What is mailbox money? Well, simply put it means - passive income; money that I collect while sipping sweet tea on my front porch. Sure, it requires an initial investment, but with rental income, you collect a check monthly without having to actively work at a job to earn (i.e. active income).
My goal in accumulating rental property is to be able to retire and still have a steady income from my investment properties. I love real estate because it’s a tangible investment. Not only is it an appreciating asset over time, but I can earn a monthly income stream on top of the equity that is growing over the period of time I own the property. If you finance your investment properties, the mortgage interest is also tax deductible. There are many benefits to owning real estate. My savvy friend sent me this simplistic informative article about tax benefits. https://www.madfientist.com/tax-benefits-of-real-estate-investing/
Let’s use my house on Canterbury Street in East Austin as an example. I paid $175,000 for it in 2011 and the mortgage is around $1500 with taxes and insurance. I rent it for $2800. This is $1300 in “mailbox money” per month and last I checked the house is worth $700,000. Can you tell me a better investment? I’m getting paid each month and I have a serious chunk of equity. The property also has enough room to build a garage apartment in the rear. This will allow me to invest another $150,000 to build a secondary unit and collect another $2000-$2100 per month in additional cash flow.
I give you this example to show ways to maximize the value of your property. Can you add a second unit? Can you convert a portion of your house to a rental? Does buying a duplex or a multi-family property make sense? If the cash flow exceeds the monthly expenses you have instant “mailbox money”.
For so many people, investing in real estate is a scary venture; the initial time and money, the risk, the unknown. But I hope I can encourage you to think differently. Ask yourself, ‘what is it going to cost you to NOT invest real estate? Creating a flow of passive income may be what allows you to move on from a job you aren’t happy in, retire early, or simply stop stressing about the value of your 401K. Life is meant to be lived; whether it’s traveling the world or working less so you can spend more time with your family. Today’s investment, is tomorrow’s opportunity. A friend of mine used to tell me, “Leverage yourself while you are young”. He encouraged me to stretch myself early in life so that I can enjoy the rewards later in life.
If you have ever considered this type of investment, it may seem like too much work or too much money up front. Ask yourself, “what am I willing to sacrifice?” We live in a culture that encourages us to keep up with the Joneses; new cars, new TVs, new clothes, new technology. Sit down and analyze your monthly expenses and your monthly investments. Is there room to spend less and invest more? Real wealth is defined by the length of time you can live off your assets if you lost your job tomorrow. Life’s too short. Do something now, even if it’s buying a cheap property on outskirts of town. I hear so many people saying there are no more good deals. It’s just not true. You don’t have to buy in central Austin. People always need a clean place to live and it’s fun to provide others with a home. Find something solid in an area that makes sense and watch what happens. Invest in your future now and when the time comes, you can join me on the front porch, share some iced tea, and wait for the mail (wo)man to arrive!
- Inside my current project, my garage apartment right behind my home. The views of the city will be spectacular. Can’t wait to show you the finished product! See the progress and follow along as it’s being built in my Instagram highlights.