As you probably saw in my most recent passive income update, I’m making solid progress in reaching my passive income objectives and am certainly very optimistic. That being said, I continue to depend on only 2 sources of income; my online company and my dividend income flows. That is not nearly enough and I’ve been looking into other ways to generate consistent income every month. On of those ways is gaining exposure to the real estate market of course (apart from my house which is great but it’s fair to say that it’s not generating any income!). I’ve already had a few posts about it:
One of the conclusions so far is that I’m probably going to start off by doing residential thus becoming a landlord. I’ve been a renter a few times some years ago and have certainly seen some of the challenges involved but last week I did some reading to get a better idea of what’s involved. Here are a few of my thoughts so far:
–Real estate is not as passive as we could imagine: Sure, I could hire someone to do repairs, collect money, discuss and find new tenants, do renovations, etc. But it’s likely that I’ll have at least some of those responsibilities which will take some time.
–Finding The Right Tenants Is A Major Challenge: When I think back, I was the ideal tenant..or close to it.. not very demanding, always paid on time, stayed for a few years and gave decent notice before leaving. Unfortunately, finding those is a major challenge. Also, knowing what pricing to charge can have a major impact on how much (or how little) choice you end up having in selecting tenants.
–Taxes Can Be Saved: There are many different ways to structure such investments but in all of those, tax savings can be significant making the benefits of the diversification even greater.
–Having A Plan Is Critical: Seems obvious now but I think I would have underestimated this impact. Knowing what type of property, of tenants, for how long, how many to buy, when to do it, how to determine my pricing, etc. All of those aspects are critical! One thing in particular that seems obvious but is important to keep in mind. I’ll only consider properties that are cash flow positive from day one. Otherwise, it kind of misses the whole objective right?
Am I Missing Anything Important? I know that some of you own buildings and would love to hear any other important aspects to consider.
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