Ahh, wouldn’t it be nice to sit back on your chair, relax, and still make tons of money? I guess that would be the ideal way to receive cash passively. I never thought about passive income this way until a strange event happened in my life.
My wife and I had just bought our third house; this one was in Florida. The home has two huge, luxury master suites, so we decided to rent them out for $800 each. We were still on the grind, paying off debt and building our dividend portfolio.
The house has three acres of grassland, and we loved to sit out in the shade and have some beer. One day we were hanging outside with our two boys, enjoying the spring weather when one of our roommates approached.
Creative Financing in Real Estate 106: Business Credit
The roommate came up to me and gave me $800, and walked off. At that moment, I knew the power of rent. Sometimes, the power of passive income can get lost in translation because you are running around doing things in the world.
Because you are busy, nothing looks pretty passive; however, you are earning double money. I mean that passive income also allows you to make more money while other cash is coming consistently.
And the mother of all consistent income is rent. It is hard not to become rich when you have the constant cash flow of rents to supplement your lifestyle. Rents are especially powerful if they can fund your dividend portfolio. So you see, rental income is a wealth generator.
I consider business and real estate the two most potent wealth generators out there. However, most people will not create income from either of these. Strangely, everyone can build wealth from rents—by sharing their property.
My wife and I are currently making $2,500/month in tax-free rental income. It is tax-free because we can use tax breaks like mortgage interest and depreciation to lower the rental income to zero.
Cash Flow 105: Diversify Your Passive Income
However, a large chunk of that cash comes from our two room rentals. In addition, we receive $1,600/month from the two master suites. My wife recently helped us save even more money by completing a refinance of my primary residence.
We are now paying $1,530/month for a 2,500 sq ft home on three acres of land. Even better, our roommate’s rent completely covers the mortgage, plus $70 cash flow. How many people in the world can say that they are cash-flowing from their primary residence.
And this is just the start. Ladies and Gentlemen, rents just continue to go up. My oldest son will graduate from high school in four years. If he stays local, he can live in this house. My wife and I can buy another house nearby.
He will continue to rent out these fantastic rooms, and by then, the rent will be $1,000/month. The mortgage will stay $1,500/month, making his cash flow positive by $500/month. There is even another room he can rent for $750. Now he is positive $1,250.
6 Types of Income Streams
What if we drop a mobile home on the property as well? Or a large shed that he can rent storage space to the renters? The possibilities are endless, and they all bring in excess cash passively.
Yes, dealing with roommates and tenants can be a pain sometimes. But going to work is pain all of the time. Rent is a powerful force multiplier that can propel anyone to the land of the rich.
Think about this. My wife and I receive $1,600/month for basically doing nothing but sharing—roughly $20,000 a year. If I only used this money to fund my dividend portfolio, I would still be hyper-rich.
Just renting at this rate for 30 years at an 8% return would be $2.3 million. This is life-changing money for us, which also can provide for my kids for multiple generations. Many times people sell their homes to avoid the stress of renting out their property. Please keep your homes.
Our first home was a nightmare because we bought it in September 2008, when the world changed due to the financial crisis. We lost all of our equity, and rents were upside down. I had to execute orders to South Carolina, leaving my wife, mother, and two kids behind in Arizona, because we would have been cash-flow negative roughly -$700/month in rents.
So, I know what a bad rental situation looks like. However, we endured, and this house will prove to be a cash cow for the rest of our lives. We owe it to our kids to fight through the pain to get to the reward—cold hard cash.
Is Rental Income the Best Type of Passive Income?
With the rental income, you get tax breaks, capital appreciation, consistent returns, and rent growth. It is almost like a joke the world plays on you. They scare you with things like vacancies, maintenance costs, and bad tenants. Those things happen, but the people who endure them become hyper-rich.
Don’t let the idea of property management scare you from the reality of becoming rich. If my oldest starts a family in 10 years, he already has a positive cash-flow home to raise his family in. In addition, being positive cash-flow means that they can probably work from home and home-school their children.
These are powerful ideas that make the rich even richer. I am glad my wife and I opened our minds to the power of keeping our homes and opening our doors to tenants. As a result, by the end of this year (2021), we will have $200,000 in our dividend portfolio.
Much of this money is the result of rental income. Rents helped us pay off our debt and fund some minor house maintenance. My wife and I recently put new rain gutters on our homes in Florida, fully paid for by rents. Having that consistent cash flow of rents can make your life more comfortable than you could dream of.
Don’t let the American media fool you; you do not have to become a home-flipper or real estate tycoon to make a large sum of rental income. You just need to share your property. There are tons of ways to make money from your residence.
A good starting point is my article “Financial Independence through Real Estate (book).” I walked through many of the steps we took to obtain three homes and a mindset of Mortgage Zero.
In the end, only you can prevent media contamination. For example, people will look at you funny when you say that you have roommates. Meh, there is a 97% chance that they do not have $200,000 in an investment portfolio.
Who would you rather be, someone who conforms to society or someone rich as hell? I know which one I choose. Good Luck!
Download Passive Income Printables for Your Financial Journey (here)
Read My Books for Free: Free Kindle Books Schedule also on Kindle Unlimited Join me on the best app for Crypto- Voyager
Follow us on our Facebook Page (here). Join our Facebook group (here)
20 Books that Will Make You Rich (here) part 2 (here)
See all my books on Pinterest (here)
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.
Leave a Reply