“I don’t make deals for the money. I’ve got enough, much more than I’ll ever need. I do it to do it.” – Donald Trump
The true goal of every real estate investor should be to create massive, passive income as soon as possible. “Passive income” means money that comes to you month in/month out, without your having to do a thing to get it.
How can you accumulate massive, passive income quickly?
Well, if you went out and bought a couple dozen single-family houses and rented them out, you would create a decent income. Good, but not great.
It’s going to take you a little time to find all of those deals, and then you would have to manage all of those tenants.
But what if you had a couple dozen units in the same building? Then you would only have to find one deal to create a great passive income.
I know what you’re thinking: “Oh no, not apartments! I don’t want to deal with the tenant hassles!” And I agree with you. You shouldn’t be dealing with any tenants. Wouldn’t it be better if you could just sit back and collect checks while someone else handles the management headaches?
Those people are called “management companies,” and they make a living by shielding investors from the day-to-day maintenance of their properties. That way, people like us can go out and continue to do what we do best: Find more properties and create more cash flow.
This is a lesson I learned early on in my career, and it has made a huge difference in my life ever since. I stumbled on it almost by accident.
I noticed that the guys in my local real estate investment club who seemed to be doing the best owned apartment buildings. So, at one of our meetings, I pulled aside one of the most successful of these investors and I grilled him. I asked him how he could keep up with so many units. I’ll never forget his answer.
“Dave,” he said, “in this business, you can either be a landlord or an investor. A landlord deals with toilets, trash, and tenants. And he makes landlord money. An investor, on the other hand, is the head of his own company. He makes CEO money, and he deals with travel and Tahiti!”
I began to understand that if I was going to grow my business the way I wanted to, I’d have to give up landlording (gladly!) and learn how to find good management companies… so I could continue to build my business by finding more good properties to invest in.
You may be thinking, “Wait. Aren’t management companies expensive?” Management companies are paid a percentage of the gross collected rents, somewhere between six and 10 percent. But if you factor this cost into the deal from the get-go – and the property still cash flows – you’ve got yourself a winner.
Not only have you found a property that will get you one step closer to true personal freedom, you won’t have to come in contact with a single tenant.
“But,” you may ask, “don’t the management companies nickel and dime away all of your profits?” While it’s true that there are some bad management companies out there, you can find a good one if you follow a few simple steps.
Go to irem.org. That’s the website of the Institute for Real Estate Management, a great resource. Go to their search box and search for a Certified Property Manager (CPM).
CPMs are people who have taken time out of their busy schedules to take a series of courses to improve their management knowledge and skills. Upon completion of the required material, they take a comprehensive test. If they pass, they are awarded the CPM designation.
These managers are the cream of the crop – the ones you want to have managing your properties. They will do all the work for you, and send you a summary report each month to let you know how your property is performing.
The only thing left for you to do is cash your checks… while you’re out finding more properties for your portfolio![Ed. Note: David Lindahl began investing in multi-family properties with virtually no money and no credit nine years ago. Today, with over 3,000 rental units nationwide, he is known as the “Apartment King.”]