How to become a millionaire
The median price for a house in the United States is $177,000 in 2015. For this example we will use a house priced just above the median at $200,000. This will become a rental property, without getting into too much detail about numbers, we will assume that the rent on this property is inline, such that you will get positive monthly cash flow, even if it is just $50 per month. Never fund a rental, do your research, run the numbers, so you avoid this mistake.
If you don’t already own a home you may want this to be your first property, with the intention that it will become a rental later. This will allow you to get into the property with a smaller down payment. If you take this route, don’t try to pay down the mortgage instead save a little each month for your next house. When your ready to move to your next property, do so, but rent this one out do not sell it.
If you already have a house and you are happy with it great; stay put and start looking for a property that you can rent out with positive cash flow. For the purposes of this example again we will use a home price slightly above the median at $200,000.
Ok, for the numbers. A house purchased at $200,000 (market value) appreciating at 3% over a 30-year period will have a final value of 475,000. The mortgage has been paid off by you tenants, and you have received an increasing cash flow over that period, by adjusting the rents to market values.
Ok, wait a minute I thought you said this article was how to make a million dollars and this is only half way. Your right, but you didn’t consider the house your living in, and if it had a purchase price of $200,000 or more, and it is paid off, you should be at about $1,000,000 dollars and your not even counting money in other investments like your 401k and your spouse or partners 401k.
Your probably thinking, but this example is 30 years out, who wants to wait 30 years to make a million dollars. You can always add another rental property every few years to accelerate the process. Keep in mind what this example represents is at most a part time job that will not consume too much of your time. If it works out, and you buy enough properties it could become a full time job.
The 5 year plan
Buy your first house when you start working, buy your second home 5 years later and move into it renting out the first. Do this every 5 years. After 30 years your first home is paid off and you getting full cash flow on it and it is still appreciating in value. Do the math, you will have more money than you need to retire.