Passive Rental Income

 

Learn how I make passive rental income

passive rental income picture 1 Passive rental income has been an excellent tool to increase my net-worth over the years.  I chose to take a non-traditional approach to purchasing my homes. In my twenties, I had a goal to save as much money as possible and to use the money to pay off my primary residence.  I created a budget and saved the money that I wasn’t investing in my 401k.  I lived within my means and saved as much money as I could as fast as I could with a goal of being debt free for the rest of my life.  This goal was achieved and has worked extremely well for me.

Over the years, I have used housing market price correction to get quality properties at reasonable prices.  I also live in the Midwest region where home prices are still extremely affordable.

Being debt free after age 30 has given me the ability to fully invest in my retirement/investment accounts and pay cash for my automobiles and rental properties.  The list below shows my current properties and their values. My last 3 properties were cash purchases.

Property 1

  • purchase date – 1995
  • purchase amount – $107,000
  • current value –       $226,853

Property 2   

  • purchase date – 1993
  • purchase amount – $40,000
  • current value –       $184,835
  • potential rent $1395 passive rental income 3

Property 3 

  • purchase date – 2011
  • purchase amount – $140,000
  • current value –       $218,632
  • current rent $1395

Property 4    

  • purchase date – 2014
  • purchase amount – $138,000
  • current value –       $163,964
  • current rent $1350

 

Finding the right property and buying it right is the key.  My process for finding a rental property is listed below:

  • Check for properties with a local agent, the MLS listing or local reality sites
  • Check zillow.com for estimated home and rental values
  • Check local county record site to see original purchase price for current owner (If the current owner owes too much on the property, don’t waste your time)
  • Do a cost/benefit calculation (See my rental property calculator below)
  • If all the boxes are checked, contact your agent and make an offer

I use a rental income calculator to quickly see possible cash flow and returns for any given property. See my “passive rental income property calculator” below to see actual cash flow minus expenses and returns for each property.  You will notice there is no mortgage expense because I pay cash for my properties.

I simply add in:

  • Estimated rent (Zillow)
  • Property tax (county website)
  • Association fee (reality site)
  • Management fee (my property management company – RentersWarehouse)
  • Repair/Maintenance (estimated at $1500/yr from past experience)
  • Misc expense (Insurance and other costs)
  • Vacancy rate (I used 1/2 month every 2 years)

This will quickly calculate:

  • Monthly cash flow
  • Yearly net income
  • Total return
  • Total return + depreciation

 

rental income calc 1

rental income calc 2

rental income calc 2

 

I use a management company called RentersWarehouse to handle my rentals. Remember we are talking about passive income.  For a flat fee of $89/month, they take care of everything from maintenance to billing.

See their list of benefits below

  • 24/7 Property Management
  • We work to collect your rent. In full. On time. Every month
  • We coordinate all your maintenance requests
  • We handle most legal paperwork and red tape
  • We assist with compliance
  • We assist in evictions and work to enforce leases
  • We help protect your property
  • We issue reports
  • We can extend your tenant warranty

I also use my management company to find my tenants. The cost for this service is 1-month rent payment.

See the list below for tenant placement service benefits:

Quality Tenant Placement

  • We accompany all prospective tenants through your property
  • We complete a thorough background and credit check on each potential tenant
  • We prepare and assist you with all lease documents, inspections and rental licensing
  • We provide a FREE 6-month Tenant Warranty™ on all placed tenants—a policy that can be extended to up to 18 months (in certain markets) with extended leases and property management services. If your tenant defaults for any reason, we’ll provide additional tenant placement services for FREE

 

See chart below showing my estimated annual passive rental income using a rent increase of 3% per year.

 

 

 

I will make $49680/year in rental income in 2017.  Keep in mind rental properties will also increase your net worth with:

  • Appreciation
  • Tax saving

 

My recommended books on passive rental income: passive rental income 2

 

Rental Houses for the Successful Small Investor     Click HERE to purchase though Amazon

By Suzanne P. Thomas

If you are interested in passive rental income through rental properties, I recommend a book called book called Rental Houses for the successful small investor by Suzanne P. Thomas.  Suzanne wrote this book to share her successful investing approach with people who want to create a better life for themselves, achieve financial freedom and how to succeed in real estate.  I really like her approach of purchasing quality property in the best locations to attract the best tenants.  This strategy has worked very well for me. This book will also share topics listed below:

  • Predict the profitability of properties
  • Find out where you can get down payments
  • Learn how to select the best properties
  • Understand how investor loans work
  • How to select good tenants
  • Creating a comprehensive lease
  • Becoming a great property manager
  • Explore the advantage of 1031 tax deferred exchanges

 

The Book on Rental Property Investing: How to Create Wealth and Passive Income Through Intelligent Buy & Hold Real Estate Investing!    Click HERE to purchase though Amazon

By Brandon Turner

About the Author – Brandon Turner is an active real estate investor and works at BiggerPockets.com.  He invests in all types of Flips, Apartments, and Buy-and-Hold properties. He is also an Entrepreneur, World Traveler, Third-Person Speaker, Author, Husband, and Father.

media outlets.

 

The Millionaire Real Estate Agent: It’s Not About the Money…It’s About Being the Best You Can Be!    Click HERE to purchase though Amazon

By Gary Keller

The Millionaire Real Estate Agent explains:

  • Three concepts that drive production
  • Economic, organizational, and lead generation models that are the foundations of any high-achiever’s business
  • How to “Earn a Million,” “Net a Million,” and “Receive a Million” in annual income

 

Build a Rental Property Empire: The no-nonsense book on finding deals, financing the right way, and managing wisely    Click HERE to purchase though Amazon

By Mark Ferguson

Mark Ferguson is a highly successful entrepreneur, real estate investor, author, and family man.  Mark is living proof that positive thinking can propel you to incredible levels of success.  He has achieved much of his financial success through real estate.

Mark has been a Realtor since 2001 and has specialized in listing REO and HUD properties since 2008.  He has a team of ten that includes 7 licensed real estate agents.  Mark’s team sells over 200 homes a year.

Mark fix and flips 10-20 homes every year, which is a great compliment to his real estate sales.  Mark has learned how to flip homes in any market and how to flip many homes at the same time.  He routinely has ten or more flips going at once.

Mark owns 16 long term rental properties that are providing over $90,000 a year in income.  Mark has learned how to buy great rental properties that have great cash flow.

Mark is also a writer with work available across the web.  He primarily publishes on https://investfourmore.com, where you will find much more information on his rental properties, rental strategies, and working with a positive attitude.  Mark has also been featured in the Washington Post, Yahoo, Zillow, Time, The Street, Huffington Post and many more major

 

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