Why “Boring” is the Best Investment Strategy for Newbies | Your Mortgage Guide

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Why Boring is the Best Investment Strategy for Newbies?

We teach our clients how to generate passive income from their rental investment properties.

Some of our clients flip homes and earn profit short term (in a few years), while others wait long term to build their assets that can be cashed in when needed.

Newbies (new real estate investors) normally want to cash in quickly to use that money elsewhere such as investing in other properties etc. Seasoned investors usually have extra money or resources to own a home long term without the rush to sell.

We teach newbies ways to not only hold on to the property long term, but also generate passive income from their rental property.

The “boring strategy” is one way newbies can invest for most profits long term.

The Boring Strategy

Let’s use an example using numbers similar to what an investor can expect with this boring strategy.

Introducing Peter and his wife Jessica Smith. Peter works in IT and earns $55,000 per year. Jessica runs eCommerce business selling products on Etsy, earning $12,000 per year, while looking after 3 kids.

Their total annual income of $67,000 per year. After taxes, they are left with $4,000 per month in total. They have approximately $25,000 in savings, in a TFSA (tax free savings account). They are homeowners and pay $1,000 per month for their mortgage, and save roughly $1,000 per month by living frugally.

One day they read an article on Your Mortgage Guide blog and decide to get serious about their financial future, rather than simply relying on Peter’s small future pension ($13,000 per year). They choose real estate investing as their tool for financial freedom.

The Smiths decide that they want to invest in rental properties, but they don’t want to manage the properties themselves. They decide to begin with nice properties that don’t need much work for renting (no major renovations needed). They want to buy these properties and hold onto them for an early retirement.

Property Research

The Smiths find their first rental property not far from their home. The property is a duplex (side-by-side homes) on the market for $120,000, but because it needs a little bit of work, they offer $110,000 with the seller paying closing costs. They put down 20% on the purchase. Both the units rent for $800 each per month, making them total monthly income of $1,600.

The Smiths make some calculations and find out they will get a passive income of around $456 (cash flow each month, after accounting for mortgage, costs and fees). They hire a property manager and within a month, they find a tenant and start generating passive income while the property value increases.

Rather than spending the cash flow to live, the Smiths decide to save the money to buy the next property.

First and Second year

After 2 years of renting the duplex out (24 months), Peter and Jessica saved $10,958 from their rental and another $12,000 from their personal savings for a grand total of $22,958.

Third year

With their savings, the Smiths are ready to invest in another rental property. To keep the math simple, let’s assume they buy a home with the exact same deal as before, with the same numbers. In reality, it could be different, but it’s the numbers that matter. Perhaps it was a single family home or an apartment – the numbers will change accordingly.

The Smiths buy the second duplex and are now able to save $912 per month in cash flow from both rental properties and additional $1,000 per month from their jobs, for a total of $1,912 per month. Within one year, they save a total of $22,944 in combined cash flow and savings from their jobs. And guess what they are going to do again?

Fourth year

Again, for simplicity, let’s assume they buy the same property again. The Smiths buy the third duplex and are now able to save $1,368 per month in cash flow from the 2 properties and $1,000 per month from their jobs, for a total of $2,368 per month. In another year, they save a total of $28,416 from cash flow and savings from their jobs.

Fifth year

This year, they want a break from home hunting. They take a year off and just save all the cash flow from their rentals and all the savings from their job. They save another $28,416 this year, leaving them with $56,832 in their bank account. With larger savings, they decide to buy a bigger property.

Sixth Year

Sixth year, they decide to keep $6,832 for emergency and use the $50,000 remaining to purchase a nice four-plex, listed at $200,000, a few hours from their home. Each unit will rent for $800 per month.

After crunching numbers, they estimate the property will produce approximately $1,034 per month in cash flow.

What do Smiths own so far?

At the end of sixth year, The Smiths own:

  • 3 duplexes, each producing $456 per month in cash flow,
  • 1 fourplex, producing $1,034 per month

They are still saving $1,000 per month from their personal jobs for a grand total of $3,402 per month or $40,824 by the end of sixth year.

Seventh year

The Smiths decide to take a break again in seventh year and save more. They are able to save another $40,824 and have a total $81,648 saved.

Eighth year

This year they want to buy again. This time, they decide to purchase 2 properties – another fourplex and another duplex (with the same numbers as earlier). Their purchase cost is just under $75,000 in down payments, leaving them extra money for an emergency fund.

Now, the Smiths have 4 duplexes and two fourplexes, generating them a total monthly cash flow of $3,892. Combine that with the $1,000 per month they are saving from their jobs and they now have just under $5,000 per month adding to their savings or $60,000 per year.

Confused yet? They still keep going…

Ninth year

They decide to buy one more fourplex (using the same numbers). They invest approximately $50,000, keeping the leftover for emergency fund. Now, they own 4 duplexes and three fourplexes, plus the $1,000 per month for a grand total of $4,926 per month in cash flow. They are still saving $1,000 from their jobs, leaving them $5,926 each month to save, or $71,112 per year.

Tenth year

After buying their last fourplex, they have over $20,000 left for emergency fund.

Now, their total rental passive income is $5,960 per month, and with $1,000 savings from their jobs, they have $7,160 every month to save, or $84,192 per year.

What’s Next?

At the end of ten years, The Smiths have the following portfolio and numbers:

  • Total Units: 24
  • Total Monthly Cash Flow: $5,960
  • Total Mortgages: $925,689
  • Total Value (assuming no appreciation): $1,280,000
  • Total Equity (assuming NO appreciation or decline or loan pay off): $354,311

Now, they have to consider whether they should keep moving forward with this same strategy, or pay off the loans.

The Smiths decide to start paying off the properties. They decide to make the minimum payments on all their loans except the smallest balance, and put everything into the mortgages until they are paid off. Then they’ll use the extra money to pay off the next smallest debt, and continue until all are paid off.

Jessica decides to quit her Etsy business and they decide to stop saving the $1,000 per month from their jobs, but will only use passive income from rentals to pay off the properties.

With an extra $6,000 payment per month toward the first debt, followed by the next, followed by the next (and so on), they estimate they will be able to pay off everything within 9 years.

After all the homes are paid off, the Smiths don’t have to make mortgage payments. They were paying $472 monthly on each of the four duplexes and $859 monthly for each of the fourplexes. Therefore, at year twenty, the couple would have an extra $5,324 every month in positive cash flow, leaving them with a total monthly cash flow of $11,284 per month or $135,408 per year (again, assuming no increase in rent over those twenty years!)

Twentieth Year

At the beginning of their journey, the Smiths were just 33 years old. Now, 20 years later, they own their rental properties free and clear. Assuming NO appreciation, whatsoever, the Smiths now own $1,280,000 worth of real estate that produces $11,284 per month in income at 53 years old.

If you’re thinking “$11,284 per month in income doesn’t seem that great for 20 years of work”, consider this:

  • This accounts for ZERO appreciation
  • This doesn’t take into account the rise in rents over the years. However, we assumed in this example was that inflation will rise at the same rate as rent, so eliminating both kept things simple
  • This strategy required just 8 purchases over a 20 year time frame, all with property management in place. This is passive income
  • With the “free and clear” properties, the Smiths could now sell them and increase their cash flow significantly

The Elephant in the room: Appreciation

Appreciation is like icing on the cake. Let’s look at the numbers, accounting for appreciation.

For the calculations, let’s assume a 3% average increase in income and a 3% increase in property values, with a 2% increase in expenses (I chose 2% for expenses because the mortgage amount is fixed)

After calculating the numbers, the Smiths see that in year twenty, their properties will be worth the following:

  • Duplex 1: $217k
  • Duplex 2: $204k
  • Duplex 3: $198k
  • Duplex 4: $171k
  • Fourplex 1: $200
  • Fourplex 2: $206k
  • Fourplex 3: $218k
  • Fourplex 4: $231k
  • Total: $1,645,000

If we are able to achieve a 3%, on average, appreciation over the coming 20 years, the Smiths’ net worth is $1,645,000 from their real estate purchases.


The strategy Smiths used was hassle-free – no middle of the night phone calls from tenants, no motivated seller phone calls, no house flipping, no dealing with contractors.

The process was boring but the numbers are impressive. This strategy shows how powerful long term real estate investment can be. You can become Wealthy through real estate investing on the side if you plan well and execute.

This was all possible because Peter and Jessica shopped for a great rental property. They didn’t just buy anything. They analyzed possible investment deals and bought the properties that generated profit. And that’s the secret to real success with real estate – being smarter than the average investor.

We hope this example gives you a blueprint for setting up your real estate business. We over simplified numbers so that you don’t get confused.

If you find this process hard, one of our professional mortgage brokers can meet with you and create a plan for you and be there with you every step of the way.


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