How to Generate Passive Income in The DMV with Income Producing Assets

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Raise your hand if you’d like to be a millionaire. We’re betting every single person reading this has their hand up right now, because who wouldn’t want to be rich? But if you really want to be a millionaire, you’re going to have to find new, creative ways to boost your income.

Some studies have shown that most millionaires have as many as seven sources of income at any given time. One great option for people looking to grow their income is to have income-generating assets, like real estate. Read on to learn about how to turn real estate into an asset that can get you easy money every month. 

What Is an Income-Producing Asset?

Before we dive into how you can use real estate as an income-producing asset, let’s talk about what income-generating assets are in the first place. You may know these income sources as passive income. In essence, they’re sources of income that don’t take up a lot of your time.

There is one small difference between passive income and an income-producing asset. Passive income can include non-physical sources, such as revenue from ebooks or stocks, that could vanish if something cataclysmic happened. But an income-producing asset is tangible and won’t disappear even if the stock market were to crash.

Why Build Passive Income?

The big advantage of having income-generating assets is that it allows you to effectively buy time in your day. Each of us is limited to twenty-four hours in which to eat, sleep, work, and play. Most of us spend that time trying to play a giant balancing game with each of those elements, limiting the amount of money we’re able to trade time for. 

But with passive income, you can have multiple sources of income going at the same time. This means that without any extra stress on you, you can double your effective work time. Not only can this give you more money, it can also lead to greater life satisfaction as you’ll have more time to spend with your loved ones and on leisure activities.

How You Can Use Real Estate as Passive Income

There are a few ways to use real estate as an income-producing asset. But for most of this article, we’ll focus on renting out a property as a form of passive income.

Although the job is not labor-free, one great way to set up a large passive income flow is to become a landlord. Buy a house somewhere with high rental rates (both in demographics and in price) and rent it out. You’ll need to do occasional maintenance and repairs, but for the most part, you’ll sit back and rake in the cash every month.

Should You Invest in Real Estate?

Investing in real estate can be a great way to earn some extra money, but it isn’t a trivial undertaking. Before you start looking for a house or apartment to buy, you need to make sure it’s the right move for you at that point. For one thing, you really need to be debt-free before you start taking on any additional properties.

If you have other debts you’re trying to pay off, a rental property can become a sinkhole in a hurry, especially if your tenants aren’t on time with rent. Make sure you pay off your credit card bills, your student loans, your primary mortgage, your car payments, and any other debts you have before you buy a second house. It’s also a good idea to have three to six months’ income saved in an emergency fund before you buy, too.

passive income through real estate

How Much to Spend

Once you’ve decided to buy a rental property, one of the first questions you’re going to need to answer is how much money you want to spend. It may be tempting to go for the fancy apartment in a wealthy neighborhood that you can rent out for a fortune. After all, more value, more income, right?

But if you’re just starting out, you don’t want to risk everything on a major investment. Plan to buy something you can afford to pay cash for, ideally something that’s priced at about 70 percent of its current market value. This will give you some existing equity in the property and make sure you’re maximizing your profits.

Why Buy in D.C.

The next question you’ll need to answer is where you want to buy your rental property. In many cases, people buy property in the same area where their primary residence is. But there may be other markets you can buy in where you can get more for your money, and Washington, D.C. is chief among them.

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One of the best reasons to rent a house out in D.C. is that the rental market there is on the rise. Rents saw an increase of about 2 percent last year in D.C. And aside from that, Washington, D.C., is one of the strongest economies in the country, with industries spanning everything from government jobs to tourism businesses.

How to Generate Passive Income in The DMV with Income Producing Assets 1

Near the City

When you’re looking for a place to rent in D.C., you want to look for somewhere near the city. The closer to the city you get, the more city commuters you’ll be able to attract. You’re also likely to get closer to the good schools, something that will be important to Millennial parents looking to find a family home.

Remember as you’re looking at homes in the city to stick within your budget. You want to look for the gems that are within a reasonable distance to the city and in good shape without being glitzy. You don’t need all-new white marble countertops for a home to move; you just need a good, solid home.

Great Public Transit

You should also look for areas that have great public transport options. Many of the people who live in D.C. choose not to drive with all the traffic and the public transport available. So you need to make sure your rental property makes it easy for them to access that transport.

Look for properties that are near subway stops in the city. If you can’t find those, check out bus routes and homes within walking distance of those stops. If nothing turns up in either of those areas, don’t be afraid to wait for the perfect option to come along.

What to Buy

You’ll also need to decide around this point what, exactly, you want to buy as your rental property. Do you want an apartment that you can rent out to a rotating group of students or young adults? Or do you want a home that a family will settle down in for a few years and that you can sell after it appreciates some value?

Whichever route you choose, take a look at the foreclosures around D.C. These usually offer a great opportunity to get decent houses for a great price, especially if you’re willing to do some renovation. But do make sure you get these inspected so you can avoid a money pit that will take all your profits in repair costs.

Pay Cash

How to Generate Passive Income in The DMV with Income Producing Assets 2

As we mentioned earlier, you really want to pay cash for a rental house. It may seem like you could get a mortgage, use the rent to cover that and take the dividends as profit. But this isn’t the smartest way to approach a real estate investment, not least of all because you’ll be on the hook for the mortgage even if your renters don’t pay on time.

But once you have a mortgage, you’ve limited both your profits and your negotiating ability. It’s harder to be competitive with your pricing if you’re trying to turn a profit against a mortgage. If you pay cash, almost all that rent money goes straight back into your pocket.

Work with a Real Estate Agent

Even if you’ve bought a house before, it’s a really good idea to work with a real estate agent on buying your rental property. For one thing, they’ll be able to help you find the best property for the best price. Their full-time job is to scour the markets for good options for you, and they know all the right places to look and all the wrong places you don’t want to buy. 

They’ll also be able to give you unique insights into the D.C. area. An experienced real estate agent will be able to pin down the neighborhoods where your ideal renters will want to live and find your options there. They can recommend good school districts and even local attractions for you to put in your rental ad.

Check-in with Tenants

Once you’ve got the property bought and tenants moved in, you may think your job is over and it’s time to sit back and earn your money. But the truth is your job has only begun; being a landlord is a low-effort source of income, but it’s not effort-free. Your tenants should see more of you than just when they sign the lease and when they move out.

Every couple of months, check in with your tenants and make sure there aren’t any issues with the property. Not only will this help you catch any problems early enough to have cheap fixes, it’ll also give you a chance to make sure the property is staying in good shape. And tenants who feel like you care about them will be more likely to pay their rent on time.

Hire a Property Manager

If you don’t have the time to devote to managing your property so closely, it can be an excellent idea to hire a property manager to take care of things for you. This can also work well for people living outside the D.C. area or people who don’t want to spend all that time worrying about their passive income. A property manager will act as your go-between for tenants and maintenance workers.

A good property manager will act as your proxy in all matters dealing with the rental property. They’ll handle maintenance, arrange needed repairs, collect rent, and deal with tenant issues. You pay them a monthly income and you rarely have to lift a finger to make money from your rental property.

Manage Your Income

Once the income is flowing in, it can be tempting to put every cent of it in a savings account labeled “Cabo.” But doing that is more than just a bad investment decision. It could land you in debt over repairs to the rental property.

You need to take a portion of each month’s rent and put it in a savings account dedicated to maintenance. Depending on how long you own the property, you may need to repair or replace the HVAC system, appliances, flooring, paint, and locks. Having a fund set aside for this already will help keep you in the black on that property.

Grow Your Investment

You should also set aside a portion of each rent check to grow your investment. Yes, one rental property is a great way to make extra money. But how much could you make if you had two or three or four, especially if the same property manager handles all of them for you?

Set aside a chunk of each rent check to go towards buying another property. When you have enough saved up to buy one, you can start snowballing the profits from those to buy more properties faster. Soon you’ll be a real estate mogul with enough passive income to live a very comfortable life.

Learn More About Income-Generating Assets

If you’re looking for ways to grow your income, having some income-generating assets is a great way to do it. And buying real estate in the D.C. area to rent out can be a fantastic way to get started on your journey to being a millionaire. Shop smart, stay frugal, and hire a good property manager and you’ll come out way ahead. 

If you’d like to get your own property in the D.C. area, check out the rest of our site at Nomadic Real Estate. We can help you with leasing, management, sales, and peace of mind. Contact us today to start finding the perfect rental house for you.

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Enhanced Reporting

Your portal includes a selection of extremely useful reports. Reports are available in the “Reports” section, and are distinct from the financial statements. Unlike financial statements which are static records, Reports are dynamic real-time records that will update with current data every time you view them. 

Scroll down to learn more about Reports:

Navigate to the "Reports" module in your portal:

Owner Portal Reports
  • Keep in mind, these reports are dynamic records. They will refresh to display current information every time you view them. 

Enhanced Rent Roll Report:

Enhanced Rent Roll Report
  • The Enhanced Rent Roll Report will show the rent amount, last payment date, move-in date, lease expiration date, and security deposit amount for each of your tenants. 
  • It will also show a portfolio summary with occupancy percentage, vacancy loss, and more!

Unit Comparison Report:

Unit Comparison Report
  • If you own multiple units (or buildings) with Nomadic, you’ll get access to the Unit Comparison Report. 
  • This report enables you to quickly compare financial performance between your units at a glance without toggling between individual reports. 

Income Statement Month-Over-Month:

Income Statement by Month Report
  • The Income Statement Detail – Monthly Report serves as a month-over-month record of portfolio performance. You’ll see itemized income and expense categories and can track monthly. This report will update with fresh data every time you view it. 

Financial Statements

Financial statements will be published to your portal on a monthly basis. The statements are found in your Documents library, and provide a historical record of all financial performance. The statements serve as a snapshot of financial performance over a given period, and are static documents (unlike Reports, the statements do not update/change in real-time). 

Scroll down for more info about the Financial Statements in your Documents library:

The Documents area contains monthly financial statements:

Owner Portal Documents
  • The statements in the Documents are are static documents. They are posted to the portal once a month to serve as a historical record of financial performance. 

Download a statement to see month and YTD financials:

Owner Portal Property Statement

You'll also find a month-over-month operating statement:

Month over Month Statement

Portal Communication Tool

You can use your owner portal to communicate with our team. Any messages you send through the portal will go straight to your Account Manager. When we reply, you’ll get an email notification and you’ll also see the message in your portal next time you log in. 

Here’s an overview of using the communication platform:

Click "Communications" and navigate to "Conversations":

Commincation Dashboard Screenshot
  • The communications module will contain a record of all messages that you create through the portal. 

Click the "New Message" button and send your message:

Owner Portal New Message Screenshot

Responses will show up in the conversation ticket:

Portal Conversation Response Screenshot
  • You’ll get an email notification whenever you get a response, and you’ll also see the message in your portal next time you log in. 

You can reply in-line using the comment box:

Owner Portal Comment

Each conversation will be logged in its entirety:

Portal Conversation Snapshot

Understanding the Ledger

Your portal includes a ledger with all transactions. The ledger is populated with data in real-time as transactions flow through our accounting software. Much of this information is also available in the Reports area, as well as the Statements in your Documents library, but the ledger is the most comprehensive resource for diving into the details. 

Please scroll through the sections below to get a better understanding of how to interpret the ledger. 

By default, transactions are sorted chronologically:

Owner Ledger Dates
  • The date reflected in the lefthand column is the actual transaction date, not the “bill date”. This is the date the transaction was actually processed. 

If you have multiple properties with Nomadic, you'll see the address for each transaction in the "Location" column:

Ledger Property Column
  • You can filter the ledger to look at just one property, all properties, or specific sets of properties. 
  • If you only have one property with us, you’ll just see the ledger for that property. 

The Description column displays the transaction type:

Owner Ledger Description Column
  • BILL: this is an expense transaction, such as for repair costs or management fees.
  • CHARGE: this is a transaction  billed to the tenant, most typically a rent payment. 
  • NACHA EXPORT: this is a credit we processed to your distribution account. This type of transaction is how you get paid! 

The Amount column shows the dollar value of each transaction:

Owner Ledger Amount Column
  • Positive Amounts: if an amount is positive, it reflects a transaction that is payable to you. Typically, this will be a rent payment that we collected from your tenants. On occasion, a positive number could also signify a journal entry or credit adjustment. 
  • Negative Amounts:  if an amount is negative, this is a transaction that is either payable to Nomadic or is an amount that has already been paid to you. Typically this will be for repair costs or management/leasing fees. Owner draws (net distributions into your checking/savings account) also reflect as negative amounts, since they have already been paid to you. 

The Account Balance column shows a sum of positive/negative transactions at a given point in time:

Owner Ledger Account Balance Column
  • Account Balance should always equal zero after a net distribution has been processed. When the balance is zero, this means that all expenses have been paid and you’ve received the remainder as net operating income, leaving a balance of zero (meaning: no one is due any money, as all funds have been distributed appropriately). 

Navigating the Propertyware Owner Portal

Your portal includes some extremely useful features that help you understand your property’s financial performance at a new level, with real-time transparency into every transaction.

Scroll through the snapshots below for an overview of portal navigation! If you need more help or have specific questions about using the portal, you can reach out to your Account Manager any time for a screen share. 

You can filter all info by date range or property:

PW Portal Filters

View a snapshot of income and expenses on your dashboard:

PW Owner Dashboard View

See every transaction in real-time on your ledger:

Owner Portal Ledger View

Statements and forms will be posted to your documents library:

Owner Portal Document Library

View a suite of real-time financial reports:

Portal Reports View

See a running list of all bills, and drill down for more detail:

Owner Portal Bills View

Under Bill Details, you'll find dates/descriptions/amounts and more:

Portal Bill Details

You can also communicate with your Account Manager through the portal:

Owner Portal Communication Tools

How do net distributions work?

Net distributions keep your accounting clean and simple. Each month we’ll collect rent from the tenants, deduct any repair expenses for the previous month and any management/leasing fees for the current month, and credit the remaining net operating income to your account. 

Net Distribution

You’ll receive a statement via email each time a net distribution is processed, and can view all transaction details in your Propertyware owner portal.