Marvelous Mailbox Money – This Might Become Your Favorite Reason To Invest In Real Estate
A few years ago Bill called me and said that he had a blood clot in his leg that broke free, went through his heart and ended up in a lung. This made breathing difficult. He would have to forego a planned scuba diving trip. More importantly he had to rest on the sofa for several weeks and avoid high-stress conditions for several months. Can you imagine being told by your doctor that you cannot work for several months? How would you pay the bills?
Bill was very fortunate that he did not have to worry about bringing home a paycheck for the next several months. He had acquired a portfolio of rental properties that produced what I like to call mailbox money.
WHAT IS MAILBOX MONEY?
What is mailbox money? It is income that comes in whether you go to work or not. This is one of my favorite reasons to own real estate. The tenants send you checks every month.
You can choose to either self-manage, or hire a property management company to manage the property for you. The latter option can be hands-off. It can also be accomplished with partnerships, where a partner manages the property.
With real estate syndications you frequently have multiple partners who do not want to be actively involved but they want the passive income. Perhaps this could be an approach which would be of interest to you.
Income from real estate is similar to dividends from income stocks or receiving interest on a savings account, but much better. It tends to go up with inflation and usually has a higher return on investment. You can read about four other benefits of real estate in another article, Discover 5 Reasons Why Real Estate Is The Ideal Investment.
Let’s take a look at the income from the simple case of a single-family rental.
A tenant mails in the rental check, or, more frequently now, pays online. Of course, you don’t get to keep the entire check. You will have expenses related to your property.
What we are really talking about is net income after all expenses are paid. These include taxes, insurance, management, utilities and repairs. If there is a mortgage then you will also have that expense.
If you don’t want to be a landlord and deal with tenants and toilets you have other options. There are solutions to get the benefits of real estate without being the landlord. Hiring a property management company is only one of them.
Many people want the benefits of real estate but don’t want to be actively involved. Others enjoy the thrill of property management. It truly can be either an active or passive investment.
BE THE BANK
Some people choose to be lenders and receive regular checks as interest. The loan is secured by a mortgage on the property. Just like the banks do. But they cut out the middleman.
Instead of putting your money in the bank and earning a paltry amount of interest you can actually lend directly to an investor who pays you significantly more than the bank would.
JOIN A PARTNERSHIP
Another way to get the passive income from real estate without being a landlord is to join a partnership. This can be ideal for someone who is working a full-time job and has limited time to look for real estate opportunities. It is common for one partner to put up most of the money and another partner to run the project.
A more complex partnership is the real estate syndication. This is regulated by the SEC and has the benefit of being available to more investors who do not want to be actively involved. It is run by one or more principal partners and can have as many passive investors as the offering documents allow. And all investors can enjoy the benefits of ownership.
Like Bill, we have also developed our own real estate portfolio. Starting with our first rental we have gained experience and education. Each additional property or partnership increases our monthly income. More importantly it contributes to providing multiple streams of income. And that helps keep my wife happy and allows me to go diving with Bill.
If you would like to learn more about how to increase your income for a better retirement download our free ebook, “3 Keys to Unlocking Your Retirement Dream” CLICK HERE. In this e-book you will learn how important “mailbox money” will be when you retire.
Another way of learning more is to join what we call our Attune Investors Club with additional information and more access to us. JOIN THE CLUB HERE.
Mike is a retired aerospace engineer with a passion for real estate investing and teaching financial literacy. He lives with his wife in Daytona Beach, Florida.