Think Like A Banker …. My 2 Million Dollar Goal
After the real estate and financial crisis of 2008, I became very concerned about my financial future. Like so many real estate investors in Florida, a lot of my real estate flips ….FLOPPED! I needed change. This current investment strategy was not achieving my retirement goals.
I needed a breakout plan. Instead of giving up on real estate, I decided to take a short sabbatical from my real estate brokerage business to study why the financial crisis happened. I took investment banking classes, focusing on real estate financial modeling and structuring real estate finance. I also took classes towards working on a degree in legal studies. After much study and research to understand this financial mess of 2008, I realized that if I was going to rebuild my real estate business, I needed to think like a banker.
I began my journey to forever change my real estate career. I mapped out a real estate investment plan that I am going to share with you below. What I ask from you are two things. First, let me help you build your real estate portfolio, as I have already done the ground work. Second, take a moment now to hit the social media Share buttons at the top of this page so others can take charge of their retirements.
My Personal Plan
The first thing I needed to do was to figure out how much income I wanted – not needed – each month when I retire. I am not interested in just existing during my retirement years. I want to enjoy my life with my wife Peggy without worry, so I decided that number was at least $100,000. I figured that I can live comfortably on roughly $8,333 a month AFTER taxes.
So now I had a starting place. To net this amount each month I calculated that I would need to gross $165,000 a year before paying taxes. Here are my numbers:
|Qualified plan contributions||–||$0|
|Adjusted gross income||=||$165,000|
|Tax liability before credits||$27,688|
|Child tax credits||–||$0|
|Estimated tax liability||=||$27,688|
Now I know that some of you are grabbing your calculators and saying “$144,400 – $27,688 = $116,116,712”
The reason I am allowing this buffer is we all know that not everyone pays their bills on time, especially tenants. Things happen in life and that’s ok. I just need to make allowances for the bumps in life.
So how am I going to achieve a gross income of $165,000 a year in my golden years? At first (investment banking courses) I was going to build a complicated financial model but then the mortgage banker in me kicked in. I proceeded to pull out an amortization chart which you can download for free here.
After playing around with the numbers, I calculated that I would need a personal real estate fund of $2,000,000 – yep 2 million dollars.
What Can $2,000,000 Can Do For My Retirement?
A $2,000,000 dollar private real estate fund will provide me with the income needed to live out my retirement years. It will allow me to make money just like the bank. Here is the breakdown.
The goal is to purchase $2,000,000 dollars of real estate over the next 10 – 15 years and buy the properties for cash or finance with 15 year mortgages.
If I held mortgages on the properties and sold them with owner financing, an income stream will be created just like the banks create. For a 2 million dollar fund, the numbers look like this:
|Loan amount||$2,000,000.00||Scheduled payment||$ 13,984.29|
|Annual interest rate||7.50 %||Scheduled number of payments||360|
|Loan period in years||30||Actual number of payments||360|
|Number of payments per year||12||Total early payments||$ –|
|Start date of loan||Total interest||$ 3,034,344.46|
To summarize thus far, the goal is to create the $2,000,000 private real estate fund and lend the money out at a minimum of 7.5% amortized for 30 year. This will create a monthly income stream of $13,984.29 which is $167,811.48 annually.
Deal Summary For My Personal Investment Plan
|HERE IS THE DEAL SUMMARY|
|Scheduled payment||$ 13,984.29|
|Scheduled number of payments||360|
|Actual number of payments||360|
|Total early payments||$ –|
|Interest Received After 10 Years||1,414,014.56|
|Loan Balance After 10 Years||1,735,899.74|
So after 10 years, my fund will receive $1,414,014.56 in interest alone and still have a principle balance of $1,735,899.74
One of my first strategies is to recruit a top notch team. So I created an entire career section on this website based on the business plan in the Millionaire Real Estate Agent authored by Gary Keller.
As stipulated by law, though, we can not and do not make any guarantees about your ability to get results or earn any money with our ideas, information, tools or strategies. We don’t know you and, besides, your decisions and your results in life are up to you, don’t you agree? You must be aware that nothing on this page or in any of our content is a promise or guarantee of results or future earnings, and we do not offer any legal, tax or other professional advice.
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