05 May Passive Income – Are You Planning?
Episode 40: Welcome to the She Builds Show, I’m your host, Stefanie Olson. Today, I want to talk to you about passive income. When I was younger and running flip jobs, my main goal was just to make money, save it, and be able to get away from using private money and be able to use my own money to flip the house. I didn’t think about keeping any of the homes, I was remodeling, I just wanted to make sure the bottom line worked and I was able to get away with a profit. As the market changed and I got into building, I really had the same goal, buy the land, build it, and sale the house. I never had a regular job or a 401k from my employer, so quite a few years ago, I did start a self-directed 401K where I could use the funds for investments I chose. I’ve never been a big fan of the Star Market annuities or any other standard ways the world views you should invest. And my dad kind of taught me early on to think outside of the box. And so now that I’m getting older and closer to 40, I’m really feeling the sense that I need to prepare for retirement. So my goals have changed, they’ve shifted. My mindset has moved, I want to gather as much passive income as possible. This is what I’m doing now…
• My husband is quite a few years older than me, and I know he will want to retire within the next eight to 10 years. He would tell you the next five years, but let’s be realistic, and I feel the burden of that and the responsibility to prepare. We both worked extremely hard, and I don’t want to have to work this hard forever, and neither does he. So my goals have changed, they’ve shifted. My mindset has moved, I want to gather as much passive income as possible, if you don’t know what passive income is, it’s an investment that brings in monthly cash flow without having to directly work for it. So regular income is exchanging your time or services for money. Passive income examples are rentals, Airbnb syndication, multi-family investments, even RV parks, anything that brings in monthly cash flow without it being directly related to your time or services. (01:36)
• So the first thing I did was write this little goal on sticky notes and place them all over my house, 40 at $1500, 40 at $1500, 40 at $1500. I wanted this goal to be something both my husband and I could tackle together, and let it be something that we could constantly have at the forefront of our minds. So the next thing I did, because I was serious about this, was hire a wealth coach… Yes, that’s a real thing. I wanted someone to slap me in the face on a weekly basis and keep me accountable to the goal and how we were going to get there. I wanted someone to poke holes in my plan, make me stay the course and keep me focused on what I set out to do… And accountability is a game changer, I’m the type of person that hates to let anyone down, if someone has assigned to me a task and is going to be there waiting for me to get it done, I’m much more likely to put that at the top of the priority list and ensure it gets done. So the next step consists of looking at deals constantly, that much passive income doesn’t come from sitting around and not thinking about ways to invest. (03:06)
• So here’s what I’ve done so far. I decided to build a house, an ADU and keep it and Airbnb it… I’ve never owned an Airbnb before, I don’t know a ton about it, but I’m willing to work, I’m willing to try, and I’m willing to do what it takes to get us to our goal with all my investments. It’s important to me to not drain my capital, also known as cash in my business. So what I did was pay cash for the build like I normally do for any spec build, but then I sold it to myself for my business with a note payable to my business, and then I’m getting a personal conventional loan on the property, and we’ll refinance the property and pay off a loan in my business. Now, this allows me to not have to come up with any money down or to take cash out of my business, so that’s just a creative way for me to be able to be increasing cash flow without draining the cash that I actually have. So then I will Airbnb it and make passive income on the investment without any money out of my pocket. (04:18)
• The other thing I have not really done a whole lot in my career is use conventional financing, I have a lot of private money lenders that I pay interest-only loans on, but honestly, the conventional lender world scares me and overwhelms me, the amount of paperwork and documents and explanations that you have to reveal to a lender is mind-boggling. So I set out to find something different, I found a lender who is a private lending company that is basically a huge group of investors that lends on fix and flips, rentals and new construction based upon your credit score, the cash flow and the deals and your experience. No crazy paperwork, no outrageous interest rates like that from the private money lenders, plus there’s no limit on how many loans you have with them when you’re trying to acquire investment properties with conventional financing. They have a cap of 10 investments with Fannie Mae and Freddie Mac, the government regulates how many investment loans they will give you, and so finding an alternative ways to get loans was kind of a must. Now, the purpose of me sharing this with you is that I want you to start thinking outside the box, I want your retirement in the life and lifestyle you want to be something you plan for and communicate about. (05:23)
WAYS TO CONNECT WITH STEFANIE…