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In 2020 I Realized I Can Make As Much Off My Website as a House…..Without the Risk of a Mortgage.

I Realized I Can Make As Much On My Website(s)
Than Owning A Rental House ... Real Estate Investing Beginner Chat

Real-estate investing. It sounds really cool in theory. You buy a home, renovate (or at least clean), then rent it out for local rental rates.  Enough to cover the mortgage plus savings and then you have enough to have passive income. Rinse. Repeat. It seems great, right? It certainly can be! There are many successful landlords who do this. I looked into it, because it sounds exciting. After all, homes tend to appreciate in value, and there’s a renter paying against the mortgage, plus a bit in actual “passive” income. 

Until I ran the numbers…..and weighed the time I’d need to put in….and realized I can make more by running websites, which has substantially lower risk. 

 

p.s. if you are in real estate investing, I’d love your input on this post. Whether positive or negative criticism, please be respectful. I’m NOT claiming to be an expert in this area whatsoever.

Example Numbers from Our Home

So to use the very specific example of our home, the mortgage + escrow is about $1000 a month. We could rent for about $2000 a month in our area. I’m using this as an example so these numbers are adjusted for ease of math, but are close to reality. Our home meets the “1% rule” that is often quoted in real estate investing circles, which is to only rent out a house that can earn 1% of the home’s purchase price in rent.

So we rent out our house….and “make” $1000 in profit. Except we don’t. I wouldn’t have the time to dedicate to the property entirely on my own, so I’d use a property management company. In my area, that cost is around 10% monthly rent (adjusted this number again but considering start of contract fees this is very close). So let’s assume that I’ve set up this property manager. They then take their 10% of the $2000 rent. That leaves us with $800/month in profits. Then, we need to save a really great emergency fund for potential repairs….

 

Savings Needed for Peace of Mind with a House Rental

There isn’t a perfect answer for this, but after a lot of research, I created an ideal savings that we would have for a rental home. Ideally, we’d have a 3 month rent buffer AND regular repair costs to consider. 3 months of rent buffer means $6000, and we’d like to have a $10,000 emergency fund for repairs (and then still contribute 10% of earnings beyond that). At this time, we have our personal emergency fund, but not a “rental house” emergency fund. We would need $16,000 in the bank just for the rental house e-fund to feel safe keeping the remaining rental as rental income. That means we would need to establish a “break even” date. 

 

Additional Costs of Owning a Rental House

Some major costs of owning a rental house would be increased taxes, and not by a little. I’m talking 40%-50% tax increases. Again in our case that would likely raise our mortgage + escrow costs from $1000 per month to $1200 per month, and lower our “profit” to $600 per month. Then, there’s the cost of business expenses (owning a business, CPA, other). So then we’re down to about $500/month in earnings….oh and this doesn’t account for yardwork which would also be a cost AND time resource for us (me setting it up, and us paying for it or doing it ourselves)….Yard maintenance can easily be over $100/month, but I’ll still estimate the following on the $500/month of earnings.

 

Our Breakeven Timeframe

So we need to hit the $16,000 at bare minimum. With earnings of $500/month, that means 32 MONTHS or 2.67 YEARS of only saving of that earned income. Not a penny actually to us. Now this would be different if we had $16,000 already set aside. That would be the smarter way to approach a rental home situation, but we aren’t there yet. This is working with our current situation. Back to numbers: 32 MONTHS of perfect tenants and no repairs? That’s two lease renewals, only to get to a level of peace of mind savings!

 

Rental Home Income vs. Online Income

Even with a *best case* scenario of $500/month and appreciating home value (which is not guaranteed and really only applicable should we sell the property) there are still massive risks associated. We’d also have the remainder of the mortgage to consider, and where would we live otherwise? So now let’s talk about online income….I’ve been working on two websites for years now. I’m happy to say that the two have always been profitable, even just from writing. That is almost entirely affiliate income earnings. My affiliate income is roughly $500/month. That’s before ad network income, which I’ve just signed a contract for one site (not this one) with Mediavine. I estimate to earn an additional $500+ per month. EVEN IF I CHANGED NOTHING, my income from these is about $1000/month. 

And do you know what risks I really have associated with these sites/business? VERY little in terms of finances. 

 

Passive vs. Active Income and How RISK Factors in....

You may feel the need to point out that running a website is active income, meaning I work for it actively. And while this is true, the time I put into each website isn’t that much. I realistically work 5 hours per week in site maintenance and writing. Yes, it took more for the initial setup of each site, but I Youtube-d and Google-d my way through any questions I’ve had and learned more with each post and website. And I truly ENJOY this work, which is perhaps much more important. I started each site as a “hobby that pays for itself,” and I’m grateful it’s grown beyond that. I don’t enjoy painting houses, or doing renovation work constantly. Yes, I enjoy the design side, and yes I love making our primary residence beautiful…..but beyond that, the tasks associated with owning a rental home are not ones I particularly enjoy. 

 

Final Thoughts

All of this is to say…..I and my husband are significantly more okay with the risks associated of me writing for my own websites and creating their own forms of passive income beyond affiliate links than we are taking on the debt of a second mortgage. There isn’t a “breakeven” date with this as I was able to make them each profitable in the first few months. And I’d rather put in the active work myself growing these sites, doing what’s enjoyable to me at minimal risk than be in a constant state of anxiety about worrying about a leak at the rental house, or awful tenants, or poor management or any of the other major risks that come with rental property ownership.

I’m certainly not saying that real-estate investing is bad. I’m saying to run the numbers and consider your own situation. My platform is TINY by internet standards…it’s like a nano-particle, and it still makes more financial sense to us than a rental property!

-Rachel

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