How The Successful Are Earning High Passive Income From Rental Properties

A great deal of investors are allocating more and more of their portfolio to real estate in 2019 and for good reasons, Stocks are pricey and bonds are not yielding enough. Rental properties are becoming very popular with investors and retirees, How do I know? With my side hustle working in a tax office I am seeing more and more returns with new or additional Schedule E forms (The 1040 tax form for real estate rental properties). Some are even producing six figures from this passive income producing investment and they are literally completely hands off.

Especially this year, as stock markets are still floating at almost all time highs and bonds are just plain sub par, I believe 2019 and the following years will be really helpful for investors who want to achieve their financial goals. And I am not the only one who believes so.

In a recent survey conducted, an astounding 97 percent of investors indicated that they plan to increase their allocation of funds to real estate in 2019 and beyond. As you may have seen in my previous article, many expect a recession soon and it may be beneficial for investors like yourself to start moving some of those funds currently sitting in stocks and bonds over to real estate which has historically generated higher rates of return with less risk.

So why is real estate the way to go?

Well we can use an example property I recently sent to some investors in my network. This example is based on a commercial mortgage rate of 5.5%, a down payment of 25%, the area average vacancy rate of 6.9% and the area average capitalization rate of 9.53%

Multi-Family 12 unit property in Melrose Park, IL

My Suggested Price: $884,029.03 (Based On Areas 9.53% Average Capitalization Rate)

Listing Price: $1020,000.00

Down Payment: $221,007.26 (Your Actual Investment)

Income: $132,480.00

Property Expenses: $40,245.00

Interest Expense: $36,466.20

Annual Net Profit: $37,787.39

Actual Return On Investment: 17.10%

So in this example you are putting down only $221,007.26 and consistently receiving profits of $37,787.39 per year, or 17.1% back on your original investment. Now of course some of those gains are going towards building equity in the $884,029.03 building, but those gains are not lost, and generally, if you are holding on to the property the value will rise. After if you get tired or want you scale up, you can sell the property with a hefty profit with years of monthly income in your pocket and use the funds as a down payment towards a much larger 4-5 million dollar building while avoiding taxes with this country's awesome capital gains laws. All this from an investment of only 221k.

Lastly these types of purchases do scale so if you don’t have 221k in liquidity your not out of the game, there are much smaller options like individual condos or even smaller 4,5 and 6 unit buildings as well, many may think this deal is too good to be true, but I see these opportunities all the time. You need someone who has an eye for the good ones when they come so please reach out or miss out.

Joshua Cherian

Real Estate Broker | EXP Realty

(630) 776-3741

[email protected]

joshuacherian.com

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