)      
Less Interest  $      (31,269)      
Less Depr  $      (15,273)      
Tot. Tax. Income  $      (14,862)      
Tax rebate @ 30%  $        (4,459)      
         
         
Annual Cost to own  $      (10,363)      
Principle Reduction  $        11,293      
Appreciation 3.5%  $        24,500      
Ownership Benefit  $        25,430      

The ownership benefit at the bottom is the net amount of money the owner will gain in the first year (and year's thereafter assuming he does not move). Of course, if he moves, he will do even better. As it stands, he has a very nice place to live and is pocketing $25,430 ... most people pay money to live somewhere!

THIS IS A SIMPLIFIED ANALYSIS

There are variables that we have not accounted for in order to make this simple (both positive and negative variables).

The reality is that this works because you end up owning a much larger asset than you normally would if you were merely buying a home for yourself. Ultimately, you are actually buying homes for yourself and three others, and you are the beneficiary of the long-term gains of ALL properties. So long as you work with a local real estate expert and buy the property in the right area, your results are highly likely to meet or exceed those estimated above.

It is possible to do a much more in-depth analysis if you have an interest in buying a quadruplex in order to turbo boost your retirement plan. If you have questions or concerns or simply want to know more, just drop me a note and we'll be in touch right away.

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