Meet Jennifer and Jim. They’re a young couple with two children and are ready to purchase their first investment property. At their age they decide they can handle a bit more risk and are looking for something with a sizable cash flow and a solid upside potential in appreciation. Their search takes them to several cities but ultimately figure their best bet is to buy in an area that saw home values plummet over the years with a relatively high rent-to-own ratio.

So far, they have $35,000 set aside for their first investment and want to leverage as much as possible, putting as little down as lenders will allow. At the end of five years, their goal is to have $2,000 per month in passive income from three rental properties. They determine that Las Vegas is an ideal market for them and begin looking there first. As they research, they see that a duplex can be purchased for nearly the same price as a similarly sized single-family home but provide much more in rental income.

Their search leads them to a duplex and their offer of $110,000 is accepted. They put the minimum 25 percent down and finance the property over 30 years, which keeps the monthly payments as low as possible. Their new monthly payment with a 5 percent loan on $88,000 and other expenses leaves them with a monthly cash flow of $405. To keep this simple Jenn and Jim didn’t share their maintenance and vacancy rate.

To meet their goal of $2,000 per month passive income in five years with three properties, their next two acquisitions must net $806 each.