Well guys, we finally did it. Our housing mortgage expenses are by far the biggest part of our budget. I can now safely say that our “passive” income can fully cover this expense bringing us 2 giant leaps towards Financial Independence. Here’s how we make the magic happen.
Before I get to that, guess what!? I started a YouTube Channel as a place to drop videos that help flesh out these blog posts. For topics that can be described visually vs. a strictly text format, I think they will really enrich the value of the content I make.
Since this topic of mortgage free living is a direct result of optimizing our property, I made a video with a walk-around tour where I help describe our strategy. Check out the video below and subscribe to follow our FI journey. Okay, YouTube plug now over.
Background
Before we get into the mortgage talk, it’s important to at least mention the fact we choose an area to live that has relatively inexpensive property values while still offering good employment opportunities.
We choose to live in the Midwest (USA), where houses are still cheap (at least when compared to the coasts). We picked a region of the Midwest that had a bustling/growing city. My wife and I were both able to secure great corporate jobs that allowed us to easily pay a mortgage. As we want to hit FI in the next 5 years, we would like to be able to pay this mortgage without having to use our corporate salaries.
Let’s talk about the Money!
Our ability to pay our mortgage passively centers on the fact that we live in the country and have two sheds that we can rent out and earn an income off of.
We purchased a $280K house with a significant down payment. Our monthly payment comes out to about $1700/month including all taxes on a 30-year note. We defiantly could (and maybe should) have bought a smaller house but we knew we could leverage the property to pay for the mortgage. Our yearly expense for housing comes out to about $20k per year, which is by far the largest expense for our family.
We have 2 buildings on our property we make money off of and here are the specifics-
Building 2
This unfinished shed is the one in the back of our property. It’s a very nice building with lights and electricity. We rent it out to an area farmer for about $5,000 per year. We literally have to do nothing to bring this income in- yeah, it’s pretty sweet. Thankfully, the farmer only needs the equipment seasonally, so it’s not a hassle for us at all. We did install security cameras around the buildings for liability purposes, but we have no other maintenance expenses.
I will note that we do have a healthy umbrella insurance policy, $2 million, just in case a freak tornado comes and wrecks the shed containing hundreds of thousands of dollars of machinery.
With this income, our home mortgage is reduced from $20k per year to $15k per year. This is pretty stable income as well judging by the steady inquiries that come in from other neighbor farmers.
Check out the video above for a detailed walk-through of this shed.
Building 1
This shed is not as passive as the one mentioned above. We are actually business partners in a venture that operates out of this shed. The shed is finished (bathroom, concrete floors, heat) and serves as a showroom for this business (more specific details to come in a later post/video).
Our partners carry the bulk of the work, and we provide the space to operate out of, a win-win.
This business currently brings in about $20k per year, but I plan to be more involved in 2019 to help grow that number to at least $40-50k.
This income more that covers the remaining home mortgage expense from a yearly perspective. In fact, we designate the extra $5k to use for utilities such as propane for heat and electricity.
How Does this fit your FI Plan?
I mentioned at the beginning of this article that I still have a corporate job that allows us to easily cover this home mortgage expense. With that being said, we still pay (double up) our home mortgage payments every month.
Our ultimate goal is to have a paid off house with zero mortgage as we near FI.
Utilizing our properties to provide side/passive income will allow us to reach FI that much quicker as we could pay the home mortgage without the necessity of my corporate job.
Do you have any tricks to help pay off your home mortgage passively? Do you share the same goal of paying off your casa as soon as possible? If so, please share in the comments below!
Also, join the discussion on our Facebook Page, or reach out on Twitter– I’d love to talk with ya! Or check out our About page.
Have a great day!
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