While it is generally true that money begets money, most everyone in the United States will be able to qualify for a loan to purchase their first home. So, why not take this golden opportunity to become a real estate investor, rather than just looking for a nice place to live?  This guide should help you answer that question, and take steps toward your financial independence.

Why Share Your First Home?

Most people consider their home an asset because they have a great deal of money tied up in it, and historically the value has tended to grow with time. But in my estimation, your home is actually a liability unless it is putting money in your pocket. It COSTS YOU MONEY to operate it (think about the taxes, utilities, and insurance). Shouldn't an asset be putting money in your pocket, rather than draining you of cash?  That's precisely what I think! 

My recommendation is that for their very first home, everyone start by purchasing the largest multi-unit dwelling that they can afford, and living in one of the units. In my case, that was a duplex. Share the house, share the mortgage payment. You do the math!  Here's a simple example.

Simple Math

It doesn't take a rocket scientist to do this simple calculation. Say, for example that you purchase a duplex for around $100,000. You move into one of the apartments, and rent the other one out. So, from day one, you have help with your mortgage payment. If your payment is $800, and you rent the other apartment out for $400, then your net payment is only $400 a month.  Save the rest.  I'll tell you what to do with it in a minute.

In addition to this immediate cash flow that drops directly to your bottom line each month, many expenses can be written off against your rental income, including depreciation, insurance, landscaping, and some others. Any repairs you make in the apartment, in addition to some share of your other expenses should be deductible. Come tax time, look for even MORE savings, especially if you can show a loss on the property - and most likely you will be able to do this. You should sit down with a tax advisor well in advance to be certain that you are maximizing your savings on April 15th.  

Movin' On Up

With the money you have saved, fix up the apartment that you are living in and prepare it for rental as well.  Heck, you can even plan to rent out the garage separately if you have one. Then, use the rental income from BOTH apartments to qualify for another property.  Then do it all over again.  It is THAT SIMPLE.  Soon, you'll be building enough monthly cash flow to retire comfortably, even without a pension. It doesn't take many properties to make this happen.  And the nice thing is that since you have lived in the houses and understand the ins and outs of maintaining them, you'll know exactly how to fix any problems as they arise.

Hire An Accountant

There, I said it. Hire an accountant to do your taxes. Unless it is your day job, you will not be as efficient or as effective as a professional. Your job will be keeping track of all of your expenses, taking care of the property, and planning your escape to bigger and better things. It is worth the money to hire someone, and it is a deductible expense. Keeping up with the changes in the tax code is not worth your time. 

A Must Have Book

The only thing I have not specifically addressed is how you actually handle the business of being a landlord. It's not that difficult, and the time you spend doing repairs and managing the place is not much more than you would with a single family home. However, there are a number of legal and financial considerations to examine before jumping in with both feet.  To that end, you should purchase and read a book like Every Landlord's Legal Guide cover to cover before you ever start looking for your first property. 

It is a great resource, and you'll be able to use it as a step-by-step guide to getting started in real estate investing the easy way.  I hope this guide has helped you. Good luck!!

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