All Forum Posts by: Steve A.

What do you guys think the best route would be if I want to get to $4,000/month passive income from rental real estate as quickly as possible? Here's a breakdown of my current situation:

Property 1: Value $200k, Mortgage $110k, 2nd Mortgage $26k, Monthly Payment $1020 (both mortgages, all tax, insurance, etc.) Estimated Rent: $1500/mo

Property 2: Value $60k, Paid cash, Insurance & Tax $150/mo, Rent $750/mo

Property 3: Value $60k, Paid cash, Insurance & Taxes $130/mo, Rent $750/mo

I currently have $25k in my checking account and my credit union MAY be able to stretch my debt-to-income ratio to allow me to meet the minimum $35k mortgage amount, which will allow me to purchase a $60k turnkey bank-owned property that will rent for $950/mo. Taxes & insurance $150/mo, mortgage is like $180/mo at 4.75%.

I should be able to purchase another property cash that will yield 1.5% of its purchase price in monthly rent. Let's say it's another $60k one. At my current rate of $1,000 per day, that's 60 days.

So my monthly cashflow at this point will be ( ($1500 + $750 + $750 +$900 +$900) * 0.92 ) -$1020 - $150 - $130 - ($180 + $150) - $150. The multiplication of income by 0.92 is subtracting 8% for my property manager's cut. I am planning on going on a year long trip around the world, and they will take care of pretty much everything, so this is necessary. This comes out to $2636 per month. Now, in reality, I am probably doing better than this since the properties are appreciating and I'm getting significant tax breaks. However, there are repairs and vacancies, so I'm calling it a wash.

So I need another $1400 per month, which can be accomplished by buying two more $60k properties yielding $900 per month each, minus $150 each for taxes and insurance. Two more 60k properties will take an additional 120 days. So in total, not factoring in my income taxes, which I'll worry about later (LOL.....oh boy), 180 days from today I should be financially independent and able to go on my year-long world trip. Books such as Vagabonding, 4 Hour Workweek, Lonely Planet, etc. as well as friends of mine who've done it say you can do this for $1500 per month and experience everything and not worry about a thing income-wise. I figure at $4k per month I can go to some of the more expensive places, like Western Europe, and probably still save some money for the year.

None of this factors in my online income, which could drop to zero or go to $10,000 per day, who knows.

Now, 180 days is alright, but is there any way to get this done faster? Any tricky financing that can speed it along? I am not able to obtain additional traditional mortgages, as the lenders are looking at my $55k W-2 income.

I have thought about 2 options:

1. Going commercial. Specifically, a small apartment building. I've heard all lenders care about here is the downpayment and the projected cashflows of the building. I have no idea if this is true and know nothing about the difficulty/steps involved in doing this. Is this viable? 10-unit apartment buildings in nice areas here go for $250-$350k.

2. Taking out lines of credit on my properties that are owned free and clear. That's two of them, or $120k worth of real estate. I wouldn't go nuts here...I would probably take out 50% to buy another $60k house. However, the only home equity line of credit I am familiar with is the one you take out on your primary residence...is it possible to get them on rental properties?

Just a little bit of leverage would give me a major boost without adding much risk, especially with today's interest rates. Any ideas?

@Matt R. I actually cut my teeth doing PPV, or Pay Per View, aka popups. They're super cheap so it was easy for a noob like me to start with very little money and figure out how to analyze data, how to set up tracking etc. I had previously blown through several thousand doing PPC and was banned from Facebook, Bing, and Adwords because frankly they hate affiliates. PPV has essentially no restrictions.

After that I went to media buys on a CPM basis. If I had to do it again I would have went PPV -> CPC -> CPM. CPM is very risky for a beginner since you're not guaranteed any clicks for your money. You have to optimize down. I just take huge risks, apparently.

Now I've found lots of alternative CPC sources that aren't as ridiculous as Facebook/Google (as an aside, 99% of what you see running on these sites is material that they would ban, except they are being "cloaked" by affiliates...basically the ad revenue that sustains these massive companies comes entirely from people whose ads they explicitly ban..something you might want to know if you own any stock in them). I'm experimenting with them and having great success, but they are very obscure and non user friendly, so not a good place to start.

Sorry I've been MIA! I took all of your advice to heart and managed to increase my profits by another $1000 per day. You all are right...with the ability to increase my income at will like this, my business should be first priority...not getting an extra $20 a day from a rental. Thanks @Shaun Reilly and others!

However I'm still super excited about real estate and hope that I can make it my full-time career soon, since affiliate marketing is pretty passive after the initial setup and testing period.

@Matt R. : There is a limitless array of products and services that one can drive traffic to. There are a few "evergreen" niches, however, that are the most popular and consistently profitable: dating, diet, skincare, bizopp, ecigs (recently), credit reports, background checks. I run mostly diet and skincare since women love to buy stuff, and the payouts are high.

@Steve Foth : I've calculated that I need to accumulate around $165,000 in cash to replace the day job income passively with real estate. This is two $100k duplexes that will rent for $1400 a month, with $35k of financing being provided by my oh-so-generous bank (LOL). That puts me at about $5800 per month in cash flow, with about $1600 of expenses (mortgages, insurance, taxes). That doesn't factor in appreciation or the tax shield effect either, so with that in conjuction with my four figure per day (possibly for a limited time?) income, I would feel comfortable bailing from my life of stability and servitude.

Thanks everybody for the warm welcome...I will get to work learning the ropes here so I don't squander all this cash!

Rooster and Mark,

I like the way you're thinking about this...I have often wondered if I might be able to make ridiculous amounts of money if I had more than a couple hours a day to do this.

I probably could.

For instance, my current ads run only in the US. I have them translated into every modern language with offers queued up, but haven't had the time to test and optimize them yet...this part does take time, effort, and focus. If I quit, I would be able to run UK, CA, AU, NZ, IE, ZA, FR, DE, ES, MX, BR at a minimum. Most of these would not provide the same volume as the US of course due to the smaller populations, but if I couldn't make another $100 per day out of each I must be doing something really wrong.

However, doing this takes not only time, but also money. To run a test I am looking at a couple thousand dollars in adspend before I get profitable, and that's IF I manage to get it profitable. It would be a shame to sit here testing new stuff and throwing away money that could have been used to buy that duplex and gain freedom that much sooner. It's something I need to think about, though, you are right.

Hey J Scott, thanks for the advice! It is good to hear from people who took the plunge.

I'm in basically an entry level position, so it's not like I'd be losing some sort of management role. But I have a once bitten, twice shy attitude because I graduated from undergrad in 2008 hoping to go into finance, and was forced to work selling shoes for 2 years due to the lack of jobs...I'm sure the economy has improved slightly but it scares the hell out of me...I never want to go back to that.

And then there's the issue that going back into this field would essentially kill me on the inside...I don't want to work in an office ever again. If I had to get a job again, some possibilities would be: teach English in Japan or some other foreign country that allows me to experience travel and different cultures, become a firefighter, go back to school for a master's in another subject in a science discipline so it's free, I'm great in any sort of sales role and I wouldn't even have a problem doing something like selling cars, hell even bartending would be more enjoyable than this.

Also regarding the Google algorithms etc, I don't do any SEO for exactly that reason...my traffic is all paid traffic, so I have far more control, and I advertise on affiliate-friendly sources with essentially no compliance guidelines or restrictions of any kind...I focused on these because I thought they would be more long term than continually getting banned from and then defrauding Google, Facebook, etc. like most big affiliates do. I would, however, like to start and monetize a blog, which would be SEO traffic, once I quit and have some more time, since I have a somewhat interesting story.

Randy,

You're right...sorry that was an approximation, I max out the 401k and stick $5500 in an IRA too....but I have cut back on this to save up for these rentals, since it does not generate current income for me.

Dev,

It sounds silly doesn't it? It is almost, in fact, on auto-pilot. But a couple months for a safety net of $50k is a tradeoff I can make for the beach...even though with the insane snow and -40 degree temps we have had lately up here, I sure am ready for it!

Also, you describe REI as decidedly non-cushy. Does having a property manager, like I have, mitigate some of this hassle? I don't need the 250-300k, just 50k is fine. Will that make my life a nightmare? I figure once I quit I'll get even better at this, since I'll have more time to scope out the best deals and maybe manage some of them on my own for better tenant screening and more profits.

Hey guys, thanks! It's really nice since I had gone the traditional go to school get a job route and it really wasn't working for me. I had $47k of student loan debt from a pretty worthless MBA, $13k credit card debt due to car repairs, medical expenses from a car wreck, basically my life was a mess. All of that vanished in a month :) . I did have one $30k profit day but it was a bit of an anomaly and chances are, realistically, it won't repeat itself. Hint: people buy the crap out of diet products on New Year's Day.

Online affiliate marketing is buying ad space online, whether in the form of a banner ad or those text links you see on the right side of, say, Google. Almost every site has some sort of ad server. Google, Facebook, Plenty of Fish, etc., it's a multi billion dollar industry. I build websites (which I had no idea how to do in November) promoting offers that are owned by advertisers (product owners/producers). The goal is to arbitrage the expenses for buying the ad space and the revenue generated from people buying the offers. So say I make $40 and buy ad space for $30...I make $10 per sale...well this is the internet, where scalability is limitless, so you can imagine the amount of money that can be made, especially when it's being funneled to ONE person, me.

But it's one of those things that's constantly changing. Back in 2008 for instance, during the Acai craze (while I was making $12 per hour underemployed in a shoe store, d'oh!) people were making literally millions overnight. Then the FTC cracked down and blah blah. I've been going strong for 4 months now but there's always the nagging doubt that my income could end tomorrow. It's certainly not as reliable as real estate. So in order to quit, I must ignore my online income and make $50k before taxes from appreciation, depreciation tax shield, and net profit on cashflow from residential real estate. That way if everything goes to hell, I know I won't be moving back in with the parents.

Maybe it's just my area (Midwest) but I find it hilarious that the prospect of accumulating half a million dollars of real estate in cash is actually easier than going through the ridiculous process of crafting resumes and cover letters, submitting applications online which aren't even read by humans and are usually immediately denied, going through weeks of interviews, and maybe getting another miserable job. What a strange world this is!

Hi!

I'm new here. I work in a corporate office setting for my day job, which is just a horribly wrong fit for me. I've been striving to get out. To that end, I started online affiliate marketing last November and had some extremely good luck. I've made about $150,000 in profit from it since then. In contrast, my office job pays $52,000.

I am averaging about $1,000 in profit per day online, plus the $52k/year office job comes out to about $140 or so per day. Additionally I bought 2 rentals cash (about $80k total) that will hopefully find renters soon (I'm having a property manager that charges 8% and no first month's rent manage them). They should bring in about $700 each, gross.

I really want to quit my job/get laid off. People look at me like I'm crazy and say, well, you can just do that NOW! But internet marketing is risky business...some days I do $2k profit, but once every couple weeks or so I'll have a -$500 or -$1000 day for no apparent reason. Now, this averages to $1000 a day or more, but it worries me. Plus, the income is mostly passive, and what little input it requires can be done here from the office, so it seems foolhardy to cut of a $52,000 source of income right now, even if it is soul crushing.

I'll be purchasing a duplex that rents for $1400/mo for $50k down, $50k financed at 4.25% here in a month (780 credit score). After that, since my bank only considers W-2 income and my online ventures are so new, I will have maxed out my DTI. I will thus be forced to buy properties 100% cash from then on until 2 years from now, when I can count my rental income towards new mortgages. Correct me if I'm wrong here. I would LOVE to figure out a way to finance some more properties. I'm not interested in hard money due to the super high interest rates. I have thought about doing some small apartment complexes, since I hear these are handled by commercial lending teams who look at down payment and projected cashflow only, but I am not sure if this is true or if I would qualify.

So as it stands right now, if my $1000/day average continues, I'll be buying a new duplex that will rent for $1200ish in cash every 90 days. So mid June, mid September, mid December.

I will quit the instant I am able to replace my day job income with stable rental income...this is everything including net profit, depreciation tax shield, appreciaton, and principal paydown....since I currently sock away about half of my salary in my 401k anyway, I don't need to get the $52k/year from net profit on rents only. By my calculations, this will be in June, after I get the second duplex rented.

Does anyone have any advice or see any holes in my plan? It's going to be kind of annoying waiting 3 months for every cash purchase...does anyone have any ideas for how to expedite the process using financing I may not have thought of? Experienced guys, what would you do if you had $1000 appearing in your bank account magically every day?