The Real Estate snowball effect

It is often said that Real estate is not a “get-rich quick” scheme. Whilst we agree with that, it surely is a “get-rich consistently” scheme. What do we mean by that? Well, consistently investing in Real estate can produce some stellar effects. It takes times to build the momentum but once the flywheel is up and running, it sure as heck runs! And if one is smart about it, one can program the flywheel to keep on running without putting in a lot of effort or even no effort.

It is illustrative to look at some numbers. The attached spreadsheet walks through one hypothetical 10 year investment horizon and showcases the power of real estate investing. First, some assumptions: We assume that every year we initiate a fresh investment amount of 50k, a cash on cash yield of 8% on any investment and a 16% annualized return realized at exit. Please note that these numbers are very typical of the offerings we bring to our investors.

Monthly cash flow is calculated as an 8% yield on the cumulative investment (net worth) in any given year. For instance, in the first year one starts with 50k leading to an annual cash flow of 4k (50k*8%) and a monthly cash flow of $333.33. As time passes and as one’s investment amounts grow, the monthly cash flow and the net worth grows. For instance, in year 6 the monthly cash flows stands at $2333.30 and the net worth at 300k. Here is where the magic happens now!. Come end of year 6, the investment we made in year 0 matures and so does our net-worth. In year 7, we invest 50k as usual but we get a 100k bump from that exit leading to a cash flow of $3000 and a net-worth of 400k. This repeats in the subsequent years as we reap the fruits of our investments. By the time year 10 ends, we stand at a monthly cash flow of $5000 and a net-worth of 800k!

In the same phenomenon, If you invest 100k per year instead of 50k, at the end of Year 10, you will get 10k per month of cash flow and Net worth of $1.6 MM.

Now, that is some snowballing! The question is if you are ready to take that first step. We cannot wait!

Take the calculator for a spin and give us feedback.

To your Wealth!

- Zovest Team

Syndication Snowball Calculator