As with most jobs, you can find a thousand reasons to put off starting to buy houses until another time, but that would be a costly mistake. Why? Because you'll lose all the time that your capital could be compounding. Using a $100,000 house (adjust the value to your own area) maybe I can give you an example of why time is so precious when building an estate.
Suppose you could increase your assets by add $1,000 per day by buying houses. If I was able to do this in the 70s with houses that cost only about $30,000, you should be able to do it with $100,000 houses. Every $100,000 house that you buy would add $1,000 per day to your assets for the next 100 days. By buying a house every three months, you'd be way ahead of my average. Now bear with me on this; if each of these houses were to increase in value I% every 90 days, you'd be adding $1,000 per house per quarter to your net worth.
Plug this into your calculator and you'll see that over 60 months or 240 quarters you would be able to accumulate 4 houses per year and have a total of 20 houses with an initial value of $2,000,000. They'd be adding $20,000 per quarter to your net worth even if you'd bought them without putting a dime down and totally ignored the equity build-up caused by loan amortization. That means your net worth would be growing tax free at $80,000 per year. In only 12 years without buying one more house, assuming that you'd have invested about $2,000 per house as a down payment, you'd have a net worth of $1,000,000.
Of course that's an over-simplification. These figures completely ignore an inflation rate of over 1% per quarter, or the effects of the compounding. If compounding were taken into account, the value of a portfolio growing at $101,000 per quarter (when one adds each new house acquisition to the old one), plus the increase in value, would calculate out to be $2,223,919.40 over the period without regard to any down payment, rents or loan amortization. Nor would that figure reflect any expenses you might have which would reduce it.
All in all, letting the earning power of your assets create $224,000 in additional net worth in 12 years isn't bad. If you think that's not enough, you should take a quick peek into the family cupboard and add up how much money you put aside the past 5 years. If you stopped buying right there, your equity would compound over the next ten years to reach about half a million dollars.
On the other hand, if you continued to add houses at the same rate, in another 5 years you'd have 40 houses worth $4,937,523.70 which would be generating $49,375 per quarter in additional net worth. That's more than $16,000 per month. Your compounded net equity at the end of that time would total about $1,000,000. I hate to tell you this, but as time passes you get better at buying houses and you'll probably buy a lot more than one house per quarter. With hard work, it took me 5 years to accomplish this.
How soon should you start? The sooner the better!
