How to Generate Passive Real Estate Income

I did stocks, I did crypto, but real estate was something I really wanted to get into. The number one reason was to earn passive income every month. If my mortgage is $2,500 per month and I get $3,000 in rent, I have $500 passively generated that I can use for whatever I need. Multiply that with a few other features, and that income starts to add up substantially. With this in mind, I bought three properties this past year using a customized strategy that works!

my investment

My first property was in Old Kensington, Philadelphia. It was a brand new build, with a 10 year tax abatement and a one year manufacturer’s warranty My plan was to stay on the third floor and rent out the other three bedrooms so I could stay there for free. The purchase price was about $350,000, and at the time, new homes in the area were going for anywhere from $370,000 to $385,000. So I already had at least twenty thousand dollars in equity to beat the market.

I bought this property with my business partner. We split the down payment and got a conventional first-time buyer loan. We had to invest $18,000 out of pocket to get $500 in passive income per month.

The second property I bought was a newly renovated house in an area near the University of Pennsylvania. Unfortunately, I could not order the same loan since it was considered an investment property. So I had to pay a little more out of pocket; It was about 20% down payment. So at about $230,000, I had to invest $40,000 of my own money.

However, most homes in the area were going for $250,000 – $260,000, so again, I could beat the market and gain some equity. Although $40,000 is a lot of money when you consider that I will be passively earning $1,000 per month in less than four years, that down payment will be paid back in full.

Just a few weeks ago, the third and final property I bought was in South Philadelphia. This house was newly renovated, which was nice, but I couldn’t get any tax breaks for it, which stings. Without the tax deduction, I would pay about $500 a month in taxes, as opposed to $60. I used an FHA loan for this property, which means I have to live in this house. However, by renting out other rooms, I can still earn more from my tenants than I spend in mortgage and taxes.

Related: How to Get Started in Passive Real Estate Investing

my strategy

To succeed in real estate investing you must do these three things:

The number one thing I would recommend is finding a strategy that works for you and your investment goals. Now my strategy is cut, dry and simple. I only buy single-family homes that are below median price and newly renovated or new construction.

All my investments follow these rules. If a house is below average or recently built or renovated – I don’t buy it. Many novice investors jump into properties that simply aren’t a good deal or are overpriced.

With patience, you can find a nice-looking home in a nice neighborhood for less than the average price for similar homes. It’s a big investment, so if it’s not a good deal, I’d stay away. The capital you save from buying from a middleman can be saved for emergency repairs, interior decorating, or putting money in your pocket.

I’m not making money flipping houses, and I don’t have time to deal with repairs and renovations. This is why new builds are ideal for me to buy. A new property will require little or no repairs and is much easier to deal with as a landlord. All my properties are new, except for one that has just been extensively renovated, so I don’t have to deal with any issues or repairs.

Related: 8 Proven Ways to Make Money in Real Estate

The second thing I recommend is a real estate consultant, especially if you are trying to achieve your goals quickly like I am. Whether it’s an investor or an agent, they’ll help you make better decisions in a market you don’t fully understand yet. My mentor is a realtor and an investor, and I wouldn’t have gotten this far without them. A real estate consultant will kick their ass to make sure you’re getting a good deal and cut the learning curve in half.

The third part of my strategy is to simply believe in myself. Investing in real estate is a big step in life, and the curious can be afraid to jump into it. Any goal can be achieved with practice, patience and a good strategy. Follow your vision.

Rich and successful people take small steps to achieve big goals. Imagine a ladder, and take one small incremental step each day instead of being the person who has this daunting goal but can’t even reach the first step.

RELATED: 10 Tips From The Real Estate Passive Income Playbook

Believe in yourself

Using this strategy, I built a $1 million real estate portfolio in just ten months. I started as a complete beginner, but with the help of a mentor, I found great deals and great features that generate passive income every month. Investing in real estate was my goal last year, and now that I’ve achieved it, I can take another step up my ladder and continue to grow.

I hope my stories and strategies help you reach your goals in 2023!

Note: It is always important to research and make decisions about any investment. This is not financial advice; Information and prices may change over time.