Can you earn property investment residual income when you own just one rental apartment space? Rob Rowsell, an expert multifamily investor, has the answers – so listen up!
Property Investment Residual Income: When Can I Start Earning Mailbox Money?
A caller on Rob’s monthly Inner Circle Zoom posed an intriguing question about property investment residual income. Would it be possible for a property investor to generate passive residual income from just one apartment building?
Also, legally speaking, syndications require a large amount of specific forms. What about this caller’s hypothetical situation?
Rob clarified with the caller that she did not intend on partnering with a general property manager on the deal. She did, in fact, hope to generate “mailbox money” from a single investment property.
First off, Rob advised to thoroughly vet the potential partners in the property deal. When you are investing a large sum of money up front, you want to know that your constituents are just as serious as you are.
Run a background check on the Key Principal signing off on the loan. The book Hands Off Investor has a lot of great tips. Above all, ask every question you can think of about the terms of the loan!
Finally, Rob explained the difference between a syndication and joint venture, based on the caller’s follow up. The IRS has very strict rules about joint ventures, which prevent them generating passive residual income. Therefore, the caller would need to stick with a syndication real estate deal to achieve her goal.
Join Our Multifamily Investing Community Today
Do you own your own multifamily rental properties? If not, do you plan to do so one day? Then you should consider joining our online financial group, the ATL Inner Circle Community! Each month, investing pro Rob Rowsell will teach you what you must do in order to build wealth in the real estate business. It’s not quite as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate, so having a successful guide in your corner like Rob is a must! Sign up today!
What you don’t know about your own Retirement Plan might just shock you! Most American workers invest in a traditional 401k Wealth Bucket Model. However, that just may not be right for you, the savvy property investor. Think about it. What if your bucket of money runs out before your retirement years end? When you rely solely on that bucket of money, the ensuing expenses can drain it over time. Those funds could dry up before you pass away, and then you may have to go back to work. Definitely not what anyone wants in their twilight years. Read on for further explanation and a much better way for you to save for retirement!
The Wealth Bucket Model Retirement Plan is Broken.
Just like Steven Covey’s book The Seven Habits of Highly Effective People outlines, we will begin this essay with the end in mind. Although small details will vary between us, we all want the same thing out of life. We want our freedom! More specifically, we want the time to do all the things that will fulfill us. Hopefully, we can make that time before we are too old to actually enjoy them to the fullest.
Rob outlines the means to this system as your Wealth Operating System, also known as your CORE Fund. This fund will form the base of your financial freedom. Eventually, your CORE Fund should start to generate Horizontal Income, totaling 1.3-1.5 times the amount of your Vitality Number.
This is how multifamily home investor Rob Rowsell encourages the members of his financial community to approach their retirement planning. However, almost every American will foolishly lean on a Wealth Bucket Model. We will explain that model next.
What Is The Wealth Bucket Model, And Why Should We Not Use It Exclusively?
What is the big picture that we want to paint about the Wealth Bucket Model? Most of us American citizens will contribute regularly to a 401k retirement fund throughout their career. There is absolutely nothing wrong when you use a 401k fund as a nest egg. However, when we rely on it exclusively, then we run the risk of running out of money before we are ready. We may have to go back to work in order to pay our bills. Rob outlines more below on the biggest expenses that are holes in the wealth bucket model.
Ignorance Is The Number One Leak In The Wealth Bucket Model
When we move on from our businesses, most of us will inevitably want to try new endeavors. We often make the mistake of thinking that our new ventures will come just as naturally as our pre-retirement ones. Many a successful investor has fallen prey to this trap. If you insist on investing funds in a new business or property, then you have to do your homework! Make sure that you partner up with some trusted experts in those fields.
Taxes – How Tax Drag Drains Your Wealth Bucket Model
When you reduce your personal Tax Drag, it can create a huge income stream! Rob preaches this point again and again to our community, and with good reason. Does your CPA recommend ways that you can legally reduce your tax burden? Well then, do it! Then, you can invest the difference in assets in accounts which will return compound interest.
Find Out What Your Vitality Number Is
Your Vitality Number refers to the annual cost of living which you want to live within. You should always live within your values, and not within your vanity! This is the biggest number that you can possibly get wrong! You want that trip around the world that your favorite billionaire influencer took on Youtube so badly. Geat real! You are not at their level yet. Unless you wait until you absolutely are, then you will blow your Vitality Number right out of the water.
Avoid Fee Drag By Consulting With Wise Financial Advisors
The task of employing wise advisors is mission critical. However, you need to keep a close eye on what they are charging you. You should also keep evaluating it annually. At some point, the value may not be there anymore from their side. Maybe they are not working as hard as they did in the past in order to achieve the results you need. It is so important to shop around, so you can avoid suffering Fee Drag from these providers.
Inflation – The Silent Killer of Your Wealth Bucket Model Investments
You do not need a wealth expert’s advice in order to know that inflation is bad. In fact, it can be a real wealth killer! Keep this in mind as you are calculating your personal Vitality Number. Create a written or printed report of your own Personal P and L. Then, you must examine it in order to find out what that number is. When you stick to that number, then you can never go wrong.
Join Our Community
Do you own multi-family properties? If not, do you aspire to do so one day? Then you should consider joining our online discussion group, the ATL Inner Circle Community! Each month, Rob Rowsell will teach you what you must do in order to build wealth in the real estate business. It’s not as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate, so having a successful guide in your corner like Rob is a must! Sign up today!
Do you want to win at wealth, but find all of that financial lingo confusing? Then you should learn the glossary of money words from wealthy real estate investor Rob Rowsell. Sit under Rob’s learning tree! Find out how to make smart investments with your money by applying these financial terms and formulas.
Financial Terms You Should Know For Wealth Wins
Rob jumps right in by explaining a few key financial terms every investor should know. Then, he outlines his wealth glossary. The definitions, as well as a few useful formulas, are outlined below.
Your Net Worth Defined
When we simply put it on paper, your Net Worth is the sum of all the things you own, minus everything you owe. What is the net worth formula, then? Your assets minus your liabilities equal your net worth.
Income: Active And Passive Categories
Rob groups Income into just two main categories: Active Income and Passive Income. He defines each of them as follows:
Some property investment experts refer to this income category as Horizontal Income. Passive Residual Income could possibly refer to your dividends earned from investments, the rent paid from your properties’ tenants, or royalties you have earned from your own Intellectual Property. Regardless of where the money came from, this can be an outstanding income source. Everyone should seek it out, since it is literally mailbox money that arrives regularly in your bank account.
Financial Terms Continued: Vitality Factor
Rob then fills us in on a financial formula he calls the Vitality Factor. This calculation is hugely important to know if you really want to understand the nuances of the financial world. A specific formula must be used in order to arrive at your Vitality Factor. You must add your own Personal Expenses to your Deductible Business Expenses. These factors will add up together to produce your TRUE Cost of Living, before you subtract your taxes and your charity contributions.
An example of deductible business expenses Rob has written off in the past is auto repair. Years ago, when Rob owned several independent auto repair shop locations, he could write off his own automotive repair expenses. That is to say, if he had to get his oil changed or install new tires, it counted as a write-off when one of his shops performed the task. However, he sold all of the automotive shop businesses, so those expenses are solely personal ones. He can no longer write off those expenses.
How Do You Calculate The Horizontal Income Score?
We talked about the concept Passive Residual Income earlier, which is also called Horizontal Income. The Horizontal Income Score is a formula that we use to best measure your ability over time to convert your Net Worth to your ultimate goal, Horizontal Income. When you divide your Horizontal Income amount by your Net Worth, then you will arrive on your Horizontal Income Score.
Do you want an example? Here it goes. Let’s say that you currently have a Horizontal Income that adds up to exactly $100,000. Your Net Worth, on the other hand, is an even $1 Million. When you divide those numbers, you will then arrive at a score of 10. That is a great score. In fact, it is twice the average score! The higher the number the Horizontal Income Score totals up to, the better. Remember this: if you do your homework and you exercise your advantages, then you will reach your ultimate retirement scenario, which is Passive Residual Income.
What Is The Nest Egg Theory? Financial Terms Part 1 Concluded
Rob talks about the Nest Egg Theory a lot in his videos. This financial approach powers the most common retirement plan that people subscribe to. This defines freedom as a number, specifically a big bag of money that we are filling up via our 401k’s and other conventional retirement plans. Rob reminds us that there is a very real fear hiding behind this theory. What if we live long enough that the money will run out, and then we will have to return to the work force and earn w2 Active Income in our old age. This is why we should work over time in order to invest our Active Income gains into sources that will generate passive mailbox money in our twilight years.
Join Our Financial Discussion Community
Do you own multi-family rental properties? If not, do you aspire to do so one day? Then you should definitely consider joining our online discussion group, the ATL Inner Circle Community! Each month, Rob Rowsell will teach you what you must do in order to build wealth in the real estate business. It is not as easy as it looks! Property taxes, liens, and legal fees can all be hard to navigate. A successful guide in your corner like Rob is a must have! Sign up today!
