Are You a Landlord When You Should Be the Bank?

A decade ago, I made a very important decision: I decided to stop being a landlord and start being a bank.  “What the heck does one have to do with the other, Toyin?” you may ask. I will tell you.

When I first started out in this business, I was absolutely gung ho. I systematically bought properties all over town; some properties I sold, others I rented out. Eventually, I owned over three dozen properties. You know what happened? I was still broke! How? Because I was so focused on buying, fixing and renting, that I didn’t map out a strategy for making money.

Some of you may be wondering how it’s possible to own that much real estate and still have no money coming in. It’s simple: I was busy being a landlord instead of a bank. There are three main functions you can have as a property owner: Occupier, landlord, or bank. Typically, we occupy our home or brick and mortar business that we own. Any property we own beyond the properties we live or work in, we have to make the choice to either be a landlord or a bank.

Landlording vs Being the bank

Being a landlord is no easy job and more often than not, the pay isn’t worth the headache. Tenants can be tough to manage. I’m not necessarily talking about having tenants who occupy a property and don’t pay you. I’m also talking about taxes on the property, maintenance, repairs, and the cost of repeatedly advertising the property when the old tenant moves out and a new tenant moves in. That’s assuming the tenant pays the rent every month.

If you’re not the occupier and you’re tired of being a landlord, you can do what I did and become the bank. Now, there is a huge difference between being the bank and being the landlord. Banks collect mortgage payments. Most of the time, landlords collect headaches. When I got this revelation over a decade ago, I stopped purchasing properties with the intention of renting them out. I decided to be the bank, which is much more lucrative.

Monopoly houses | landlording

How to Be the Bank

A bank is not brick walls and teller windows. We know that. Some of us bank or invest using online banking institutions. The good news is you don’t need a license to go from being a landlord to being a banker. You only need to restructure your business. Instead of renting out properties, switch to loaning out money. I loan out my money by carrying paper on secured instruments.  If you have ever owned a house that you took out a bank loan to get, you may know the bank is holding a mortgage on your house. But the bank is not your landlord.  Every month, you sent the bank what is known as a mortgage payment. The loan you got to buy the house was secured by the house itself. As long as you made your payments, you made progress paying off the loan. During that time, you were responsible for the taxes, insurance, maintenance and repairs. Whether the house was in tip top condition or not, you were responsible to send the payment to the bank. If you missed a payment. The bank could recoup the loan by taking control of your house through foreclosure and selling it to the another buyer.

When it comes to your property, you have the same rights, only you forfeit the ease of the process when you choose to be a landlord instead of a bank. You can generate the same cash flow by selling your house with a land contract or cash for deed. Get a qualified seller who can afford to invest a reasonable down payment then you can collect monthly payments for years to come, much the same as you would as a landlord. The difference is you will be selling the house over years and collecting interest in addition to the principal payment. Not only that, but as homeowners, your buyers will be responsible for maintaining and repairing the property on their own, which relieves you of the heavy burden of property management. Choose selling the property over renting the property and you will create cash flow without creating headaches.

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