Wealth Accumulation through Positive Cash flow properties

Continuation from the previous post “Portfolio during retirement “, this article is to discuss with the 26 years accumulation of 26 positive cash flow rental properties, what will be the networth?

Previously mentioned that we have to focus on the three elements:

Liabilities
Networth
Cashflow

Previous post ““Portfolio during retirement “ discussed and explained on the cashflow from the rental properties. Let me used back the previous example of buying 1 property per year method. However, this time, we will look into more details on 1 property and propagate to the rest of 26 properties by the age of 55 years old.

Property details

Property type: Apartment / Condominium

Purchased price: $250,000

Down payment: 10%

Loan amount: 90%

Tenure: 20 years

Interest rate: 5%

Monthly Installment: $1504

Assumption on the property appreciation is 5% per year. This is in-line with the yearly inflation rate in our country.

Table 1 below is the Loan Amortization table.

Loan Amortization Table

Chart 1 is the equity build up for the next 20 years.

Equity Accumulation

Based on the chart, at the end of the 20 years, the property is valued at around $631K

Now required to squeeze some of the brain juice with doing some maths.

Total equity or networth for all 26 properties will be $5 millions.

Compare to Mr & Mrs Wong networth is around $4.75 million also quite closed. But this is better, why?

Two reasons:

There are Positve cash flow for all 26 properties
Total networth is higher than Mr & Mrs Wong

Wealth Accumulation Start

Let’s look into more details of the data presented of the 26 properties.

There will be 7 properties paid off at the aged of 55 years old.

The remaining 19 properties outstanding loan will be around $2.5 millions.

Since each properties is value at $631k in the market, you will just need to sell 4 properties to paid off the remaining 19 outstanding loans!

$631k x 4 = $2.524 million

At the end, you will have 22 fully paid off properties at the aged of 55 years old.

How about cash flow now?

The cash flow now will be whatever rental you get.

Assuming that each property rental is $1500, each month you will get $33k (net rental income).

Conclusion:

Case study presented above is achievable for everyone since only acquired 1 rental properties per year for the next 26 years. The only rule is positive cash flow. I do understand that everyone has time and money constraints. But if you do not spend extra effort to work on the wealth accumulations, no one will help you.