If you’re ready to create passive income through real estate investing, you’re in the right place. I’m about to walk you through nine simple steps you can use to purchase your first rental property and begin earning a passive income! This is the EXACT strategy that I, along with hundreds of other investors, have used to become financially free.
There are plenty of other strategies out there, but this technique is for you if you’re looking for a tried-and-true method to get your feet wet in real estate investing. This strategy will absolutely change your life. Keep reading The Ultimate Guide to Passive Income if you’re ready to become a successful real estate investor!
I want to be clear: I am not a genius. I’m exactly like you. It wasn’t that long ago that I was frustrated with my finances. It seemed like I worked so hard every day, but at the end of the month I had nothing to show for it. I could hardly make ends meet. In fact, I had to sell my possessions in order to pay my bills. From that struggle, I created the Freedom Cheat Sheet. It’s a totally free PDF designed to help you determine how many rental properties you’ll need to become financially free.
Again, I’ve not done anything special; I’ve simply followed a path laid out by real estate investors before me. If I can follow this strategy, I know you can do it too. Think about this: all successful real estate investors started with ONE property. You have to start somewhere! And if you can begin, I know you can grow your portfolio and attain financial freedom.
But what about a lack of money? I’ve been there too. In fact, when I began my real estate journey, I was going through a foreclosure and all my assets were frozen. I hit rock bottom financially, and climbed my way up. So please, get all of your fears, objections, and worries about money out of the way. Money is NOT an obstacle.
Here are the nine steps to creating passive income through real estate investing:
1) Find a house! How? There are a multitude of ways. You can utilize the services of a realtor, work with a turnkey provider, search for homes on Craigslist, or identify houses for sale by owner. It doesn’t matter how you find the property, but there is one key detail you need to know: the best properties are NOT in your backyard. The chances are high that the best investments will not be located in your own neighborhood. You’re looking to get the most value, and the highest ROI, so don't be surprised if the best investments are not located in your neighborhood, or even your state.
2) Hire a contractor! Since you won’t be local to your property, how will you find a trustworthy and capable contractor? It’s doable. Here’s a tip: if it’s your first time, don’t rely on one contractor. Simply go to a job board, such as Craigslist, in the city of your property. Find three contractors that offer free estimates, and utilize their services. However, don’t take advantage of them. Please value their time, be respectful, and go in with full intentions of hiring one of these professionals. Let them know you’re buying a rental property, and what your expectations are. Since you won’t be living in the property, you don’t need everything to be top notch. You want to make your investment a fantastic home for your tenants, but you also don’t need to install all the bells and whistles. Make it clear to the contractors that they have competition! This will ensure you’ll receive a fair and honest estimate. Also let them know you’re looking to establish a long-term working relationship. Evaluate your three estimates, and choose a contractor! I typically like to choose the contractor who has provided a middle-of-the-road estimate. I don't want cheap work, but I also don't want to work with someone whose fees are astronomical.
3) Get an inspection. Let me forewarn you: it is an inspector’s job to be thorough. They WILL nitpick the property, so don’t be intimidated when you receive an inspection that is pages and pages long. This is the norm. What you need to do after you receive the report is compare it with the estimate from your contractor. As a landlord, you don’t need to repair every single item on that list. Find the items that are structural issues or safety concerns, and take them seriously. Identify which items are small, cosmetic faults, and decide if they’re worth your time. You’re trying to establish a stable, solid investment that won’t need much maintenance in the following years. The little things can slide by, but I like to replace things that support the integrity of the house, like old electrical wiring, windows, and outdated plumbing. Most of my properties receive new furnaces and water heaters, and we always install new carpet and paint.
4) Make sure all of your numbers are in alignment. Calculate your return on investment, and see if the numbers make sense! When you add up the totality of your repairs and purchase, you want to make sure you come out below the market value. That way, you’ll have equity in the property. Remember ROI is king! If the ROI doesn’t make sense, this is not the house for you! Don’t fall in love with the house; fall in love with ROI. ROI is what will bring you passive income every month.
5) Buy the house! If the numbers make sense, go for it! There are many ways to purchase the house. You can use cash, or use financing through a private lender or traditional loan. Other strategies include borrowing from your 401k, using an IRA, HELOC, etc! Again, don’t let a perceived lack of money get in your way! You can do this; you just have to be creative.
6) Hire a property management team. This is an essential piece of the puzzle! Having a reputable, effective property management team is critical to your success as a landlord. Here’s why you need to hire a property management team, and here’s how to do it properly.
7) Rent out the property. You want to place a tenant in the property as quickly as possible, in order to start earning. This should not take long, and a great property management team should ensure that your property is filled with a reliable tenant.
8) Take out the equity on your property to purchase another. This is where the magic happens! This is how high level investors go from one property to 100 in a short period of time. Again, there are multiple ways to pull this off. Most banks will be happy to do a cash out refinance. You can also do a HELOC, or initiate a deal with a private lender.
9) Repeat! Keep this snowball strategy going until you hit your Freedom Number! Once you gain momentum, you’ll be amazed at how quickly you can pick up properties and move closer to your goal.