Passive Income?

[Dawg In Montana]

Heloc would probably be the option and the rent would need to cover.

I wouldn’t be doing that at your age.

We haven't had the money until now to even consider it. What are your thoughts/advice on the subject? Anyone in similar positions? Are there any other opportunities you would throw out to consider?

If you are taking out a HELOC I wouldn’t say you have the money now, you just have the headroom to borrow more. But don’t confuse borrowing with having.

 

[LFC911]

I wouldn’t be doing that at your age.


If you are taking out a HELOC I wouldn’t say you have the money now, you just have the headroom to borrow more. But don’t confuse borrowing with having.

great clarification and the best answer may be do nothing

 

[darcytribe]

Had a similar thought a few years back but talked with some friends who had rented out homes they owned who explained the headaches they dealt with managing the properties and renters. Then with the Covid govt. response in many areas where they basically said people didn't have to pay rent if they weren't able to sealed the deal for me- not interested.

 

[bz_711]

I think you'd be better off looking more so at a business/real estate combo...all the upsides of RE but with added cash flow of business...such as: car wash, laundry mat, storage facility, etc.

Good Luck!

 

[LFC911]

I think you'd be better off looking more so at a business/real estate combo...all the upsides of RE but with added cash flow of business...such as: car wash, laundry mat, storage facility, etc.

Good Luck!

Gated RV storage lots seems to be in high demand around here, maybe that's a way to go?!?

 

[Tahoe1305]

I’ve been doing this for 20 years. Always self managed. Sadly mostly on out of state properties (I move a lot).

My 2 cents is, it is one of the best ways to build wealth in the appreciation sense. When you tack on the passive income it’s pretty good. There are large tax incentives as well (with limits if you aren’t a “real estate professional”).

I will say time is the only thing that makes it worth while cash flow wise.

In CO I’d be $1000/ month upside down cash flow right now with a mortgage vs renting it. And that’s in a market that’s pretty flat and possibly headed down a bit. I’ve never had the “economics” be so poor.

My best places have been in FL. I’ve refinanced a few times (lower rate and principal) but my rental income vs mortgage is 4:1. That took 16 years though. It nets me roughly $30k a year in passive income after the tax benefits (long term rental not short). Additionally someone else has nearly paid off the entire mortgage and the house is worth over double what I originally paid. In all I’d estimate that home will “net me” close to $1M at the 20 year mark with appreciation and rental income combined assuming I sold it (house was $200k in 2008 fwiw).

Again time is what makes this all work. At your ages that may be a different conversation. I will say there is stress involved as well, especially if you self manage. I’ve had 3 going at once and it was a lot with my other work responsibilities.

Happy to help more if needed.

 

[RockAndSage]

Gated RV storage lots seems to be in high demand around here, maybe that's a way to go?!?

RV/Boat storage, big yes. Storage shed properties too. Very low overhead, and people with RVs/Boats generally have more money than most home renters, more life accomplishments, etc, and more capable of paying their bills.

 

[Tahoe1305]

RV/Boat storage, big yes. Storage shed properties too. Very low overhead, and people with RVs/Boats generally have more money than most home renters, more life accomplishments, etc, and more capable of paying their bills.

I’m actively looking at doing this right now for a more turnkey/low stress passive investment.

If anyone else is currently doing it and can share info please reach out.

 

[LFC911]

RV/Boat storage, big yes. Storage shed properties too. Very low overhead, and people with RVs/Boats generally have more money than most home renters, more life accomplishments, etc, and more capable of paying their bills.

Great point...might need to do some more research and brush up on my business planning skills.

 

[wapitibob]

I had two high end residential rentals and a commercial building; get good renters and don't jack them on the rent and they'll stay with you for years. As for repairs, houses are just wood and sheetrock ...
I wouldn't borrow for a rental unless it cash flows well enough to cover all expenses. Not an easy task in todays world. A friend has a bunch of rentals in NM; bought on foreclosure, remodeled, then rented and they cash flow very well. The trick is to buy right.

 

[WoolOverAll]

There is a lot of stress involved and the ROI didn't work out for me. I rented out a 1 bed trailer on my property with a stall for their horses in the barn.

Be prepared for tenets to do all sorts of dumb things while renting. I encountered a ton of scammers, deadbeats, and very obvious would-be squatters when screening tenets. You have to be on top of making sure they can actually pay the rent. I ended up giving it up because it felt like being a parent for other adults who hate me because they agreed to rent from me. The amount of simple repairs that turned into 10x the cost from them not telling me something was acting wrong drove me insane. A $10 toilet float value repair turned into a $200 extra water bill because apparently a constantly running toilet isn't something worth mentioning.

 

[Laramie]

I have 2 rental houses. I hand selected tenants and keep their rent reasonable. One has rented for 7+ years and the other 5+ years. In 11 years, I have only had 5 total tenants between the two houses. It is very rare I get called for anything other than major appliance repairs when they happen. It has been good cash flow but not amazing. I could charge 20% higher but I would end up with a lot more calls for all the little stuff that my current tenants just handle. Home prices on both have nearly doubled - I got in at a good time. I have been looking for a third but the market just doesn't make sense right now. Rental properties only work in todays market if you find a hell of a deal on the house and likely will have to remodel to some extent.

 

[MountainTracker]

My wife and I have ~$200k in equity in our home and I'm trying to convince her we need some rental properties in retirement for passive income along with other benefits (i.e. taxes, depreciation, etc...). I'm 57 and she's 61. Her concerns are well be over there all the time fixing stuff and/or get a bad renter. I am pretty handy and if i can't fix something, i have firefighter friends with side hustles that can.

A couple of friends of mine that are self employed have done this for quite a while and have multiple properties and have no regrets.

We haven't had the money until now to even consider it. What are your thoughts/advice on the subject? Anyone in similar positions? Are there any other opportunities you would throw out to consider?

Have you considered selling your current home and buy something that has a detached ADU/MIL and then rent it to a traveling stewardess or traveling nurse/doc. If your area has need for that. It’s not exactly hands off though.

Didn’t read if you are looking to pay cash out right and not hold a loan. If you were to hold a loan on the rental the interest rate would typically be higher as it isn’t your primary residence. You could probably get a better rate by using a local bank. If you bought a different property with an ADU/MIL you should get a lower rate bc it would technically be your primary residence.

Lowering your risk is important bc who knows what can happen in the market, and being able to carry both without issue should be top of the list.


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[cnelk]

Sounds like opening a daycare in Minnesota would be a good passive income

 

[Maverick1]

Sounds like opening a daycare in Minnesota would be a good passive income

Wow.

 

[LFC911]

Have you considered selling your current home and buy something that has a detached ADU/MIL and then rent it to a traveling stewardess or traveling nurse/doc. If your area has need for that. It’s not exactly hands off though.

Not at this time, maybe in 4-5 years (at the earliest) when i retire but sub 3% interest rate is too good to give up.

 

[BreechFace]

Sounds like opening a daycare in Minnesota would be a good passive income

Only if your Somalian.

 

[307]

Legacy is also part of it...my son is 27 and has an IT degree and a good job about to move out of the nest. Another thought is for him to get an FHA loan and live in it for a year, fix it up, rent it out and move onto the next one. Snow ball it that way. We can help him out on the cash flow and then we can avoid the HELOC. Ultimately he's getting it all anyways.

This is the only way and reason I'd consider it. If you can limit your purchase to something that your son can likely afford on his own, then it might make sense, especially if he's handy (or willing/excited to learn) and would work with you on the project. You also have to be really honest with yourself about your son, and how likely it would be for him to hold up his end of the bargain, vs slacking because the "landlord" is just mom and dad.

If it's just a dollars and cents for time and risk calculation, then definitely no.

 

[Coopsdaddy]

Anything can be done,let’s get that out of the way.
No way for me,I’m 50 and if you don’t have the cash to pay I wouldn’t.
I don’t want the headache for a few hundred a month.
Now if I was 25-30 and could get in on some good deals were by the time I was 50 I had 5-6000 or more of income off paid for property than maybe.
Not sure why you wouldn’t pay off your home.
Something to being debt free.
If I was had 2-400000 to invest at 50 plus years old I would throw it in s&p type fund.
Why do you need passive income.If you were debt free and let your 401s grow and add your ss on top of that you have plenty.
At least for my lifestyle.
I have three kids and would take a bullet for them in a second but they can make there legacy.
If I have something left they will get mine but I’m not worried about it.
You have done a good job saving and lots would love to have your portfolio.

 

[BreechFace]

I would not take a HELOC for rentals. Given your age and only $200k in equity, that seems too much risk without knowing the other side of your finances.

And a 27yr old child still living with me would have been paying some sort of rent for 9 years. But you didn't ask for that advice so disregard it.

Buying a rental home to "rent/lease to own" to your 27yr old who just now is planning on getting out of the house on his own sounds like family strife down the road if I'm being completely honest. It doesn't sound like you and your wife are in the financial situation to play bank for him. But your idea of him getting into a home is a good one, see below.

I'm sure I'll hear a lot about "well it's a different market these kids face today." See below.

My niece is dating a guy who is renting 1/2 a room from another guy his age that bought a house and has 6 dudes renting from him while he pays extra on the mortgage paying it down. By the time that dude gets married and kicks the other dudes out he can then refinance into a 30 year loan with a decent payment that he can afford. It's all a matter of what one can put up with, either the renter or the owner, they both are steps into adulthood.

My wife and I own 3 rental properties, that we purchased in 2009 (absolute bottom for the last 40 years on pricing) and we don't use any money coming out of them, just let it build up in our LLC we formed that holds those rentals. But be prepared to have $$$ going out when issues happen, as they will. But the equity gain has been ridiculous from when we purchased to now.