How do I make $1 million in annual cash flow in less than 10 years of investing?

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Becoming a successful investor does not happen overnight. It requires patience, hard work and the ability to reassess after making any mistakes. Looking back on more than a decade of investing in real estate, I’ve concluded that five things have been the most influential in my success to date. These five things will also be essential throughout my lifelong career as a real estate investor.

In less than 10 years of deliberate investing, I was able to amass an eight-figure investment portfolio that generates over $1 million in net cash flow per year. This was accomplished by following these five core concepts listed below. I hope this helps you meet your investment goals in less time than you think!

1. I started investing and never stopped

I started investing early in my life, but it is never too late to do so. Time is on your side when you own long-term rental real estate. During my time as an investor, I never let analysis paralysis stop me from taking action and investing in an asset I believed in. Every year, I found ways to buy more real estate, which meant I needed to be creative and consistent in order to keep going strong. cash flow.

Even when I lost money on a deal or encountered major obstacles, I continued to invest in real estate. Over time, the mistakes you make will help you become a savvier investor. Start investing and keep investing to earn the returns you are looking for. Don’t lose sight of the fact that rental real estate income will grow over time. Better than taking too long to find the right property.

2. Where did I intentionally buy the real estate

We always hear about location, location, location. But what does this mean? This means finding the right macro and micro markets that align with my investment goals. Different places are more suitable for different people and investment strategies. One thing that allowed me to take my portfolio to the next level and generate high amounts of passive income quickly was not limiting myself to my local market.

Instead, I set very specific investment criteria based on my goals. I then invested in the markets that best suited these goals and provided the best returns. yes that means i need to educate myself other markets And build teams of professionals working in these markets. It is a process that takes a lot of time and effort but is necessary to build the right team.

I was always on the lookout for the next best market to invest in, which didn’t let me be satisfied with investing in just one spot. Even as I continued to expand to a location where I had developed an established team, I moved to other markets for better portfolio diversification.

3. I used all available resources to help me grow my portfolio

Capital is the most limiting factor for anyone looking to grow their portfolio! It is essential that you use all the resources available to you. Once your down payment money is over, you need to save for the down payment on your next property. However, you should look into other ways to gain access to more capital. The most successful investors look at all available resources. This allows them to aggressively grow their portfolio, and that’s exactly what I did.

Over the years, I have used several methods to acquire and own more real estate. For example, I have access to equity in my existing investment properties home equity line of credit (HELOC), These funds are used for the down payment and leverage. I have also converted mine IRA in a self-directed IRA, which is a type of account that allows you to invest in real estate. Over time, I have partnered with other individuals and borrowed money from associates and private investors who are also interested in real estate. Some of the other opportunities I’ve looked at to raise capital include:

• Cashing in a smaller portfolio of stocks to use as down payments on more rental properties.
• Side hustles were created, only a few of which focused on real estate.
• Saved the income from my rental portfolio for reinvestment.
• Built an active business at REI resulting in Rent to Retirement.
• Leverage as much as possible—responsibly, of course.

Scalability is the name of the game if you want to create substantial passive income and generational wealth with your real estate portfolio. These funds will compound over time as you have more capital to reinvest. Your main goal is to earn more income in a way that accelerates your goals.

4. I maximized tax benefits

Despite being boring to most, the tax advantages you have as a real estate investor are essential to your future success. This is the most powerful aspect of REI because it compounds over time. Most people are not able to take advantage of tax benefits to their full potential because they are not aware of it. Keep in mind that tax benefits are not available with other asset classes in the same way that they are in real estate.

I used my current portfolio to buy more properties and always reinvested any positive cash flow. This was accomplished through the performance 1031 Exchange, using HELOCs, and cash-out refinances in properties that increase equity over time. these are all Tax-Deferred or Tax-Exempt Strategies Using equity in a property to reinvest in additional properties. I further increased the depreciation by running a cost segregation study on all of my assets. Doing so helps accelerate depreciation by allowing me to take a larger loss on the asset in the first year, which in turn offsets the income earned from all sources of income. Doing so allowed me to have more capital to reinvest and a quick return on capital that would otherwise have been paid in taxes.

All of the investment properties in my portfolio show losses each year through normal depreciation and expense write-offs. Even though these properties generate positive cash flow, the tax benefits at my disposal allow me to reduce my taxable income substantially. These same benefits are available to any investor who owns rental real estate. This is why we often refer to cash flow from rentals as “tax-free income.” Income based on my current state and federal tax brackets.

Even if you are aware of some of your tax benefits, most people are not aware of each and every write-off and tax deduction available when investing in rental properties. It’s also common for investors not to track expenses properly, which means they can’t take full advantage of all tax deductions. It is estimated that about 97% of people who own investment properties have at least one inaccuracy in their investment tax filings. This point leads me to my final point.

5. I have added the right people to my team

I have made sure to surround myself with top-notch professionals in all aspects of my investing career. Everyone I add to my investment team is a professional investor himself. This allows them to provide the best advice related to the investment goals I am working towards. The team you build is essential to your success as a real estate investor.

Professionals you should work with include financial advisors, accountants who specialize in real estate, and tax strategists. Keep in mind that tax strategists are different from accountants. An accountant is more defensive in nature when it comes to preparing and filing taxes for you. In comparison, tax strategists are on offense and will help you strategize the optimization of your portfolio.

Additionally, you will need to find lenders who offer multiple loan products, lend in multiple states, and are investors themselves. Look for contractors, property managers, brokers and builders who are all professional investors.

It is not an easy or quick process. However, I’ve always found the right people to work with, and I’ve done whatever it takes to retain them. Sometimes, this means going through 10 or 20 bad contractors or property managers before finding the right fit. At Rent to Retirement, we have these team-building resources available to you nationwide, which can prove invaluable when striving to achieve long-term success as an investor.

conclusion

During my time as an investor, I have only taken advice from people who are where I want to be. I specifically seek out mentors who have cultivated the level of success I am striving to achieve. There are many people who are quick to offer their opinion on things with which they have no experience, which is especially common in the real estate investing sector. I never listen to these people. Instead, the professionals I’ve consulted have always been more successful than I am. I look for ways to add value to their life or business so share some nuggets of wisdom about how they earned their success over time. This process alone has made me millions of dollars!

Following these five steps consistently over time is an effective way to build financial independence and generational wealth through real estate investing. It takes time and effort, but it’s also not a very complicated process. My biggest advice would be to start investing now and never stop investing. Continually apply all the lessons learned to become a saver and a more successful investor. Real estate investing is a lifelong journey where there is always something new to learn!

Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.