This month marks 10 years since my wife and I bought our first rental property — a humble little duplex that changed the trajectory of our financial lives.
Since then, we’ve slowly and intentionally grown our real estate portfolio. Rental income plays a big role in our plan to retire early. And now, we’re saving up for our next property, with a purchase date likely in 2027.
We estimate we’ll need around $50,000 for a down payment. And instead of parking that cash in a low-interest savings account, we’re doing something a little different. We’re building a reverse CD ladder.
What’s a reverse CD ladder?
Most CD ladders are designed to give you rolling access to your money over time — like one CD maturing each month or year.
But with a reverse CD ladder, you buy multiple CDs that all mature at the same time.
The plan is simple. As we build our savings, we periodically lock portions of it into CDs that all end around mid-2027. This is the target date for our next property purchase.
This way, we keep earning great interest along the way, and when the time comes to buy, every dollar (plus interest) becomes available.
Our $50,000 CD ladder setup
Most CD ladders start with a big lump sum. But we’re building ours month by month. Here’s the general plan:
- We’re aiming to save about $2,000 per month over the next two years
- Every few months, when the cash pile hits a few thousand, we buy a new 6-month to 24-month CD
- We make sure each new CD ends around June or July 2027.
By the time we reach our goal, we’ll have multiple CDs maturing with about $50,000 available. Plus, we’ll get all the interest earned along the way.
How much interest can we earn?
CD rates fluctuate widely across banks. But with the best available CD rates now, I could realistically open my first CD today with a 4.00% APY.
Since most economists are forecasting rate drops in the next year or two, I’m going to assume I’ll be buying at progressively lower rates as time goes on.
Here’s a rough calculation of how much interest I might earn if I purchased four CDs over the next few years, each with a slightly lower rate than the last.
|
CD Term |
Amount |
APY |
Interest Earned |
|---|---|---|---|
|
24 months |
$12,000 |
4.00% |
$960.00 |
|
18 months |
$12,000 |
3.50% |
$630.00 |
|
12 months |
$12,000 |
3.00% |
$360.00 |
|
6 months |
$12,000 |
2.50% |
$150.00 |
Data source: Author’s calculations.
If we stuck to this plan, the total money saved would be $48,000. And the total interest earned would be $2,100 — a nice little boost toward my rental down payment! It’s not life-changing, but that’s an extra couple grand we don’t have to earn elsewhere.
Since I’m expecting rates to drop over time, it feels even more important to lock in the best rates I can find today. And if you’re considering a strategy like this, you should plan accordingly. Check out today’s top CD rates and lock in a high APY while they’re still available.
Is a CD ladder right for you?
If you’ve got a clear savings goal that’s in the one- to five-year timeframe, using CDs might be a smarter way to save. Just make sure all your money matures by the time you need to use it.
Will our exact timing work out for buying a property? Only time will tell. But one thing’s for sure, I’m not going to let my money sit idle when it could be earning $2,000 in interest!
