what is passive income

I was lucky, I don’t know why, but for some reason I picked up on the concept of passive income at an early age. At 9 years old I used to consistently beat my parents at Monopoly. At 9, I was just happy to be better at something then the grown ups, but I was subtle learning an important lesson. Id giggle as each time they landed on one of my properties I was slowly taking their money one faux hundred dollar bill at a time, and my pile of money would grow strong until the game ended. Today I know this, was a rough concept of generating passive income.

What Is Passive Income?

Passive income is payment you recieve on a consistent basis, with very little to effort required to maintain it. Contrary to active income, in which you trade your time for money, passive, or residual income is created generally by investing in assets, or putting in a lot of time up front that produce a monthly income.



Why is passive income important?

Passive income is important because, it is not directly related to the time that you spend. You make educated investments that create a steady income stream. Because you are not spending time, passive income investments are a good way to plan for retirement. By gaining more and more income producing assets, you are in direct control of growing your wealth.

Some Passive Income Examples:

I have dabbled in a few of these, but I’ve been able to create the majority of my income with rental properties, as you recall with house #1 and house #3. Rental properties have allowed me to achieve financial independence, and I am currently growing this business.  I am a big believer in diversification, I’ve always been an advocate of diversification, and no one way is better than the other. I recommend that people experiment on a small scale to see which methods interest you the most

Passive income is not FREE money. All forms of passive income require the following:

  • An initial financial investment – An examples of up front financial investments would be purchasing dividend producing stocks.
  • An initial time investment – An example of up front time investment would be. Creating a hit song and receiving residuals, or royalties on a monthly basis.

What Makes Passive income so powerful?

What makes passive income so attractive, is that once you lay a foundation, the residual income get easier build. With traditional active income there is a limit to how much time you can dedicate to working. With 24 hours in day and a general work shift being 8 hours of your day, it’s virtually impossible to find time for more then a second job, not to mention how brutal of a lifestyle that is. With passive income, you are not bound by the time restraint, and letting your money work for you. As long as you are generating enough income you can create as many passive income streams as you like.

The best thing about passive income, is when you don’t have to be at work, you get to actually live life. The majority of us are stuck in a position, where we need to work to keep things in order in our life. Jobs determine: when you go to sleep, when you wake up, what you eat, how you dress, and what you drive. Passive income allows you to spend your days doing what’s most important.



How To  Generate Passive Income In The Beginning?

  • In the beginning you need active income – Unless you come from a wealthy family, you will need capital to build your passive income empire. Theres no way to shortcut this part, you need to have a primary means of income to get started.
  • Be Frugal – Think of this as the time of sacrifice, this may seem unreasonable but, stop spending so much money. Try to find economic ways of entertaining yourself. Cut down on food budgets, try not to eat out too much and cook at home. Here are some yummy ideas of what frugal people eat! 
  • Create a plan. A big part of creating passive income is having a strategy. Have answers and procedures for every conceivable scenario.
  • Determine how much passive income you need – Figure out how much residual income you need to make to live your life comfortably.
  • Set realistic short term financial goals – It’s ALWAYS great to shoot for the stars, however creating short term goals that can be reasonably achieved. An example of a good short term goal is saving up for a down payment on a rental property,

Achieving financial freedom is not easy to achieve, but by setting goals, saving, and frugal living you can begin on your journey to residual income. After laying this foundation, by the time you are generating enough income to live off of, you will have definitely earned it.

Investing in real estate young afford everything

Investing In Real Estate Young

If I could go back in time, to my senior year of high school, with the financial knowledge I have now….I would have retired years ago. It hurts my head to think how uninformed, and uneducated the school system leaves our youth after earning your diploma. All those years chasing grades, learning formulas, and a plethora of other things, yet no talk of rental properties, building passive income, or even the financial basics. Unfortunately, this scenario is all too common. I was in my mid-20s by the time I accidentally started building passive income.

 

The average person graduates high school and college. After college they have incurred student loan debt so they get an entry level job, they rent while dating, get married then search for the dream house. The couple applies for mortgages, they purchase the dream house at the top of their budget. And the cycle begins. This is the point when you stroll up to the starting line of the rat race.

 

Your living arrangements are your biggest expense, for this reason, I recommend beginning savings for your first house right out of high school. Once you establish stable employment or hone your hustling skills, rather than renting, the best way to start investing in real estate, is to find a local duplex or a cheap single family home. In order to find a good deal, you may have to sacrifice, and consider living in a low-income area. Low income doesn’t necessarily mean dangerous, but do your research. There are benefits to each strategy.

 

The benefit to buying a cheap home is that you can pay it off fast. In my area, I can find a 2 bedroom home in a low income, but safe area around 50k. If you concentrate your income on paying this off, you can own this house in under 3 years. By paying off your primary residence, you have eliminated what is generally everyone else’s biggest expense. You now only have to cover your property taxes and insurance. This means now it’s easy for you to save, what would be rent/payments for your next investment. Imagine how fast you could save up for rental if you didn’t have to pay rent.

 

The benefits of buying a duplex as first investment slightly differ in this strategy. The idea here is to find a well-priced duplex. My criteria is that the duplex cost less than if I was buying 2 separate houses. Using the example above, if the average 2 bedroom was 60k, I would be looking at duplexes with a comparable amount of bedrooms per unit for 110k or under. Once purchased, find a good tenant to rent out one side. Make sure the rent you charge is enough to cover the mortgage as well as your bills. At this point, you have your own place, and your living rent free. Continue to save money as if you did have rent and apply this to the mortgage. If you continue this in a few years, you’re going to have the duplex paid off free and clear. Now when you receive your rent payments, they are mostly profit. You can now save up for a down payment on your next place, then replace your old side of the duplex with a new tenant. The income from having 2 new renters will be profit and you will own real estate.

 

By investing in real estate young, by the time you’ve paid off the property In either strategy, you’ve already aggressively taken a large step towards passive income and getting a clear view of the finish line that is the rat race. Once you move out and have either completely paid off and rented, you are now able to buy more rentals, or at the very least you have an asset generating enough monthly passive income to cover your new mortgage payment. Without having to worry about rent\mortgage payments you can begin a fast paced savings plan, that will allow you to grow your portfolio and subsequently, your rental income . The younger you are when you star investing in real estate, the sooner you can start building up your rental portfolio.



the landlord commandments

The 15 Landlord Commandments

For people like me, that accidentally started building passive income. Learning the landlord game has definitely been an interesting journey. As with any career path, when your in it, you get to see a whole different side of things. I believe one of the keys to success is the ability to adapt, so as Ive continued to grow my rental portfolio there are some tips that I have learned that can help to ensure your success with rental properties, and the keep them profitable and passive as possile

  1. Thous shalt Always Screen Tenants. The first line of defense for any landlord against major headaches, and utter destruction. Screen your tenant. Take a look at a persons track record with an online background check. Being able to find a good tenant is the foundation of a strong rental business.
  2. Thou Shalt NOT Rent To People You  Don’t Know. Your friends, your cousins, your moms friends, your brother, ex girlfriends little brother who’s “cleaning up his life now”, these are the people you want to avoid as tenants. When things go left, they will ruin your investment plan.
  3. Thou Shalt Always Do A Video Walkthrough Before Lease. Self explainatory right, which damages or stains were done before then tenant moved in, become merely hersay, when both parties not video evidence is available. I always do a video walk through with the tenant present. This way when they move out, they know if theres any holes in the wall, we both they weren’t there before hand.
  4. Thou Shalt Set A Tone For The Relationship. Always be prompt, professional, and reliable with your tenants. Set a standard for the way you run your rental business. Have policies and procedures in place, and follow them. Let tenants know up front what is expected.
  5. Thou Shalt NOT Discuss Personal Matters With Tenant. This is a big part of professionalism. Some tenants can naturally be friendly, and inviting. Maintain a professional relationship, when tenants begin to think of you as a friend, it can lead to late rent payments, and request to waive late fees, and a plethora of other things, that can undermine the foundation of your rental income
  6. Thou Shalt Be Clear Whats Expected. On time rent payments, how much are late fees, these are things you  need to express . If cutting grass, and raking leaves, or snow removal are the tenants responsibility, make sure this is clear in the beginning. I make sure a tenant knows whats available by including a tenant responsibility sheet.
  7. Thou Shalt Collect Electric Payments. Come on its 2016, I really hope your not driving to pick up a check from a tenants. Always collect rent via online payment service such as Paypal, or get a deposit only bank card from your bank, this lets tenants deposit your rent payment at any local bank of your choosing. Then all you need to do is check your balance from your app. Work smarter not harder!
  8. Thou Shalt Answer Your Tenants Calls. Believe it or not I know a few landlords who actually have a callous attitude towards this. A landlord should be accessible, or atleast have a 24 hour property management company in place. The tenant may be calling you to tell you a pipe burst in the wall, you need to be able to address problems fast, the faster you handle it the faster its in the past.
  9. Thou Shalt Make Repairs Fast. If the fridge goes out or the disposal break go fix it. Remember your tenants are paying you for a fully function living space, when things break fix them fast to keep the space functional. Don’t give your tenants a reason to get upset with you.
  10. Thou Shalt Fix Things Right The First Time. This is one I learned the hard way, in the beginning, I tried to nickel and dime things, cheap $10 fixes, I learned fast that this just creates an everlasting headache. If I’m fixing the same problem for $10 10 times, I probably could have just had it done right in the first place. Im all about keeping it a passive as possible. If you are not handy, get yourself a GOOD handy man that you can call for repairs.
  11. Thou Shalt Set Aside Money For Repairs. When its time to replace the water heater, or a leak from the upstairs shower caused the ceiling to sag. This emergency fund will keep you from hurting your profitability. If you fail to plan, you plan to fail, always set aside ATLEAST $75 per month per rental. I find by saving a designated amount, and setting aside, the emotion is removed from the money. When a tenant calls with an issue, instead of thinking, “more money out the window” you think “thats fine we have money set aside for that”
  12. Thou Shalt Have A Firm Late Fee Policy, and do not defer. Make your tenant sign a copy of your late fee policy before moving in. Let them know what date rent is expected, and how much per day it will cost after that. If you let this slide tenants do not have an incentive to be on time. I need my tenants to make me a priority, the business can only run efficiently with promptness. If something breaks, I fix it fast, I expect my money with the same speed. Now if a tenant tells me they switched jobs and now get paid on a different day, I would be willing to work something out, but never be willing to accept consistent late payments.
  13. Thou Shalt Always Have Eviction Paper Work Ready To Go. Have all late notice and eviction papers ready to go. I keep a folder with these by my desk. If a tenant doest pay, the late notice is sent, which usually rectifies the issue, but if not, Im ready to follow up with the rest of the eviction paper work
  14. Thou Shalt Raise Rents Yearly. This is something I wasn’t doing. You will need to check in you area for local laws regarding raising rent but its a good idea to raise rents yearly. This is one of the reasons I enjoy investing being a landlord, they keep up with inflation. Always check what other rentals are going for in the area. As a general rule I raise my rents by $50 per lease renewal. This is about half of whats allowed in my area!
  15. Thou Shalt Recognize A Good Tenant. If you have a good tenant, know what you have. Be a good landlord, and you will keep good tenants around for many years. These people are the heart of the business, show them respect, and respect their privacy. If you have a good long term tenant that pays well and treats the property good, you will always stay profitable
how to find a good tenant

Investing is real estate in the form of rental properties can be extremely lucrative, and an excellent asset that generates income. When you talk to people about rental properties the response normally falls into one of two groups. They either love it, and are swimming around in large pools filled with coins like Scrooge McDuck, whenever they have spare time, or they hate it and have tales terrible drawn out evictions, and thousands of dollars in damages. For some reason, this is the life associated with being a landlord, which is true to an extent, but can usually be prevented if you can find a good tenant. Here are a few tips to put the odds of building wealth with real estate in your favor. If you’ve ever had to find a tenant for the first time, you might ask the following questions:

  • What’s the best way to find a good tenant?
  • How do I screen a tenant?
  • What are the characteristics of a good tenant?

When you are a landlord, you need to rent to good people.  Screening tenants for your rental property will be the key to your success. – No Nonsense Landlord

The Number 1 rule to find a good tenant

Do NOT rent to any family, friend, or anyone you have any type of relationship. This is should go without saying, and is ranked very high on the 15 Landlord commandments, if you want to find a good tenant, and goes without saying but you wouldn’t believe how many people do this. No matter how nice this person is it wont generally work well. Your tenant landlord relationship needs to be professional. This means do not make friends with your tenants. One of my tenants used to always invite me out for drinks, but I always made sure to politely and respectfully decline.

Tenant Screening.

Screen your tenants. No really really screen your tenants. Seems like common sense for anyone hoping to find a good tenant, but remember those angry investors, this is the step that was either skipped or botched, that cause them to feel this way.  The first step to find a good tenant is the pre screen. This is done when you first advertise your property. Make sure you clean before taking pictures, because clean rentals help to attract clean tenants. Post your ad, with a detailed description of the property.

Next, you will want to add the things that will be required, I always choose the following, no felony convictions within the last 5 years, no sexual crimes arrest, must have verifiable rental history of at least 3 years, and must earn 3 times the rent, and no evictions ever. Those questions for potential tenants, are my first defense to help weed out the rift raft. I find that it filters out the majority of dead beat tenants. Last I include my application fee, this is generally $50, and is used to cover the background check, this is also put in the ad, for two reasons, so they know that I will be verifying the above questions, and because no one wants to waste $50 if they know they won’t pass. As I get potential responses, I call them back give them the address, and tell them do a drive by to see if they like the area. If they are interested I meet with them, and show them the inside. If the prospective tenant wishes to proceed. I have them fill out my application, and collect the application fee.

Now its time for the background check. Back in the day, this was tricky, but these days there are a number of tenant screening services such as Next you will want to add the things that will be required, I always choose the following, no felony convictions within the last 5 years, no sexual crimes arrest, must have verifiable rental history of atleast 3 years, and must earn 3 times the rent, and no evictions ever. Those questions for potential tenants, are my first defense to help weed out the rift raft. I find that it filters out the majority of dead beat tenants.

Last I include my application fee, this is generally $50, and is used to cover the background check, this is also put in the ad, for two reasons, so they know that I will be verifying the above questions, and because no one wants to waste $50 if they know they won’t pass. As I get potential responses, I call them back, give them the address, and tell them to do a drive by to see if they like the area. If they are interested I meet with them to show them the inside. If the prospective tenant wishes to proceed. I have them fill out my application, and collect the application fee. Now it’s time for the background check. Back in the day, this was tricky, but these days there are a number of tenant screening services such as

As I get potential responses, I call them back give them the address, and tell them do a drive by to see if they like the area. If they are interested I meet with them, and show them the inside. If the prospective tenant wishes to proceed. I have them fill out my application, and collect the application fee. Now it’s time for the background check. Back in the day, this was tricky, but these days there are a number of tenant screening services such as Next you will want to add the things that will be required, I always choose the following, no felony convictions within the last 5 years, no sexual crimes arrest, must have verifiable rental history of at least 3 years, and must earn 3 times the rent, and no evictions ever. Those questions for potential tenants, are my first defense to help weed out the rift raft. I find that it filters out the majority of dead beat tenants. Last I include my application fee, this is generally $50, and is used to cover the background check, this is also put in the ad, for two reasons, so they know that I will be verifying the above questions, and because no one wants to waste $50 if they know they won’t pass. As I get potential responses, I call them back, give them the address, and tell them to do a drive by to see if they like the area. If they are interested I meet with them to show them the inside. If the prospective tenant wishes to proceed. I have them fill out my application, and collect the application fee. Now it’s time for the background check. Back in the day, this was tricky, but these days there are a number of tenant screening services such as rentprep, that can do a full background and credit check for a reasonable price. These checks are quite comprehensive. Within 24 hours, any lies are exposed, as I have access to their former addresses, criminal history, eviction history, bankruptcy filings, credit score, and employment information. I then cross reference this with the application for discrepencies. My personal preferences are:

  • Credit Score must be atleast 600. I feel this score means you are fairly responsible, I may sometimes go as low as 570 if everything else is in order.
  • Criminal history must be extremely mild. I don’t allow any recent felonies within the last 7 years, no drug crimes(have you seen how the DEA kicks in drug dealers doors, looks very expensive), no sexual offenders, and pretty much anything that would indicate the tenants lifestyle could end them back behind bars, because jailed tenants can’t make rent. However if the prospective tenant got into a got arrested for public intoxication during Mardi Gras 5 years ago, I would not disqualify the tenant. Things happen, but this is a judgement call.
  • No evictions ever! I don’t care if it was 20 years ago. An eviction is one of the worst, and expensive things a landlord can go through. Evictions mean the tenant would not leave and had to be escorted out by law.
  • I make sure that they really work where they claim. Tenants will sometimes get creative here and give family members numbers, and instruct them to pretend to be employing them. I call jobs and speak with the supervisor, I verify employment and length of employment, this should match what was on the application. I require them to be on the job for at least 2 years.
  • I verify previous landlords, tenants also sometimes try to use family members for this, so use discretion. When the former landlords pick up, I confirm who I’m speaking with then ask them to verify the address of the the tenant, usually landlords will know this address right away and is a good indicator. Its always a good practice to speak to the landlord before the current. Sometimes the current landlord will be anxious to get rid of a bad tenant, and give a false praise. Once confirmed, I ask how the tenant was and how the home was treated. Landlords will tell you if they were trouble makers, or if they were late on rent.

If everything checks out, I can end my search to find a good tenant, and call the prospective renter and let them know that they passed the check and give them a move in date, and request one months rent plus a security deposit equal to one months rent. By pre filtering, and then screening and verifying potential tenants in this manner, I end up with end up with a responsible person who has the makings of a good tenant. I find that tenants with clean backgrounds, and pass these verifications are not flukes, they actually care about their reputations, thus are less likely to tarnish it. Both my tenants from house #1 and my tenants in the townhouse investment property that have been screened this way have rented my homes for 3 or more years at a time, and are extremely low maintenance. By thoroughly researching to find a good tenant from the beginning, I have less hassle and can truly consider this income stream passive income.

 

Are you a rookie landlord or a seasoned veteran landlord? Any tips I might have missed here? Let me know in the comments below!

why your house is a liability

Your house is NOT an asset

Chances are you’ve heard someone at some point utter the phrase “your house is your biggest asset”. Seems legit, after all home ownership is the American Dream. But the reality is, your house is a liability, perhaps your biggest, depending on other financial  factors. When you purchase a house to live in you begin to incur inevitable expenses.

What are assets and liabilities

Before we can understand why your house is a liability, we must first learn what both assets and liabilities are. In simple terms(because simple is always better), an asset is something you buy that generates income. Things like rental properties, businesses, royalties, or affiliate  The latter, liabilities are the opposite, things like cars, clothing, electronics, boats and generally anything that cost money to maintain and/or generates expenses. These terms, and the ability to identify such are fundamental on your journey to financial freedom.

Why your house is a liability

Now that we know these terms let’s think about home ownership in all its American glory. You find the house of your dreams. You make an offer, get financing, and everything runs smoothly. Let’s look at the expenses that you are now responsible for. There the mortgage, insurance, taxes, lawn care, and repairs. All of these expenses are taking chunks of your income. In the unfortunate event you lose your job, these things will likely become unsustainable, and the home may likely end up in foreclosure.

How a house can become an asset

On the other end of the spectrum, real estate used as an asset, is one of the best ways to generate passive income . Let’s take the same example from above, however, instead of living in this house, we make it a rental property. There will still be expenses involved such as the mortgage and insurance, but by renting this out for an amount greater than the expenses, a profit margin is created. Now the rent – mortgage, insurance, and taxes = profit. That same house, that was once a liability, is now generating income rather than extracting it. Not only are you now generating a passive income, but you are also paying off the home over time. You can always convert your house to an asset from a liability by moving out and turning it into a rental, the way I did when I accidentally started building passive income. The most important thing to remember is that you always want to own more assets then liabilitie

5 tips for airbnb host

A few tips for airbnb host

So it’s been a year since the Airbnb experience with house #4. 72 guest later, I’ve become more seasoned in the art of hosting. Here are 5 tips I would like to share these tips for airbnb host that I learned on my journey.

  • Respond to guest right away. Guest love when you respond to inquiries in a timely manner, 95% of guest just have simple questions about the property or area. Most of the questions can be answered via the Airbnb app. I highly recommend downloading the app, it’s much faster then the website. I prefer to try to eliminate the need to exchange numbers with guest, to keep this as close to being passive income as possible.

 

  • Create a guest book. Airbnb guest questions can be greatly reduced by typing up a few pages with info such as, info on the area, the house rules, wifi password, and check out instructions. I always sit this on the coffee table in the living room so it’s the first thing my guest see as they arrive. This drastically reduces any post arrival confusion.

 

  • Install an electronic passcode lock and a nest thermostat. In 2016 I’m all about automating processes. These two items save me hella time. The electronic passcode locks eliminate the need for me to have to pick up and drop off keys from guest. I run several businesses so I simply don’t have time. Some Airbnb guest have late flights or drive in and don’t reach the home until after midnights, it’s much easier to email them a passcode. The Nest is essentially a thermostat that connects to wifi and can be controlled from my iPhone. Because I live in Florida, it gets really hot, to the point I wouldn’t feel comfortable letting someone walking in a boiling hot house. The AC can take several hours to condition the air, so I like to turn it on 12 hours before a guest arrive. With the Nest I can do this from anywhere, as well as shut it off when guest leave, saving me money on the Electric bill

 

  • Handling picky guest. As a Airbnb host, feedback is king, when a guest first arrive, out of 72 guest, I have had 2 guest not like my home and request to leave. Always check with the guest when they first arrive, ask them if they like it. Most will happy and tell you how beautiful your home is, every once in a while you get someone who decides that they prefer a hotel. My advice is to let them go, but have them cancel on their end. By having the guest cancel, it won’t count against you, and once the guest cancel they no longer have the ability to leave you feedback.

 

  • Have procedures in order and follow them. I have procedures in order from the time the guest first contact me. I always double check that they have read the entire listing, and ask if they have any questions, if all is good I allow the booking. On the day of arrival, around noon, I send them the electronic lock code, with a message asking them to contact me when they make it in. I do this for two reasons, to make sure they that found it, and that they are happy with it. Once the guest confirms they are pleased. I send them message about the guest book and that it has info about the house as well as the wifi passcode and tell them to enjoy the rest of thier trip. On the day of arrival I ask if they enjoyed the home, then remind them to view the check out instructions. They will usually confirm they enjoyed the rental, when they do, I follow up a few hours after departure and thank them for leaving my house in good shape, and that I will leave them 5 stars, and if they enjoyed my home a 5 star review would help my small business grow. Ask for a good review?….heck yea, and it works too(of course I gauge this, depending on the vibe)

If you follow these tips, you will do well as an Airbnb host, most of it is common sense. Keep your guest happy with in reason, each guest is different, so try to be understanding. If you would like to become an Airbnb host click here to sign up 

Airbnb Investment Experience

The Airbnb Investment Experience

airbnb investment

So May of 2015, I closed on House #4. House #4 was an old bungalow  built in the 40s, that had not been updated since the 40’s.

The original plan was to turn this into another rental to add to my portfolio.

Mid way through my renovations, my pregnant sister, called to let us know that my niece had been born. I had to get back home to Detroit to see her and the baby right away.

My family and I are originally from Detroit, so we visited frequently. We generally preferred the comfort of hotels, but with 2 children, we always sprung for the suites, to have a private area away from the children. The suites at

 

The suites at Motor City Casino are EPIC, but pricey starting around $475 per night. We began to look for vacation rentals and I stumbled across Airbnb. If you are not familiar with Airbnb, it’s an innovative start-up which allows host to rent out spare bedrooms, and entire homes to guest traveling for short periods of time. I stayed in vacationed in rentals from VRBO many times, but Airbnb investment homes seemed to have a cozier at home feel. After searching I found a cute apartment in Dearborn, Michigan(a small suburb east of Detroit) for the low price of $87 per night. The cost for 4 nights was the same as 1 night in a suite.

After our flight, I was anxious to see what our accommodations for the weekend would look like. We jumped in our uber to and headed to our destination. When we arrived, I was impressed. It was 2 bedrooms, I had my own kitchen, and plenty of space for the kids to have there own beds, and I was close to everything. The whole experience was excellent. Having access to a stove, and refrigerator was extremely convenient. The idea of an Airbnb investment intrigued me.

Airbnb Investment Property

When I arrived back to Florida, I was intrigued. I looked on the Airbnb website to see if anyone else was hosting in my city, to my surprise they had quite a few host. I started clicking listing and looking at everyone’s calendars to see how many bookings they were getting. Almost every property had at least 20-25 days booked. I looked where House #4 was on the map and saw a listing around the corner, that was booked solid for $99 a night + $60 cleaning fee, with a lot of reviews. I knew I could rent House #4 for around $850 per month, this was the original plan, however I pulled my calculator out and did the math…if I could book 20 days per month @ $99 per night, I could easily gross approximately $2000 a month. After bills(electric, water, and cable) I could take home $1700 per month from a house that I only anticipated $850 from, literally double my money, not bad for a side hustle. I had to try it. Ill admit I was nervous as hell to spend all this extra money, furnishing, paying bills, and getting all the small items a person would need to feel comfortable. Now one thing I know is how to find bargains.

airbnb investment

I had about 2 weeks left on renovations so i frantically stalked craigslist furniture section for good deals on nice upscale furnishing.

I’m actually proud of my interior decorating skills. I found myself doing stuff guys where I’m from don’t do, such as picking out wall decor, and making sure the furnishing matched the carpet. I spent about $1500 total, on furniture, a few cheap LED TVs from and bed sets from Walmart. I decided order

I found myself doing stuff guys where I’m from don’t do, such as picking out wall decor, and making sure the furnishing matched the carpet. I spent about $1500 total, on furniture, a few cheap LED TVs from and bed sets from Walmart. I decided order

Now one thing I know is how to find bargains. I had about 2 weeks left on renovations so i frantically stalked craigslist furniture section for good deals on nice upscale furnishing.

I’m actually proud of my interior decorating skills. I found myself doing stuff guys where I’m from

don’t do, such as picking out wall decor and making sure the furnishing matched the carpet.

I spent about $1500 total, on furniture, a few cheap LED TVs from and bed sets from Walmart.

Now one thing I know is how to find bargains. I had about 2 weeks left on renovations, so I’m frantically stalked craigslist furniture section for good deals on nice upscale furnishing. I’m actually proud of my interior decorating skills. I found myself doing stuff guys where I’m from don’t do, such as picking out wall decor, and making sure the furnishing matched the carpet. I spent about $1500 total, on furniture, a few cheap LED TVs from and bed sets from Walmart. I decided order

I decided order wall mounts to keep the TVs aways from toddler finger prints. I bought wall art, rugs, dishes, pots, pans, silverware, everything Id need or so I thought. Took a few pictures of my house on the inside and out and listed on Airbnb. Then I sat by my phone and waited for the Airbnb in app to start doing its things….show me the money!

Airbnb Investment Property

my Airbnb rental

After a week of no action I was getting nervous about my investments on the various furnishings and knick knacks, I’d purchased to dress the home up.

I met my contractor at the house to do a final check, paid him and now the house was fully renovated, furnished, and making no money. I remember this day because I was bummed out, I had my home on Airbnb for a week and nothing. I locked up the house and headed home soon as I turned off the street I heard an alert from my iPhone I had never heard before.

I pulled my phone out the pocket to discover a message from Airbnb, someone wanted to rent my house for 5 days :). I had my mojo back, I would be hosting my first guest in about a week and a half. I went home and slept a little better that night knowing at least I was going to see some money this month. When I woke up I noticed I had a new message from

I went home and slept a little better that night knowing at least I was going to see some money this month. When I woke up I noticed I had a new message from Airbnb, someone was in town and wanted to stay at my house that day. They wanted to stay for 6 days, I accepted the request. I still had loose ends to tie up, the TVs I had bought were still in the box, I cleaned up everything the best as possible, I installed a  Schlage electronic keypad on the door, so I wouldn’t have to worry about physically meeting guest for the key exchange. After finishing up I left and let the guest know the home was ready.

After the guest arrived I made him aware that this was my first time as a host, he told me he loved the place :). I let him know if he needed anything to call me I wanted this to be a positive experience. After a few hours he called me let me know a list of things that he needed, this is when I realized just how much humans require(he asked for a mixing bowl, toaster, coffee maker, and tea kettle). Yikes now I’m spending more money, I thought, but I obliged, I was sure these items would be helpful in the future anyway. A few days later, my first guest left. I had to clean the house, I was charging $60 for a cleaning fee, so I didn’t mind but it’s a bit gross to clean up after other people but, I was getting paid for it so I just did it.

The first time it took me 5 hours to clean the home. Later that day The first guest left me my first review…5 Stars!!!! I was proud of myself, I had a new guest checking in the following day, and before I could pat my own back I had a new guest request for the 8 days starting the same day the next guest would check out.

After the guest arrived I made him aware that this was my first time as a host, he told me he loved the place :). I let him know if he needed anything to call me I wanted this to be a positive experience. After a few hours, he called me to let me know a list of things that he needed, this is when I realized just how much humans require(he asked for a mixing bowl, toaster, coffee maker, and tea kettle). Yikes now I’m spending more money, I thought, but I obliged, I was sure these items would be helpful in the future anyway. A few days later, my first guest left. I had to clean the house, I was charging $60 for a cleaning fee, so I didn’t mind but its a bit gross to clean up after other people but, I was getting paid for it so I just did it. The first time it took me 5 hours to clean the home.

Later that day The first guest left me my first review…5 Stars!!!! I was proud of myself, I had a new guest checking in the following day, and before I could pat my own back I had a new guest request for the 8 days starting the same day the next guest would check out.

After the guest arrived I made him aware that this was my first time as a host, he told me he loved the place :). I let him know if he needed anything to call me I wanted this to be a positive experience. After a few hours he called me let me know a list of things that he needed, this is when I realized just how much humans require(he asked for a mixing bowl, toaster, coffee maker, and tea kettle). Yikes now I’m spending more money, I thought, but I obliged, I was sure these items would be helpful in the future anyway. A few days later, my first guest left. I had to clean the house, I was charging $60 for a cleaning fee, so I didn’t mind but its a bit gross to clean up after other people but, I was getting paid for it so I just did it. The first time it took me 5 hours to clean the home. Later that day The first guest left me my first review…5 Stars!!!! I was proud of my self, I had a new guest checking in the following day, and before I could pat my own back I had a new guest request for the 8 days starting the same day the next guest would check out.

I ended up renting my Airbnb investment property out 5 times that month for a total of 22 days at $99 a night with 5 cleaning fees at $60 a piece. This broke down to a gross monthly payment of $2500. The bills for the first month were $98 for the electric, $62 for the water, $120 for cable/internet totaling $280, plus I had to pay myself for cleaning(I don’t work for free, not even for myself lol) another $300. I was looking at $2500 – $580 = $1920 net. That is $1070 more income than if I had turned this property into a traditional rental. The Airbnb investment was successful!  I decided at that moment I needed more of these. I am considering turning my townhouse investment property into an Airbnb once the current tenants lease is up This was better than my projections. Airbnb was a game changer! If you would like to earn money renting your space on Airbnb sign up here and earn $50 for hosting your first trip!   I am currently LOVING the Airbnb Investment business model,  although my main investment goal is to be able to live off of passive income, and Airbnb is not truly passive, if success continues I will be converting House #1 and the Townhouse investment property aka House #2 into Airbnb Investment rentals as well.   P.S. To use my Airbnb coupon code click here, if you use it you get $35 of your first stay, and they will give me $35 off my next trip as well, so it would be really cool if you used it!

 

Are you an Airbnb host? Would you turn your rental property into a vacation rental? Let me know in the comments below!

 

UPDATE:

5 months later find out how the Airbnb investment experience is doing and how I made over $11,000 in 5 months in Part 2 of the Airbnb Investment Saga

townhouse investment property

The townhouse investment property aka House #3

So it had been a few years since I started accidentally building passive income with house #1. The tenants that I had, were happy renewing there third lease. I was making $650 a month like clockwork(which I discovered was way below market value). At the time I was running another business that was running well, and I was using the rent payments toward my mortgage along with my other income to pay off my new house fast. I think it took me 3 years to pay the hard loan off. I admittedly buckled down and focused on paying off my second house as fast as possible because, well I hate owing money. I actually didn’t really even take being a landlord serious, I would always fix issues with my tenants right away but I still wasn’t thinking of it like a business, but when my loan was paid off, I was suddenly actually generating $650 a month without doing any real work, it was awesome. I was beginning to tire of the business I was in, and begin looking into other ways to generate income. I soon realized that if I had more houses, Id have more passive income….duh! Im not sure why I didn’t think about it sooner, but as soon as I did, I was ready to buy another house.




I scanned daily for deals on properties, this time wasn’t going to be an accident, I was making a conscious decision to buy a rental property. A lot of the prices I was seeing, were high. If you know me I won’t buy it unless I get a deal. Finding a deal has always been one of my talents, so after a month of screening potential properties, I spotted a 2 bedroom, two story town home for 45K, for sale by owner. I knew by finding a direct owner to buy from I had a better chance negotiate my price. Whenever you go through realtors, there is a series of people you have to deal with, and it can be difficult to negotiate without the sellers realtor messing up negotiations. I normally would not be interested in town homes  because I didn’t want to worry about HOA fees. HOA Fees are the cost to maintain the property charged to each owner to keep things up. This particular townhouse did not have HOA fees, in fact it was similar to a house as each owner was responsible for there own property. I went to check it out, and it was great. I mean the last owner had a tenant who left the home a little dirty but, it didn’t need any repairs, just a good clean. I told the owner I was interested in the townhouse investment property, and would be in contact later in the day. To make sure I was getting a good deal, I went home and hopped on Zillow.com and researched what the other properties had recently sold for. They were averaging 40K needing minor work, but as I mentioned, I needed a deal. I called the owner and told him I wanted to make an offer of 37K, I figured at that price, I could replace the carpet, fix the minor drywall issues, and replace the carpet and still be under 40K. Fortunately the owner was wanting to sell and my offer was accepted, I sent him a contract and we scheduled a closing date about 20 days later.

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I was closing on my second rental property, and I was excited. I decided after much research that I was going to rent this property via section 8, it was in a decent neighborhood and I hoped to attract a responsible tenant. I checked with my county to see what the requirements were, as I had always been told section 8 is a lot of trouble to deal with, me being one to like to learn things for myself. I quickly found out that the requirements were just pretty much common sense stuff, i.e. all doors must be weather proofed, all outlets along countertops needed to be GFI compliant, no leaks, same stuff I’d do anyway no big deal. I listed my property in a few of rental websites, with pictures and began getting calls right away. I was very meticulous in the wording of my ad, knowing how to find good tenants, was essential to filter out the rift raft. I listed all my requirements, which were realistic, no violent felonies, renter must have atleast 2 years rental history, no evictions, and I was going to run a background check to verify. I wasn’t concerned with employment history or credit because the majority of people on section 8 have the majority of rent paid for them by the state. I located a tenant who was honest and passed the background check, now it was time to schedule the inspection  I scheduled an inspection, and waited. About a week, until someone was available to inspect my townhouse. The inspection was brief and, I was told I passed. I notified the tennant, and she has been there going on 3 years now. I was able to rent this property out for $850 per month. Now the combination of house #3 and House #1 were generating $1500 a month in rental income. I was officially and lanlord. I’ve heard a lot of “experienced” investors say that townhouses are bad investments, but now that I’m 3 years in, I’ve find this to be false, I LOVE my townhouse investment property. I believe that under the right circumstances anything can be a good rental.

start building passive income

How I Accidentally Started Building Passive Income.

House #1

I moved to Florida back in 2010 on a whim, I had a little money saved up, and I wanted to make sure my family had a gauranteed place to live. We were staying with my finance’s cousin until we could get on our feet. I spent my days looking for deals on property. After a few weeks I came across a private seller with an 3 bedroom home. The owner needed quick money, and only wanted 21K.  He was renting the property to tenants who were about to move. The tenants were very messy, and had about 5 pets.  The home had roaches and part of the floor coming up in the kitchen and all the carpet smelled like urine. I paid cash for the home and suddenly I owned property, this was house #1.  After purchase my fiancé and I ripped up the carpet and put some cheap carpet in it, we replaced the kitchen floor with some peel and stick tiles, and painted the walls. I wasn’t thinking about building passive income, but rather how much it was going to cost me to fix up.

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I think at the time I spent around $2000 on making the home livable. The house did what it needed to, it provided gauranteed housing for my family and I, the exterior was ugly and it was located in what could be described as an industrial area, and not very attractive. I loved the fact that I had a home, that I didn’t have to pay a mortgage on, all I had to worry about was the taxes which were low. We lived here happily for 2 years.

Fortunately the ambition in me always pushes me to want to upgrade things. I knew on the market I could sell the home for around 35K, and the type of house I wanted to upgrade to was around 65K. I began searching for houses again for about a month before I came across a gem in Clearwater, FL, in a super convient location, close to the Tampa bridge and the major highway in the area. It was a nice looking home with a for sale sign that read 69K with contact info. I called while I was sitting in the homes driveway, and spoke to Phil, who flipped homes for a living. Phil explained he bought this home in a lot of 10 houses from the bank, and that he was looking to sell immediately. I arranged to check out the inside, and was viewing the house the next day. It was a little outdated but I loved it. The location was PERFECT. I had about 30K saved up and I knew I could get close to 35K for my current house, so I immediately listed my home for sale and told Phil I wanted to make an offer of 57K. I figgured listing my primary home cheap it would sell fast, the same day that it was listed I got a call from a gentleman, who appeared to be interested in buying my house, what luck. The buyer told me he wanted to come take a look at my house immediately, and he did the following day. After his walk through he made a verbal offer of full price, luck was on my side.

Now before you rag on me for accepting a verbal offer, I want to just say in my defense, at this point I was new to this, no one ever thought me anything about real estate. But back to the story, the guy who was buying my home arranged to meet me the following Monday to sign the contract, I set up an appointment with a title company and was excited that I was a bout to move into my dream home. Unfortunately, my luck doesn’t usually work out as well as it appears, when Monday rolled around I did not hear from my buyer, I gave him a ring and was sent to the voice mail. WTF! He was just talking to me all every day. I called over the next few days probably somewhere near 30 times, this guy was obviously avoiding me. I hate unreliable people. Saddened, I decided to call Phil and tell him that I wasn’t going to able to get my dream house. Phil asked why, I explained to him what I had been through. Phil then suggested getting a loan, “my credit sucks” I said, but Phil had an answer for me, “what about a hard money loan?”. A hard money loan as I learned, is private loan through and doesn’t involve banks. Phil had a hard money lender named James that he introduced me to. Phil told me as long as I had 20% down  he would approve me and didn’t care about the credit. I just had to make interest only payments and I had 3 years to make a balloon payment. I could come up with the rest in 3 years, this sounded like a good plan. Now I wasn’t relying on selling my old house and I was able to move, but what was I going to do with two houses. The answer almost came like clock work, I could rent it out to cover the monthly payments while I saved up for the balloon. I didn’t realize it then but I was laying the pavement to the road to retirement. I listed my home on craigslist for rent for $650 and found a prospective tenant immediately. I made sure to take the right steps to find a good tenant.  I was happy I was now generating $650 per month without doing anything. I was building passive income. The payments rolled in like clock work and I was able to cover my payments which were $475 a month and still saving $175 toward the balloon without any work. This random chain of events was crucial and a staple in the beginning of my career as a real estate investor, this is how I accidentally started building passive income. My home was now an income generating asset, and no longer a liability.

This is around the time I had just finished up reading Rich Dad, Poor Dad, by Robert T. Kiyosaki which is an excellent read, frankly the man is a genius. If you are interested in building passive income, I highly recommend reading it if you are looking to get into real estate investing. The book itself isn’t going to teach you any real estate methods, however it changed the way I thought about home ownership vs owning properties that allowed me to begin building passive income.