Owning rental property must be the best investment I have ever had. Since I now have over 30 rental properties, I am successfully unemployed and will never work a job again.
It may seem hard to learn how to invest in real estate and owning rental property, but it is actually quite simple.
Lets look at the 18 amazing benefits to owning rental property and investing in real estate. There are so many amazing things about rental properties.
In fact, I talk to a lot of people who invest in stocks, and after I tell them about all of the benefits of rental properties, they start wondering why they are investing in stocks when they could have more benefits with rental properties.
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It’s Not Your Fault You Are Poor
All my life, we were taught in school how to be an employee. We were never taught real estate investing in school, let alone how to earn passive income.
The lessons our teachers taught us had specific answers and specific ways to do them. When you think about it, that is exactly what an employee needs to do. Do what they’re told, how they’re told, and when they’re told to do it.
We were never taught to be an investor, business owner, pastor, inventor, or missionary but I was taught how to be an employee.
This in itself is not bad but it’s only one type of learning and I desire to learn more about how to not be an employee.
To work for your money is having a hourly job that pays you for the hours that you put in. Having your money work for you is buying assets that make you money without you doing any work.
Advantages of owning a rental property benefits:
- You make money in 6 different ways
- Passive Income from rents
- Tenants pay your mortgage
- Equity Capture
- Forced Appreciation
- Market Appreciation
- Huge Tax Advantages
- Retire Early
- Financial Freedom
- Pass the properties to your children and grandchildren
- You can use other people’s money to make money
- You can insure your properties
Real Estate Investing is Passive Income
An asset is not the home you live in, or the car you drive, unless these actually make you money. An easy way to understand it is: an asset puts money in your pocket, and a liability takes money out of it.
If you bought a Lamborghini and rented it out to make money on it, that would be an asset. If you bought the same Lamborghini and did not make any money from it, it would be a liability.
Like a single family home, it can be an asset or a liability depending on if it makes you money or not.
By learning these principles, my mind was open to seeing the new possibilities of earning money through passive income in monthly cash flow rather than an hourly paycheck. I knew that I wanted to stop working for someone else and work myself and be independent.
I personally do not count on a pension, Social Security, or my job for my retirement because these can be taken away by politicians any time. I decided that I wanted to create my own retirement, one that is not dependent on anyone but myself.
Now what about you? Why do you want to invest in passive income and real estate?
Stop and ask yourself these questions:
- How would my life be if I did not need to work 40+ hours a week for someone else in order to make money to pay for my bills?
- How would my life be if I never had to worry about how to pay my bills again?
- How would my life be if I could design my life the way I want to live it instead of designing my life around my job?
- What are the things I would actually do with my time if I could do whatever I wanted to do?
- Where would I choose to live if I didn’t have to work to pay for my mortgage?
These are all the questions the financially rich people of the world have the ability actually ask themselves because they have their money work for them, not them for money.
This is the key principle of for passive income. Let’s look at that one more time. Have your money work for you instead of you working for your money.
It sounds easy doesn’t it?
It is easy once you learn from those who have already designed their life to fit them, not their job. Those people have found the amazing blessings of Master Passive Income.
To get started, you need to learn how to think like those who are already rich. By educating yourself how to use your money to work for you, you will have the ability to design your life the way you want to live it because you design your life around you, not around your job.
What Passive Income is Not:
The way of the rich is not trading hours for dollars.
When you have a job, you put in an hour of work and get an hour’s worth of wages in return. If you don’t work, you don’t get paid. Working a job is an example of trading hours for dollars. Being a sole proprietor of any type of business is also not passive income because you have to work every day to make money.
If you don’t service your customers you don’t get paid. You have substituted one boss for many different ones that can fire you whenever they want.
Putting your money in the stock market, mutual funds, treasuries, or bonds is not how the rich earn their money.
When you buy stock in a company, you are giving the company money in return for shares in the company. Those shares rise and fall on the earnings of the company, of which, you have no control over.
The officers and employees of the company have the control leaving you with a hope the earnings will go up over time and force the stock price to go up.
Likewise with mutual funds, they are completely out of your control. There is a fund manager who pools investor’s money together and purchases company stock in multiple different companies calling it a “diversified” portfolio.
What Passive Income Is:
The rich earn their money through “Passive Income“. This is because they buy assets that make them money the fastest way possible.
If you want to quit your job, you need to replace your hourly/salary income with an income that comes in whether they do any work or not. Passive income allows you to get paid by the value you bring, not the hours you put in.
If you have $3,500 in expenses per month and your passive income is $4,000 a month, you can quit your job and design your life the way you want to live it.
Monthly cash flow from passive income is the true way to be rich. The rich spend their time and money acquiring businesses, real estate investing, intellectual property, inventions, etc. These are things that bring in money every month for you and your family to live on. If you park your money in a mutual fund or 401K and hope for the value to go up, you are more like gambling, not investing.
There are many different types of passive income streams but the way of the rich is real estate investing that generates monthly cash flow. You may have seen many house flipping shows or heard of wholesaling homes, but these too is not the way of the rich.
In house flipping for money, once you stop flipping houses you stop making money. You must count on the next deal to get you through the month before your money runs out.
Now, the true way of the rich is through buying and holding onto an item that brings you cash flow every month.
Ways to Make Money Owning Rental Property
I have owned rental properties for a good 13 or 14 years now, and I have over 30 properties that make me money every single month. Just the passive income alone is amazing. I am able to feed my family, put a roof over our heads, and take care of my family without having a job.
That is only one of so many benefits of having a real estate rental property business.
There are six different ways that owning rental property will make you money. It’s not just income one time, it is passive income every single month.
1. Passive Income
This is the number one way you make money!
On the first of the month, checks come rolling in. This gives you money to live on, to travel the world, to pay your bills, whatever you want.
Rent – Expenses = Passive Income
Example: You are renting a property for $1,000, but your expenses are $750. There is a $250 gap that will go into your pocket every single month. That is positive asset income.
If you rented it for $1,000, but you were paying $1,250 in expenses every month for mortgage, taxes, insurance, etc., you would be paying out $250 a month. We don’t want that! As investors, we want to make passive income every single month.
2. Equity Capture
Let’s say you buy a property that is worth $100,000, but you only pay $80,000. You capture $20,000 in equity in that property right away.
You can refinance this property and use the equity to purchase other properties. Imagine doing this with a stock. What if there was an Apple stock or Amazon stock that was worth $3,000 and someone sells it to you for $2,500?
You capture $500 in equity, because you can turn around and sell it for more right away.
3. Market Appreciation
Just because of time, inflation, demand, and the way the market works, over time your property is going to be worth more than when you bought it. There are going to be fluctuations up and down.
Market appreciation alone will make you money.
4. Forced Appreciation
Let’s say you have a property and it is worth $100,000 and you buy it for $80,000, so you capture $20,000 from the start. You could paint the walls, change out the carpet, put in some granite counter tops, and clean up the yard.
In doing this, you would be spending maybe $7,000 on improvements, the value could increase to $127,000.
That is another $20,000 that you forced in appreciation.
It is a great way to make money owning rental property!
5. Mortgage Buy Down
Your expenses include your mortgage, taxes, insurance, property management fees, repairs, etc., and we account for those when we purchase a property.
If you buy a $100,000 property for $80,000 and you put 10% down, $8,000, you still owe $72,000. The expenses, including mortgage, is paid by your tenant.
You are not paying the balance of the mortgage. Over the years, the mortgage will be paid down by your tenants! I have many properties where tenants have paid off the mortgage.
Many investors keep their properties for 30 or 40 years, and after 30 years, with a 30-year mortgage, that mortgage is paid by the tenants and then the investor has all of that passive income coming in.
6. Tax Deductions
Tax deductions and tax deferments are another way you save money with rental properties. When you buy one property, it becomes a business and you can write off all of your expenses.
If you have a cell phone that you use in your business, you can write off the expenses of that phone. If you live in Indiana and want to buy a property in Hawaii, you can travel there to check out the property and write off your expenses.
Also if you go to Alaska on a fishing trip and look at some properties while you are there, some of those expenses can be written off. If you have one property, the IRS sees it as a business. Talk to your accountant for more information!
PRO TIP: 1031 Exchange
A 1031 Exchange is a little more advanced. If you have one rental property and you want to move that into another rental property, you can sell the property, not touch the money, and use that same money tax free to buy another property that is bigger and better.
Think about Monopoly.
You buy the land first, then you put a house on it, and then another house. You keep growing until you can put a hotel on there. Each time, it grows until you make more money every month.
Rental properties are nothing like the stock market. You may earn dividends from some stocks, but the amount is minuscule. The only way you really make money is when you sell a stock for more than you paid. It is similar to flipping a house, because you only make money one time. Rental properties are amazing!
More Benefits of Owning Rental Property
7. Generational Wealth
I love my family and I want to take care of them. I want to make sure they are taken care of in the future too. This is generational wealth.
I can own a property and then pass it down to my kids, so they are making money every month. Plus, I can teach them how I am running my business, so they can do it themselves. They can then pass it down to their kids, and so on.
8. Control of Your Time and Properties
When I had a job, I had a boss that basically dangled a carrot in front of my face, which was a paycheck, and it made me work. If I didn’t work an hour, I wouldn’t get paid.
My boss had complete control over my life. I had to ask him for time off of work and I hated not having control over my life.
When you have many rental properties, you don’t need to work anymore, because your properties are making you money.
You have complete control over your life, your time, and the rental properties themselves. If you want to add granite counter-tops or change your water heater to 50 gallons, you can!
If you own stocks, the only control you have is buying or selling. You have no control over the businesses you invest in, so if someone runs the company to the ground, you could lose all of your money.
9. Have the Money and Spend it Now
Instead of waiting until you are 65 or 66 years old and the government telling you it is okay to retire, why not retire at 55, or 45, or 35? Why wait until you are 65 years old or more?
You have the money now that you can spend. I knew the more properties I had that made me $250 or more, I was that much closer to where I could replace my income from my job.
My ultimate goal was to quit my job and have money coming in to replace it.
Self-Directed IRA’s and 401K’s
Many people say they have a 401(k) or IRA and they will use that to replace their income when they retire. Some people use their 401(k) to invest their money and they borrow from it or do a self-directed IRA.
The downside is that all the money you make has to go back in your 401(k). You can’t keep it and pay your bills with it. That is the one downside of using your 401(k) to invest.
I want to be able to have my money and spend it now.
10. Automatic Business
I literally work 30 minute a month. Not a day, not a week, 30 minutes a MONTH. All I do is get statements from my property managers, see that everything is going well with my properties, and that is it.
Imagine if you made $10,000 every month from your rental properties and you only had to work 30 minutes. You could hire a bookkeeper to look over the statements, but I like to do that myself.
I hire property managers, realtors, wholesalers, contractors, you name it. I hire other people to do the work for me, so I can do whatever I want. You can do this too.
My properties make me money and I pay the property managers from the rents I am receiving. I am not paying the property manager, the tenant is paying them.
The taxes, insurance, mortgage, interest, HOA fees, etc., the tenants are paying for those expenses. Wouldn’t you love to have a business that just ran itself and the customers paid for everything? Of course!
That would be amazing.
11. Do The Business Right
Build the business first, buy the property, and then put the property into the business. That makes you money while you sleep, while you go out to dinner, while you do whatever you want.
You can even start other businesses with your free time to make more money.
My business runs with or without me. If I were to pass away, my business will still run itself and my wife will have it or my kids will have it.
12. Other People’s Money (OPM)
You can use OPM to grow your business dramatically. I’ve used leverage, or borrowed money from other people, so many times and recycled my money over and over that I can’t count how many times I’ve done it.
I took the first $17,000 and put it into a property. Then I refinanced that property, pulled the cash out, and put it into a second property. I refinanced the second property, pulled the money out, and bought the third and fourth properties.
I did this over an over again, and eventually I was able to buy $150,000 houses for cash, refinance, pull the cash out and put that into another property. It is amazing how you can use other people’s money to grow your business dramatically.
Robert Kiyosaki, author of Rich Dad, Poor Dad, taught us there is good debt and bad debt.
Bad debt takes money out of your pocket. If you get a car loan, you are paying out money every single month.
Good debt puts money into your pocket every month. When I get a mortgage on a rental property, I have all of the expenses paid by the tenant, and I don’t pay anything.
On top of that, I still make money while I sleep or take a vacation.
In my FREE Investor Workshop, I share how I bought 19 properties in 6 years and made $6,500 in gross rents.
It took me six years to get 19 properties, and I kept growing my business by buying one after the other, as quick as I could. It is like a snowball rolling down a hill.
At first it is small and isn’t fast, but as it starts rolling and grabbing more snow, it gets bigger. As it gets bigger, it gets faster, as it gets faster, it gets bigger faster. T
he same thing happens with rental properties. All of the money I make from one property to 100 properties, I use to buy more properties.
Imagine Borrowing Money To Buy A Stock…
If you went to a banker and asked to borrow $150,000 to buy stock in Apple or to invest in a painting, the banker would laugh you out of the room. You won’t get any money out of him, because it is a stock and not a tangible asset like real estate.
You can’t get a loan to buy a stock. What you can do is use the money from a banker to buy a property. You can get leverage, or a loan, on a property, because the worst case scenario is the banker will take the property if you don’t pay the loan.
13. You Own a Business
A great thing about real estate is that you own a business with all of its benefits and protections. If you buy stock in Apple or Amazon for $100,000, and ask an insurance agent to insure the stock if it goes down, they will laugh at you.
If you buy a home, you can get homeowners insurance, landlord insurance, and even umbrella insurance to protect your investment and you.
14. Your Business will Multiply
As you own more rental properties, your business will multiply. Just like with the snowball, it is going to keep getting bigger and bigger. Pretty soon, you will have 10 properties.
To get to the 11th, 12th, 13th, or more, it gets easier and easier.
I bought three single-family homes and a duplex off an investor.
I never would have done that in the beginning, because I didn’t have the money, experience, or knowledge. I was able to do that and put $25,000 down and put the rest in a seller-financing note.
15. Tenants Pay for Everything
The tenants will pay off the mortgage for you as well as all of the other expenses. The business is paying for itself and it makes you money. You will not pay the expenses.
A rental property is a stable and secure investment, unlike any other investment, because it is actual property. If your rental property burns down, you still own the land. On top of that, your property is insured.
16. Stable Investment
In 2009, the market crashed. However, I don’t invest for appreciation, I invest for passive income. Whether the market goes up, down, or sideways, I make money.
When the market goes down, I make even more money, because I gobble up properties.
I can see shifts in the real estate market from months and months out. It takes a long time as opposed to the stock market, which can drop in a day. Owning rental properties is a much more stable and secure investment.
17. Flexible Options
I love having flexible options. I can move into a property if I want. When I first started investing, I lived in California. I realized how expensive it was and ended up moving to my house in Arizona, because the tenants were moving out. Most people can’t do this.
We can choose to move into a property, rent it out on Airbnb, or sell it. There are so many options!
When I am 65 years old and have 30 properties, I can choose to give some to my kids or sell one or two.
18. Diversify in Other Areas of the Country
Let’s say you are building your business and you have eight properties in the city. You can branch out to another city maybe in another state and eventually not have all of your eggs in one basket.
I started in one city, then moved to another city, then moved to another.
This is just a short list of all the great things about owning rental properties. This is a business that, if you follow the steps, you will make a business over and over again.
Every single city I invest in is a new business.
Get out there, start investing, and change your lives for the better!