Mortgage Killer Accelerator

Hypothetical game plan, not guaranteed

150 paid-off rentals on a $120,000 job

Age 35 to 85. Five phases. Thirty-two cycles. One fictional person.

Who

The player

  • Fictional, 35 years old, $120,000 a year, 3% raises, works until 67
  • $30,000 saved. No inheritance, no partners
  • Saves 20% of gross pay for houses
  • Buys $100,000 houses that rent for $1,050 a month

Result

The answer

155houses paid off at 85
81age debt-free
$1.1 millionnet rent a year at 85, today's dollars

Possible in the model only if the plan goes roughly as drawn. Small changes cut it to about 50 to 140.

Math

One house, the whole idea

  • Rent $1,050 a month, expenses 40%: nets $630
  • Loan payment $537: about $93 a month left
  • Paid off: the full $630 is free
  • Thin at first, strong at the end. Repeat 155 times.

Plan

Five phases

Launch35Build40Scale60Kill the debt72Harvest8185First houseFirst paid offPeak: 122 housesDebt-free

32 cycles

The flywheel

Save from the jobBuy or rehabRent itNet rent + savingsRefinance cash backBuy againPay off debtFreed payments32 cyclesone loop, repeated for 50 years
  • Save from the job
  • Buy or rehab, then rent
  • Refinance rehabs to get cash back
  • Buy again
  • Then pay off, and each paid house frees cash for the next

Phase

Launch: ages 35 to 39

Build the savings machine and buy the first homes with ordinary loans.

  • 1. Withholding reset to savings
  • 2. Freed-payment roll
  • 3. Pretax and credit sweep
  • 4. Found-money sweep
  • 5. House-hack ladder
  • 6. Rent the home you leave
  • 7. Live-in improve and sell
4houses at 39
0paid off
$272,260debt, today's dollars

Phase

Build: ages 40 to 59

One or two leveraged buys a year, then the first rehab-and-refinance deals.

  • 8. Buy, rent, hold
  • 9. Rehab and refinance (BRRRR)
  • 10. Reserve ladder
  • 11. Yearly rent review
  • 12. Turnover make-ready
  • 13. Insurance re-shop
  • 14. Property tax appeal
  • 15. Same-payment refinance
  • 16. Seller-financed buys
  • 17. Assumable loans
  • 18. Records and depreciation
  • 19. Manager hand-off
  • 20. Lender ladder
39houses at 59
0paid off
$2.0 milliondebt, today's dollars

Phase

Scale: ages 60 to 71

Four rehab deals a year plus leveraged buys, on portfolio loans after the first ten.

  • 21. Like-kind exchange upgrade
  • 22. Stress drill
  • 23. Prune and replace
  • 24. Rehab crew cycle
122houses at 71
6paid off
$6.1 milliondebt, today's dollars

Phase

Kill the debt: ages 72 to 80

Stop buying. Every dollar of net rent goes to the highest-rate loan first.

  • 25. Avalanche the portfolio
  • 26. Paid-house snowball
  • 27. Recast after big payments
  • 28. Servicer audit
122houses at 80
112paid off
$415,257debt, today's dollars

Phase

Harvest: ages 81 to 85

Debt-free. Net rent buys houses outright, for cash, every year.

  • 29. Cash-buy cycle
  • 30. Required distributions to houses
  • 31. Estate and step-up planning
  • 32. Family office hand-off
155houses at 85
155paid off
$0debt, today's dollars

Chart

Houses by age

04080120160Age 35Age 45Age 55Age 65Age 75Age 85OwnedPaid off

Chart

Debt rises, then falls to zero

$0$2M$4M$5M$7MAge 35Age 45Age 55Age 65Age 75Age 85Debt (today's $)Peak at 71

Chart

Rent passes the job

$0k$300k$600k$900k$1200kAge 35Age 45Age 55Age 65Age 75Age 85Net rent (today's $)Job pay (today's $)

What if

Stress tests

The plan as drawn155Rates 1 point higher111Expenses 45% of rent, not 40%95Prices and rents grow 2% a year, not 3%132Only 2 rehab deals a year139Saves 15% of pay, not 20%107No rehab deals at all112$160,000 houses at $1,500 rent55Rents grow 2% while prices grow 3%49Everything a little worse99Goal: 150

Risks

Where it can break

  • Peak debt is about $17.7 million at 71 ($6.1 million in today's dollars) across 116 loans. A deep recession with high vacancies at that point is the single biggest danger.
  • Each leveraged house only nets about $100 a month at first. A few bad tenants or a roof can wipe out a year of a small portfolio's profit.
  • Lenders can change rules. Portfolio and rental-income loans can have higher rates, shorter terms or balloon dates.
  • Rehab deals depend on finding houses below value and on reliable crews. Fewer deals means fewer houses (see the stress tests).
  • Insurance and property taxes have been rising faster than rents in many areas. If costs reach 45% of rent, the result drops to about 95 houses.

Story

Milestones

  • 35: Buys house number one with 25% down.
  • 39: Four houses. Saving 20% of pay.
  • 45: Ten houses. Standard loans are maxed at ten; moves to portfolio lenders.
  • 53: First rehab-and-refinance deal.
  • 60: 44 houses. Four rehab deals a year from here.
  • 65: First house paid off.
  • 67: Retires from the job. Rent now carries everything.
  • 71: Peak: 122 houses. Stops buying.
  • 72: Kill-the-debt phase: every dollar goes to the highest-rate loan.
  • 81: Last loan paid off. Debt-free.
  • 85: 155 houses, every one paid off and rented.

Do it

Next steps

  • Put the client's real numbers into the plan, never sample ones
  • Pick the market, lenders, manager and crew first
  • Run the stress drill every year
  • Use a CPA, a real estate attorney and an estate attorney

Hypothetical, not guaranteed. A fictional person and a simplified model. Not an offer, and not tax, legal or investment advice.

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