{"id":10804,"date":"2024-02-14T20:01:31","date_gmt":"2024-02-14T20:01:31","guid":{"rendered":"https:\/\/imsfund.com\/?p=10804"},"modified":"2024-02-14T20:01:31","modified_gmt":"2024-02-14T20:01:31","slug":"after-several-years-of-investing-these-are-my-fundamentals-for-generating-passive-income","status":"publish","type":"post","link":"https:\/\/imsfund.com\/index.php\/2024\/02\/14\/after-several-years-of-investing-these-are-my-fundamentals-for-generating-passive-income\/","title":{"rendered":"After Several Years of Investing, These Are My Fundamentals for Generating Passive Income"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div :class=\"{ 'hidden': $store.proContent.showFullPrompt() }\">\n<section class=\"px-4 relative border border-slate-200 mobile-toc lg:hidden\" x-data=\"{open:false}\">\n<button x-on:click=\"open = !open\" class=\"flex items-center gap-4 my-2 border-none w-full\"><br \/>\n<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-6 w-6\" fill=\"none\" viewbox=\"0 0 24 24\" stroke=\"currentColor\" stroke-width=\"2\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" d=\"M4 8h16M4 16h16\"\/><\/svg><\/p>\n<p class=\"font-semibold text-slate-800 text-base m-0 js-toc-ignore\">In this article<\/p>\n<p><\/button><\/p>\n<\/section>\n<p><span data-preserver-spaces=\"true\">I often hear new investors ask: \u201cWhat types of properties are the best? \u201cWhat should I look for when evaluating rental properties?\u201d\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">They are starting at the wrong point. As with any major venture, real estate investing starts with clarifying your goal. And every investment decision you make must align with your goals.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">For most investors, the goal is\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/your-idea-of-financial-freedom-is-different-than-mine\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">financial freedom<\/span><\/a><span data-preserver-spaces=\"true\">. However, financial freedom is more than just replacing your existing income. It\u2019s about maintaining your current lifestyle for as long as you live. To achieve this, you need\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/passive-real-estate-investing\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">passive income<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0that meets three requirements:<\/span><\/p>\n<ol>\n<li><strong><span data-preserver-spaces=\"true\">Rents must outpace inflation:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0If rents do not outpace inflation, you cannot achieve financial freedom because inflation continuously erodes purchasing power. The major driver for rents and prices is population growth.<\/span><\/li>\n<li><strong><span data-preserver-spaces=\"true\">Income persistence:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0Financial freedom requires that your income lasts throughout your life. Your financial future is tied to the long-term economic growth of the city where you invest.<\/span><\/li>\n<li><strong><span data-preserver-spaces=\"true\">Income reliability: <\/span><\/strong><span data-preserver-spaces=\"true\">The rental income must continue, even in bad economic times. The reliability of your income hinges on your tenants remaining employed, even during economic downturns.<\/span><\/li>\n<\/ol>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Process<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Property selection is a three-step process, as illustrated here, starting with the investment location or city.<\/span><\/p>\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">1. Location\/city<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">The first and most important investment decision is the city where you invest. The city determines all long-term aspects of your rental income, including the ones listed in the graphic.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Primary selection criteria:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Significant and sustained population growth<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">A metro population &gt; 1 million<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">Low operating costs<\/span><\/li>\n<\/ul>\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">2. Tenant segment<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">In order to have a reliable income, your property must be continuously occupied by a\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/the-secret-to-reliable-rental-income-is-good-tenants\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">reliable tenant<\/span><\/a><span data-preserver-spaces=\"true\">. A reliable tenant is someone who stays for many years, always pays the rent on time, and takes good care of the property. Reliable tenants are the exception, not the norm.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Also, you will need multiple reliable tenants over the years you hold the property. The best way to accomplish this is to select a tenant segment with a high concentration of reliable people. You can find this segment through property manager interviews. Once you identify a segment with a high concentration of reliable people, determine what and where they are currently renting.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Based on these properties, you can create what I call a property profile. A property profile has at least four elements:<\/span><\/p>\n<ol>\n<li><strong><span data-preserver-spaces=\"true\">Location:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The location(s) where a significant percentage(s) of the target segment are renting today.<\/span><\/li>\n<li><strong><span data-preserver-spaces=\"true\">Property type: <\/span><\/strong><span data-preserver-spaces=\"true\">The type of properties they rent today. Condo, high rise, multifamily, single family\u2014the type does not matter. Only a reliable tenant matters.<\/span><\/li>\n<li><strong><span data-preserver-spaces=\"true\">Rent range:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0What the segment is willing and able to pay.<\/span><\/li>\n<li><strong><span data-preserver-spaces=\"true\">Configuration: <\/span><\/strong><span data-preserver-spaces=\"true\">Two bedrooms, three-car garage, large backyard, single-story, two stories?<\/span><\/li>\n<\/ol>\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Property selection<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">You can give your property profile to any real estate agent, and they can find conforming properties. However, property selection involves more than matching the target tenant segment\u2019s housing requirements. The property must also:<\/span><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Meet your initial\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-roi-in-real-estate\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">ROI<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0and\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/rental-property-cash-flow-analysis\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cash flow<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0requirements.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The price must be within your budget.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The time to rent must be low.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The renovation cost and risk must be acceptable.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">The property should have low maintenance.<\/span><\/li>\n<\/ul>\n<p><span data-preserver-spaces=\"true\">A good property manager can provide an accurate rent estimate and time to rent for the property, and an investment real estate agent can provide the rest of the information needed.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">There\u2019s much more to selecting (and bringing to market) good investment properties. However, these criteria should give you a good idea of the fundamentals.<\/span><\/p>\n<div class=\"justify-center \" x-data=\"{ IabAdad_block_: popAd(['r720x90'], '1') }\" :class=\"IabAdad_block_.linkURL ? 'flex pt-8' : 'hidden'\">\n<a x-show=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.linkURL\" x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/after-years-of-investing-these-are-my-fundamentals-for-passive-income', IabAdad_block_.sponsor, IabAdad_block_.title, IabAdad_block_.id, 'blockAdClicked', 'blockAd', 'postContent')\" target=\"_blank\" x-init=\"&#10;      analytics.track('blockAdLoaded', {&#10;        referrer: 'https:\/\/www.biggerpockets.com\/blog\/after-years-of-investing-these-are-my-fundamentals-for-passive-income',&#10;        sponsor: IabAdad_block_.sponsor,&#10;        ad_title: IabAdad_block_.title,&#10;        ad_page_location: 'postContent'&#10;      })&#10;    \" x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/after-years-of-investing-these-are-my-fundamentals-for-passive-income', IabAdad_block_.sponsor, IabAdad_block_.title, IabAdad_block_.id, 'blockAdViewed', 'blockAd', 'postContent')\" rel=\"noopener\"><\/p>\n<div class=\" hidden sm:block\">\n<img class=\"m-0\" :src=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.r720x90\" :alt=\"IabAdad_block_.r720x90Alt\"\/>\n<\/div>\n<div class=\"block sm:hidden\">\n<img class=\"m-0\" :src=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.r320x50\" :alt=\"IabAdad_block_.r320x50Alt\"\/>\n<\/div>\n<p><\/a>\n<\/div>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">I outlined the process for achieving financial freedom through real estate investing. If you follow this process, your odds of achieving financial freedom are excellent. If you have questions, feel free to ask in the comments below.<\/span><\/p>\n<div id=\"visibility-group-block_64dd561cede13\" class=\"visibility-group  hidden\">\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n<div class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n<div class=\"relative z-30 lg:w-1\/2 \">\n<main class=\"py-4\"><\/p>\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Find an Agent in Minutes<\/p>\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:18px\">Match with an investor-friendly agent who can help you find, analyze, and close your next deal.<\/p>\n<p><\/main>\n<\/div>\n<div class=\"lg:w-1\/2 first:mt-0 relative h-full lg:flex lg:items-center\">\n<img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Agent-Finder-Block-2.png\" alt=\"find an investment-friendly real estate agent\" title=\"After Several Years of Investing, These Are My Fundamentals for Generating Passive Income 2\"\/>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"wp-block-group is-layout-constrained wp-block-group-is-layout-constrained\">\n<div class=\"wp-block-group__inner-container\">\n<div class=\"wp-block-group__inner-container\">\n<div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n<div class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n<div class=\"relative z-30 w-full \">\n<main class=\"py-4\"><\/p>\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n<p><\/main>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p class=\"italic\"><b>Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n<\/div>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.biggerpockets.com\/blog\/after-years-of-investing-these-are-my-fundamentals-for-passive-income\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this article I often hear new investors ask: \u201cWhat types of properties are the best? \u201cWhat should I look for when evaluating rental properties?\u201d\u00a0 They are starting at the wrong point. As with any major venture, real estate investing starts with clarifying your goal. And every investment decision you make must align with your [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":10805,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"fifu_image_url":"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/investing-principles-1-1024x517.jpg","fifu_image_alt":"","footnotes":""},"categories":[9],"tags":[],"class_list":["post-10804","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/10804","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/comments?post=10804"}],"version-history":[{"count":1,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/10804\/revisions"}],"predecessor-version":[{"id":10806,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/10804\/revisions\/10806"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media\/10805"}],"wp:attachment":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media?parent=10804"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/categories?post=10804"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/tags?post=10804"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}