The infamous 3 Ts: Tenants, Toilets, and Trash! Without a doubt, they are the biggest turnoff when most people consider investing in real estate.
Let's face it, nobody likes the idea of a late night phone call from a bad tenant complaining about a leaking toilet or busted pipe. I can tell you first hand that it certainly isn't what you want to experience on a Friday night. For many people, being a hands-on landlord just doesn't fit with their desired lifestyle. And while the benefits of owning rental properties are tremendous, that is certainly understandable.
Is there a way to generate substantial passive income using real estate without these late night phone calls and the headaches of dealing with less than desirable tenants?
What is truly amazing about real estate investing is there is absolutely no need to try and fit a square peg in a round hole. There are many different ways other than owning rental properties to generate significant passive income while still being secured by a hard asset. One of my favorite investment strategies that I have utilized extensively over the years is owner financing.
In this article we will look at the benefits of owner financing and see if this could be a good fit for your financial and lifestyle goals.
Substantial Passive Income:
A real estate secured note is generally going to produce a strong monthly payment to you that is vastly superior to more traditional investments like stocks or bonds. For retirees facing the "yield crisis," this high level of consistent income can be extremely attractive.
Secured by Tangible Asset:
It is hard to find many other assets that offer the tangible security of real estate. Having lived in Houston when Enron collapsed, I saw first-hand the devastation that can occur when stock holders are wiped out. It was absolutely catastrophic for many families as life savings vanished overnight. With a real estate note, if your borrower should default then you would foreclose on the property. Property laws in Texas are very strong, and generally strong throughout the United States, from a lender's perspective.
Other than collecting a check from the mailbox, with a real estate note there really isn't much management at all as long as the borrower is living up to their end of the agreement. You are free to travel, vacation, or do whatever you please without much responsibility from your side. Should the borrower fail to honor their obligation, you will most likely need to hire an attorney to begin the collection / foreclosure process.
Great for Properties That Don't Fit Your Rental Standards:
I spend a significant amount of my marketing investment on finding tremendous deals on Off-Market Properties. Often I come across extremely attractive deals on properties that I am not interested in keeping as a rental property. Perhaps the property is too old or needs too many repairs or simply the economics just don't justify the headaches. These properties are great candidates …