Inspired by an interview with Jocelyn Paonita Pearson.
This piece was written by Rachel Schroath, creator of RachelSchroath.com and Podcast-Inspired Blogs.
Dreaming of money that grows on trees? Or at least money that finds its way directly into your savings account? What you’re looking for are passive income streams and for info on these beauties, I’m going to turn to my good friend, Jocelyn Paonita Pearson.
Jocelyn Paonita Pearson helps college students graduate debt-free, just like she did, with tools from her online business, The Scholarship System. Jocelyn knows how to make money and make it work for her. Instead of having to pay off debt, she creates passive income to continue building her wealth and do things most can only dream of like work from anywhere or take a last-minute international trip to Europe with a friend.
One of the many ways Jocelyn has created passive income for her and her family is through rental properties. It’s a simple concept that anyone can do and that’s why I asked Jocelyn to walk us through how it would work.
Here is how can you emulate Jocelyn and create major passive income through rental properties:
Decide to Be Debt-Free
Jocelyn financed her schooling with scholarships and graduated debt-free. This was a decision she made before she got out of high school, and that decision allowed her to create multiple income streams after college. Although she didn’t need to, Jocelyn still worked throughout college and saved up her money so she could put it to work in the future.
After graduation Jocelyn looked to invest that money she saved into a down-payment on a rental property. “It’s 100% because I don’t have those student loans sitting there” she said.
Is there debt holding you back from investing in a rental property? Get it down to where you’ll be able to save money and have it start working for you.
Decide What You Want
Immediately after graduating, Jocelyn bought a condo in Atlanta where she would be working. She knew it would start out as a place for her to live rent-free and then function as a rental property after moving out of Atlanta.
Going into the search for the right rental property, Jocelyn knew exactly what she wanted. She was looking for a 3 bed, 2 bath property. This decision was strategic as she would eventually have the possibility to collect rent from three roommates, and she also knew the three-bedroom plan was the most rentable type of property for families. Jocelyn knew this setup was a must from the get go.
Before you buy a rental property, do the research. Find out what’s most desirable in your area. A 3 bedroom condo might not be the most realistic if you live somewhere like NYC. Check out what’s online and what the people you might want to rent to are interested in.
Get Smart about the Location
When deciding between property locations Jocelyn was stuck between two places- one more pricey and better for her and another in a location that was less desirable to Jocelyn. To decide what would be a better rental property, Jocelyn posted potential listings on Craigslist to see which one would get the best response.
This is a phenomenal way to test the waters with location, style, and price.
If you’re thinking about buying in a different state or somewhere you aren’t familiar with, make sure you understand the area before making the purchase. Besides saying, “That area is cheap,” visit it or talk to people from around the area to see which location is the most rentable.
Family or friends can also tell you where you’d want to buy. You’ll have a much easier time selling tenants on your property when you know the ins and outs of the location.
Rent to People You’d Want to Live With
To find quality tenants, Roomster is a great site to utilize. Fill out a profile and make a post saying, “I’m the owner, but I’m looking for people that I would want to live with.” This is the rule that Jocelyn swears by. Even if she’s not planning on living in the rental property, she looks for people she would want to live with. Having this relationship with her tenants has been a huge bonus and helped solve issues before they became drastic.
Consider matching roommates to live in your rental property. You’ll be able to charge extra and take your pick of roommates without compromise. Get on Skype with potential tenants if you aren’t in the area and get to know them. It’ll pay off later!
Cash Flow over Increase in Value
Jocelyn pointed out that while many look for properties that will increase in value, what an investor should be more concerned with is cash flow. It would be great if your property increases in value, but that’s what we like to call ifcome. You're making bets and not focusing on the real cash coming in.
Look for properties where you could easily charge enough for rent to cover the mortgage. Your focus should be on the money flowing in and out each month, not years down the road.
Final Thoughts: Making your money work for you is a financial sweet spot.
Not sure how to get there? Let’s talk! I’m a financial coach, and I offer a personal and affordable way to get your debt in check and your cash flow positive.