3 Ways To Tell If You Will Make Recession-Proof Passive Income..

So...you bought your first single family home,and you think you got it at a good price.  All the gurus say you make your money when you buy, not when you sell...and as far as you can tell, you bought at a good price, after evaluating all the factors you could think of.  Congratulations! 

Well, conceptually, you DO make your money when you buy, but that's only the first part of the story...Let's say you have done what many people are doing now, buying bank owned properties.  These can be a great deal, and let's face it, it's no picnic getting the banks to pay attention to you and your offers.  But for our purposes, you already went through that process.  Hopefully, during the due diligence period, you estimated the repairs.  BUT, 3 items stand in the way of making this a truly hands-off, income generating experience.  Let's look at them, in order... 

1. Rehab costs-Your contractor might have made the best effort they could in evaluating these costs, but rest assured, they have not dug into the walls yet to find the missing copper, wiring, dead animals, rotted wood, etc., that lies underneath.  Budget another 20-30% above the estimated cost for that effort. It will cut into your returns, before you even HAVE any returns. And the contractor needs cash now-none that I have met will settle for equity in the house!

2. Tenant placement-Now, THIS is fun stuff!  Marketing your property to prospective tenants, who think they can live anywhere, with any credit standing, and won't tell you about their impending (or existing) job loss, untrained dog, or deadbeat brother in law who will be crashing on the couch “just for a few days”, is no walk in the park for you, the untrained property owner.  Not to mention the missed appointments for showings, reluctance to let you pull their credit, proper lease agreements (who really reads those things?  Only after there is a problem, right?), and rent collection in a neighborhood you may or may not feel comfortable in when carrying money.  Thinking twice just yet? There's more...

3. Congratulations, you have finally rented your house to an apparently upstanding family, and you and your sweetie decide to take a much deserved weekend at the beach.  You're lying there, drink in hand, blue sky, green sea, and the one you love next to you...Ahhh, this is the life...

      And the phone rings.  You debate whether to let it go to voicemail, and you curse the cell company for even HAVING service on this remote beach.  But, you better pick it up...it's your tenant, and the toilet is clogged.  Before replying, “what the heck do you expect ME to do about it?”, you remember that you have a plumber who helped you out once on your own house, and you tell the tenant you'll get back to them quickly.  You jump up, get on your laptop, get the number of the plumber, and call.  He says, “It's Saturday evening here, pal, you want me to do WHAT?” And you say, “Just go over there, take care of it and send me the bill.” And what a bill it is...triple what you think it should cost... 

Now, what was it that we were saying about passive income from real estate? 

From your real estate investment.

But, there ARE ways to be careful, keep your costs down and still not deal with the hassles that can make your life miserable.  Read on in Part 2 for a tidy way to box up your investment, and make it behave like a mutual fund that returns in excess of 12%.  Every year.  Guaranteed. 

Look out for part 2- 

4 Items to Have In Place To Make Yourself a Recession-Proof Virtual Investor