How Much Did My First Rental Property Make in Year One?
Real Estate as Passive Income
When I bought my first rental property, it brought in $22,800 in passive income in the first year, which I was happy with.
It worked out very well for a first investment. But the trip was not a straight line from point A to point B. Even though there were some setbacks and wrong turns, it was all worth it in the end. In this post, I’ll talk about the steps I took to get ready to buy my first investment property and the decisions I made along the way.
Because of how the economy is right now, many of us wonder if real estate is still a good investment. Interest rates are high, and there are anxieties about the economy, the tech slowdown, rising energy costs, inflation, job security, etc. Is investing in real estate still a good idea?
The short answer is yes. We must, of course, do our due diligence and research. This is true in any climate but is more important in the current one. A three- to six-month emergency fund is always a good idea. This holds regardless of the state of the economy. Maintaining financial security and stability is critical, especially in today’s volatile economic situation.
That being said, real estate investing is still a terrific way to make a lot of money, which is why it is one of the most prevalent ways to make a fortune. Donald Bren, for example, is named “America’s richest real estate baron” by Forbes. He was also placed 112th on the list of the world’s wealthiest individuals. He started off as a carpenter’s helper in his father’s business and has since earned a net worth of more than $16.2 billion through real estate investing. Not bad at all.
My first attempt
Back to my first attempts to get into real estate investing, I was living in San Francisco, which at the time was and still is the most expensive real estate market in the country. I was easily outpriced, and it was just not viable for me to invest in that market; thus, it seemed my real estate ambitions were dashed.
One day, however, my coworker told me about a real estate agent friend of his who was buying rental homes outside of California, in particular, in Chicago. It was that conversation that gave me the idea. I decided I needed to look out of state if I wanted to get my feet wet in the real estate market.
What followed was a series of events that led to the purchase of my first rental property. This later became a template that I use when looking for real estate:
- I started looking online for suitable properties on Zillow / Redfin in the city/neighborhood I was interested in—in this case, it was Chicago.
- I contacted a local real estate agent.
- I flew to the city to look at a few properties that I fell in love with on Zillow and that were within my price range.
- I met with a loan officer to prequalify for a mortgage.
However, the property was sold to someone else because I had some negative marks on my credit history and could not qualify for the loan. My hopes were dashed again.
My second attempt
I went back to the drawing board and began working on boosting my credit history. It took another year to improve my credit score enough to qualify. Overall, the journey lasted two years, from beginning to end, with many ups and downs. Finally, I found another property. This time, it was in Chicago’s trendy Printer’s Row district. I fell in love with it immediately and made an offer. This time, I got the loan, and the rest, as they say, is history.
Conclusion
There are a few things I learned in the whole process:
- Find the right agent: - Find someone who is competent and knowledgeable about the local market - Someone you can trust who is on your team - This is just as crucial, if not more so, than choosing the perfect home
- Once you’ve done your research online, visit the property in person. - Some of the homes I fell in love with online did not live up to my expectations when I finally got to see them in person - It’s also essential to see the neighborhood and to talk to your real estate team in person
- Be flexible; things do not always go as planned. Be willing to change your strategy
- Be persistent. Don’t give up when you face an obstacle, which you will
Finally, have some fun! I put a copy of the keys on my vision board to remind me of the journey and motivate me as I go on. Since then, the property has generated more than $120,000 in passive income.
I’ve added two more rental homes in other cities to my portfolio and look forward to adding another. Investing in rental properties has been a very rewarding experience, both financially and for the lessons I’ve learned.
If you’ve enjoyed this article, subscribe to the moonlight metro for more like it.