Let me pk with you...

Got a foreclosed house in 2009 for $70k + 7500 repair, rent for $1000/month. yearly expense ~$3500, net $8500/year  (11% cash flow)

in 2011, house appraisal value at $110k,  got Heloc for $77k.  Did not use it until 2012 for another one at $80k with $5000 repair.  Rent $1200/month.  The first house is also rent at 1200/month.  Interest expense $4000 + two house expense $4000 each.  Net $16800/year.

I only reinvested $8000 from first three years rent income ($25.5k).  My cash flow return at 16800/77500= 21.7%  and both properties are appraisal  $110k, which are 110k-77.5k, 110k-85k (or 32.5k, 25k), total 57.5k (57.5/77.5 = 74.2%) capital gain in three years or average 20% a year.

so in three years, my cash flow reachs 21.7% and capital gain at 20% annual rate.  If I try to do it again at 6th year (2015) and 9th year (2018) without extra investment, my cash flow on the initial investment (77.5k) would be at 50%, and capital gain at 15% annual rate. 


BTW, this is a real case. not guess