The goal of Monopoly is to trade-in four houses for a hotel. This goal is lofty and can change the tide of war inside the game. But why does it have to end with the game? In real life, most people will only own one home at a time. By only owning one house, we may be missing out on some of the best income opportunities of our lives.
I have recently been touting the benefits of real estate investing. My last article was “Taxes 103: Real Estate for the Win!!” where we covered the sweet benefits of owning real estate. Now that we have some background knowledge of real estate, we need to start talking about strategy.
I own three homes, and I have no intention of buying an absurd amount of real estate rentals. As lovely as it is to own multiple homes, I already have a job. I have no desire to create another job for myself throughout my retirement.
Become a Land Millionaire
I will still need to buy a few more properties to reach my goals. Based on my Retirement 4-50 plan, I want to create $6,000 a month of passive rental income. I currently bring in roughly $2,200 a month after debt service. The strategy will now come into play. Let’s look over some of my options.
Pay off all of my houses. If I pay off all of my places, I will achieve my $6,000/month income. Finishing my mortgages would also be less stressful than keeping a pile of debt. However, this is not my style. To me, paying of a 3% loan off early will have severe opportunity costs. Again, that is just me. Some people are more comfortable not having any debt.
Add more single-family residences. Single-family homes are not mainly my jam. They just don’t produce enough income to make the headache worth it. Single-family homes can be less stressful than other more prominent properties. I might buy a couple more because these homes will give you options later in life for your family. The book “Build a Rental Property Empire” talks more about single-family rentals. Again, I don’t think this is my path to my real estate goals.
Buy an apartment building. Purchasing an apartment building could be very interesting. Depending on the Net Operating Income (NOI), I could probably reach my rental income goals with one apartment building. After reading “The ABCs of Real Estate Investing” and “Zero Down”, I gained a large amount of confidence in the process of buying an apartment building.
There are some cons to buying an apartment building, mainly that you will need a team to operate it. You will need maintenance staff, lawn care professionals, and a manager. You can outsource all of this to a property manager; however, you will still need to stay on top of them. For passive income, I would consider owning an apartment building that a property management firm runs. I will have to remain involved, though.
Use Real Estate as Your Wealth Generator
Buy a commercial building. A commercial building is similar to owning an apartment building, but you usually have a small number of tenets. A commercial building can be a boon because it is easy to manage or terrible if the tenets perform poorly. Financially, your fates are tied together
Self-Storage or Mobile Home Park. Each of these has its quirks, but I would quickly achieve my rental income goals by owning one of these. I could take a year or two and get super-smart on these investments and then make a great purchase. One of these options would supercharge my finances up for life. For more on Self-Storge, read “Growing Wealth in Self Storage” and Mobile Homes “Making Money with Mobile Homes.”
The journey above is my path to rental income fortune. How about your approach? How do you decide which direction is right for you? Here are some necessary steps to get you started.
Real Estate Investing 102
1) Determine your overall passive income goal. Passive Income goals include your retirement income, rental income, business income, and investment income.
2) Determine how much of your overall goal will derive from rental income. Rental income will be a percent of your comprehensive plan. The percentage will come from how comfortable and knowledgeable you are in real estate.
3) Determine your risk/stress/time levels. Real Estate can be as passive as you make it. The more inactive you decide to make it, the more you will pay someone else to handle the business side of owning properties. There are many ways to achieve your rental income goals, do not limit yourself to one method.
4) Educate yourself. Don’t just jump in. Take your time, read books on the different rental income types, and take courses on various real estate ventures. The more you know, the more options you will have available to you.
Mortgage Zero: The Art of Zero-out-of-Pocket Housing Costs
5) Give yourself a timeline to get started. Just because I said to research does not mean to stay in education-mode for your entire life. Set a goal like “Buy a home in one year’s time.” Do not fall prey to analysis paralysis.
6) Set a timeline for your overall passive income goals. I gave myself until age 50 (10 years from today) to achieve $6,000/month from each of my four passive income pillars. My total would be $24,000/month, but the best part is the diversification of income between retirement, real estate, investments, and business.
You can decide to play Monopoly in real life if you choose or buy one mobile home park. You may only need $1,000/month of rental income and achieve that from renting out a guest house in your backyard. Your dreams are up to you to accomplish. You don’t have to be a superstar real estate investor to get involved. Just get educated, take action, and reach your goals. Individuals who do this will be ahead of 90% of the population of people.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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