Let’s use an example of investing $20,000. If you purchase stocks with that $20,000, you will have $20,000 invested. If those stocks increase 5% that year, you will have $21,000 and realize a true 5% return. Now, let’s say you invest that same $20,000 into a rental property. You borrow $80,000 to purchase a $100,000 home. Say that home went up 5% that year and is now worth $105,000. You have $25,000 in equity and an actual return of 25%. Consider also that the home produces $200 a month in cash flow ($2,400 a year). Just from that income you are receiving a 12% return ($2,400/year rent income/$20,000 down payment). This still doesn’t include the returns you receive from tax benefits through depreciation or equity buildup as the tenant pays the loan for you. Do you see how all these factors can produce an enormous return? Even the income alone of 12% will easily beat stocks’ suggested 7% annual return over time. There is a reason more millionaires have been made through real estate than any other investment. It’s the math, not magic! This is a real-world example, and we actually have many properties that consistently beat the conservative numbers used in the previous example. We have our clients work backward to achieve their financial goals. For example, someone decides they want to achieve a passive income of $75,000 annually to replace their current job. Breaking that number down to a monthly income, we get $6,250 a month. Using an average rental that cash flows $450 a month, that person would need to buy 14 properties to reach this goal. If they bought two properties per year, they could achieve financial independence within seven years! Don’t forget: When these properties are paid off, the annual income more than doubles to easily achieve a passive income of more than $150,000 a year One last item to address for all the naysayers who ask: “What happens if the real estate market crashes like in 2008?” Buy more at a discount. Fewer people will be able to buy homes, which drives up rental demand and rental prices. Your rentals will have fewer vacancies and more income. •
Zach Lemaster is the founder and CEO of Rent To Retirement. Lemaster is a seasoned real estate investor who has accumulated a large portfolio of rental properties across multiple markets, including single-family, multifamily, commercial, and new construction. He is
passionate about educating others on the numerous benefits of real estate investing and how to use real estate as a means to create the lifestyle each person desires.
38 | think realty magazine :: september - october 2022
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