Archive for Residual Income
Commercial Real Estate Investing: Building Residual Income with Real Estate
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the people of Sucre, Bolivia - Horno Ckasa'B
Greetings from Southwest flight 1398 to Phoenix, AZ.
I am on my way to meet with the team from Food for the Hungry Bolivia. I am looking forward to connecting with the Food for the Hungry Boliva staff. I sure miss the community of Horno Ckasa ‘B.
Anyway…..
When I first started investing in real estate, what attracted me most was the ability to build “asset” wealth quickly. I felt as long as I focused on building assets the cash flow would come. Well….like most “newbie” real estate investors, the harsh reality is ….it is not that easy. Especially, when you are leveraging yourself into assets and especially with residential real estate.
I discovered the hard way that leverage is good…but a lot of it can hurt you. I don’t believe in having personal debt (other than a reasonable mortgage). I do believe in having business debt. But business debt can get out of hand went you are leveraging everything you can….but I digress. I will share that thought in another post.
When I entered into commercial real estate, cash flow was a little easier….obviously with “cash flow” properties. It was when I leveraged myself into distressed properties or land where it got tricky.
Today’s post is how “smart” real estate investing can build residual income. From my experience, I have not always been a “smart” investor. To this day, I am paying for mistakes. So I hope as go through this “investing” adventure together, you can learn from my mistakes.
So…..
Building Residual Income Using Real Estate
There are endless ways to make money in this world, but if you are looking for the kind of investment that can not only help you in building residual income but also freeing yourself from the daily grind then real estate investing may be your “vehicle”. With the recent crash in the equities markets and 401Ks being cut in half many people are looking for more stable, secure and hands off investments. Smart real estate investing fits that bill and can set you free. The key pharse here is “smart investing.”
Every working stiff knows how to collect a paycheck. You dust off the ol’ resume, put on your best interview clothes and start to pucker up. Working for someone else, forty hours a week can make you well off but it will never make you truly wealthy. You’ll never control the means of production so you’ll never be truly rich, or independent for that matter. The tidal wave of layoffs going through the country is reason enough why many people need to work on building residual income.
Residual income is money made from an investment or business that pays you dividends over time for work done up front. Many people create these kinds of businesses through the Internet or through traditional means and turn them over to talented managers. Yet a great way to make some extra money, maybe even enough to quit the daily grind, is to build up real estate investments over time.
Imagine this scenario. You take 10% of your annual income and put it aside. This amount is then used as down payment on a piece of real estate. You rent that real estate out for more than the monthly expenses and keep the profits. The tenant covers your costs and you make extra money. This is one of the best tactics when it comes to building residual income because you will continue to make this money as long as you own the house. You can even pass it down to your children!
While many people think about real estate as a traditional single family home rental, the options are endless. Commercial real estate like office buildings, retail shopping centers and apartment complexes all offer the same help in building residual income yet spread the risk out amongst many tenants.
While at first you may only be looking at an extra couple of hundred dollars a month in residual income if you continue to repeat this process and roll your profits into new properties you will soon have a burgeoning real estate empire. Best yet, the longer you hold the properties the more equity you build up. If you ever need a large infusion of cash to cover a new car, college tuition for junior or your spouse’s new found addiction to slot machines you have money just sitting in your houses.
Sticking to the fundamentals, having an experience mentor at your side, staying humble, and continuing your education will give you the results your want…..a big residual check. Going your own way….or feeling invincible are sure signs of failure. Sounds like I am speaking from experience does it not?
Until next time…….rob
Residual Income: Do What You Want And Still Get Paid
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Residual Income....that sounds sooo good!
Greetings from The Pit @ the Univesity of New Mexico. Watching my boys play at Steve Alford’s basketball camp. Good times and good people. Today’s topic is one close to my heart because it has been my passion for most of my life. Not specifically residual income…but the lifestyle residual income provides. I hope you enjoy.
Residual Income
Most people who invest in commercial real estate are focused on generating profit (cash flow). One way investors generate profit is though residual earnings, which make up the net income an investment can earn over the minimum rate of return. Residuals are a source of passive income that generates income without requiring continuous active participation. Artists and intellectual property owners also generate residuals through royalty income.
Why Should I Focus on Residuals When It Just Seems Like a Small Amount Every Month?
If you spend all of your time working on the tasks that require the most effort for the littlest reward, at best you will only get the 
littlest reward. Instead, it would be better to spend a minimal amount of time on achieving the maximum reward (i.e. increasing residual earnings). If you are not creatively inclined or unable to invent something requiring a patent, real estate investment is a relatively easy way to begin earning residual income.
How Does This Work?
For example, let’s say you spend 40 hours a week at a job making $25 per hour or $52,000 per year. Theoretically, you are working every minute of every hour to earn $25 per hour. Now, let’s say you invest in an apartment building for $75,000. The building has four units that each rent for $400 per month, for a total of $1,600. If the mortgage on the building is $600 per month and the property management company is $100 per month and the remaining expenses are $100 per month, that means you earn $800 a month or $9,600 a year for spending at most 30 minutes a month writing a few checks. If you spent 15 minutes a month handling the apartment building, that equates to three hours or work a year, which would mean that you earn $3,200 per hour.
I can’t live on $9,600 a year. I Still Need My Job. Now What?
The explanation behind the above example applies to multiple buildings also. Let’s examine the same idea only with five properties. Following the same logic and using the same numbers, you would take home $48,000 a year, which means you earned $16,000 per hour.
Just because you earn residuals, doesn’t mean that you need to give up your job. Residuals allow you to have regular income of 
a potentially sizeable nature without a lot of work. They can provide you with financial security as well as legal rights to income that can be passed to your children or heirs. Take the time to think about residuals and other passive income streams. With a clear understanding of where your money comes from and how much work you must put in to earn that money, you too can begin to work smarter.
Until next time…..rob