This 32-year-old makes $431,000 a year investing in real estate — which is how he earns passive rental income

I always tell people that real estate has the potential to be a great investment. But getting started can be daunting.

As a real estate investor for eight years, I’ve found that the key is to take small steps. When I first started investing at the age of 23, I set a modest goal of making a little extra money on top of my engineering salary by renting a property or two.

Today I own 61 rental units that generated $431,000 in rental income last year. I am also a real estate coach at the Roofstock Academy. I mostly work out of a converted van that my wife and I live in. When we’re not touring the US in our van, we stay in our California duplex home.

Thanks to his flexible income streams, Michael Albaum and his wife spend part of the year living in their converted van and traveling around the US.

Photo: Michael Albaum

After paying my mortgage, property taxes, property management and maintenance fees, I make about $6,000 a month in passive income from my real estate portfolio.

Since 2019, I’ve been investing that money into a redevelopment project that converts eight units into 17, and I’m living on my full-time coaching salary.

How I bought my first property

In 2013, right out of college, I was working as a fire protection engineer, making $73,000 a year.

Saving for an investment property was a goal of mine, so I was living well below my means. I was paying $800 a month to rent an apartment with roommates. My employer covered essential expenses like my car and cell phone bills, which allows me to save even more every month.

In 2014, I used $40,000 that I had saved in cash and sold $20,000 worth of stock for my first real estate purchase: a $295,000 single family home in Southern California. I also took out a loan from a family member to cover the remaining costs, so I didn’t have to take out a loan from the bank.

The house was empty for two months before I rented it out, but it didn’t need any renovation. The monthly rent of $1,810 from my tenant allowed me to pay the monthly loan payments on the house and the running costs of administration.

Expansion of my real estate portfolio

Until 2016 I was the owner of three houses. I financed my second purchase with a traditional bank loan and the third with a $250,000 loan from a family member at a 30-year interest rate of 4%.

I’ve made $51,404 in gross rental income from all three properties this year, and while most of the money has been used to cover mortgage, maintenance, and property management expenses, I’ve also been able to take home about $1,800 a month.

In 2017 I decided to top up my savings to purchase additional properties. I found an even cheaper apartment to share with roommates and put those savings, plus the money I made from real estate, into the stock market and my investment accounts.

When I learned how much further each dollar could go in cheap markets — where cash flow was high and purchase prices were low — I began looking outside of California. I bought and repaired the cheapest apartment buildings I could find in the Midwest, mostly in Ohio and Kentucky.

To do this remotely I developed relationships with agents and property management professionals in these markets so I knew I would have a team on site to identify the best properties and take care of my tenants.

I work with small, family-owned management businesses whose fees average 7% of my gross rent per property but can reach as high as 20%.

How to start your own real estate investment journey

I feel very fortunate to be able to work a standard 9-to-5 coaching job and explore new parts of the country from my van – while earning passive income through my real estate investments.

Albaum works 9am to 5am as a real estate investment coach and is currently leading a redevelopment project.

Photo: Michael Albaum

I believe if you save enough money and look in the right places, investing in real estate can give you a head start – even in times of sky-high real estate prices.

Here’s my best advice:

1. Start small with a well-researched strategy

My investment strategy is the “BRRRR” method: buy, rehabilitate, rent, refinance, repeat.

I buy homes in markets where units are rented for much more than their monthly mortgage payment. I repair them and then rent them out to help pay for the house and invest in other properties.

To learn which strategy works best for you, I recommend doing some basic research. There are so many resources available, from podcasts (including mine, The Remote Real Estate Investor) to online courses.

You can also reach out to other investors on forums like BiggerPockets, where the BRRRR method became popular, to learn more about their strategies.

Many people also wonder what their return targets should be. I always say that people should compare the total returns they can get from real estate (calculate this by adding cash flow, appreciation in value, loan payments, and tax benefits) to the returns they could get from other investment vehicles.

Choose a number that works for you. And most importantly, don’t compare yourself to others.

2. My method is about doing as little work as possible

I buy something when it feels easy and I know it won’t take too much work to outsource the property to a management company.

Even if this means lower profit margins up front, I can simplify my life and use the majority of my real estate portfolio as a source of passive income. You do the work once to buy and repair the house and then you can reap the rewards as long as you own the property.

The main goal of my real estate portfolio is to become 100% financially independent or cover all my expenses without work, also considering future expenses.

3. You don’t need a full renovation to increase property value

There are two ways to increase the value of your real estate: maximize yield or profit or minimize costs.

So far I’ve spent about $2.5 million on renovations across my entire portfolio, and I’ve tried to make every dollar count. Just adding upgrades like laundry rooms and stainless steel appliances to ready-to-rent properties can help increase a property’s rental value.

Buying in favorable markets or locations where homes are likely to appreciate in value over time and making small adjustments to those properties can also increase the long-term value of your purchases.

4. Rely on local real estate professionals

I always work with local property management companies in the markets I invest in.

This allowed me to build a portfolio in the Midwest while living in California and now I can travel while earning income from my real estate. I can FaceTime tours with my agent, rely on a trusted contractor for renovations, and let my property manager find responsible tenants.

Use online platforms like All Property Management to connect with local experts in your target market and seek recommendations from your peers and network.

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

Do not miss:

Leave a Comment