For the past 4 or 5 years everyone has been jumping on the “flipping” and rehabbing bandwagon because of the late night infomercials.
“I made $45,000 on this flip that took me 3 weeks with no money of my own!”
“In just 90 days I found and wholesaled this 23 unit building for a $93,000 profit!”
blah… blah… blah…
Yes, these profits are out there to be made… but isn’t the goal of most people who get into real estate investing to become rich and to make money with as little work as possible?
I know it’s my goal. I don’t want to constantly have to work each and every week of my life to find that next flip to inject cash into my life. This is not PASSIVE INCOME if you ask me!
Just to clear things up… Flipping homes (<< the only flipping resource that we recommend to anyone), wholesaling (one of the best ways to get started), and rehabbing are extremely lucrative ways to make a living in real estate investing.
But, if you use these strategies… and only these strategies… you are making it harder on yourself come retirement time.
In my opinion you have two options that will allow you to have passive income and build wealth in real estate investing.
- Invest in income properties that grow in value and generate passive income
- Systematize your flipping/wholesaling/rehabbing business to the point where you have people taking over the operations… with you collecting portions of the profits from each deal.
Really, you should strive toward both goals. If you are running a flipping/wholesaling/rehabbing business your ultimate goal should be to build it to the point where you have a team running the operations and you can step back and just collect royalty profits.
Then, with some of your profits you should go out and acquire income properties that can provide you with stability and massive wealth growth in the future.
When I first started out in real estate investing I was all gun ho for wholesaling and lease options.
Then it hit me…
I have two options… either I systematize this business so I don’t have to constantly work day in and day out to see a paycheck… or I begin to focus on income properties.
For me, I chose to go strictly to income properties and not build up my wholesaling business. I just didn’t want to be in the daily grind of constantly having to find deals, make hundreds of offers, etc. That’s just not me.
What I want is to get to the point where I can sit back and not work at all and live a nice lifestyle from the passive income of my investment properties. For me, flipping just won’t get me there.
Here’s a quick example of what my first income property has done for me.
Details: Small 4 unit apartment building
- Purchase Price: $164,000 (no money of my own!)
- Positive Cashflow: $400/month (decent… but not that good)
- Value today: $275,000
- Monthly time spent managing the property: 3 hours (at the most)
So, over the past 4 years since I purchased that property, I’ve accumulated over $110,000 in equity, $19,200 in positive cashflow, and a ton of tax writeoffs.
Sure, this example is not jaw dropping numbers wise… but just imagine when you rack up 15, 25, 100+ units. That’s what I’m looking at. I’m looking at true wealth accumulation and passive income… I’m not interested in having to always work to put money in my bank account.
So, with my investment properties alone, I plan on being able to quit “working” before the age of 40 (that does not include my other businesses that are creating my month to month income… both active and passive)
While this plan may not be for everyone… it is exactly what I want out of real estate investing.
So, look at your goals and decide which real estate investing strategies will help you get there.
But, everyone in my opinion should include investment properties as part of their overall real estate investing plan.
Good luck and I’ll see you at the top!
The REI Brain
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