How First-Time Buyers Build Wealth in 10 Years Using 3 Rentals

Patriot Nation, let's talk reality for a minute here. We're all just trying to have fun. We're trying to maybe raise families, trying to have a good career, and along the way, we're trying, of course, accumulate wealth. And the simplest way to do that, frankly, is to own a home. You have to own a home to start wealth creation. And so, the qu easiest way to have massive wealth creation is to own multiple homes. But the fact is, most of us can't afford to be buying rental homes along the way, every year or every two or three or even four years. We just don't have that kind of money to put down 15 20% on a rental home. So, I'm going to show you a strategy right now, a 10-year strategy. And trust me, 10 years goes by very fast. A 10ear strategy where you're acquiring three rental homes while you're living in the fourth home that you acquire. And by that time, after 10 years, your wealth, your accumulated equity will be almost a half a million dollars. And your cash flow from those three rentals will be in excess of $9,000 a month. So, if that's of interest to you, watch this video all the way through. And as always, let's kick off this rodeo right now. Hi folks, I'm Kevin Fagen. I'm the mortgage patriot on your side, nestled here in the Hill Country above San Antonio, Texas, serving all you proud Texans and all you great folks all around the country. Another great one today because today we're talking about acquiring real estate rental homes. Now, even if you don't even own a home right now, it's imperative that you understand that the easiest track to building wealth for your family or just for yourself is to acquire real estate. You've got to own a home, as I mentioned before. And so, therefore, owning multiple homes is the easiest way, easiest path to gaining massive wealth that you wouldn't be able to acquire otherwise. You can spend all day long trying to contribute to your 401k, but that's not going to get you as easy a path as it would be as what I'm about to show you. So, if you would, as we get into this, if you hit the like and subscribe, please, that brings my content to the forefront. And I like to u you know, really teach on these matters. You can see all my some prior videos here where I talk about the best home, the best loans to use for particular circumstances, maybe the best renovation loans for acquiring properties, maybe uh VA advantages to using a VA loan. All these matters are topics that I've done in the past. But again, here we're going to talk about the quickest path to owning multiple homes and acquiring wealth over time. Okay, let's get into the strategy right now. So, what am I talking about? Well, the average American homeowner buys typically two, if not three homes before buying their, you know, forever home. In this case, I'm going to call the forever home, a home that you live in for 15, 20 plus years as you really establish roots in that community or school district or what have you. People will typically buy a starter home first and then usually maybe a second home, you know, small upgrade from the starter home, knowing full well that they're going to move out of that one as well and move into their forever home as their third home. That's that's a typical scenario. But the problem is they sell these homes as they go along. Other words, they don't keep them and turn them into rental units. That's going to be the strategy we're talking about here going forward. So, we're going to talk about acquiring in our example every after every three years, you're going to buy another home, a new home to as your primary home, but you're going to keep your existing home as your rental. We're going to do that for 10 years. That's going to acquire three homes. So, by the 10th year, you're acquiring your fourth home as your primary. That's your forever home. But meanwhile, you've acquired now three rental properties along the way. We're going to show give you all the assumptions. I'll show you all the numbers of what happens when you use the strategy. Let's start off with some assumptions and then we'll go forward from there. So, let's assume you're making as a household one or two or three, however many wage earners you have, $80,000 a year. $80,000 a year or more in your household income. That's assumption number one. Hopefully, that's not too dramatic. Number two, assumption that you're purchasing your first home. And let's say that this video is towards the end of 2025. So, in the year 2026, you're buying your first home for $300,000. That's uh lower than the median income uh home in in in Texas. Anyway, your state, of course, will vary. You can put in the comments, "Hey, I can't find anything under $300,000." But let's assume $300,000 for our purposes. And let's assume over the 10-year period that housing prices are going to appreciate 4% per year. That's a historical average roughly. We've been, yes, over the last 10 years, prior 10 years, we've been much higher than that. But that's why I think over the next 10 years we're going to kind of revert to the mean and I think the average appreciation in housing prices will be about 4%. Let's also assume that rental increases of you know lease payments will be 4% per year as well. So $80,000 $300,000 purchase price 4% housing appreciation and 4% rental increase per year. Those are our assumptions. Let's start this strategy right now with purchasing year one of a $300,000 property with your household income of $80,000 because an $80,000 income will qualify you for a $300,000 purchase. That's why we chose those numbers. This is your primary home, remember? So, as a primary owner, you can qualify for an FHA loan, which will allow you a three and a half% down scenario. So, on a $300,000 house, three three and a half% down, that's 10,500. with your closing costs, that's going to add about another 10 to $11,000. Basically, when it's all said and done with seller concessions and maybe down payment assistance as your first-time home buyer, your average uh out-of pocket cost is going to be about $10,000. So, fully in, write the check, $10,000 will buy you about a $300,000 house, okay? In the state of Texas anyway. Okay? That's your first home year one. Now, contrast that immediately with an investment property. If you were trying to buy an investment property out of the gate on a $300,000 investment property, you have to come out of pocket for at least 15, usually 20%. So let's say 15% of $300,000. That's $45,000. And seller concessions aren't allowed to the extent that they are on a primary home. So your cash to close is going to be about another 15 on top of that. Let's call it $60,000. So, in the case of your primary home purchase, that's about a $10,000 down, you know, cash to close check versus investment property, $60,000. That's why nobody can nobody can do this coming out of the gate. So, that's year one acquisition of home. Let's move on to year four. So, now we're in year four. Start of year four, we want to reboot this whole strategy. Want to buy again. But that $300,000 house because it appreciates 4% per year in our example by the start of the fourth year is now worth $337,000 roughly $500. So that's what your purchase price is going to be in our example. But rather than sell your existing home, which has a little equity in it now went from 300 to 337, that equity is not that really that big because why? Because when you sell that property, you're going to have about 8% uh closing cost. Where does that come from? Well, it's about 6% for all the commissions that are involved to the buying and the selling agent. And then the closing costs are about 2%. So 6 and two, that's 8%. Bottom line is a $337,000 house if you sold it is only going to produce about a check to you net of about $10,000. So that's what the people where the mistakes come in. Do not sell that house. Keep the house and rent it out. The rental on that approximate rent on that house in year four, starting year four would be about $2,375. So, you're going to get inflows over and above your mortgage. It's going to have a ne a positive cash flow, in other words. And that again, that rental should be around $2,375 per month. Not bad. And now, by the start of year four, you bought your second home. And because it's a primary home, once again, you're moving your family or if you don't have if you're single, even better. More flexibility. But you're moving because most people move after three years anyway in their starter home. You're moving into that second home as as your primary. and you get all the benefits of a primary home loan options. Once again, you can go FHA or conventional, three and a half to 5% down, and you're still available for down payment assistance potentially. So, again, that second home you would buy for $337,000, uh, you can put down a very small amount. You might be writing a check for again for about $10,000 after seller concessions are involved as opposed to trying to buy your first rental home maybe in year four when we're once again you're going to be writing a check for over $60,000. So year four you're acquiring your second home and you're keeping your existing first home. Let's move on with the acquisition of your third home and you're moving into it as your primary once again and you're going to not sell your existing home number two. So you had existing home number one, you bought year one, bought in year four. You're keeping both those two homes and you're buying now because prices are going up 4% a year. Roughly that $300,000 house way back in the day and year 7 is now a $380,000 house approximately. So you're buying for $380,000. It's not your forever home just yet. We're going to put off three more years before you buy your forever home. So in year seven, you're picking up a home for $380,000 with an FHA or conventional loan. Once again, 3 12 to 5% down, your cash to close with seller concessions is going to be about 10 to 12 to 15,000. Say 15,000 as opposed to once again a $380,000 house on a for a pure investment property where you're putting down 15 to 20%. You're writing a check for well over $60,000. So, here we go. And now the rents on your two homes in by year 7 have now grown to $2,675 per month. Your cash flow, your net cash flow compared to your underlying mortgages are increasing dramatically, right? And you haven't done anything other than just own a couple of different homes. So let's take you now to that very last scenario in year 10 where you buy your forever home and let's look at all the numbers combined. So, finally, we're at the start of year 10 and you're ready for your forever home. And you buy at the start of year 10. What is that house going to cost you? Well, the house has been appreciating 4%. So, now that same $300,000 house in year one is going to cost approximately $427,000. So, you're buying for 427,000 or more for your forever home, but now you're keeping home number three, right? And guess what? Rents across the board are going up 4% a year as well. So your aggregate rents across home number one, home number two, and home number three are now $3,5,000 per month. So the summation of those, all three of those homes together, you're getting a check in the mail for $9,000 per month gross rents across those three properties. And now you're in your fourth and forever home. And life is good. Now let's look at the equity that you built along the way because you did not sell those rental homes. If each home now is worth $427,000 approximately, your aggregated net worth, your equity across those three rental homes is now $452,000. It's almost half a million. So, you would have left a half a million or $450,000 on the table that that you never would have had you sold these houses along the way. So, here is the power of never selling the homes, the primary homes that you live in. simply rent them out and buy a new home. Rinse and repeat. Now, that $9,000, I should say, again, that's a gross number. You still have three underlying mortgages for those rental homes, but your net positive cash flow is going to be pretty significant. And now, let's look at one last wild number. If we took these from year 10 to year 30, in other words, if we just held for 30 years, all those three homes, and you stayed in your forever home, home number four, guess what? Your net worth would be at that point about over $3.2 million of net worth. Why? Because you kept all those three homes in particularly. And even more significant, your positive cash flow from those rentals would be in excess of $19,000 per month. $19,000 per month. And that's almost a net figure because why? Because now you've almost paid off all these mortgages because you're 30 years down the road on these things. So this is the power of not selling but rather acquiring along the way your new primary home and renting out your existing or your previous primary home. That's the strategy. That's the way to build. Well, it's easy. Out of pocket costs were way down. In each scenario, we had about $10,000 for the first two rentals and then 15 for the for the third. So that's uh $35,000 out of pocket that you paid along the way versus over $200,000 if you were trying to buy rental homes using investment types of scenarios. So once again, I hope this is meaningful to you. Share with your family and friends, those that are wanting to accumulate rental homes or start buying uh just for their own primary purposes. And I'm Kevin Fagen,