Dustin Heiner – Master Passive Income
First off, I am super excited and here writing about rental properties for the Military Millionaire community. If you are here and are in the military, I want to tell you thank you so much for your service to this amazing country and for protecting our freedoms and liberties. My hope is to give a little bit back to you amazing people and help you with your future after the military.
Secondly, I was able to quit my job and retire early when I was 37 years old because of my real estate investing business. My business started with one property, and has grown to over 35 properties with only two mortgages with the rest of the properties owned free and clear. My wife and I are fully blessed to live the life of our dreams and that is exactly what I would like to see happen for you.
Lastly, I am super excited for you and the path that you work on with investing in real estate. I would love to see all active duty and veterans invest in real estate and never have to work once they’re done serving our great country.
Real estate investing is by far the best way for anyone to make money, protect their wealth, and leave a legacy for your children. From just one real estate transaction, you can make dramatically more than you ever could in the stock market, mutual funds, or bonds. The key is to how to actually invest in real estate. Not all ways to make money in real estate is actually investing.
There Is Only One Way to Invest In Real Estate
Flipping a house is not investing, it’s actually just a job that you own. Flipping homes do not make you passive income on a monthly basis that you would be able to quit your job with. If you do not flip that House, you don’t make any money. If you don’t get the next deal to flip, then you will run out of money. Money does not keep coming in if you do not flip another house.
Wholesaling properties is also not investing. It is a great way to make money quickly, but if you do not wholesale that next property, then you will not make any money.
Investing In Savings Accounts, Stocks, Mutual Funds, and CD’s Aren’t Enough
The entire goal of investing is to park your money someplace that earns you a great return on it. If you invested in a savings account, you may make .001% return on it from the bank. Obviously, this is a horrible return and not a good way to invest your money. You can also get certificates of deposit and make potentially 2% to 3% return on your money in one year.
You can also invest in the stock market where you are actually investing in a company. The downside is you don’t have any control over the company and the company could go bankrupt at any given time. If it does then you lose your money.
Most people when they invest in the stock market hope to get an 8% to 10% return on their money in one year. Why would you settle for 8% to 10% when you can realistically make as much as 780% or more return on your money in one year with a rental property?
You should invest your money in a place that makes you even more money, provides you a passive income every single month, and protects you from the market fluctuations.
The only real way to invest in real estate is to buy income producing properties. This can be single-family homes, duplexes, triplex’s, fourplex, and multifamily apartment buildings. When you invest in real estate rental properties, you earn money every single month from the rents you receive for that property.
6 Ways Real Estate Rental Properties Makes You Money
Imagine yourself being able to make money without even working. If you were on vacation, your rental property will still make you money. While you’re watching your kids Little League game, your rental properties making money. And not just making you money one way, it makes you money in six different ways.
Real estate rental property investing is so lucrative and so terrific that there are six actual ways you make money when you own one rental property. You do not earn money, but rather make money with real estate rental properties. You earn money when you are paid a wage, like working in our and getting a minimum wage. That is how you earn money. Investors make money where it did not exist.
1. Cash Flow
Making money every single month is by far the best reason to own rental properties. Every single month you are able to make passive income in the form of cash flow that goes into your pocket every single month.
This is how I was able to quit my job and have enough money coming in to pay for my bills my mortgages and any other expense that I have. Because I have my rental property business that makes the passive income, I will never work a job again.
To calculate your passive income it is super easy. You take the total rents that you collect from the property you subtract every expense that you incur in the property. Whatever is left over is your passive income that comes in your pocket every month.
For example, a rental property with $1200 a month in rent with $950 of expenses each month would give you a positive cash flow of $350.
Wouldn’t it be amazing if you are able to make an extra $350 every single month just from one property?
Now imagine if you had 10 properties in making three and $350 a month. That would be $3500 every single month!
What if you had 20 properties that made $350 a month? Then you would be making $7000 a month in passive income!
Hopefully you can see that by investing in rental properties you will be able to have enough income in order to replace your job. Then you would be able to quit and never work for someone again.
2. Equity Capture
Equity basically is the value of your home versus how much you owe on the property. So, if you have a home that is worth $120,000, and you owe $100,000, then you have $20,000 in equity. If you have a home that is worth on a $120,000, but you owe $220,000, then that would be a $-100,000 in equity.
For us investors, we look to make money every single way possible and a great way is to capture as much equity as we can in a property when we buy it.
There is a saying that you should remember: “you make money when you buy a property, you realize the money when you sell the property”.
This means that you want to buy low and sell high. Even though real estate rental property investors focus heavily on passive income every single month, capturing equity is also something that is very important.
When I buy a property, I do my best to purchase it well below the market value. For example, I purchased a rental property in Houston Texas that had a market value of $210,000. With negotiating with the seller, pointing out the issues that need to be corrected, and making last-minute adjustments, I was able to purchase that property for $151,000!
That is an immediate $59,000 equity capture in that one property!
I don’t know of any other investment that you can buy rental properties and make almost $60,000 after you buy it and still own it.
3. Market Appreciation
generally, the real estate market goes up. I have even heard that the real estate market doubles every 20 years. Me personally, I’m not so sure of that but I do know that over time all of my property values have increased greatly.
With inflation, more demand for properties, and low interest rates, prices for homes keep going up.
This is not something that investors usually quantify in their numbers but it is a good thing to know. More than likely the market will go up anywhere from 5% or more each year.
Now this is not taking into account market crashes that sometimes happen. It is always unfortunate when the market does correct and prices come down. This is why us investors do not invest for appreciation but for cash flow. No matter if we cannot sell the property, we can still rent it out in order to make passive income every single month.
4. Forced Appreciation
when you first buy a property you can increase the value of the home by putting some effort into fixing it up. Similar to flipping a property, you want to rehab it well enough so that people would be interested in buying it. Instead of letting someone else buy the property from you, the value of the property goes up because of all the work you did on the property.
Let’s say for example you buy a property from $100,000 and put $20,000 into it to get it rented. That would be a total of $120,000 into the property. After you finish all the repairs, the property could potentially be worth $150,000 because of all the work you put into the property makes it worth more.
Basically other buyers would see the property and think that they would be able to pay more for such a nice property that is updated.
Now with the forced appreciation, you can take your property to a bank and refinanced the money and pulled out to buy another property and do everything all over again. You can basically use every one of your houses as your personal piggy bank that you can pull money out of.
5. Mortgage Buy-down
I absolutely love this part of investing in real estate rental properties. It basically comes down to the fact that your tenant is paying off your mortgage for you. Not just paying the purchase price of the home but the interest as well.
Because we investors calculate our expenses before we buy the property, we are able to make sure that the mortgage is paid for by the tenant because we add that in as an expense.
Imagine you buy a property with a FHA loan which is 3 ½% down and I home that is $100,000.
3.5% down is a $3500 down payment. That brings your balance to be $96,500. With the mortgage, you also have interest that you will be paying on the property for 20 or 30 years.
Even though you only put down 3 ½% on the property, you still owe the bank. The beautiful thing is that the rest of the principal and interest that you owe to the bank is paid for by the tenant. The only money that came out your pocket was 3.5% that paid to allow you to borrow money to buy the property.
6. Tax Advantages
there are quite a few tax advantages that us investors and business owners can take advantage of. Because the Iris sees a rental property business as a business, we are able to reduce our taxable income by the expenses that are businesses incur.
If you work from home, you can deduct a portion of your home office expenses from your income. If you own a cell phone and use it for work you can use a portion the phone bill in order to use to be a deduction on your tax return. Traveling, food, accommodations, technology, etc. and many things are considered parts of the business and you can write them off in your taxes every year.
Real estate investors also have a huge opportunity to do further taxes from the sale of a home until a future date. It’s called a 1031 exchange and is in the IRS code. It allows investors like us to sell a property and move up into apartment complexes. There are also many other benefits that you need to talk to your accountant on for tax advantages for your business.
The bottom line is that real estate rental properties make you money in six different ways and is the only investment that serious investors should do.
If you want to quit your job and never work again, then it would be wise to invest in passive income and cash flow rental properties.
Dustin and I are on very similar wavelengths…Here is a similar article I wrote!