How to Earn Cashflow from Property You Don’t Own

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Yes you heard me correctly! You can indeed build a property portfolio and become financially free without actually owning a property. What’s more, I’m not talking about investing overseas or an area that plagued with social problems. I’m talking about your own town or city or in a worst case scenario a maximum of a 45 minute drive from where you currently reside. So do I have your attention? Great, then let’s begin…

Before I begin, let me ask you a question. What monthly income would you need in order to stop working completely? Most people tell me that it would be around $4800 per month, which is around the average family take home pay. My next question is, how badly do you want it? For me, I had a burning desire to become financially free. It was an obsession. I wanted time to do the things I enjoy doing. Time is precious. It’s finite. You cannot save up time and use it later because once it’s gone, it’s gone forever.

So write down a few reasons why you want to be financially free. You see, the why is always more important than the how. I will tell you exactly how to do this very shortly, but unless you really want to do it, unless you have a compelling “why”, then it is very likely you will take no action whatsoever.

OK, so now that you have a compelling reason why you want to be financially free, you are probably still wondering how on earth you can build a property portfolio for less than $56000. And I’ll be honest with you, I really struggled with this as well when I first started out.  In one of the early refurbishment projects that I did, I tied up over $32000 in one property and had to wait over 6 months before I could remortgage and get some of my initial deposit back. Unfortunately, since the credit crunch lenders require hefty deposits on buy-to-let mortgages, usually of 25{04e39f6ffdf8be9b896c03abc6059c9e26fe004b726500641c0dcf891fbd3902} or more. What’s more, you cannot remortgage for 6 months meaning that your funds quickly become tied up, making it nearly impossible to grow your portfolio in a short space of time.

So what’s the alternative I hear you ask? Well, would you agree with me that ultimately, what we are trying to achieve is cashflow from the property, without having to pay the hefty 25{04e39f6ffdf8be9b896c03abc6059c9e26fe004b726500641c0dcf891fbd3902} deposits? So how do we buy the property without the 25{04e39f6ffdf8be9b896c03abc6059c9e26fe004b726500641c0dcf891fbd3902} deposit? Simple, we don’t! Instead, what we do is find a struggling landlord and offer to take the property off them as a corporate let. What this means is that we will guarantee the landlord a fixed rental for the property over a long period. We act as a management company and ensure that the property will be maintained to a satisfactory standard. We also usually pay for the property to have a light refurbishment, in order to bring it up to standard. This normally costs us on average $5600.

So why would this be appealing to them? Well, there are many reasons why a landlord may be struggling, which can include:

  • Being an accidental landlord. They may have bought the property at the peak of the market and are now in negative equity, meaning that they are unable to sell the property without making a loss.
  • They may have relocated to another part of the country, or even abroad, and are struggling to manage the property adequately.
  • They may be too old to manage the property effectively and just want an easy retirement.
  • They may just be tired of dealing with tenants and want a “hassle-free” life.

Therefore, the appeal of having a guaranteed long-term rent plus having the property fully managed for them often very appealing. We normally pay around $320 per month for every double bedroom in a property. What we stipulate with the landlord, however, is that they consent to us renting out the property on a room-by-room basis. The reason we do this, is that the yields are far higher doing it this way. We normally rent each double room for around $640 per month and overall look to make $800 per month cashflow from the property. So therefore, if you were to do this 10 times, it would cost you $56000 and give you $8000 per month cashflow, which is more than enough for most people to become financially free. So what are you waiting for!

Author Bio: Francis Dolley runs a rent to rent course in the UK teaching students how they can successfully build a portfolio of properties that they don’t own, yet generate substantial profits each and every month.