Saturday, 30 March 2019

Simple Step To Earn Passive Income In Real Estate

Simple Step To Earn Passive Income In Real Estate

As a financially literate person, your job should be to create enough passive, this way you can leave your life the way you want without having to physically go to a job, this way you can start enjoying your life while you're still young and juicy instead of waiting until you're old enough to retire

I told you my number one favorite way to create passive income is by investing in real estate but many of you asked does real estate truly give you passive income, I mean if your tenant eats some nasty food and they end up clogging your toilet, someone has to fix that, this isn't very passive

Here's How Real Estate Investing Works

Everybody needs the place to live, businesses need office space, and stores need retail space,  instead of being a person that has to pay to use this real estate, you can be the investor and buy the real estate and then rent it out to somebody else who uses this real estate and they pay you with rent

For example, you can go out and buy a small home and instead of you physically living there, you would rent the small home out to a family and this family would pay you rent every single month for living in your home

It's hard for many people to think of real estate investing as a passive investment because when you own a house and you lease it to someone else there's work and maintenance required with it, but there's a hard way and a smart way being a real estate investor.

  1. Should You Invest In Stock Market or Real Estate - Get The Answer
  2. 5 Things You Should Know Before You Invest In Real Estate
To show you what I mean I am going to give you two different example.

My friend was 20 when he bought his first real estate investment property and he has no idea what the heck he was doing, he read a real estate books that if you hire a property manager then they would handle all the work and you get to just sit back and watch the checks roll in, so that's what he did

  • A property management companies job is to handle all the day-to-day work of owning real estate investment property A-Z and then they get paid a percentage of rental income and they usually charge somewhere between 4% - 10% of your gross rents

This way if you don't get paid either do they, well, he don't know what he was doing so the only thing he looks for in his property management company was their price. 

He put in a very bad tenant into his property and his property management company didn't even sign a lease with this tenant and then this tenants would call up his property managers every single day asking for concession and free things all the time, and the property manager would call him every day ask what he want to do.

That is not passive. And then this manager got so tired of dealing with this tenant that they told the tenant to start calling him the owner directly. Then he has to talk to them listening to what they want to say and he was the one coordinating with his contractor to do work.

As you can see this is not passive at all, but in his first deal, he didn't have a mentor and he doesn't know anybody investing in real estate, so he had to figure it out himself.

Here's how it went for one of his property that makes him passive.

He got a notification from a real estate network that there is a property for sale in a great neighborhood at a below market value price, so he went and check it and he thought the property was solid so he put an offer on the property that same day, after some negotiating his offer got approved and then over the next two weeks he sent his property inspector out there to make sure that the property is in good shape and then 

  • He got different contractor bids to see what it would cost him to do the renovations, scheduling these four appointments took him 20 - 30 minute because all he had to do was text his contractors and tell them where to go and they know what to do

The best part is that his property manager was put in charge to review the work because they knew what he wanted to get done. The property manager makes sure the work is done correctly and they reported to him. Once the property was rent read, his property manager came in, they marketed the property for lease and they had a tenant move in like two or three weeks

  • He doesn't know the tenant name, he doesn't know what they do, all he know was that they pay on time. If there's a small issue like if the toilet breaks he doesn't even hear about it he just sees it on his monthly report

In the beginning, he knew he was doing something wrong, he just didn't know what yet, 

He heard about those big real estate investors that owned thousands of units but there's no way they could be on the phone with thousands of tenant every single day, so he had it figure out what he was doing wrong

  • In other words, he had to learn to be an investor instead of a manager. Most of his work now, besides looking for more investment properties, is just reviewing monthly reports that his property manager sends him, but the only way he has been able to do this is because he put in the work to build system and build people in his real estate team

yeah there's still some occasional work required but it's minimal and he can do it on his own schedule from anywhere in the world but in order to make real estate investing a truly passive investment you have to put in the work in the front end to make it work

That is it for real estate investing

No comments:

Post a Comment