For it is equity , not cash flow , that will make one become an accredited investor faster . According to DQYDJ , there are an estimated 12,417,040 accredited investor households in the US , which accounts for over 9 percent of all American Households . Case in point : The local market has increased easily 20 % since 2019 . Let ’ s use our friends , a local couple who own a local portfolio for this illustration . For privacy reasons , let ’ s call them , “ PJ ”. They currently own five properties under their belt , and they saw a huge gain in their portfolio in just one year .
Here are the actual numbers of their fiveproperty portfolio :
● Property 1 – Appreciated $ 25,000 – 2 bed / 1 bath PUD – Home in a Planned Urban Development , 950 sq . ft . / B market rental
● Property 2 – Appreciated $ 15,000 – 1 bed / 1 bath Condo , 525 sq . ft . / C market rental
● Property 3 – Appreciated $ 70,000 – 3 bed / 2 bath SingleFamily Home , 2,050 sq . ft . / owner occupied , A market
● Property 4 – Appreciated $ 50,000 – 3 bed / 1 . 5 bath Condo , 1,250 sq . ft . / B market rental
● Property 5 – Appreciated $ 40,000 – Luxury Condo 2 bed / 2 bath + loft 1,050 sq . ft . / A market rental
Image by Gerd Altmann from Pixabay
The appreciation in one year alone was $ 200,000 .
Notice that the appreciation of the property is relative to the type of property it is . Appreciation also fluctuates depending on the property size , as well as the area it ’ s in , plus many other factors .
The $ 200K gain is not bad considering the pandemic created such an economic disaster last year . Also , the time spent on management is merely a few hours per month . As a bonus , the rents of these properties will be increasing as well , creating about $ 425 in added monthly cash flow in 2021 .
Plus , Zillow predicts properties to appreciate over 10 % in the same area this year . That will make take it to 30 % appreciation in just a matter of years .
The monthly income is just the icing on the cake ; the sweet spot is the appreciation , which added $ 200,000 to the PJ ’ s net worth . Now , they can utilize that appreciation and buy another property , which is exactly the game plan .
" When I choose a target area to invest in , I also like to start reading their local newspaper online . You ’ ll discover a lot of information that can help you , plus learn who the Top Producers are too — successful brokers always advertise in their local media ."
The bottom line is if you invest in highappreciating markets and also purchase right . By right , meaning finding undermarket gems that require rehab that “ force ” appreciation ; or buying an equityrich property — one that is severely priced undermarket for some reason or another .
Remember investors , the money is made at the PURCHASE . Savvy investors only buy properties that they know are real winners . Also , it ’ s a fallacy that all deals need tons of work . Not true ! We ’ ve purchased properties where one could eat off the floor at COE ( close of escrow ), yet they were still drastically under market . Why ? The buyer was merely MOTIVATED .
Many deals that the PJ ’ s and other savvy investors make are with local senior investors , many in their 80s who are simply ready to retire and cash out . Some need the cash to enter a retirement home or they move in with the kids . Others do not have heirs , or they have children who don ’ t want to become landlords . You see , to them and many , rental properties are seen as a “ headache ”.
I know it ’ s difficult for you and I to believe that there are individuals who do not see the value of owning real estate . Yet , it ’ s true . It ’ s happened over and over again in our market .
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