In 5 years, Mr and Mrs Cannes acquired 6 rental properties and a home. The rental profits from all properties are now enough to replace one income and make them financially independent. The following were the steps taken by Mr and Mrs Cannes.
As Mr and Mrs Cannes were finishing university, their jobs during school and after graduation went to aggressively repay most student loans and save up for their first down payment Their lifestyle decreased as they started cooking their own meals, biked to work when they could and lived as frugally as they could.
Mrs Cannes buys first rental property
Mrs Cannes is a risk taker at heart and had been thinking a long time about buying a rental property. With her new salary as an engineer, she decided to dive into the real estate market coincidentally right before the local real estate started to crash in 2007. She knew her first home would be a rental as it had to be bought in a favorable location at an affordable price. She bought it owner occupied with a 3% down payment (in the good ol’ days when 0% down payment was available). She and Mr Cannes lived in it while renovating to make it favorable for tenants and refinancing. Once the renos were done, she refinanced it and pulled $50k for the next property despite the real estate crash. She did not have luck on her side as she was even laid off from her cushy job. She got back on her feet being the optimist that she is. Finally she leased it and went running to the bank with her lease for her next mortgage approval.
Mrs Cannes buys second rental property
Mrs Cannes knew that banks offered favourable rates and conditions to owner occupied properties so she made sure to fulfill that requirement by living in it first. She bought another house owner occupied with 5% down payment while her first property was rented out. She and Mr Cannes lived in it, reno’d it and finally leased it.
Mr Cannes buys first rental property
Mr Cannes is a conservative investor. He saw his then-girlfriend go through ups and downs with her first rental purchase but realized she had gone through a big learning curve and was turning a profit on her first and second property. Not wanting to be left behind in the wealth building, he decided to follow her strategy and buy his first owner occupied house with a 5% down payment that Mrs Cannes had encouraged him to save. They lived in it, reno’d it, and finally leased it.
They repeated the process over 5 years and successfully acquired 6 rental properties. Their down payments ranged from 5% to 20% depending on the property and much of that money came from refinancing properties or saving their hard earned salaries.
Last house is home
After their success and meeting their passive income goal, the last home that was bought is the house they now live in and plan to live in for the next 2 decades. They bought it to fill their needs and not the needs of potential tenants. Their home is actually much smaller than most of their rental properties because they want to reduce their environmental footprint and don’t want to maintain a large home.
Frugality and savings throughout the years
During first 3-4 years, they were very fugal and saved all of their earning on building the next down payment or paying off reno loans. When they stopped buying rentals, they untightened the purse strings a little and started enjoying bigger vacations and more consumer items that they had restricted during the first phase of buying rentals. Finally they decided to buy nicer furniture and other items that would bring joy to their day to day life.
Where are they now?
Since buying their home, they are now focusing at repaying their home mortgage within 5 years. Once it is paid off, Mrs Cannes will be able to retire and accomplish what her heart wants.
As an alternative, they could continue to buy more rentals instead of repaying their own mortgage aggressively. They could decide to buy commercial properties as an alternative in order to diversify. Instead they choose to be more conservative by deleveraging their aggressive property portfolio as they prepare for retirement.