Can I make Money as a Landlord?

401K or Real EstateThere are countless investors that want the fast returns.  Just buy a rental property, sit back, and make money as a landlord.  They think that just being a landlord will make them the riches they need to be financially independent.  The tenant pays your mortgage, and you relax on the beach.  You hire a property manager, set up automatic payments for rent to be deposited, and your mortgage gets drafted every month.  All while you play.

Here is how to make that fantasy happen in reality

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How Becoming a Landlord Will Help Me Retire Early

This is a guest post from Benjamin Davis on becoming a landlord.

Back in 2011, when I started my PhD, I was far thinking I would ever imagine becoming a landlord. Fast forward to 2015, I cash out on a stock portfolio I had since I was 16 and I bought a condo all cash. This was possible due to aggressive savings and a good amount of luck investing in the stock market.

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Should I Invest in my 401K or Real Estate?

401K or Real EstateThere are many people that have a 401K at their work place.  Some companies offer a 401K match.  So people wonder, should they invest in a 401K or Real Estate?   These people want some of the riches of real estate.  They want to purchase a rental property and they want passive income in retirement.  These people want to get rich, and they know many people have gotten rich with real estate.  It is their meal ticket out of their W2 job.

Here are my thoughts in where you should invest your money.  Remember, I am not an investment adviser (but I did stay at a Motel 6 several times).

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Landlord Tax Planning

Saving-MoneyIf you are a landlord, you are likely interested in landlord tax planning.  There is no better time to prepare for this year’s taxes than January 1 – of two years ago.  If you waited too long, and are now worried about your taxes, there is only a limited number of things you can do.

I plan all year on my taxes.  There are capital improvements to make, replacing items that may be working fine but will help keep a tenant or make it easier to get a new tenant.  Ways to speed up expenses and possibly defer revenue.

Here are some things to ponder to help minimize any tax burden you have.

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Pay off Rental Mortgage Debt

Rental Mortgage DebtA few posts ago, right about last year, I wrote about my plan to pay off rental mortgage debt.  I had laid out several of my options, and I ignored all of them.  Instead, I continued to pay my regular payment, bought a new rental and paid cash for it, and paid extra on my current mortgage that is targeted to be paid off next.  If I would have skipped the new rental, and put that money on the rental mortgage, I would almost have this rental mortgage debt paid off.  Instead, I have that money as a 15%+ income producing asset.

There are many reasons to pay off rental mortgage debt, those reasons are all against the many pundit’s advice to stay leveraged.  Here are my own personal reasons and what I have accomplished in the past twelve months.

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I Quit My Job to be a Landlord

CountDownChartThat’s right, I quit my job to be a landlord.  Are you prepared to give up your job and be financially independent?

It takes more than just a vision of what it is like to be financially independent.  For me, I was planning on this for several years.  And when you have a goal in mind, you shoot for the goal.  The problem comes when the goal is near at hand, sort of like when a dog is chasing a car.  Pretty soon, you catch the car.

So here is what went through my mind in deciding the day, how the time went by, and what I gave up.

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Why Real Estate Investors Fail

Why Real Estate Investors FailI get asked all the time by potential real estate investors how much they should invest in a rental.  They do not want to be a line item on the “Why Real Estate Investors Fail” sheet.  Some want to take a 401K loan out.  Some want to bypass their 401K contributions to save money for real estate investment.  For some reason, saving money seems to be difficult for many potential investors.

I say, do not do anything that may run you short of capital for your own life.  Make sure your own life is secure, before you risk it all.

Here are some thoughts that I have written down.

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How to Know if You Are Financially Secure

Financial IndependenceAt one time, I was just a working stiff.  I still am, for now.  Working a 8-5 job, sometimes on-call, weekends, and trying to climb the corporate ladder.  I was a member of a hot shot team that was selected for future management.  When you are climbing your way up, you have a tendency to make a lot of people happy, and some not so happy.

It’s fun when you are making a lot of money; but you know the money train cannot last.  At some point, a merger may knock you down, a layoff, a boss that you cannot satisfy, or some other reason that you may not even understand.

Welcome readers of OurNextLife!

Regardless, you need to make sure you are prepared.  An emergency fund comes first, then becoming debt free, then bringing in other forms of income.  I already had the first two, when I started investing in real estate.  Here is how I knew I finished the journey to be financially secure.

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Rental Property Asset Allocation

Saving-MoneyAre you holding the proper rental property asset allocation?

My investment account has finally recovered from 2007.  That’s right.  My investment account has finally surpassed my account balance record set way back in October 2007, over eight years ago.  (It actually passed the mark a few months ago, and I just got around to writing this post.)  It was only just about $50K higher in 2007 that it was back in 2000 or so.  My current 401K, which is nearly as high as my investment account is today, was at $0 in 2003 when I started at my current mega-corp, as I have always converted my previous employer 401Ks to an IRA, and a Roth wen i could afford to pay the tax hit.

If you do not have the proper investment allocation, you could be in for a large surprise in your quest for financial independence.  Being financially independent is not just about having a large amount of money.  It is about multiple income streams and redundant sources of passive income.  And living below your means.  Here are a few insights into what I have done to become financially independent.

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Should I Pay Off My Rental Mortgage?

debt-37557_1280-PDIf I pay off my rental mortgage, my cash flow will definitely increase.  It has been a year since I paid off my last mortgage, not literally my last mortgage, but the most recent one I paid off.

My investment account balance has grown back to where I was before I paid the mortgage off, and then some.  So, I am now wondering if I should pay off one additional mortgage.  There are a lot of things to think about before you make a sizable payoff.  What are the other uses of the capital?  How strong will your cash flow be after the payoff?  What are the alternative investments, such as the stock market?

Here is the analysis that I am going through.

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