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Tax Free Income - The Ideal Wealth Builder

Aug 17, 2007
This ideal wealth builder concept is very simple, and can be summed up in one sentence! Buy one investment property per year for the next 10 years. Or be even more aggressive and buy 2 properties a year. Double your tax-free income! However, for this overview, we will use one property. Here's how it works:

Find yourself an Exclusive Buyer's Agent who knows what you're trying to accomplish. This person will be invaluable to you in locating the right properties. This person will not have any conflict of interest and will be there just for you.

Then get to work! Locate and purchase one great investment property. Try to stay in a $125,000-$150,000 price range, because you want this property to appeal to the widest segment of renters without being on the low end. Look for a home in an up-and-coming area. One that is well constructed. If it's priced under market, that's great. But keep in mind that the most important consideration is the location and the property itself. You're going to be in this for the long-term!

Year #2 - Repeat the same procedure. Then keep repeating the procedure for up to 10 years, always being careful to find just the right property.

The example I'm presenting will be based on the following considerations:

* The home has been maintained in ideal condition.

* Both the area and the home have appreciated in value.

* The rental market for the area has also increased.

So, here's how it works:

Refinance the home you bought in year #1. This $150,000 home (at least in the Middle Tennessee market) should now (10 years later) be worth $225,000-$250,000, if you have purchased it following the above guidelines. You will have also kept the property rented, which has made all your payments...and you've been able to take advantage of all the tax breaks associated with rental property.

Proceeds from a refinance are not taxable income, so you are looking at approximately $100,000.00 of tax-free income. You've not sold the home (which would be taxable income)...you've only refinanced it! Could most people live on this amount of money for a year? You bet they could!

OK - So now we start repeating the process all over again. In year #11, you will refinance the property you bought in year #2...and so on. This system will provide tax free income for years to come. You will only have to work if you choose to do so! Isn't that a great feeling?

Just be sure to keep the properties in good condition and they will serve you well for years to come. It just requires some careful planning.
About the Author
Pam Rumley is a veteran real estate broker in the Nashville, TN area. She is a true Exclusive Buyer's Agent. There is never a conflict of interest regarding your real estate transaction. You can be assured of receiving 100% of her attention and loyalty - 100% of the time.

For more information, visit her comprehensive website, www.NashvilleRealEstateAuthority.com
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