09/24/2025
How do you build wealth in real estate?
There are many ways but in this post we’ll breakdown the first rental we ever purchased & what we’re doing with it now.
8 years ago we purchased a home in Maryvale for $90,000. We spent about $20,000 in the beginning to fix it up & get it ready to rent. We’ve had the same tenant the past 8 years & have collected nearly $120,000 in rent. The tenant paid us back what we had invested into the property!
However there are other costs associated with owning a property. We were fortunate not to have a mortgage on this property so we didn’t have to pay interest on a loan. We also managed the property ourselves. However we did have property taxes, Insurance & miscellaneous repairs that cost us approximately $20,000 over the 8 years.
So what’s the plan now? Our tenant has decided to move out & we’ve decided to sell the home to get something newer. It was a great first rental but the house is almost 70 years old & it’s about a 30 minute drive from where we live. This is where the new property in Westbrooke Village comes into play.
We plan to put some additional money into our old rental before we put it up for sale but after everything is said & done we expect to net around $290,000. We will then roll the proceeds from our old rental into our new rental in Westbrooke Village. This has many benefits: We are trading our old property for a newer property that is closer to us, by completing a 1031 exchange we don’t have to pay taxes on the money we’ve made (for now) & we will have some remaining proceeds to invest (which I’ll get to in a second)
Since the new property we’re buying is cheaper than what we’re selling (about $100k difference) we have a couple options. 1) We can pay taxes on the $100k & do whatever we want with it. 2) We can invest that money into something that qualifies under the 1031 exchanges rules (More real estate, Storage facilities & other options). We haven’t decided what we’re going to invest the extra proceeds in yet but ultimately our cashflow will be higher than it previously was with our old rental making it another win.
You’re probably thinking we got lucky & bought when prices were cheap & you’re not wrong. However when we purchased that home we had similar thoughts to what you’re having. There were lots of articles talking about the housing bubble & how expensive real estate was. Looking back we can laugh, we’re glad that we made the leap to purchase our first rental .
On top of the cashflow & appreciation we’ve gained over the past 8 years we’ve also been able to depreciate the rental which saves us each year on our taxes. We also have a HELOC (Home Equity Line of Credit) on our rental which allowed us to leverage the property & have access to capital when we needed it for other investments, creating more income.
I know this post is longer winded than most but we figured other may benefit from our story of purchasing our first rental. Since then we’ve purchased several other rentals & have done similar things. We don’t have any plans to liquidate our rentals but continue to upgrade them to bigger & better rentals via the 1031 tax code. The upgrades will increase our monthly cashflow & pay for our retirement.
If you’ve considered investing in real estate or know of any properties we may want to purchase, we would love to hear from you!
