Owning Rental Units For Residual Income
Creating streams of residual income is one of the secrets of wealth creation and financial freedom.
There are several ways to create these streams. Today, we’ll discuss how real estate can help you secure a continual income stream. There are primarily two ways real estate investors make money: one way is through buying and re-selling properties, or “flipping.” It can be an effective technique, but not exactly a residual form of income, unless you can predictably sell a property every month without much effort in any market.
The second way to secure income through real estate investing is by owning rental properties. In other words, you become a landlord.
Of all the residual forms of income, this is perhaps the most difficult, but it’s also the most common. Here’s one scenario of how you can get introduced to this type of investment. You buy a property and live in it for awhile. Then, you purchase another property and rent out the former residence. The money that comes in as rent goes toward your current mortgage, or pays the mortgage of your rental place.
Some investors keep acquiring new properties as they pay off the old ones; others just jump into it with full force, buying up rental properties.
Here are the pros and cons of this form of residual income:
Pros. Rental markets are fairly stable. You can usually find people who will rent your place. The money is good, too. Hundreds, if not thousands of dollars can be brought in for a rental and there’s always the opportunity to purchase more and even buy large rental units. If you’re handy, you can do lots of the maintenance work yourself.
Cons. It’s not exactly worry-free. You can have bad tenants, who don’t pay–and it can be tough to evict them. Maintenance is another hassle and worry. Ask any landlord about the 3 a.m. emergency calls. Being a landlord isn’t always good for the self-esteem–sometimes you’re forced to make some harsh decisions, like tossing an non-paying renter onto the curb.
This is the first post in a series about ways you can create wealth and financial freedom using residual income strategies. For more information, you might want to read the introductory post in this series. It’s called Five Ways To Create Wealth With Passive Income.
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