Cash-on-cash

return
Annual cashflow ($1,310 × 12) $15,720
÷
Cash put into property $3,500
Cash-on-cash return: 449%

Note: While I don’t pay for utilities I do pay for trash collection. However, I
raised all the tenants’ rates by the amount necessary to cover it. Additionally,
two or three tenants have expressed interest in buying a property. If I decide to
sell, I would finance 25 percent for them so that I would still be getting my
residual income.
While I was in the middle of this project I started building my own house, in
another St. Cloud suburb. Much larger than our first house (the new one is 4,800
square feet, more than double the size of the other house, my construction costs
came in at about $360,000. I took a $420,000 mortgage at 2.9 percent special
financing. In yet another example of how contacts pay off, I approached a
mortgage broker I knew who, like me, had left his post office job. By putting 25
percent of the price down, I qualified for the low mortgage rate.
When we closed on the loan I received a credit line of $140,000. This money
will be used to either finance more construction and/or buy more rental property
to pay for our personal dream house.
This year I’m also planning to build five single-family homes for some of my
existing tenants as well as others. I project $600 a month in passive cashflow
from these properties. In three years, with additional homes built, I project the
income to rise to $2,000 a month. In seven years, the goal is to have enough
homes to bring in $4,500 a month plus equity. At that point, with almost $60,000
in passive income, I plan to retire.

Seeing Is Believing
The numbers tell my story. Here’s the before-and-after short version as reflected
in my financial statements:

Prior to Real Estate

Monthly Bills Monthly Income
$1,000 mortgage $2,000 my job
$800 credit cards $1,550 my wife’s job