Rental Income

I have had quite a bit of experience with buying, selling, and managing rental property and I have come to some conclusion based on this experience. If your thinking about becoming a landlord there are a few important steps to take before taking the plunge.

1. Start Small – One of the biggest mistakes I made as a new real estate investor was buying to many properties too fast. I eventually learned some costly lessons to come to this conclusion but trust me it’s better to buy only 1 or 2 properties your first year so that you can really get a hands on grip of all that’s involved with being a landlord. If after the first year you decide it’s not for you than you have the option to keep them and buy no more and keep collecting the rental income or sell them and get completely out.

2. Buy In Working Class Neighborhoods – Low income areas mosty have tenants that don’t pay or when they do you have problems collecting it not to mention that there are much fewer buyers for these properties when you decide to sell. High income areas have good tenants that pay but between the higher mortgage payment which causes little to no cash flow and the higher property taxes it’s almost impossible to net a positive cash flow unless you buy the house for cash. Stick with homes in middle income areas where people have jobs but don’t make a lot of money. The tenants these homes attract are mostly good hard working people that pay their bills and between the nice cash flow and increasing property values you can really do well.

3. Buy In Cash – You have probably heard the term “Cash is king” and it hold true. When you make an offer with cash you can get huge discounts off the sales price and the seller and realtor know they won’t have any problems closing on the property. If you have enough cash always buy homes using it and than after you get a great deal and close on the house you can cash out by financing the home with a bank. Since you bought the home at a discount using cash you may be able to get all your cash back using a mortgage.

These are just a few words of wisdom that it took several years to realize and can make you a lot of money and save you even more. Owning rental property is one of the best ways to make passive income if you know what your doing.

Why You Should Invest Opposite of Everyone Else

Being popular and following the crowd may have many benefits but when it comes to investing it’s the worst thing you can do.

By the time everyone is following the investing crowd many of the big profits have already been made. If you really want to make money go opposite of the investing crowd. Think back a few years ago after the stock market crashed and everyone was withdrawling whatever money they had left from the stock market.

Fast forward to today and you can see what a big mistake that action was. For the rare few that stayed in the stock market and looked at it as a opportunity to buy high quality stocks at a discount it paid off in a big way.

The stock market may go higher from here but the big profits have already been made. Instead the beaten down real estate market could be the way to invest. No one wants to own real estate, period. The only people investing in it are the long term investors.

If your looking to flip real estate this is definitely a bad time to invest however if you can buy a fixer upper for little money, rehab it, and rent it you can flip it later down the road when the market improves. Worse case scenario, the real estate market doesn’t fully recover in several years but you still have the rent coming in every month.

When everyone is buying sell,when everyone’s selling buy. More investors have made money doing exactly opposite of the crowd that following it.

Creating Multiple Passive Incomes In Real Estate

If your a new real estate investor or looking to become a investor there are some great but little used ways to increase the income on a property. Not only will this increased revenue help you make more money every month but it also improves the resale value of your property.

1. Advertising – I love to buy buildings in urban areas that have lots of traffic by them since this traffic represents money to the keen investor. I have had billboards put up on the sides of buildings facing traffic and rented the space for a monthly fee. You would be surprised at how much money you can make this way. I average between $100-$500/month extra income this way.

2. Parking – One of the easier ways to generate additional income is to charge an extra fee to the tenant for the use of the driveway or garage. If the tenant isn’t willing to pay an extra $50-$100/month than I rent it to the neighbors.

3. Cell Towers – Since cell towers are crucial they are a must for phone companies. You can call these companies to ask them if their interested in using your property for a monthly fee. If your lucky enough to get accepted for a cell tower on top of your building or property they pay very well. I have heard monthly income from $1,500-$5,000 plus.

4. Rezoning – The best way to potentially double or triple a properties value is to have it rezoned as a business zone. As a business property your property will be available for higher rents and multi-use which makes the resale value much better.

5. Adding an Apartment
– This is the best way to increase your monthly income on a residential property. Making additional income also makes the resale value worth that much more.

These are just a few of the possibilities for increasing a properties income and values. If you get really good at these hidden income sources you can buy underpriced properties and increase their value substantially.

Real Estate

Investing in real estate can be scary if you have never attempted it before.  After all your dealing with some pretty big numbers.

Even seasoned property investors get a little nervous their going to make a bad investment.

The key to buying real estate and making it a profitable passive investment is management.

When I first got into real estate I made the mistake of buying to many properties to fast.  I bought 18 homes in my first year which was a big mistake.

What I learned is that in order to make real estate work for you is that you must have a game plan first.

Buying one or possibly two investment homes should be a much easier learning curve.

You will have time to rehab and rent out the property and if you made any mistakes learn from them.

My advice would be to buy nice single family homes in middle class areas since you can buy them cheap and rent them out quick to decent tenants.

The key to making rental real estate a passive income is to hire a management person or company to manage your tenants.

My real estate broker use to have a saying, Your happy when you buy and sell the property the problem is everything in between.

He was right you can make money buying cheap and make money selling for a profit but the management is a nightmare.

Let the professional management companies deal with ads, screening, and finding tenants, collecting rent, repairs and code enforcement, eviction hearings, etc.

Trust me paying 15% or so of your rental income is a bargain to avoid the hassles of dealing with tenants.

I made the mistake of handling it all myself for the first few years and boy the nightmare stories I could tell you.

Do yourself a favor and hire a professional management company since not only are they cheap, they have contacts in the business that can save you money.

Once you have your first rental property on cruise control, you can concentrate on buying your next or on other passive income projects.