As you probably know when you invest long term you enjoy the benefits of compounding interest. But what few people realize is that with real estate your money will grow even faster. You will be well on your way to millions in real estate if you keep reinvesting your profits and here’s how.
REIVEST YOUR PROFITS. This is often times easier said than done. I myself have used some of my profits for other things than reinvesting in real estate. But if you keep reinvesting your money into other profitable real estate investment your real estate empire will grow at an amazing rate. Let’s look at an example where we reinvest our profits for 10 years buying a property every two years with our NET profit. Say we have a profitable investment that NETS roughly $1,000 per month (a real obtainable goal) that you purchased with $30,000 down. If you saved your profits in an account for two years you would have around $24,000 ($1,000 x 24 months = $24,000) to use as a down payment for another real estate investment. This investment that you purchased makes you $750 per month net. Now you are profiting $1,750 per month. In another two years you buy another real estate investment. This time you have $42,000 ($1,750 x 24 months = $42,000) to invest in a property. You purchase another investment. This investment will net you more money because you had more to put down. Let’s say that this investment will NET you around $1,200 per month. Now you are profiting $2,950 EVERY MONTH!!! That is huge profits in just 4 years. You do this again in another 2 years. You are almost to the point where you are buying the properties outright now. Two years at $2,950 per month will give you $70,800 to go out and reinvest in another property. You are starting to get the idea of how reinvesting your profits can be more beneficial than spending them. Also remember this whole time you are making mortgage payments on the real estate you own so your net worth is increasing. So you take the $70,800 and reinvest in a property that NETS you $1,700 per month. Your new monthly profit is $4,650!!!!!! In just six years time you are making $4,650 a month or $55,800 per year. That is more than most people’s salary. In two years you reinvest again. You now would have $111,600 to invest in another property. At this point I would recommend leveraging your cash and buying two houses with a mortgage on each. Your NET profit from these two houses would be $2,400 per month ($1,200 per property). Your new monthly profit is $7,050 per month or $84,600 per year. In another two years you will do the same thing and reinvest your profits. This time your profits will be $169,200 to reinvest. I would again recommend leveraging your money and buying two properties using a mortgage. Your two new investments should NET around $3,500 per month. So after 10 years of buying real estate investments and reinvesting your profits you would have holdings capable of netting you $10,550 per month or $126,600 per year. The choice is yours to keep reinvesting and see what happens or you can use the profits to do whatever you please. The best thing about investing in real estate is the freedom it provides you. You started out with a $30,000 dollar investment and turned that into $10,550 a month cash flow in just 10 years. Not to mention the fact that you have paid down a portion of each of your mortgages and have substantial real estate holdings. Forgetting about the amount that you have paid off in your mortgage you have invested a total of $447,600 in real estate. In ten years you have a significant cash flow each month and a net worth of at least $447,600. How does that feel? Take a look at the chart below to get a quick idea of how this happens.
INITIAL INVESTMENT = $30,000
TOTAL REAL ESTATE HOLDINGS = $447,600
TOTAL NET PROFIT PER MONTH AFTER 10 YEARS = $10,550
Compare that to any compounding interest or even the stock market to see how good of an investment real estate actually is.
I know this sounds easy enough but the problem is that most people cannot resist the urge to spend their profits and the illustration above takes a significantly longer amount of time. In fact most investors never buy more than two properties. But if you do the rewards are far greater than any other type of investment that I know of. Contact a Kiehn agent today to learn how we can help you reinvest your profits and become financially independent.