Author: James Davis
In 2001, I made an investment in a 5 acre parcel directly behind Rudy’s BBQ on Capital of TX Hwy (near Barton Creek Mall).
I paid $440K for the 5 acre parcel with a house on it. I rented the house out for the price of my monthly mortgage payment.
I put 20% down ($88k) and had a mortgage payment of $2,450 -- covered by rental income.
Six months later, I was offered $600k to purchase the entire tract. I netted a $110k profit on that transaction!
One was an 8-unit complex on 2-acres in Pflugerville, which in 2002 (when I made my purchase), had a population of approximately 12,000 people. I financed $155k of the $250k purchase price and used money from the 1031 exchange proceeds for the down payment.
Today, that property has had an average of $1,000 per month in positive cash flow. That’s equal to $156k in positive cash flow over 13 years.
Even better, since I closed on the initial transaction, the population of Pflugerville has grown to over 50,000 folks! (Think property value!!)
I’ll be selling that property for about $500k and will net $485k at closing. I owe around $80k on it to date, leaving me with $405k of profit to purchase another property.
When I do this, I will do another 1031 tax deferred exchange and will leverage my $405k at 75% LTV (that’s loan to value for the newbies).
With that much profit, I will easily have enough of a down payment to purchase a property in the $1.6M range.
My plan is to find a property which will allow me to make fiscal and physical improvements to get the CAP rate to 12 percent, an investment making my cash on cash return around 22 percent, and an annual return of almost $92k -- or $7,667 a month.
Side note: This gain doesn’t include any of the tax advantages that are available with real estate investing.
Conservatively, I am estimating that this will increase that value to about $8,755 per month!
As you are probably aware, real estate is a ‘packaged commodity’, meaning that rental values tend to go up and down with inflation, so what is positive cash flow tomorrow should be equivalent to today’s value in ‘buying power’.
From this one, singular investment, I will have achieved a monthly income for life, all by making an original investment of $41k and harvesting the equity of my 8-unit complex in Pflugerville.
And that is how I leveraged real estate to leverage my financial freedom.
And I can teach you how to do the same. Follow me on Facebook or shoot an email to jdavis4@kwcommercial.com
About James:
James Davis has worked for many titans in the corporate world, including: Mostek (3years), Motorola (3 years) Crystal Semiconductor/ Cirrus Logic (15 years). However, this wasn’t his passion. James had a passion for real estate. He retired from his Engineering position Have always been interested in Real Estate and retired from his Engineering position at Cirrus Logic on March 31, 2000 to pursue Real Estate full time.
In total, James has amassed over 30 years of experience personally investing in his own real estate holdings, completing 18 buys and sells of real estate totaling approximately $30M.
James currently owns 22 doors (4 duplexes, an 8-unit, a 5 unit, a SFR), valued at ~ $2M.
James currently resides (and sells in) Austin, TX and knows the entire city like the back of his hand.
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