After a lot of positive response from my post last week The tortoise wins every time I decided to see what other theories we could test out.  My business partner Stephen Smith suggested we look at something simple like a $100,000 property purchased every year for ten years.  At first, I thought that this would cost more money than my slow and steady approach of buying a new property every five years. But there are some added benefits to buying this way.  We will have to put more money down, but we will speed up the buying process which might make us a millionaire sooner than we expect. So here is the plan.  We buy a $100,000 home every January.  We put 20% down so we can avoid paying PMI.  Because we are "investors" our rate will be a little higher than if we were owner occupants.  For simplicity sake, we are going to assume that rent covers all carrying the cost of the loan, not a penny more or a penny less.  Yes, you will get more rent over time than you need, but that is a whole different post.  We will assume that these properties appreciate at an average rate of 3%(1)

Ready, set, go!

Year one is upon us and we buy our first rental property.  $20,000 down payment, loan of $80,000 rate of 6%. (we are going to use 6% for the rate every time just to keep things simple.)  After we close we have renters paying a little more than it really cost to own it, but for our math, we are going to assume that money is in savings never to be touched.  (well, unless we need a new roof, or AC, or foundation)  For all our calculations we will assume that the property is self-sustaining.


Year two and three go the same way.  Each year we are saving up $20,000 to buy a new property.  Sounds expensive I know.  If we have just purchased property #3 we now have put $60,000 into our investments.  Let us see how things look.

  • Property 1, is now worth, $106,090 and we have paid the loan down to 77,884.82.  A value of $28,205.18
  • Property 2, is now worth $103,000 and we have paid the loan down to 78,933.04.  A value of $24,066.96
  • We have paid in $60k for three properties and their combined value is now $309,030.  After we paid the debt on the property we will have a profit of $72,272.14

Years 3-7 go as planned.  We have just purchased our 7th property.  We have invested $140,000 in 7 years.  A very strong investment.  By now we have realized that each property is a little bit different part of town, as we had to move around a bit to keep to our criteria of $100,000 homes.  Also in real life rates would have changed a little.  Since it is hard to predict rates we are keeping ours in the example at 6%.  If your rates go up, rents will go up as well because fewer people will be able to buy homes, so it should all work out. Either way, we are keeping to our assumption that the properties more or less pay for themselves.  So where do we stand as we start year 7 with our seventy property?

  • Property 1, is now worth $119,405.23, loan balance is, 73,004.31, giving us a value of $46,400.92
  • Property 2, is now worth $115,927.41, loan balance is, 74,336.06, giving us a value of $41,591.35
  • Property 3, is now worth $112,550.88, loan balance is, 75,590.44, giving us a value of $46,960.44
  • Property 4, is now worth $109,272.70, loan balance is, 76,771.95 , giving us a value of $32,500.05
  • Property 5, is now worth $106,090.00, loan balance is, 77,884.82, giving us a value of $28,205.18
  • Property 6, is now worth $103,000.00, loan balance is, 78,933.04, giving us a value of $24,066.96
  • Property 7, we just purchased for $100,000,  Balance is $80,000, value is $20,000

After 6 full years and our 7th purchase, we have invested $140,000 in cash, we have $766,244 worth of real estate.  If we sell everything today and pay off all the loans we will have around $239,722 left.(2)  That is about a 12% ROI each year.  So we are doing ok.


It is now year 15.  We have purchased all ten properties as planned.  Investing some $200,000 in ten years.  A very impressive number if I do say so myself.  Retirement is getting closer every day.  So what do things look like now?  Well, we have had some fluctuation in the market.  Ups and downs on price and rate.  We have been able to dollar cost average the purchase of real estate.  When the market went down, we got to buy in a little nicer area, when the market was up we had to buy out-of-town.  But now we have 10 great properties and let's see how we are doing at the end of year 15.

  • Property 1, is now worth $155,796.74 loan balance is, 55,852.03, giving us a value of $99,944.71
  • Property 2, is now worth $151,258.97 loan balance is, 56,839.08, giving us a value of $94,419.89
  • Property 3, is now worth $146,853.37 loan balance is, 59,109.94, giving us a value of $87,743.43
  • Property 4, is now worth $142,576.09 loan balance is, 61,248.88, giving us a value of $81,327.21
  • Property 5, is now worth $138,423.39 loan balance is, 63,263.55, giving us a value of $75,159.84
  • Property 6, is now worth $134,391.64 loan balance is, 65,161.19, giving us a value of $69,230.45
  • Property 7, is now worth $130,477.32 loan balance is, 66,948.58, giving us a value of $63,528.74
  • Property 8, is now worth $126,677.01 loan balance is, 68,632.13, giving us a value of $58,044.88
  • Property 9, is now worth $122,987.39 loan balance is, 70,217.88, giving us a value of $52,769.51
  • Property 10, is now worth $119,405.23 loan balance is, 71,711.51, giving us a value of $47,693.72

That is $1,234,420.09 worth of real estate that we only paid $200,000 for.   Not bad.  Two other things are also happening that we are not taking into account.  One is by now your rents have increased by about 3% a year.  So most likely each of these properties is making you more money per month than you would need to cover the notes.  Since the notes are at a fixed rate, the largest part of your expenses is fixed.  Taxes will go up and down, and maintenance will also cost more now, but on average you will be making more money.  You can either be pocketing that money or, you could be using it to pay down the debt.  Either way, the increase in rent would have put your return much higher than I have calculated here.


You don't have to buy anything "special" or at a great price to make money in real estate. Sure those things help amplify the results, but nothing does more for real estate than time.  Time is the greatest creator of wealth in real estate.  The longer your time horizon the less critical it is to by the "right" property.  Making sure you buy a good rental property that will stand the test of time is job one.  Everything else is just a bonus.  


  1. If we pick the right properties we should do better than 3%, but because I don't like to oversell we will play it safe with 3%.
  2. I did not include real estate commission or closing fees because those vary from state to state, and we are not ready to sell just yet.