3 Smart Ways to Make an Extra $1,000 a Month
What would YOU do with an extra $1,000 a month in your bank account?
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Around BiggerPockets, you'll hear a lot of stories of "big success." Someone just flipped a house and made $100,000. Someone just bought a 300-unit apartment building. Someone just crossed the threshold of a million dollars in net worth.
These are awesome and inspiring stories, but if you are a newer investor, these goals might seem unattainable.
Today I want to share some strategies for making money investing in real estate, but rather than explore the best ways to make millions in real estate, I want to explore some ways to simply make $1,000.
As I go through this post, keep that first question I asked earlier in your mind: what would YOU do with an extra $1,000 a month in income? Also understand that none of this is “quick” or “easy.” This will take some work. But if an extra $1,000 would change your life, then keep reading.
And if you have family or friends who would benefit from earning an extra $1,000 a month, do me (and them) a favor and share this on your Facebook wall!
With that, let’s get to it.
(Note: below I give a lot of “numbers” and example deals. Understand that every real estate market is different, and you might think these numbers are absurdly high or absurdly low, depending on where you live. Try not to focus on the number as much as the principle behind the number.)
3 Ways to Make an Extra $1,000 a Month Through Real Estate Investing
1. House Hack Your Way to $1,000
House Hacking is a term I use a lot to describe the process of combining your personal, primary residence (the house you live in) with your desire to build wealth through real estate.
There are several ways to “house hack,” and they all can work if you do them right. Let me give you a few scenarios.
First, there is the "rent-hack" scenario. You rent a house or apartment and rent out the extra bedrooms to some roommates. (I did this in college before I knew anything about real estate investing!) Then there is the "live-in flip" — which I also did, right after college. But the technique I want to spend the most time on right now is the "small multifamily house hack."
The small multifamily house hack is the process of buying a small multifamily property, either a two, three, or four unit property, and living in one unit while renting the other units out.
Let me give you an example of how a person could earn an extra $1,000 a month this way.
House Hacking Example
Jeremy found a $315,000 fourplex located twenty minutes outside Minneapolis. He purchased the home using an FHA loan, which requires just a 3.5% down payment. Including closing costs, Jeremy comes to the closing table with just over $15,000. His mortgage payment, including taxes and insurance, ends up costing him $1,600 per month. Add water/sewer/garbage/vacancy/maintenance to that, and he's at $3,000 in expenses.
He lives in the basement apartment, a nice 2-bedroom unit, while renting the other units for $1,100 a piece for a total monthly gross income of $3,300.
Jeremy is now getting paid just under $300 per month to house hack this property.
“But Brandon,” you say, “that’s not $1,000 a month!”
Patience, young Padawan.
You forget one important thing: Jeremy is now living free. Jeremy was paying $700 a month before in rent at a crappy apartment and now lives for free.
Check out the PDF on the right, which shows the breakdown of the numbers as run through the BiggerPockets Rental Property Calculator.
Jeremy now has an extra $700 per month in saved rent and $300 a month in cash flow for a total of an extra $1,000 per month. Plus, he's building equity, has a hedge against inflation, and is learning how to be a landlord/investor all at the same time. Plus, when Jeremy decides to move out, he can rent his unit out for $1,100 a month also and bump his cash flow on that property up to $1400 a month.
Not too bad for Jeremy.
2. Wholesale Your Way to $1,000 a Month
For those unfamiliar with the real estate twist on "wholesaling," let me explain.
Wholesaling is the process of finding a great real estate deal through hustle and hard work, signing a legal contract to purchase that property, and then selling that contract to another investor who will actually be the one buying it.
(It’s a bit more complicated than that, but do a quick search around BiggerPockets and you’ll find a lot more info, or check out The Book on Investing in Real Estate with No (and Low) Money Down for an entire 1/3 of the book dedicated to the art of wholesaling.)
Now, how can a person make an extra $1,000 a month through wholesaling?
Let’s look at an example. In this example below, we’ll be looking at how direct mail can help a person achieve that goal.
Lori decided to become a part-time wholesaler to earn some extra income and decides that of all the different methods a person could use to find deals, direct mail would be the most sustainable for the long term.
Lori prints out 1,000 letters printed on blank white piece that simply say, “I would like to buy your house for cash. If you are interested in selling, please give me a call at…”
She then sends that to a list she ordered on ListSource.com for out-of-state owners who had owned the property for more than 10 years.
All in all, with the printing, the stamps, the paper, and buying the list, Lori spends $1,000 to send those 1,000 letters.
Within a few days, the calls start coming in.
Lori gets 4% of people to call her back about, so she talks with 40 people.
Of those 40 people, one of those who calls is Elmer. Elmer owns a single family home that needs a ton of work, but needs to sell quickly, and he has no money to repair it.
Lori does some quick “70% Rule Math” and sees the following:
- The After Repair Value is $125,000
- x 70% (for the 70% rule) leaves her with a value of $87,500
- She estimates the home needs $25,000 in work, leaving her with $62,500
- She wants to make $2,000 gross on the wholesale deal, leaving her with $60,500
Lori offers Elmer the $60,000, and he accepts. She then talks to a local house flipper who agrees to pay $62,500 for the deal.
At closing, Lori ends up with a check for $2,000, of which $1,000 she spent on direct mail letters.
Lori simply repeats this process over and over every month to make an extra $1,000 per month in cash.
(P.S. In reality, since Lori knows she can make $2,000 in revenue for every $1,000 she spends on marketing, she would very quickly start to ramp up her marketing budget until she was spending tens of thousands of dollars a month. But if all she wanted was $1,000 a month, this works too!)
3. Flip Your Way to $1,000 per Month
Finally, let's talk about house flipping.
The television shows have glamorized this industry and “easy money,” but flipping is anything but that. However, for those dedicated to learning the business of house flipping, incredible income can be earned.
We don’t want to talk about incredible income, though. For the purpose of this article, we just want to earn an extra $1,000 a month. So how do we do that?
With flipping, that $1,000 is going to be “averaged” over the course of a year, since no flipper in their right mind would flip one house every month just to make $1,000 per flip. Instead, to earn $1,000 per month in extra income, a flipper would only need to flip one home per year and make a $12,000 profit on that flip.
House Flipping Example
Hal just finished reading J Scott’s amazing book, The Book on Flipping Houses and is excited to get started on his first flip. However, Hal doesn’t want to quit his job and become a full time flipper; he just wanted to earn a little extra cash each month to pay for private school for his six-year old daughter.
Here’s how he did it.
Hal looked around for months to find the perfect deal. He analyzed deals daily using the BiggerPockets House Flipping Calculator, but couldn’t find a good enough deal. Until finally one of his Short Sale offers went through.
Hal runs the numbers (you can see his BiggerPockets House Flipping Calculator analysis by clicking the image to the right) and moves forward on the flip.
The home was in terrible condition, located on a nice street about 20 minutes away from Hal's work. He analyzed enough comps to know that the home would sell for around $225,000, but it needs $45,000 worth of work (as provided in a bid from a local reputable contractor).
His offer is accepted at $132,000.
After 94 days, the home is sold for $225,000, and Hal walks away with a check for $24,453.42.
It wasn’t easy, and it wasn’t super quick. But he had done it.
Hal decides that he’ll continue flipping, but only do one project every year or two. This way, he can ensure that he only buys INCREDIBLE deals that will get him the extra income he needs.
After all, $24,000 in profit every two years works out to $1,000 a month in extra income.
What About You?
I started this article with a simple question: What would YOU do with an extra $1000 a month in your bank account?
A thousand extra dollars could mean more freedom from your job, more time home with your kids, more vacations, a nicer car, or one of a million other things.
Or maybe $1,000 is simply a good starting point, a “quick win” goal to help you launch your much larger real estate ambitions?
Whatever reason you may have for making an extra $1,000 a month, there is one thing I know: it could change your life.
Hopefully this post has given you just a few ways that YOU could make that happen in your life. This list is FAR from comprehensive, and there are hundreds of ways to make money with real estate. If you have any other suggestions, I hope you’ll share them below in the comments!
Finally, if you appreciate this post, do me a favor and share this on your favorite social media channel!
Thanks and I’ll talk to you next week!