My April 2016 Monthly Update
Each month I create a new report that covers the latest things going on in my passive income businesses. These include buy and hold real estate rentals, online businesses, and writing books. I want to share all of my successes and failures along with my lessons learned so that you can follow my lead and quit your job with passive income.
A quick reminder for everyone, including myself, the passive income business is not a get rich quick scheme. I’ve been doing this for over 10 years and have been through the good and bad times of passive income.
Through it all, if you stick with passive income businesses, you will be amazingly blessed at all of the work you put in.
Since last month’s update, I have been busy working on a number of ways to earn passive income.
Real Estate Investing
In my real estate business, I have many different locations that I invest. If I were to only invest where I live, I would have a hard time finding properties that fit my criteria. Houston Texas is an area that I invest in and have been looking for new properties for you months now. The prices have been going up there pretty steadily and it is hard to find a property with much equity or good cash return from the rents.
While I have been looking into Houston for the next rental property, I also look at other areas of the country at the same time. I never limit myself to an area but limit myself to good deals.
This month, I put a property near Cleveland Ohio under contract and am in the escrow process right now.
Here are the details:
Asking Price: $62,000
Current Value: $70,000
Currently rented for $1,000 a month
Expenses: Taxes $200, Insurance $100, Property Management $100
Total Cash Flow: $600 w/o mortgage
This property has already been fixed up by the current owner who live there and put a lot of sweat equity into the property. He moved out and rented out the property for $1000 a month.
My strategy for purchasing rental properties is to buy cash, fix it up, get it rented, and then refinance the property and put all the money out. The most I would be willing to pay for the property was 75% of $70,000 because that is the maximum that I could pull out doing a delayed financing mortgage.
The maximum I would pay was $52,500 because I wanted to pay that cash and pull all of the money back out after I had it rented.
In any property you purchase, you need to negotiation the purchase price with the seller. Your goal is to get the property for as cheap as you can while not losing the property in the process.
How I Got the Seller Down 26%
For this property, I put in an offer for $35,000 to start with. I knew that I would work my way up but I needed enough room for the seller to come down below my maximum purchase price. Within a few hours of my initial offer, the seller came down $10,000 from his asking price to $52,000.
So just by putting in a low offer, I have already got the seller down to the maximum amount that I’m willing to pay for the property. If I were to accept this price, I would be doing really well. But obviously I did not stop there.
I countered his $52,000 offer with a $40,000 offer knowing that he would more than likely come down more on the price. The next day he countered with $50,000. Even better!
Now I wanted to settle at $45,000 by splitting in the middle with them. I told the realtor that, instead of going back and forth anymore, I’ll give him my best offer and split in the middle with them at $45,000.
The seller came back with the asking price of $47,500. I told him that my final offers $45,000 and if he did not accept it in the next day, the offer would go back down to $40,000.
So we settled on the price of $45,000 and we are currently in escrow!
By pulling out all of my money, I will have a mortgage payment of $225 a month. Adding those to the taxes insurance and property management fees, the total expenses will be $625 a month.
That is a profit of $375 a month with none of my own money in the deal!
I currently have four different properties that I have my eye on that I would do the same process of buying, fixing up, renting, and refinancing.
Currently, I’ve been making close to $500 a month from my first book “How to Quit Your Job with Rental Properties” and it has been getting lots of great reviews. Along with my rental properties, I am in the process of building my book writing business to where it replaces my income from my job as well.
Another great thing happened this month. I finally finished my next book that I started in February of this year. It has been a long process to write the book but I believe it is turned out well and I’m excited about it.
This book is on a topic that I am also very passionate about, marriage. I have been teaching, counseling, and leading a marriage ministry at my church for five years now and decided to create another line of books for my publication business.
This first book, “Lasting Marriage” is going to be the flagship book for a series of books on marriage and family ministry. I already have plans for the next five books and will write those over the next five years.
The next step for this book is to have the editors finish editing it, create an appealing cover, get the book formatted, and publish it for sale on Amazon. The intended launch date is June 1st 2016.
I have a long list of future books that I’m going to write both for passive income as well as marriage and family counseling. Just imagine if I had 10 books that were selling $400-$500 a month that would be $4000-$5000 a month in passive income. I did the work once and it sells itself over and over again.
Plan to Quit My Job
I’ve shared many times that I currently have enough passive income for my rental properties to quit my job but I have not done it yet. I built my business over the last 10 years to quit my job and I now have a new challenge for myself.
Obviously I desire to quit my job right away, if not right now. Before I do that, I decided to make a challenge for myself. My new challenge is to do it all over again. This year, I want to build up enough passive income to replace my income all over again. If I move as fast as I desire, I should be able to do it in six months from now.
I would much rather quit sooner but having an income from a job allows me to get more financing from my properties to buy more properties.
My Plan to Beat My Challange
Take $120,000 cash to buy $1500 in passive income from rental properties before the end of June. That is $1500 after expenses which would be cash in my pocket. From there I would refinance all the properties in an investment loan called a “bundled loan”.
A bundled loan is where I am able to take multiple properties and combine them into one loan from a bank and have the one loan cover multiple properties. The advantage of this is that I am able to
- Lower the costs of refinancing the property
- Have one mortgage payment
- Can do unlimited properties and not stick to the government cap of 10 properties
- I can pull out 75% of the total appraised value
- use the cash I pull out from these properties to buy more properties that bring in cash flow
- do this process over and over again.
The new area in Cleveland as well as another area in Akron Ohio will help me move quickly to accomplish my challenge to replace my income all over again.
I will be working extremely hard to accomplish this challenge in less than 6 months.
How are you doing with your investing? Leave me a comment below!
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