Rent or Sell? A Real Estate Investor’s Tough Choice
One of the best ways to be or become financially independent/retired early (FIRE) is through passive income. Passive income is income that is made with very little or no labor involved on your part. One of my favorite ways to make passive income is through renting out real estate. I have several units across the United States that I rent out to people. How it works is pretty simple. I purchase a single home or multifamily dwelling such as a duplex or triplex and then list it for rent. Someone likes the property so they accept the amount of rent I am charging per month and they move in. There is a lot more to it than this, but I am keeping it simple for this post. I take the rent, subtract the mortgage (if any) property taxes, insurance, and any other expenses. What is left over is my net revenue. I will keep some of the revenue set aside for vacancies and maintenance repairs. If I make $500 a month net revenue on a unit (just an example), that is $6000 a year. If I have 10 of the same units, then my net revenue is $60,000 per year. Of course this sounds really awesome, but there is a lot more to it than that. I will get into those details in another post.
We just recently purchased a little larger home with a lot more land than we had before. The house listed for $325,000 and we ended up buying for $280,000. It appraised prior to closing for $300,000. So we closed on a home that already had $20,000 in equity. The house was a previous rental, but it is located in a neighborhood where rentals are very few. The majority of the home owners in this particular neighborhood have lived there since the beginning of the development back in 1987.
You do not have a will! – Again,