• Purchase price: $188,900

• Property type: New construction, single-family home

• Down payment (20%): $37,780

• Loan type: 30-year fixed DSCR

• Interest rate / APR: 7.125% / 7.508%

• Seller concessions: $2,500

• Total cash to close: $45,713
  (Down payment plus lender fees and closing costs after concessions)

Loan amount: $151,120

Monthly Ownership Costs

This Is A Screenshot From A Website Called Rentcast Which Will Give You A General Idea Of What A Home Will Rent For Based Upon The Street Address Given

Conservative Rental Income Assumptions

This model assumes slow, steady rent growth, not aggressive projections.

Property Management 

(The Real Cost of Being Hands-Off)

This investor chooses professional property management.

• Management fee: 10% of collected rent

Updated Monthly Expenses (Year 1)

• Base ownership costs: $1,340.54

• Property management: $195

👉 Total monthly expense:$1,535.54

Net Monthly Cash Flow (Year 1)

• Rent: $1,950

• Expenses (including management): $1,535.54

👉 Net cash flow:$414.46 per month

This cash flow is not spent.

How the Cash Flow Is Used

Rather than increasing lifestyle expenses, the investor allocates cash flow conservatively and this is done to be used in case any repairs need to be made on the rental property. Since this is a new home, the builder should issue a 1 year warranty.

Monthly Allocation

• $300/month → High-Yield Savings Account (3% Interest Gain) 

• $114.46/month → Stock market investment (8% Interest Gain)

This approach:

• Builds a true emergency fund

• Adds diversification outside real estate

• Maintains liquidity

• Keeps the model conservative and repeatable

• 
  

This is for informational purposes only and not tax advice. Everyone's situation is unique. Seek advice from your own tax professional concerning your unique situation.

Investor Profile (Tax Context)

• Age: 45

• Filing status: Single

• W-2 income: $100,000/year

• Federal marginal tax bracket: ~24%

• State taxes: Not included (varies by state)

• 
  

Why Taxes Don’t Destroy This Deal

Rental income is not taxed like W-2 income.

Deductible Expenses Include:

• Mortgage interest

• Property taxes

• Insurance

• HOA dues

• Property management fees

• Depreciation

Depreciation (Estimated)

• Depreciable value: ~$151,120

• Annual depreciation: ≈ $5,495

Result (Simplified)

After deductions and depreciation, the rental income is close to tax-neutral, even though it produces positive cash flow.

This is one reason high-income earners often use real estate as a long-term wealth and tax-efficiency tool.

(Always consult a tax professional.)

Property Growth & Equity After 5 Years

• Annual appreciation: 2.125%

Estimated value after 5 years: ≈ $210,300
Remaining loan balance: ≈ $141,000

👉 Equity after 5 years:≈ $69,300

Investment Account Growth (5 Years)

📈 Stock Market Portfolio

• Initial investment: $114.46

• Monthly contribution: $114.46

• Assumed return: 8% annually

Total contributions: ≈ $6,982
Estimated value after 5 years:≈ $8,500

🏦 High-Yield Savings Account

• Monthly contribution: $300

• Interest rate: 3%

Estimated value after 5 years:≈ $19,500

This is fully liquid capital.

Total Net Worth After 5 Years

What This Scenario Actually Shows

This investor:

• Bought one modest new construction rental

• Used professional property management

• Took zero shortcuts

• Made conservative assumptions

• Invested only the remaining cash flow

• Never relied on appreciation alone

And still built nearly $100,000 in net worth in five years — while maintaining a full-time W-2 income.

Final Thought

This is what boring, disciplined investing looks like.

Not flashy.
Not viral.
But repeatable.

Wealth isn’t built by chasing perfect deals — it’s built by executing solid ones consistently.

Important Disclaimer

This example is for educational purposes only. Returns, tax outcomes, and expenses vary by individual situation. Always consult your CPA, tax advisor, or financial professional.