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How to Create Wealth Investing in Real Estate

The biggest factor that real estate investors can use to accelerate the growth of their wealth is leverage.


[Updated: Feb 04, 2021 ] Dec 20, 2019 by Ruth Lyons

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Rental property purchase price $      100,000
Mortgage (80%) $        80,000
Down payment (20%) $        20,000
Closing costs $          5,700
Total cash outlay -- Year 1 $        25,700
Metric Year 1 Year 2  Year 3
Cash outlay $        25,700 $          -   $             -  
Total annual rental income $        16,200 $      16,200 $     16,200
Total annual expenses $        11,000 $      11,000 $     11,000
Positive cash flow (net annual profit) $          5,200 $        5,200 $       5,200
Annual ROI on initial investment 20.23% 20.23% 20.23%
Metric Year 1 Year 2 Year 3
Mortgage balance $        80,000 $      78,718 $     77,473
Annual equity growth $          1,282 $        1,245 $       1,310
Property value (appreciating at 3%/yr) $      100,000 $    103,000 $   106,090
Total equity ownership  $        21,282 $      25,527 $     29,927

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