March Update 2016

Welcome to another monthly update here on master passive income! Each month I like to update you on my progress of using passive income and delayed financing to quit my job and provide for my family. I’m very excited to share with you the progress on my recent passive income businesses from March.

Why?

Because this month is when I proved that my business model of buying and renting real estate in any part of the country works!

Here’s what happened.

In December 2015 I purchased my most expensive investment property in a completely new area of the country from the other areas that I invest. I bought the property for $151,000 cash and had a plan to pull all my money out and have the tenants pay for the mortgage as well as pocket $800 a month in passive income.

To sum up anything, I bought the property for $151,000 cash, had a tenant locked in 18 days later for $2100 a month with an 18 month lease, and then refinanced the property with delayed financing pulling out $161,000!

Now I have every penny, and then some, pulled back out of the property and into my pocket!

As you can see from my closing disclosure, the loan amount was $161,000 with a 4.625% interest rate. The monthly principal and interest payment is $827.70.

The line that I want you look at is the very bottom one that I highlighted in red. Total cash to close is $157,143.44 coming back to me in my pocket!


A quick side note.

I keep all my money in Capital One 360 checking account where I earn .90% interest each month from my money. For March, I earned almost $70 just from this one transaction, and that was only half the month!

Houston 1 Deposit

If I had all $157,143.44 in my account for the entire month, that would $140 in my pocket!

Capital One 360 is a great place to keep your money while you are searching for a new investment.


I purchased the property for $151,000 and pulled out $161,000 out of the property 3 months later. After closing costs, the total cash that came into my account was $157,143.44.

That is $6,143.44 more than I bought the property for using delayed financing!

Houston 1 Closing Disclosure
Houston 1 Closing Disclosure

Obviously buying a house for cash and pulling all the money out three months later is only good if you have someone else paying the mortgage for you.

 

Good thing I have a tenant locked in at $2100 a month for 18 months!

Here are the numbers once it’s all said and done:

Monthly Income
Rents: $2,100

Monthly Expenses
Mortgage: $827.77
Taxes: $266.70
Insurance: $166.25
Property Manager: $80
Total expenses: $1,340.72

Total Net Monthly Passive Income: $759.28!!!

This is totally exciting! Here is the business model in a nutshell.

  1. Buy the property cash
  2. Rehab the property to be rent ready
  3. Place a tenant in the property
  4. Refinance the property to pull all my money out
  5. Tenant pays all rent and expenses
  6. Property Manager manages the property
  7. Own an income-producing property
  8. Repeat the process over and over again

If you want to learn more in depth on this process, check out my blog post on the five-step process where I go in depth on how to implement this strategy.

 

What’s Next?

Now I am currently looking for new properties that I can use the delayed financing technique on.

Last month I talked about a property that I was looking at in Houston as well. It was looking pretty good until I found that the maximum total the property could rent for was only $1700 a month. After mortgage, property taxes, insurance, and other expenses I would only make $200 or $300 in passive income a month. I usually look for at least $350 and up when I tie up my money for a property.

Currently, I am looking into direct marketing to buyers in the Houston area with a wholesaler who would do all the work for me. I would pay all the marketing and expenses and the wholesale company would do all the work finding leads on properties that are not currently on the market. This strategy would take a couple months before I find a property because it is a long term process.

  1. Develop a mailing list of potential properties
  2. Mail postcards to the current owners inquiring if they would like to sell
  3. Follow up on any leads that come in from those postcards
  4. Sit down with individual sellers and negotiate terms
  5. Present an offer to the seller
  6. Get a contract to buy the property
  7. Enter escrow
  8. Purchase the house

The reason why I’m doing this strategy is because I could find properties for much less than current value. At times even 50% of the after repair value.

Again this is a long-term play in fighting properties but this business is pays off in the long run.

For the rest of my passive income businesses, I’ve been working hard on developing books, courses, and other passive income ideas.

Check back again next month when I post how April is going.

Let me know how you are doing with your passive income.

Leave me a comment below.

My March 2016 Monthly Update