Now it’s time to take our passive income up a notch. In “Self-Storage vs. Mobile Home vs. RV Park part I,” we discussed how we could make good passive income on one acre of land. Today, we will up the ante by purchasing 5-10 acres of land and building out some serious passive income.
I will structure this article differently than the first one because we will be using a large amount of capital in this model. We need to make different considerations on where we purchase our land, and also, we may need to combine ideas to make the best income with the lowest risk.
Where should we buy our land? The most important principle of real estate is location, location, location. Heck, I just wrote an article about buying virtual real estate, and the same rule applies in the metaverse.
Buy Land, Start Farm
We need to buy land near a medium-to-large population center. Who uses self-storage the most? People who live in apartments. Who is looking for affordable housing like mobile homes? Students, the elderly, and young families. Who uses RV parks the most? Retirees.
We need to be hyper-aware of where we purchase our acreage. Yes, it would be nice to get a cheap plot of land in the middle of nowhere, but who will live out there?
The ideal location would be within 5, maybe 10, miles of a military base, hospital, metropolitan area, or college. Real estate there is already expensive, so go in with your eyes open.
The location is so important because you want a large pool of people to rent from you. The smaller the pool, the worse the choices you have for tenants. I read this in “How to Invest in Mobile Home Parks.” Opportunities for good land are getting smaller, but they are still out there. You will have to pay more upfront.
A quick idea. Let me throw out a quick thought. The pandemic, and life in general, have led people to seek the cheapest, safest living possible. Employees, students, and retirees can now work and make money independent of location.
Start a Home Business
There will be a new market for living in remote lands, far from city centers. I am thinking about when I drive from Yuma, Arizona, to Las Vegas, Nevada. There are vast acres of desert lands that are available for purchase.
The book “Dirt Rich” by Mark Podolsky educates us on buying remote land for cheap. Here’s my pitch. You buy 10-15 acres of land in the middle of nowhere. You set up a nice concrete fence, establish utilities (electric, solar, water, internet, etc.), and purchase everything we discussed in part one.
If you can keep your costs low enough, you can create affordable housing (with self-storage) in the middle of nowhere. You’ll make your money from purchasing cheap land, maybe $5,000-$10,000 an acre.
You can also offer RV hookups and call it a remote campsite. Offer just enough for the RV’ers to survive for a few days. Many people would love to avoid towns and spend the night in a safe environment outside the city. You have to be creative.
Funding your project. I will discuss more financing options for your project in part three of the series, where we are purchasing substantial commercial real estate. Today, we will need roughly $1 million to get everything we need. That is for a reasonably-priced city, not necessarily California.
We Make $50/day in Passive Income
All of the articles I wrote about Creative Financing in Real Estate and Maximum Leverage come to mind. In this case, you want to establish your primary residence on the property first. This allows you to tap the lowest interest rates possible.
You buy your ten acres and establish your primary residence with a 30-year fixed mortgage. When you arrange the land purchase, ensure you combine it with a small mobile home. I am talking as small as humanly possible. With today’s prices, that should be a generic two-bedroom, two-bathroom mobile home for roughly $70,000.
My wife and I walked through these homes when I was on my 60-Day Pre-Retirement, and they were ugly but functional. Please take emotion out of the process—as investors; cash flow is our emotion.
With medium-priced land and a cheap home, we are ready to build out our cash flow. We have a couple of options when it comes to making our business model.
Starting your business (no leverage). First, we can build out our cash flow the slow way. If you are risk-averse, this is the way to do it. This method works by purchasing properties from cash flow in hand (read no leverage).
Should You Buy Property in a Small City?
We can start by renting the room in our primary residence—this can give us enough money to buy a lofted barn house ($8,500) in less than a year. We now have two cash-flowing assets—the room rental and the barn house. I would recommend buying two to three barn houses and forming into a tight group on your land.
This timeline leaves you with only one tenant and a good chunk of pure cash flow. You also have no maintenance or expenses. If you don’t care for tenants, you could probably get to ten barn houses. If you rent those for $300 (you’ll need some gimmicks) each, you’re looking at $3,000/month in passive income.
You can also mix it up with RV hookups. You’ll now have to deal with tenants, either short-term or long-term. Yes, they are a headache, but to become rich, they are part of the path forward. If you don’t want to take out a loan, don’t buy an RV or mobile home.
Starting your business (with leverage). If you want a faster way to grow wealth, you’ll need to understand leverage. I recommend “Unfair Advantage” by Robert Kiyosaki and “The Millionaire Fastlane” by MJ DeMarco.
Run a Profitable Dog Park on Your Property
There is such a concept as good debt and bad debt. Leverage is debt that helps you purchase assets that make you money. I love leverage. I own over $1 million of real estate and don’t pay for any of it out of my pocket.
After you read and understand leverage and are comfortable with your plan, there are two approaches to getting cash. You can incorporate a business and ask for a business loan, or you can buy your mobile homes and RV under your personal credit.
There are pros and cons to both, but unfortunately, that discussion is out of the scope of today’s article. I do love talking about leverage, though. If you want to go the business route, read the book “Zero Down” by Monica Main. Read “Build a Rental Property Empire” by Mark Ferguson if you’re going the personal credit route.
The main concept. I’m running out of time here because I’m over 1100 words already. Time flies when I talk about topics I love. Doing these scenarios in your head makes you a great investor. It helps you envision the path to wealth and create step-by-step models. If you haven’t tried to do this, read the book “How to Take Smart Notes” by Sonke Ahrens.
The central concept is to buy land close to a city center. Or go the utterly opposite path and buy in the middle of nowhere. Ensure you know where you are buying and WHY.
Financial Independence through Real Estate
From there, drop your primary residence, and start funding your assets. I believe a combination of self-storage, mobile homes, and RVs (and hook-ups) presents the best option for this land size. However, if you don’t like tenants, stick with self-storage.
Conclusion. Take your time. You don’t need to rush off, take out huge loans, and have 15 tenants running around your property. It’s essential to take a bird’s eye view of your investment portfolio.
Your land assets are just a portion of your wealth. When you live in your small mobile home with a roommate and one self-storage unit, you are well ahead of the power curve.
Take this time to diversify your passive income. Start by funding your dividend and crypto portfolios. Also, become a content creator to bring in passive income from royalties and automated business.
Using all these assets together will lead to the best decision-making available. When it’s time to expand your land assets, do so with confidence. This isn’t a get-rich-quick scheme. We are building long-term financial health through investments. Always take a holistic approach to investing.
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