$10,000/mth Passive Income

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$10,000/mth Passive Income

Balane Frece
Austin, TX · Member since 2018 · 12 posts · 2 votes

Looking for suggestions on how to take money out of stocks, invest into real estate, and maximize passive income :)

GOAL: $10,000 passive income per month

WHY? To leave our W2 jobs, travel, and spend more time with family

HAVE: Here's a list of what we've achieved so far :) 

1) $600,000 in liquidable stocks/bonds as well as $50,000 in retirement funds

2) $170,000 in annual wages (mix of W2 and 1099 employment) 

3) Ability to become accredited investors (my boyfriend's father is qualified and would support us) *I bring this up in case there is an investment strategy you know of that is only accessible by accredited investors* 

QUESTION: If you had the situation above, how would you most quickly reach the $10,000/mth passive income? Managed rentals? Private money lending? What other strategies do you know of? Keep in mind we work 40 hrs per week each so passive is key! THANK YOU! 

Best, 

Balane :) 

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Ivan BarrattBusiness Member
Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
7y

@Balane Frece Lot's of info and insight here already. The answer is simple: if you want a 120k/year in passive income you'll need approximately 1 to 1.2 million of real estate equity earning 10 to 12%. If you aim much higher than this you'll likely end up speculating and putting your hard earned cash at great risk!

In order to execute well you'll need a lot of education in evaluating deals and their sponsor since your first rule is DON'T LOSE MONEY!! Rule #2: Remember rule number 1! Rule #3: figure out how to get yield without much risk. :)

Also, you'll need to continue to work the income funnels (w2 and 1099 earnings) and use the excess cash from earnings and cash flow from passive income to reinvest in the machine.  This will help accelerate the timeline!

All this is simple however it's anything but easy. That's why very few are able to do it!

First step; have the discipline to evaluate 100 private offerings before doing one deal! It's the same concept as looking at 100 rentals before buying one. Also, at this stage in the cycle many people are taking too much risk. Be careful and don' t be in a hurry!


Get educated first!!

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y

    Many, many ways. Depends on your definition of "fast". My first reaction is use your liquid funds a DP on NNN...and be done with it.

    3Reply
  • Geoff Garrett
    Latham, NY · Member since 2014 · 20 posts · 12 votes
    7y

    Balane,

    I am wondering what you and your boyfriend do or what skill set you guys have?

    Also when you want to make 10k per month do you plan to leave your job and have some time to devote to remotely running your real estate investment or do you want to be completely hands off?

    This may help dictate what is best suited for you.

    I personally would try to parlay your skill into the way they can best relate to real estate.

    For example if one of you were a mortgage lender at a bank I would recommend looking into doing private money lending. 

    If you guys work in the building trades you may want to look into buying and repair distressed properties.  From there either selling them or renting them out.

    It seems like you want to long term develop semi passive income.  How passive that is will depend on what you choose.  Typically the more passive/less time required from you the lower the relative returns are likely to be.

    Long term I think that having larger multifamily properties can be pretty passive as long as they are able to support a property manager or they are purchased properly and can support the cost of property management.  The flip side of this is that you still must manage the manager to some extent.

    Your other option is to work in private money lending but that is going to take time to find good deals as well as vet the deals.  Also if you choose poorly and the borrower fails you have the requirement of foreclosing and taking care of the mess.

    Another thing you may want to look into is syndication but unless you control the deal you wont be able set the payout schedule or control money release etc.

    If you could give us feed back that would help us tailor the recommendations!

    Geoff

    1Reply
  • Richard Sherman
    Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes
    7y

    How passive is passive and how much do you want to travel.  Your income is your biggest weapon, you are doing great on your assets, if you are into FIRE I am guessing your saving 50%+ per year?

    1Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    7y

    @Balane Frece The quickest way to reach passive income may and still will take some time and effort on your part. You need to look into buying commercial real estate. It's up to you whether it is apartment buildings or hospitality or something else. But bottom line, you'd need to roll up your sleeves and put in a significant amount of work for some time to make it happen. An alternative is to have passive income now and come to you much slower buy investing in someone else's syndications. The amount of work is minimal as all that you'd need to do is to review and evaluate someone else's deal and decide whether you'd want to invest in it.   The payouts are dictated by GPs in a deal, so as LP you'll make less but will have no work to do at all! 

    1Reply
  • Jim Pellerin
    Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
    7y

    joint venture with other investors. You are the money man/woman. 

    You should be able to find lots of people looking for money on this site or at your local real estate investing organization.

    Also, find some private equity investments.

    2Reply
  • David Thompson
    Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
    7y

    Hi Balane,

    There are several ideas out there that could get you say min 8%.  There are certainly lending strategies but if you are relatively young and want to live on that you'd have it in taxable accounts and have no tax advantages.  You also don't get any longer term appreciation opportunity.  You could also look at syndication deals as a passive investor since you mention more about the income and what it can do for you like quit the job, travel, etc.  

    Syndication deals in commercial real estate are passive investment that often come with significant tax advantages that you should think about given you want to live on this money.  Many deals we review pay a min 8% preferred return which is not a guarantee but the next best thing as it prioritizes you being paid before the general partner gets their split.  Return projections can get up to the mid teens over time with a combination of income and profits at sale in say 5 to 7 years or so depending on market conditions.  I'd favor core plus holdings in solid areas.

    Since you are not accredited, you will have more limited choices but there are deals out there that allow some non accredited investors and that's what I'd focus on for now.  I particularly like value add MF apartments, self storage and manufactured home parks. These 3 niches have performed very well over the past 25 years and held up the best during downturns like 2009.  Here's a few blogs that might help w/your education and understanding of your options.

    https://www.biggerpockets.com/blogs/9145/74876-gro...

    https://www.biggerpockets.com/blogs/9145/53820-why...

    https://www.biggerpockets.com/blogs/9145/53959-vetting-an-apartment-deal-sponsor---10-tips-from-an-insider

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    all real estate is risk.. its just how U manage the risk.. 

    also keep in mind no matter what you do its not like you can just dial oin 10k a month and it goes for ever.

    markets ebb and flow..  you go into 5 year deals they pay off.. need the next one..

    one of the more consistant things you can do is lend money.. or JV on developments with VERY trusted operators.

    you can buy some form of rentals.. most people do those.. but depending on how you do it they are not that passive.. you have to engage to keep them running smoothly.

    you could also look at other things like investing in some other type of small business  Which at its base is all real estate is a small business.

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    5Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y

    Like I mentioned above, there are a number of ways to do this.  Here's one:

    1 - Use your current liquidity as a DP on NNN investment(s). Max it out.
    2 - Initially, use the cumulative cash flow from the NNN's as a down payment on the next NNN.  You should be able to do this on a smaller scale in the first year.

    3 - Continue to reinvest the now exponentially growing CF into the next NNN's until you don't want/need to anymore...you reached your goal. Then get out of the way, and let the NNN's do their thing.

    Thanks to the nature of NNN (no babysitting needed), this is truly the ultimate passive investment during the expansion phase (#1 - 2 above), and it's just as passive when you reach the retirement phase (#3).

    2Reply
  • Ayne C.Pro Member
    Rental Property Investor · Tampa, FL · Member since 2018 · 251 posts · 124 votes
    7y
    @Joe Villeneuve What are all the abbreviations you mentioned?!
    1Reply
  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Balane Frece:

    Looking for suggestions on how to take money out of stocks, invest into real estate, and maximize passive income :)

    GOAL: $10,000 passive income per month

    WHY? To leave our W2 jobs, travel, and spend more time with family

    HAVE: Here's a list of what we've achieved so far :) 

    1) $600,000 in liquidable stocks/bonds as well as $50,000 in retirement funds

    2) $170,000 in annual wages (mix of W2 and 1099 employment) 

    3) Ability to become accredited investors (my boyfriend's father is qualified and would support us) *I bring this up in case there is an investment strategy you know of that is only accessible by accredited investors* 

    QUESTION: If you had the situation above, how would you most quickly reach the $10,000/mth passive income? Managed rentals? Private money lending? What other strategies do you know of? Keep in mind we work 40 hrs per week each so passive is key! THANK YOU! 

    Best, 

    Balane :) 

     By the way, having your boyfriend's father sign off as an accredited investor while you are actually investing in the deal, is dishonest and actually illegal. There's probably a reason why those accredited definitions exist. It's so that people who don't have that much liquidity/assets don't put money into a deal that they can't afford to lose.

    5Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Ayne C.:
    @Joe Villeneuve What are all the abbreviations you mentioned?!

    DP = Down Payment

    CF = Cash Flow

    NNN = Triple Net

    2Reply
  • Account Closed
    Rental Property Investor · Santa Rosa Beach, FL · Member since 2014 · 168 posts · 35 votes
    7y
    @Joe Villeneuve I like Joe’s thinking on this. I am accredited and getting into the syndication realm (MF, self storage) with the intent of snow balling into NNN direct ownership. My thinking is that this would give me the most passive type of portfolio as I am a busy professional. I also like the limited liability aspects of being a limited partner.
    3Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Account Closed:
    @Joe Villeneuve

    I like Joe's thinking on this. I am accredited and getting into the syndication realm (MF, self storage) with the intent of snow balling into NNN direct ownership. My thinking is that this would give me the most passive type of portfolio as I am a busy professional. I also like the limited liability aspects of being a limited partner.

    ...and you can own NNN anywhere the number$ make "dollar$". You don't have to own them close enough to manage, since there is no real management involved.

    I want to own the first NNN on the Moon,...but I'll accept Mars.

    2Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    7y

    There should be now we in RE until marrweed.  

    The worst kind of partnerships are those you expect to go perfectly so nothing gets put in writing...

    3Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y
    @Balane Frece. I’m not sure your boyfriends father can just sponsor you like that to become accredited. Have you talked to a lawyer about that?
    1Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y
    Originally posted by @Caleb Heimsoth:
    @Balane Frece. I’m not sure your boyfriends father can just sponsor you like that to become accredited. Have you talked to a lawyer about that?

     Cosign. 

    0Reply
  • Ivan BarrattBusiness Member
    Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
    7y

    @Balane Frece Lot's of info and insight here already. The answer is simple: if you want a 120k/year in passive income you'll need approximately 1 to 1.2 million of real estate equity earning 10 to 12%. If you aim much higher than this you'll likely end up speculating and putting your hard earned cash at great risk!

    In order to execute well you'll need a lot of education in evaluating deals and their sponsor since your first rule is DON'T LOSE MONEY!! Rule #2: Remember rule number 1! Rule #3: figure out how to get yield without much risk. :)

    Also, you'll need to continue to work the income funnels (w2 and 1099 earnings) and use the excess cash from earnings and cash flow from passive income to reinvest in the machine.  This will help accelerate the timeline!

    All this is simple however it's anything but easy. That's why very few are able to do it!

    First step; have the discipline to evaluate 100 private offerings before doing one deal! It's the same concept as looking at 100 rentals before buying one. Also, at this stage in the cycle many people are taking too much risk. Be careful and don' t be in a hurry!


    Get educated first!!

    9Reply
  • Varinder KumarPro Member
    Real Estate Broker · LA & ORANGE COUNTY CA -Multi Family · Member since 2016 · 374 posts · 132 votes
    7y
    @Balane Frece I have a similar goal my self, in regards to the target number monthly. Here is how I am going to do it. I call it “the mullet”. So I have a SFR already with long term tenants. The backyard has enough room for me to build a 1 bedroom studio, which I am going to Airbnb. So you got a long term tenant in the front and short term rental in the back. Business in the front and party in the back- mullet. Lol. But in all seriousness my goal is to have two “mullets”. Let’s look at the numbers... I purchased my SFR/LTR for $406K. With a balance of $355K remaining. Generating $2700/monthly. Now to build the STR in the back is going to cost roughly $70-80k. Based on my location I am looking to have a vacancy of about 5 days a month, tops. With a per night cost of $99 to start and some nights a higher amount, holidays, weekends etc. So this amounts to about $2500 a month. So I am looking at a ROI of about 2.5 years on $80K. With me so far? Keep reading... Now I am looking to duplicate this process. And by generating $2500 on the STR and $2500 on LTR (front house) I’m looking at $10K a month. With my career I have I should be able to have all of this free and clear in less than 10 years. Of course there are other factors involved and thIngs can go south in cwrtaIn ways. But to be honest thIs Is the best way in my professional opinion. MINIMUM INPUT AND MAXIMUM OUTPUT. Feel free to PM me to discuss other details. Hope this brings some clarity and good luck!
    4Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    7y

    There are only 2 Rules to successful REI. Everything else, much like Geometry, are Postulates.

    The first Rule of REI is Never, under any circumstances, ever, EVER, spend your seed money.  Use it to infinity, but never spend it.  Your seed money must start out as, and remain forever, a verb...not a noun.  When it becomes a noun, you lose.

    The Second Rule of REI is Never, under any circumstances, ever, EVER, forget Rule #1.

    The First, and most important Postulate, is to Stay in the Game.  As long as you follow rules #1 and 2, this should be no problem.


    The Second Postulate, is to understand that as long as you are following Rules #1 and #2, you will never lose money...since you will always be Still in the Game (Postulate #1)

    There is no Rule 3.  If you don't follow Rules #1 & 2, you won't be around to follow any other rules.

    3Reply
  • Omar Khan
    Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Andrey Y.:
    Originally posted by @Balane Frece:

    Looking for suggestions on how to take money out of stocks, invest into real estate, and maximize passive income :)

    GOAL: $10,000 passive income per month

    WHY? To leave our W2 jobs, travel, and spend more time with family

    HAVE: Here's a list of what we've achieved so far :) 

    1) $600,000 in liquidable stocks/bonds as well as $50,000 in retirement funds

    2) $170,000 in annual wages (mix of W2 and 1099 employment) 

    3) Ability to become accredited investors (my boyfriend's father is qualified and would support us) *I bring this up in case there is an investment strategy you know of that is only accessible by accredited investors* 

    QUESTION: If you had the situation above, how would you most quickly reach the $10,000/mth passive income? Managed rentals? Private money lending? What other strategies do you know of? Keep in mind we work 40 hrs per week each so passive is key! THANK YOU! 

    Best, 

    Balane :) 

     By the way, having your boyfriend's father sign off as an accredited investor while you are actually investing in the deal, is dishonest and actually illegal. There's probably a reason why those accredited definitions exist. It's so that people who don't have that much liquidity/assets don't put money into a deal that they can't afford to lose.

    The BF's father could cosign or be the managing member of an entity which invests in projects. There is nothing dishonest and illegal about this. A lot of people, especially those with more affluent parents/family, do this to invest into private deals where accredited investors are required. There is a reason why rich keep getting richer. 

    7Reply
  • Rebekah Scott
    Investor · Denver, CO · Member since 2017 · 9 posts · 6 votes
    7y
    @Balane Frece This is my favorite question, because it is also the question I answer for most. Putting your money into the real estate market first starts with choosing the right agent and the right market. I live in Denver, CO and about 50% of my clients are out of state. Step 1: familiarizing yourself with the market you are about to put your money into. Step 2: setting expectations of what kind of returns you are going to receive. STEP 3: get plugged in with a KNOWLEDGEABLE INVESTOR oriented agent and brokerage. Step 4: start placing your money in places. I have had great success with 4-plexes recently. They are around 400k, but you are cashflowing around $1,500. 8-10% cap rate with 15% IRR. I would suggest putting 25% down on as many multi-unit and single family houses you can. Having a variety of properties is a great way to create cash flow and also build long term wealth. That is what I always suggest. Happy to answer any other questions you may have.
    1Reply
  • Andrey Y.
    Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Omar Khan:
    Originally posted by @Andrey Y.:
    Originally posted by @Balane Frece:

    Looking for suggestions on how to take money out of stocks, invest into real estate, and maximize passive income :)

    GOAL: $10,000 passive income per month

    WHY? To leave our W2 jobs, travel, and spend more time with family

    HAVE: Here's a list of what we've achieved so far :) 

    1) $600,000 in liquidable stocks/bonds as well as $50,000 in retirement funds

    2) $170,000 in annual wages (mix of W2 and 1099 employment) 

    3) Ability to become accredited investors (my boyfriend's father is qualified and would support us) *I bring this up in case there is an investment strategy you know of that is only accessible by accredited investors* 

    QUESTION: If you had the situation above, how would you most quickly reach the $10,000/mth passive income? Managed rentals? Private money lending? What other strategies do you know of? Keep in mind we work 40 hrs per week each so passive is key! THANK YOU! 

    Best, 

    Balane :) 

     By the way, having your boyfriend's father sign off as an accredited investor while you are actually investing in the deal, is dishonest and actually illegal. There's probably a reason why those accredited definitions exist. It's so that people who don't have that much liquidity/assets don't put money into a deal that they can't afford to lose.

    The BF's father could cosign or be the managing member of an entity which invests in projects. There is nothing dishonest and illegal about this. A lot of people, especially those with more affluent parents/family, do this to invest into private deals where accredited investors are required. There is a reason why rich keep getting richer. 

     How many PPMs/OAs/SAs have you looked at? At most, there is a space for the "investor" and one for the "spouse" on the SA.

    This isn't signing on a mortgage. These are different contracts.

    I agree you can make anything a gray area though. Sure, the father can sign on the "investor" line and just shuttle the funds and emails to the son-in-law, but this is impersonation (ie. getting a different person to sign for you). If you start being dishonest here, you will go down the road of being even more dishonest in future real estate endeavors.

    0Reply
  • Brian LaPorte
    Rental Property Investor · Cleveland, OH · Member since 2018 · 21 posts · 10 votes
    7y

    I would be very very careful getting into the deal with a girlfriend, and her father, involved.  The deal could go great, but your relationship might change, and things could get really messy.  At least if you're married things are a little more official on paper.  

    Brian

    2Reply
  • Eric Nurmi
    Specialist · IL · Member since 2018 · 47 posts · 42 votes
    7y
    @Balane Frece Experts in both the stock market and real estate are expecting another correction. So poise yourself to take advantage of the opportunity when it comes. From what I know, Austin is a good market (have a home builder friend mode there recently to do a large development). So, I’d encourage you to get to know your local market both commercial and residential rental opportunities. Another friend of mine helps people set up their own banking system that allows people to take advantage of both rental and interest payments from rentals. He has one client getting more income from the interest than the rentals. This can also be a good strategy to grow your passive income and wealth. As another comment asked- what are your skills sets? This will help you take advantage of how and what you start to look for with your opportunities. Stic to what you have interest in. Biggest mistake is putting money where you don’t watch it. So interest or SKILLSET in what you are doing is a good starting focus.
    1Reply
  • Omar Khan
    Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Andrey Y.:
    Originally posted by @Omar Khan:
    Originally posted by @Andrey Y.:
    Originally posted by @Balane Frece:

    Looking for suggestions on how to take money out of stocks, invest into real estate, and maximize passive income :)

    GOAL: $10,000 passive income per month

    WHY? To leave our W2 jobs, travel, and spend more time with family

    HAVE: Here's a list of what we've achieved so far :) 

    1) $600,000 in liquidable stocks/bonds as well as $50,000 in retirement funds

    2) $170,000 in annual wages (mix of W2 and 1099 employment) 

    3) Ability to become accredited investors (my boyfriend's father is qualified and would support us) *I bring this up in case there is an investment strategy you know of that is only accessible by accredited investors* 

    QUESTION: If you had the situation above, how would you most quickly reach the $10,000/mth passive income? Managed rentals? Private money lending? What other strategies do you know of? Keep in mind we work 40 hrs per week each so passive is key! THANK YOU! 

    Best, 

    Balane :) 

     By the way, having your boyfriend's father sign off as an accredited investor while you are actually investing in the deal, is dishonest and actually illegal. There's probably a reason why those accredited definitions exist. It's so that people who don't have that much liquidity/assets don't put money into a deal that they can't afford to lose.

    The BF's father could cosign or be the managing member of an entity which invests in projects. There is nothing dishonest and illegal about this. A lot of people, especially those with more affluent parents/family, do this to invest into private deals where accredited investors are required. There is a reason why rich keep getting richer. 

     How many PPMs/OAs/SAs have you looked at? At most, there is a space for the "investor" and one for the "spouse" on the SA.

    This isn't signing on a mortgage. These are different contracts.

    I agree you can make anything a gray area though. Sure, the father can sign on the "investor" line and just shuttle the funds and emails to the son-in-law, but this is impersonation (ie. getting a different person to sign for you). If you start being dishonest here, you will go down the road of being even more dishonest in future real estate endeavors.

    I would say a fair number. I'm a GP on a number of deals especially because I run some of them :)

    Entities can, have and do invest in syndications. Apart from the reasons the OP mentioned, some other reasons include: confidentiality, tax and estate planning, portfolio management, etc. 

    As long as a managing member of the entity is accredited, the entity is considered accredited. HNW individuals, families and groups use this to transfer wealth, help their kids and/or introduce their network to opportunities which they wouldn't otherwise have an option to invest in. 10-20 years ago these deal were affectionately called "country club" deals because that's where they happened.

    There is no gray area and neither is an investor being dishonest. 

    I do agree with Brian LaPorte's articulate response. Just because you can do it, doesn't mean you should considering that the OP is not married.

    1Reply
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