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This 32-year-old grosses $431,000 a year from real estate investments—how he earns passive rental income

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Real estate is a good investment. This is something I tell everyone. It can seem daunting to get started.

My eight-year experience as a realty investor has taught me that it is important to start small. My goal was to invest a small amount of money in addition to my engineering salary, and I had one or two rental properties.

Today I am the owner of 61 rental properties that generated $431,000 last year in rental income. Roofstock Academy also has me as a coach in real estate. The van I use is a conversion that my wife, and I own. Our California duplex is our home when we’re not travelling across the U.S. on our van.

Michael Albaum, his flexible streams and income allow him to travel with his wife in their converted van for part of each year.

Photo: Michael Albaum

In passive income, my real estate portfolio generates about $6,000 per months after I pay my mortgages and property taxes.

The money I have been saving has allowed me to live on my coaching income and invest it in a project that will convert eight units into 17 more.

How I bought my first property in real estate

After graduating college in 2013, I was a firefighter engineer. My annual salary was $73,000.

My goal was to save money for investment properties. I lived very low. For $800 per monthly, I rented an apartment that was shared with two roommates. Essential expenses such as my car and rent were covered by my employer. I can save more each month on my cell phone and mobile bill

2014. I bought a single-family property in Southern California for $295,000 using $40,000 of cash I had saved. For the remainder of my purchase, I used $40,000 I had saved in cash and borrowed $20,000 from family members.

It was vacant for 2 months until I decided to rent it. However, it did not need renovations. I was able to make monthly payments for the loan and cover the operating expenses associated with managing the house by renting the apartment from my tenant at $1,810 per mo.

My real estate portfolio is growing

Three houses had been my property by 2016. My second house was purchased with traditional bank loans. The third I purchased from my family members at a fixed rate of 4% for a 30-year period.

That year, my total gross rental income was $51,404. Although most of the money I earned went toward property maintenance, mortgage costs and management, I also took home $1,800 per monthly.

2017 was a year that I increased my savings in order to buy more real estate. I found a cheaper place to live with my roommates and I invested the savings and the income I made from real estate in the stock market as well as my investments accounts.

When I learned about how much further each dollar could go in opportune markets — where cash flow was high and buying prices were low — I started looking outside of California. I purchased the best multi-unit property deals I could in the Midwest (mainly Ohio, Kentucky) and then fixed them up.

Because I was unable to do it from far away, I developed relationships with local agents and property managers so that I would have someone on the ground to help me find the right properties and care for my tenants.

My fees average 7% on my property’s gross rent, but they can go up to 20% if I am working with family-run management companies.

How to get started in real estate investing

I feel very lucky that I get to work a normal 9-to-5 job as a coach from my van and explore new parts of the country — while also earning passive income through my real estate investments.

Albaum, who works 9-5 as a coach for real estate transactions, is managing an ongoing redevelopment project.

Photo: Michael Albaum

I believe that if you save up enough money and look in the right places, you can get a leg up by investing in real estate — even in an era of sky-high home prices.

Here is my greatest advice:

1. Begin small by implementing a thoughtful strategy 

My investment strategy is “BRRRRR”. Buy, Rehab, Rent, Rent, Refinance and Repeat.

In markets that rent out units for more than the monthly mortgage payment, I purchase homes. To cover their cost, I repair them and then let them go to tenants to make them profitable.

For the best strategy for you, it is worth learning about the basics. You have many options, including podcasts, which I also use. The Remote Real Estate Investor) to online courses.

Forums like these allow you to reach other investors. BiggerPocketsTo learn more about their methods, visit the BRRRR site.

People often wonder how their investment returns should be calculated. My advice is to compare real estate’s total return with the potential returns from other investment options.

Select a number you feel comfortable with. Don’t be influenced by anyone.

2. My method is designed to make it as easy as possible for you.

When it feels effortless, I will buy something. I also know I can outsource the work of managing the property to someone who is competent.

Even though it means less profit upfront, I can simplify my life by using the majority my real estate portfolio to generate passive income. After you’ve completed all the necessary work to purchase the home and make it your own, the reward is yours for life.

My main objective in real estate is to be financially independent at 100%, which means that I can pay all of my expenses, including future costs, without having to work.

3. A complete remodel is not necessary to increase your property’s worth.

You have two options to increase the property’s value: Maximize profits or maximize returns, or reduce expenses.

To date, my portfolio has been renovated for approximately $2.5million. And I tried to spend every penny. A few simple upgrades, such as stainless steel appliances and laundry rooms to properties that are already rented can increase a property’s rental value.

Buy in the right markets or in areas where houses are likely to increase in value. Making small changes to properties that have already been adjusted can help to boost their long-term worth.

4. Get in touch with local professionals when it comes to property.

Local mom-and pop property management firms are my main focus in any market I invest in.

It allowed me to develop a portfolio while I lived in California. This allows me the opportunity to both travel and generate income with my properties. My agent can let me view houses via FaceTime and I can rely on trusted contractors for any renovations. It is up to my property manager who will source trustworthy tenants.

Online platforms like All Property ManagementTo connect with local experts, seek out recommendations from your network and peers.

Michael AlbaumIs a head coach and real estate investor. Roofstock Academy. Follow him on Twitter @MichaelAlbaum.

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