These people tend to tell that the key is to use capital that’s not your own – like from a bank. I understand how it works with common mortgage. But let’s say I already have a mortgage, thus own one property/real estate. Now I’m in debt towards the bank and they’re not giving me another loan to buy another flat since I need to be repaying the first one (?).
So, how does it work? Where do these people get the needed money to buy the second property? The third one?
In: Economics
Let’s say you own a 3-level home in Boston’s Dorcester neighborhood, and your mortgage is $3000/mo for simplicity, and the government’s being really generous and has declared you exempt from tax obligations.
You live in one apartment, and your two tenants live in the other two. You charge them $2000/mo for rent. It’s like roommates but with more paperwork and you’re making that schmoney. You’re now making $1000/mo from owning property. Not enough to stop working, but enough to put some money away for property #2. Combine your income & assets with the projected income from your next property and your lender gives you a mortgage for another 3-level in Dorcester for $3000/mo. But you only need 1 apartment, so you rent out all 3 floors at $2000/mo for $6000/mo from this property, netting you $4000/mo from all properties. Rinse and repeat until you own all the property on planet earth.
Assuming your mortgages, properties, and lease agreements are all identical like spherical apartments in a vacuum, the function to calculate your profits would be ((l*u)*p) – (m*p), where:
l is the cost to rent a unit
u is the number of units on a property
m is the cost of a mortgage on a property
p is the number of properties
Tl;dr: The hardest part is getting the 1st one, the rest after are pretty easy. For your best shot at hitting it big, spec into the multi-family property skill tree instead of the single-family tree, progression is honestly broken for multi-families rn.
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