One of the most popular investment alternatives for people looking to diversify their portfolios and create passive income is real estate. But to some, the phrase “free real estate” could seem absurd. So what exactly is free property, and how do you obtain it?
In the context of real estate investing, “free real estate” is a piece of property that brings in enough rental income to cover all of its costs, including the mortgage, property taxes, insurance, and upkeep. To put it another way, it’s a property that generates enough cash flow to pay for all of its costs and still nets you a profit each month.
Investors typically employ the 2% rule and the 50% rule to achieve free real estate. According to the general concept known as the “50% rule,” an investor should plan to spend 50% of the rental income on costs such as upkeep, repairs, and management fees. This rule aids investors in estimating a rental property’s cash flow and determining whether it has the potential to become a free real estate asset.
The 2% rule, on the other hand, is a rule of thumb that indicates an investor should seek to create monthly rental income of at least 2% of the property’s purchase price. For instance, you should try to earn at least $2,000 per month in rental revenue if you spend $100,000 on a house. This rule assists investors in locating homes with the potential to earn significant rental income, increasing the likelihood that they will eventually become free real estate investments.
Investors must also take into account other elements including location, property type, vacancy rates, and tenant quality in order to obtain free real estate. For instance, a rental home in a sought-after neighborhood with little vacancy and good renters is more likely to generate significant rental revenue and qualify for free real estate status.
To sum up, free real estate is a piece of property that brings in enough rental income to cover all of its costs while also bringing in a profit for the investor each month. Investors must pick properties that have the potential to create significant rental income while maintaining low expenses using the 50% rule and the 2% rule as recommendations in order to reach this position. To improve their chances of obtaining free real estate status, investors must also take other aspects into account, such as location, property type, vacancy rates, and tenant quality.