Here’s your new job: Pick out one day a month to drive around town and do nothing but pick up checks with your name on them.
If you can do simple math (I’m talking 2 + 2 = 4), then you have every opportunity to make this your new life.
Let me show you exactly how it’s done…
Please allow me to begin with a little story that I’ll never forget.
A month or two after hiring on a new associate here in the office, he perfectly explained the pure moneymaking power of using your money to work for you.
You see, this new colleague was a recent college graduate who was living in an apartment at the time. And after a discussion with his landlord one day, he realized how simple the landlord’s job was, which I’ll summarize in this new associates words…
“All he does is drive around at the beginning of every month and pick up check after check after check!”
I chuckled because this young man was learning something wonderful about what real estate can do for just about anyone – turn your life into a series of paydays that require almost zero work.
But of course there’s a little more to it than just hopping in your car and driving around to pick up checks whenever you’d like…although it’s not much more!
You see, one thing I love about real estate is that I know how profitable any deal is before I actual make it.
It’s all simple math.
And in the case of buying and renting out apartments, let’s say, it all comes down to this:
Will the rent I collect from this apartment be more than the mortgage I’m paying on the property?
There are hundreds of “mortgage calculators” on the Internet that can help you figure out this amount before you even get close to pulling the trigger on an apartment, and then you can get that number nailed down before making any purchase!
Then all you have to do is use tools like Zillow and Trulia to see what sort of monthly rents are being charged for similar units in the same building or area.
So, if my mortgage payment is $800 a month and I can see that the same style apartment next door is being rented out for $1,100 a month, I would make that deal…
But if my mortgage payment would be $1,200 a month on the same apartment, the deal doesn’t make sense, does it?
In the latter case, I’d be taking a loss every month until the apartment was paid off, which would likely be decades down the line!
But if the deal does make sense, I know that I would have the opportunity to collect roughly $300 a month after paying the mortgage on this apartment until I’m able to pay it off…Simple!
Now, of course you should also take into consideration repair costs or the chance that you may go a month between tenants at some point, but 99% of the math is right in front of you.
And here’s the best part: after you scrape together enough cash for the down payment on that first apartment (that makes sense according to the math), you’ll be playing with the house’s money, in a sense.
By that I mean you’ll be collecting $300 a month based on the previous example, which is $3,600 a year.
So just a few years into your rental would hand you more than $10,000 in rent payments that you can now use on the down payment to purchase a second apartment to rent out!
As long as the math of the deal makes sense, you’d then be collecting rent checks from two properties!
That $300 a month then becomes $600 a month. And that $3,600 a year becomes $7,200 a year!
Then it’s only half the time from buying apartments #1 and #2 before getting your hands on apartment #3!
Add on another $300 check each month, and you’re now sitting on more than $10,000 a year in rent payments…
…and at this point, you could be just a year from that next property.
Apartment #4 means $14,000 a year just by driving around collecting rent checks!
And now you’re able to either A) go for a bigger/better apartment that you can charge more a month for, or B) purchase your next apartment in a matter of months!
What you’re doing is making your money work for you.
That passive income that started at just $300 a month has turned into upwards of $2,000 a month by now!
Of course, this isn’t a way to get rich overnight. In the scenario I’ve just laid out, we’re talking about maybe a decade before it all plays out.
But all it takes is that first property!
And even if it takes a decade to get to the point where your ONLY job is driving around on the first of every month to collect a pile of rent checks from your tenants, isn’t that worth it?
And I’ll leave you with a few notes:
- If you have enough cash saved up to start with more than one property, go for it! If the math makes sense, the deal makes sense.
- Stick to one area. First of all, you’ll know the prices and flow of the real estate in that area better, rather than juggling multiple areas at once. And second, make it easy on yourself to show apartments, collect checks, and make repairs.
- Make it easy on your tenants. The big mistake most landlords make is being difficult by charging extreme late-payment fees or not helping tenants with simple repairs. While a difficult landlord may save/make himself a few hundred extra dollars, an easy landlord may secure a good tenant for years and years that would be eager to leave after year 1 of dealing with a difficult landlord.
With this plan, just by following simple math, collecting monthly checks will be your new job…
