So I’ve been on this MAJOR thought process this month that it would be cool as hell to trade in one of my online websites for an actual PHYSICAL piece of real estate instead :) Like a small condo or studio or something. It’s a far cry from all my bitching and moaning about owning a home for sure, BUT – and here’s where the entrepreneur in me comes out, the idea that I could own a real-life piece of property to make passive income from forever and ever (and ever) just excites the Dickens out of me… I could be the next Donald Trump! ;)
Before you say anything, though, I KNOW there are a ton of downfalls with owning “investment properties” and it’s not as easy as everyone thinks. Things break all the time, you have to be a landlord, the initial investment takes forever to be recouped – I get all that. But I’ve also been talking to a lot of people who currently do this pretty successfully, as well as digging into a little research myself, and so far I haven’t heard anything that’s *that* different than what I already do with my websites now? In fact, both entities share some incredibly similar traits:
- They both bring home income. One is a ton more stable than the other (real estate – everyone needs a roof over their head, right?), but overall both entities can give you some sort of cash flow if done properly. And even more so as the yeas go by!
- They both require maintenance. The online stuff a lot less than the real estate side (at least in terms of money), but both still need to be watched carefully in order to keep all the wheels turning. One big oversight and the profit to be made can go kaput.
- They can both be sold at some point! There’s inherent value in both properties, but there’s a much HIGHER demand for real estate buyers and a pool of them to choose from than in the online world ;) 99% of people don’t even know you can make money with blogs to begin with!
But as much as seeing all these comparisons helps reassure me that I’m not too far off of current dealings, it also scares the living POOP out of me too. What do I know about owning a piece of residential real estate I don’t live in myself? What if there’s something else out there that’s huge and glaring that everyone’s afraid to talk about for some reason? Like a crazy housing monster or something? Haha…. okay, pretty lame joke but you get what I’m saying ;)
I’ve never in a million years considered doing something like this, what, with my disdain for all things home ownership, and now that I’m letting the idea creep to the top of my mind I’m just shocked there’s been nothing that’s made this a deal breaker for me yet. What am I missing? Have any of you tried this and failed (or succeeded!) miserably? What would you have wanted to known going in to it all for the first time?
The whole idea intrigues me to no end, though… and every time I read an article on how millionaires got to where they did, 50% of the time it had something to do with real estate. That can’t be coincidence, right? I mean, I don’t know *that* many people that do own more than one home in general, but those I do I’d consider more well off than those who don’t, that’s for sure. So I think there’s really something pretty telling there. No matter which way I end up going in the end.
Other Pros to Investment Properties
I’ve also made up a list of why else I want to own an investment property or two (or three? four? a whole complex??):
- It’s *different*. No matter how much I love blogging or building new sites/charities/etc, I’ll always need to be doing something new. And lately the idea of sitting in front of a computer for X more hours a day with something new doesn’t thoroughly excite me much ;) But being able to drive somewhere and SEE your property?? Woah…. that would be hot!
- I need to diversify! I can’t have all my income and time tied up in one insanely focused area, right? What if you get tired of reading BudgetsAreSexy? (*gasp*) Just like with investing in stocks and funds/etc – you need to have a healthy mix of diversification here too. I LOVE me the blogging game, don’t get me wrong, but at some point I need to spread my wings farther out and grow more into other areas as well.
- I need to expand my skill set. Even though managing online properties and residential real estate is pretty similar, it’s obviously fairly different too. By going down a new path I won’t only be diversifying my investment eggs a lot more, but I’ll also be picking up a totally new site of skills for my mental tool box – which is super important to me. I can’t stop learning!
- Interest rates AND property values are still down in the dumps. Which means even more opportunities to cash in and grab myself a nice little piece of property out there.
- You can write off a lot of the expenses. This one I didn’t know about until a neighbor told me yesterday, but apparently you can write off a lot of the money that goes into the upkeep: new fridges, plumber calls, new floors – whatever’s needed to maintain the home (though I should probably research this more just to be certain ;))
- There’s actual insurance for homes! If your house burns down, you’re at least covered for the bulk of everything. But with blogs and websites? Shoooot… if those guys get blown up or hacked or if the entire interwebs stop working God forbid, you can kiss your stuff goodbye… it’s scary :(
- Someone else would be paying off your mortgage!! I mean, how awesome is that?? Even if you don’t make ANY money off the monthly rent checks, you’d still be dwindling down your main mortgage and after 15-30 years depending on how you set it up you’d own it outright! And do you know what that means?? You’d have almost 100% pure cash flow coming in after that – crazy! (Minus any expenses and taxes and all that of course) Then you could sell it!
- You could hire a property manager to do all the work for you :) And the stress, rent collections, background checks, etc etc etc… You’d have to be okay with sharing a part of the income with them in exchange for this niceness, but it would be money well spent in my opinion for sure. This alone would nix most of my reservations about owning another home – I wouldn’t be on the hook 24/7! (Another pro to this? You’re not FORCED to live nearby anymore – which means it doesn’t hinder you from traveling or moving across the country/world anytime you wish)
- And lastly, I already have a down payment without touching any of my cash reserves…
That’s the second – and most important – piece to the puzzle here right now :) Remember that property I told you I sold during my baby break last week? Well, it netted me a good $20,000 which I could easily just turn around and dump right into a down payment on a small 1 bedroom condo or efficiency in the area. Or perhaps even farther out considering that can only buy you a door sometimes in our area! Haha…. dumb DC real estate…
I can’t go much further into the details for contractual reasons, but in a nut shell I’ll be getting that huge chunk of money there for selling the ownership rights of the site going forward, but will also be kept on as a consultant for a certain amount of time too – allowing me to still have some decent cash flow going forward. So pretty much a win-win for all parties involved. And again, helping me to improve my skill set! I can now say I sold a website! Woohoo! :)
But back to the idea of dumping the money back into a new condo here. You can see where my brain is going with all this right? In essence I’d be trading an online piece of real estate for a PHYSICAL piece of real estate!! And I don’t know many people that have done that, or at least expressed it in those terms :) On top of all the advantages I’ve already laid out, the story in itself would be pretty bad ass to tell over the years! And just adds that much more to the whole adventure.
So, after reading all my thoughts here about this sexy little exchange idea, what do you think? Smart? Dumb? Wondering why I even wasted your time today? Haha… I wanna hear it all! I need to know if I’m overlooking something pretty damn important here, or if I’ve pretty much covered the basics and now just need to grow a set of balls and pull the trigger ;) The fact that I’m so nervous just THINKING about all this right now is exciting! I feel like I’m living!
I don’t know when I’ll make a final decision really, but when I do you’ll be the first to know. It’s just good I haven’t rushed into anything like I did when we bought our first house after 48 hours of seeing it! How you go from looking around for 2 bedroom rentals to BUYING an entire home is beyond me… That old J. Money was straight up cray!
PS: If I don’t end up going through with this, where should I put the money instead? Against my current mortgages?
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!