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Author: activeREinvestor Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76901  
Subject: 10 Year plan (attention JAFO31) Date: 5/11/2004 1:54 PM
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A new topic but maybe of the greatest interest to JAFO31 and I...

Broad principles here. More or less prove true using history but history is no guarantee of the future.

Assume a person wants to retire with a passive income in 10 years time. They want 50K gross income.

They buy 1 home a year for 10 years.
Each one costs 50K
Homes (on average) double every 7-10 years
Rents double (on average) every 7-12 years

In the homes were bought with interest only loans and there were NO down payments. 100 leverage so no equity to start.

If the numbers work as they have on average then the first property will have doubled in 10 years. Pay off the mortgage (50K) by taking out a new 100% mortgage and you have 50K left over. Use this to live on.

Comments, ideas, ways to improve the model?

Yes there are possible issues. Most can be dealt with if you wait longer, buy a few more, use less leverage, etc. Try to just consider the model and how it might work and how it could be improved so that the risks are contained.

Why am I posting this? There are people who are starting to realize that they have 10-20 years to retirement and they do not have any real savings or pension. If they work at finding one good deal a year for 10+ years they just might improve their lot in life. The reason this works better then just savings is the use of leverage and the fact that a tenant will cover the running costs. Certainly more work and potentially more risk then putting cash into a mutual fund. Well, maybe not as much risk as the stock market over the last 3-5 years.

Bring on all possible comments. Interesting and constructive ones are the most welcome.

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