Don’t Settle For Less Than 30% Return On Your Money

by Brandon · 10 comments

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That’s the highest annual interest rate return for a five-year CD (Certificate of Deposit) according to today. Even worse than that, my local bank offers me a .5% interest on my savings account. This means if I had $20,000 in savings, I would earn an incredible $8 per month.

In this down economy, investors are used to seeing returns like this. So many people are turning to the stock market for growing their money.The stock market has, historically, earned an average of 8-10% per year.

Significantly better, of course, than the bank CD or savings account.

But what if I told you 30% was not only possible, but the minimum threshold you should ever settle with?

No, you are not going to find that in the stock market, or your local bank. Yes, stocks do sometimes soar significant amounts in one day and stock investors can make a sizable profit quickly – but these are not regular returns and most day-traders lose money in the long run (See The Myth of The Hero Stock). It’s no different from gambling. Gamblers love to tell stories of the day they won $500 on a $20 bet, but hide the six months of losses they’ve faced up to that point and the fact that they lost that $500 the very next day.

So how do you achieve 30% returns, regularly?

Of course, you already know what I’m going to say.

Real Estate.

However, the purpose of this post is to teach you how this is done, step-by-step. It’s easy to tell you how its possible, but I actually will walk you through exactly how this is done and why it isn’t a fantasy to make 30% or more on your money.  It is important to understand that not all real estate investments can achieve these results. However, if you invest correctly, a 30% return is the minimum you should aim for on your investment.

30% Case Study

We are going to look at an example of a single-family investment house. We’ll call it 123 Main Street. A typical mortgage is going to require a 20% down-payment, so we will need $16,000 for our down payment. We will also need roughly $4,000 to cover the closing costs, prepaid insurance, and hiring someone to give the inside a good painting and some new carpet.

Our total investment: $20,000.00.

Our total mortgage amount on the property: $64,000.00.

The home is rented out for $1,200.00 per month to a nice family who pays for all their own utilities. The mortgage on this property, with taxes and insurance, comes to $600.00 per month. This leaves $600 per month in cashflow. However, we are not going to use that full amount, but only half of it – assuming over time we will need to spend some money on hiring a handyman to fix things or to pay the mortgage when the home is vacant for short periods of time.

Thus, we are clearing $300 per month in positive cashflow, or $3,600 per year, a “cash on cash” return of 18% ($3,600/$20,000)

“But that’s not 30%!”

And I am not finished, either.

Let’s look at this from a five-year timeline. After five years, the mortgage will have been paid down $4,000.00, so we only owe $60,000.00. Meanwhile, property in America has historically appreciated between3%-5%, so I will use a middle number of 4%. Thus, the home is now worth $97,000.00.

After five years, our equity is: $37,000.00 ($97,000 – $60,000) and we have been collecting $3600 per year in cashflow (or $18,000 in five years of cashflow).

So, in five years we have taken our $20,000 investment and grown it to $55,000 – which equates to an 175% return in five years, or an average annual return of 35%. ($20,000 / $35,000 = 1.75, & 1.75 / 5 = .35)

But Wait, There’s More…

Not only are the returns I have discussed above possible, but are only a very conservative look at returns you can achieve by investing in real estate the right way. There are numerous ways to increase that number, to super-charge your returns even more:

      1. Buy at discount: I never pay full price for a home, and you shouldn’t either. If this home was purchased for $80,000 – it should be worth, at minimum, $100,000. Imagine adding $20,000 in equity immediately to the calculations for your return (I did – it works out to an annual average return of 55%)
      2. Force Appreciation: I love properties that need a little help. Not a lot, necessarily, but certain features can force a property to increase in value almost immediately. For example, adding a closet in a previously “bonus room” can turn a two-bedroom house into a three-bedroom – adding significant equity, or putting up a fence and new landscaping can increase curb appeal and thus force appreciation. That 4% per year average appreciation could be increased significantly the first year, as high as ten or twenty percent or more.
      3. Tax Benefits: Real Estate investing has certain tax benefits that can greatly increase your returns as well. Depreciation – a deduction allowed by the IRS but doesn’t actually cost you anything – can help offset any tax due on your investment income. For more information, talk to your tax adviser or CPA. I am not one, but I do know that last year I paid $0 in taxes. Try doing that with the returns from stocks.
      4. Infinite Returns: If you don’t have any money, you can still invest in real estate. Nearly all of my properties have been acquired with no money out of my own pocket. What do you think the return is on an investment of $0? Infinite. Granted, I often had to put my own time, experience, and often labor into these properties. However, I just want to let you know it is possible to invest in real estate and make killer returns without starting with a huge sum of money.

Obviously, there are benefits to using CDs, savings accounts, and the stock market. These avenues can be good for storing extra income until you find a better place, as they are significantly more liquid than real estate (you can add or subtract money easily), and I don’t believe you should ever put all your eggs into one basket. However, if you are looking to diversify your investment portfolio, I encourage you to look at Real Estate. It may not be as passive as other forms of investing, but the returns can be significantly better, if you invest correctly.

If you’ve stuck with me this long, I am going to assume you understand the concepts I’m talking about. For a more thorough look at how you can turn these returns into million dollar wealth, check out my 100% free eBook “7 Years to 7 Figure Wealth.” Just enter your email in the form on the top-right side of this page and I’ll email you it immediately.

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About Brandon

has written 199 Awesome posts in this blog.

Brandon Turner (G+) is the Senior Editor and Community Director and owner of He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

P.S. looking for hard money loans in California? Be sure to check out my friends over at They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

P.S. Looking for more real estate investing knowledge? If you are interested in a top-notch course to help you understand the nuts and bolts of creative real estate investing, I would like to recommend Ben Leybovich's Cash Flow Freedom University. Ben is a close friend and has been my trusted adviser for years. He's a smart guy and CFFU is pretty awesome. The course is waitlisted, but while you wait for an opening Ben will send you tons of FREE content. Seriously. Click here to check it out.

(yes, that's an affiliate link!)

{ 10 comments… read them below or add one }

Keith June 15, 2012 at 3:07 am

I have my eye on a short sale that must have fallen through, it was listed for 49k, but now is listed for 20,900. I have not seen the inside yet to know the repairs.

This is it. Next to a church, but not an area I know. I think there are good/bad areas of this town in NJ, so I know this is bad part.

I have no money to get this, do you think hard money would work. I would hope to finance out.

Your thoughts or suggestions?


Keith June 15, 2012 at 3:12 am

Opps, forgot to say Rent could easily be $1,000 or max $1,200. I figure a 2/1 home less than a half-n-hour from NYC could be a deal (assuming repairs n stuff). Taxes are $5,600.


Brandon June 16, 2012 at 8:48 pm

Hey Keith,

Thanks for the question! My thoughts (without looking too close!):

1.) It’s not a good idea to invest in an area you don’t know. Not that you shouldn’t invest in this one, but make sure you spend a good deal of time learning about the neighborhood. Study, study, study. Drive by, at several times of the day and night. Talk to neighbors. The type of people in the neighborhood will be the type of people who rent the house. How do you feel about them?

2.) Short Sales are messy and they take a long time.

3.) What is your end game? Flip? Buy N’ Hold? If you are going to flip it, a hard money lender would work possibly (if the numbers are right), but if you want to rent it, it is much tougher to find a hard money lender who will go long term. Can you qualify for a mortgage or partner with someone who can?

4.) Since you have no money, you could get this under contract and then sell the deal to another investor (wholesale it). That would be a good way to get to know the ropes without risking anything major.

Every deal is different and has a million little parts that make it better or worse, so I don’t know for sure. Obviously, $1000 rent with a $30,000 property is awesome, but knowing the condition of the house is key. The MLS listing looks okay, but hard to tell. Those are my thoughts though. Keep me updated on this! Email me anytime. Good luck!

On a side note – my taxes are $1400 per year and that drives me nuts! I couldn’t handle $5600! Dang!


Keith June 19, 2012 at 2:11 am

Thank you Brandon. After spending three years in Charlotte NC, I am just getting used to these NJ taxes. (originally from Long Island, NY… so I am aquainted with high taxes!)

I am thinking Buy-n-Hold, and if it bombs hopefully I can get out with a flip.

Appreciate all the sound advice.


Al Williamson June 16, 2012 at 1:06 am

Nice job Brandon! Glad you mentioned items 1 – 4. I’m a believer!


Brandon June 16, 2012 at 8:39 pm

Thanks Al! It’s good to know I’m not alone! 🙂


Chris September 11, 2012 at 3:21 am

Hey Brandon,

Do you have your properties in an LLC to protect yourself incase
anything were to happen?

What do you recommend as far as this goes?


Brandon September 20, 2012 at 4:46 am

Hey Chris – Yeah, I use LLCs to buy stuff in. They are fairly cheap to set up, protect well, and hide my name from the public records. Obviously, I have to say you should always consult with a lawyer and I’m just saying what I do 🙂


Mark August 21, 2013 at 8:30 pm

I love your blog, but you’re not compounding returns. Stocks historically get 10% compounded every year. a 175% return over 5 years is not a 35% compounded return. It’s actually closer to a 22.5% return. Still really good though.


Brandon August 22, 2013 at 5:44 am

Hey Mark – you are correct! Thanks for pointing that out!


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