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The Longterm Plan -
Projected growth curve of an Investment Portfolio


The following is a projection of a sample portfolio, it is a realistic growth pattern of value. A conservative rate of growth of 6% a year will show the amount of money one can accumulate in a 12 year period.

Starting today controlling $1,000,000 in residential real estate we will calculate a conservative linear (meaning “steady”) rate of growth of 6%. Historically this is the rate of appreciation that the average home in the U.S. Has experienced in the past.

Year 0-1 - $1,000,000 X 6% = $60,000 $1,000,000 + $60,000 = $1,060,000
Year 1-2 - $1,060,000 X 6% = $63,600 $1,060,000 + $63,600 = $1,123,600
Year 2-3 - $1,123,600 X 6% = $67,416 $1,123,600 + $67,416 = $1,191,016
Year 3-4 - $1,191,016 X 6% = $71,461 $1,191,016 + $71,461 = $1,262,477
Year 4-5 - $1,262,477 X 6% = $75,749 $1,262,477 + $75,749 = $1,388,226
Year 5-6 - $1,388,266 X 6% = $83,296 $1,388,266 + $83,296 = $1,471,562
Year 6-7 - $1,471,562 X 6% = $88,294 $1,471,562 + $88,294 = $1,559,856
Year 7-8 - $1,559,856 X 6% = $93,591 $1,559,856 + $93,591 = $1,653,447
Year 8-9 - $1,653,447 X 6% = $99,207 $1,653,447 + $99,207 = $1,752,654
Year 9-10 - $1,752,654 X 6% = $105,159 $1,752,654 + $105,159 = $1,857,813
Year 10-11 - $1,857,813 X 6% = $111,469 $1,857,813 + $111,469 = $1,969,282
Year 11-12 - $1,969,282 X 6% = $118,156 $1,969,282 + $118,156 = $2,087,439

Now that your portfolio has grown what do you do with all that equity? Sell? Exchange? Hold? The answer to this question is dependant on each individual investor, however do you remember the saying “It’s not what you earn but what you keep”? To apply this principle to your investment portfolio here is an excellent strategy that will keep the maximum amount of money in your pocket and out of the government’s pocket.

Instead of selling or exchanging why not refinance and free-up the equity in your portfolio. Get an 80% refinance loan and leave a 20% equity position untouched. Take the proceeds from the refinance and payoff the existing loans the remaining proceeds are there for you to do as you please. Remember the proceeds are from a loan so the money you receive can not be taxed.

1) You can now continue to hold your properties and they will continue to “debt-service” them-selves (the rents will continue to pay the monthly mortgage payments) and appreciate..

2) If you want to change to different or newer rental properties don’t sell but do a 1031 exchange. This is an IRS approved transaction which allows owners of investment rental properties to “Trade up” to another property without any capital gains tax consequences. The tax liability is merely “deferred” until a later date but this date can be pushed back indefinitely because you can repeatedly do 1031 exchanges.

Okay, what just happened?...Let’s recap.
You acquired control of rental property with little down.
You allowed the property to appreciate in value while taking advantage of the tax benefits.
You freed-up equity by refinancing, cashed out money without paying any taxes.
You exchanged up to other properties to begin the cycle again. Well done!!!



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