Monthly residual income is one of the most attractive aspects of being a real estate investor. The checks come in every month, and you’re not trading your time to earn the income. This means freedom and many a successful real estate investor enjoys the freedoms in life that are afforded by substantial monthly income that comes from rents on their properties.
The real question is how do you want to structure your business? Do you want monthly income coming in small chunks from a larger number of properties or in big chunks from fewer large properties? Most of you will favor the second option and so do I, having discovered that rental income apartment buildings is both more substantial and also less risky.
I’ve heard just about every real estate investment strategy there is out there and a lot of them sound like this. ‘Find one or two single family homes each month that each generate at least $100 a month in positive cash flow. One hundred such properties will leave you with $10,000 a month in total residual income!’ Whether you’ve learned real estate through the school of hard knocks or in a weekend seminar, chances are you’ve heard something like this before.
I agree with that reasoning up to a point and, like many real estate investors, have done that song and dance too. Yes, you can get monthly residual income from owning single family houses long term. But with that comes a whole slew of maintenance and management issues that are unique to that one property. By the time the rents are collected, busted pipes fixed, and phone calls from a needy tenant are taken, you will be questioning how valuable that $100 a month in net income really is.
Imagine that scenario amplified 100 times! The question really is, folks, do you want a full-time job managing dozens of properties or do you actually want to invest in real estate? Most of us do not want to trade in one job for another and I have realized this too. Holding single family homes is a much harder paycheck to earn and it’s also a lot riskier to have all of your money in single family houses.
What happens if you lose your tenant in your single family house? Your monthly income from that property disappears until a new tenant moves in and the mortgage still needs to be paid every month. A few months of vacancy can wipe out all the annual residual income from a single family home, tapping both your wallet and your spirit. Is that how you envisioned this business unfolding?
