Personal Finance Resources

Anyone that knows anything about business, wants to make passive income. Many folks would like to have a primary, or secondary source of passive income in real estate.  I am one of those people. Currently, my passive income in real estate is around $500-$550 per month (including signing a lease agreement just this past Tuesday). Not much, huh? Well what could you do with an extra $500 per month? Today, I would like to present a high level overview of my plans for passive income in real estate. But first, let me define “passive” as I see it, for you.

There are lots of definitions out there, but to me, passive income is “hands off” or “almost hands off” income streams.  The real estate investing that I do, coupled with property management, has great potential for current and future benefits. However, investing in real estate takes a lot of initial work, with some additional work down the road. Likewise property management requires a lot of startup effort, with a lot less in the future. I don’t believe there are too many highly lucrative, true blue, do nothing type income streams, unless you are planning to hire someone else to manage your businesses (BE CAREFUL!).

Bottom line, the income streams I am building should prove to be low maintenance in the future. So now, I want to give you a guide that I am using to create passive income in real estate:

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A bond, simply defined, is a type of investment which is very similar to an IOU. It is a loan in the form of a security with two basic components, the face value (principle), and the coupons (interest rate). The bond is a contract between the issuer and the bondholder to pay certain amounts of money in the future. The issuer of the bond promises to pay the bondholder principle and interest according to the terms and conditions listing in the bond. Many cities and countries issue bonds to fund new highways and other such projects.

The definition of bond yield is the rate of return on the bond, which takes into account the sum of the interest payment, the redemption value at the bond’s maturity, and the initial purchase price of the bond. Yield on the bond relates to the return on the capital you invest in the bond. You will hear the term yield a lot as it relates to investing in bonds. There are many types of yields you’ll need to be aware of listed below.

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I graduated from college several years ago, and I thought it was expensive then! In school I watched costs consistently rise every semester or year, and knew I had to get out fast if costs were going to keep going up like that. With all the other fees like books, housing, lab fees, class fees, parking permits, and more, college adds up to be astronomically expensive.  I can only imagine what the costs are at now and cringe. Today, many families are turning to an Astrive Student Loan to help bridge the gap between those rising costs of college, and financial programs which can be limited. An Astrive Student Loan is private, also called an alternative student loan, meaning that it does not come from the government, but from a private financial institution. When choosing the right college for you or your family member, you should be able to go to the school of your choice, and not be limited by what you can afford. 

Loan Details

An Astrive Student Loan is a great way to help you pay for college, and will help you cover the full cost of higher education. They have surprisingly competitive interest rates, and unlike financial aid programs, you won’t be turned down because your family makes too much money or for having other federal and private grants and loans. Also, you can use an Astrive Student Loan with or without a federal loan. All of those hidden costs that come with going to college are covered, such as: travel home, room and board, books, essential computer equipment, athletic fees, lab fees, and even more. Don’t burden yourself down with credit card debt when you can easily acquire an Astrive Student Loan.

Repayment Options

There are several options you can use to repay your loan, and you can choose whichever one is best for you. 

• First of all, you can do the immediate loan repayment, meaning that you start paying on the principle and interest 45 days after you receive your first check. This option will save you the most money, if you can do it.
• Secondly, you can do interest only monthly payments. Interest payments will begin 45 days after you receive your first check, and the principle isn’t paid until either 45 days after your graduation or cease to be enrolled at least half time.
• Last, you can do deferred payments, meaning that you pay nothing on your loan balance until six months after your graduation.

The Astrive Student Loan is a great loan for you and your family to look into. If you have any other questions on acquiring student loans, check out my other articles on Consolidate Student Loan Benefits and Problems.

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The real estate analysis spreadsheet presented at the bottom of this post is an extension of the spreadsheet provided in the Simple Guide to Real Estate Investment Property Evaluation. As noted in that article, I did not provide a space for you to enter any repair or holding costs. In this version of the real estate analysis spreadsheet, I provide the spaces to enter this information. But before I give you the link to download the information, I would like to give you a few pointers on how to estimate repairs and holding periods:

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Forget free groceries coupons, instead master the art of the “Fresh or Free” program provided by our friends, HEB. In this post I am going to detail the method we use to get the most out of the program. The basic overview of the program is provided in my Groceries for Free post.

The basic principle we use to maximize our gain is the law of large numbers. My wife and several lady friends assemble, usually in a group of about 6 or 7 ladies, and go out at night. They usually go out around 9 or 10 PM, with the goal being to collect items that are already expired, as well as targeting the midnight hour, to get items that have just expired.

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Want to get groceries for free? HEB has a spectacular policy called “Fresh or Free”. This is not a joke or hype or any kind of sales pitch. This grocery store actually provides an opportunity for anyone to get groceries for free. If you do not know of the HEB grocery chain, it’s probably because the chain is only located in Texas. My wife and I shop there almost exclusively, especially because of the Fresh or Free program. Here is a basic rundown of how to take advantage of this great policy:

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AD&D Insurance, also called Accidental Death and Dismemberment Insurance, is additional insurance which provides benefits for certain injuries and death due to an accident.  It is designed to pay out a large financial benefit to you in the event of a dismemberment (which can include either loss of limb or of sight), or to pay your beneficiary in the cause of an accidental death. AD&D Insurance is typically provided at no cost for some regular life insurance policies, and some companies provide an AD&D Insurance policy to their employees at no additional cost.  If you are a younger family or couple, than it is ideal to look into, as younger people are more likely to die from accidents than from natural causes.

Benefits

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The bi weekly mortgage plan has devoured countless victims. Everyone has heard it - “Paying your mortgage bi weekly will save you 7 years of mortgage payments”. But do you know why? I would like to elaborate why the bi weekly mortgage plan is flawed, and show you the most effective way to calculate the necessary payment to payoff your mortgage on the best schedule - your schedule. But first, let’s look at some reasons why most bi weekly mortgage plans are flawed:

1. The balance is only recalculated once a month.
   That’s right, even though you make 2, and sometimes 3 payments in a particular month, you mortgage balance is not reduced until the end of the billing cycle. This means that the mortgage company continues to collect interest on the mortgage balance as of the beginning of the billing cycle, so in effect, the lender gets to float your payment, and collect additional interest on it from other sources, until the end of the billing cycle. It’s like giving the lender a short term, no interest loan. Does that anger you? It should, because this is never disclosed openly to the borrower.
2. Typically the payment is “drafted” from your account on a schedule.
   This is a pet peeve for me. This guarantees the lender that they will get first priority at your money, regardless of your circumstance. But Jeffry, it’s so much more convenient! Maybe, until you have an emergency, and need money fast, then you are up a creek. I never, under any circumstances, give anyone access to my main checking account. I pay my bills when I am ready to do so, and I suggest you do the same, even though it is slightly more trouble. Use a quality spreadsheet, like my Free Home Budget Spreadsheet, to ensure you get all your bills paid, every month.
3. Often, the lender charges additional fees to setup the bi weekly mortgage plan.
   As if it is not enough that they get an interest free loan, draft your account automatically, they may have the nerve to charge another fee on top of all of this, to setup a bi weekly mortgage plan. It makes me sick to my stomach.

Ok, ok Jeffry, I see your point. But I still want to pay off my mortgage earlier, without having to come up with any additional money every month. This is the real misconception. Just because you are paying half of the would be monthly payment every bi week, doesn’t mean you are truly paying half the amount. About one month out of every six months, you will be making 3 payments, which is the only way for the bi weekly mortgage plan to show any benefits. So instead of making bi weekly payments, just do the math to make the equivalent monthly payment:

Bi weekly payment X 26 / 12 = equivalent monthly payment

By using this formula, you will be able to have the true fixed monthly payment, and still achieve the desired result - paying off your mortgage 7 years earlier. But if I could go one further - what if you want to payoff your mortgage even faster than that? Good news, I have compiled a spreadsheet that will allow you to compute a necessary monthly payment, based on a bi weekly payment and desired number of years. All you have to do is fill in the Input Section, and presto - you have the required monthly payment necessary to payoff that mortgage on your desired schedule. Here is a quick example:

Feel free to leave any comments / questions below. You may download the xls spreadsheet here:

Bi Weekly Mortgage Plan Converter.xls provided by Personal Finance Resources

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A debt management solution does not imply going for the best remortgages in the town. Anything but mortgages should be pursued. True, that a credit card application would take much longer, but in the end it teaches patience, and time management. Another better solution would be lender loans.

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A personal umbrella insurance policy, simply defined, is your protection in case you are ever involved in a high-dollar liability case. It’s the word that everyone fears, lawsuit. People and lawyers are suing for nearly everything today, and juries are awarding more and more money to the injured. That money comes from somewhere, and unless you have an extra five million laying around, a ruling in the 7 digit range can be financially devastating to you and your family. A Personal Umbrella Insurance Policy has been created to help you avoid such situations.

Do I Need A Personal Umbrella Insurance Policy?

While you may not ever see yourself accidentally rear ending a school bus on your way to work one morning, you may be able to imagine the millions of dollars you could be sued for if one or many of those children are injured. Accidents can happen frequently, and with so many people suing for these accidents, it is best to be prepared in the event one of these happens to you. What if someone gets hurt on your property, and sues you for it? Going out to the lake with some friends? What happens if someone gets hurt while in your boat or on your jet ski? You could be found negligent and be forced to pay. The fact is that even though you can’t keep these accidents from happening, you will be financially responsible for them.

Additional Personal Umbrella Insurance Policy Details

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The strategies contained in the article are not that advanced, but are very solid. The very first section “Pay your bills on time to maintain a good credit record and qualify for low rates.” DUH! Even if you are only able to pay the minimum payment, or less than the minimum payment, send the credit card something. All it takes is a couple of 30 and 60 day late payments on your credit report to plummet your credit scores. However, if you are just starting out, and have no credit, it would be worthwhile to run small balances on 2-3 credit cards, in order to build your initial credit. Always paying your credit cards off at the end of the month will not get you any substantial credit.

When I first started out, I did exactly that. Ran some small balances and began to build some credit. Beware, though, as this can be extremely dangerous for someone new to credit cards. A euphoric feeling tends to circle around the ability to get nearly anything you want without having the cash. Carefully watch what you spend and track your balances.

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