From the course: Seven Streams of Real Estate Income

Generating income through rental properties

From the course: Seven Streams of Real Estate Income

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Generating income through rental properties

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- [Instructor] Passive income can be a great way to generate an additional stream of revenue. Rental properties, commercial real estate transactions, private money lending and maximizing tax savings are four ideas. Let's start with rental properties. These are properties that you purchase as buy and hold and rent them out. The renters pay your mortgage, and when there's money left over, that's cashflow that you can either use for other investments or to supplement your income. As leads come in for properties, you can qualify if they may be a good buy and hold, and you do this through looking at the cashflow that it can generate. It becomes active income if you're doing everything. If you're finding the tenants, you're fixing the toilets, you're repairing the property, you're doing everything. When you're a landlord, that is not passive, that's active. Conversely, it becomes passive if you have a management company who does everything and manages the property for you. Yes, you do pay a management fee. No, you don't get the calls when the renter hasn't paid. The management company takes care of that. So having a good management company in place can be well worth the small fee that you pay every month because that makes the investment passive, and you focus on other things. What you do do is take the cashflow and use it wisely, either buying additional rentals or using it for some other investment or some other life goal that you have. Buying a rental property. This training resource covers five secrets you must absolutely know before you buy a rental property. It's powerful when you know what to look at before you do something versus looking in the rear view mirror, and in hindsight, figuring out what you should have been asking. So the five secrets are location, location, location, inspection, do your due diligence, tax advantages, and appreciation versus cashflow. Rental properties are all about cashflow. People typically buy rental properties for the cashflow versus the appreciation. This training resource addresses appreciation versus cashflow. Typically, when you're looking at a rental property, cashflow trumps appreciation, and this will explain why. Tax advantages. There are many tax advantages. Having a good CPA will help you take advantage of them. Most people don't know what they all are. Having a CPA on board as one of your core team members is hugely beneficial to you. Doing your due diligence is paramount. In what condition is the property? What needs to be done to it so it's in code? Or what needs to be done to it so you can raise rents? What are the maintenance costs? How easy is it to access? How popular is the area? Many questions to ask during the due diligence period. You can see a list of some of the questions to ask in this training resource. Inspection. Always inspect a property before you buy it so you know what you're dealing with. An inspection may be a pleasant surprise. It could be in great shape or an inspection may yield some big surprises that aren't so great. You want to know what you're dealing with before you buy something. Want to know what your costs are going to be. If you're upgrading or bringing something up to code. Inspection is critical because it unveils and exposes what you'll be working with. It can also help you determine if the property is even right for you, and the number one secret, location location, location. We've all heard that. Location is what drives value. For rentals, is it in an area that's appealing for renters? Spend a few minutes on this document so that you know the questions to ask before you jump in.

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