People think that you need a lot of money to get into real estate investing, but with the principle of infinite returns, you don’t need hundreds of thousands of dollars to get in and start making passive real estate income.
Here’s just one example of how you can achieve infinite returns with a small upfront investment:
In June of 2021, I purchased a simple condo for $156,000. It was nothing extravagant. I put 20% down to avoid private mortgage insurance (PMI), which equated to $31,200. The remaining mortgage totaled $124,800.
By January 2022, this condo had appreciated nicely and was now worth $199,000.
With that level of appreciation, I chose to refinance and get another 80% mortgage. Based on the new appraised value, the refinanced mortgage was worth $159,200, which I used to both pay off my old mortgage of $124,800 and pay myself back for the original investment of $31,200 that I had personally put into the deal.
Just like that, the first mortgage was paid off, the $31,200 went back into my wallet, and I had set myself up for all the following “infinite returns”:
- No Money in the Deal: As a result of redoing the mortgage, my own money was no longer tied up in the deal.
- Equity: Even after paying myself back, I still had $39,800 of equity that I hadn’t even tapped into yet.
- Asset Appreciation: I’m still getting asset appreciation on the property as the market goes up and real estate appreciates in value each year.
- Cash Flowing Property: Because I rent out the condo, my tenants are paying the mortgage down for me each and every month and providing passive rental income.
- Tax Benefits: The IRS allows for a beautiful thing called depreciation on the asset, which allows me to reduce my capital gains through that depreciation mechanism.
There you have it, infinite returns – a method by which you can refinance a property, pay off your old mortgage, return whatever you originally invested in the deal, and still get all the benefits of owning an investment property.
