A word of caution: unless you have the personal skills to deal with tenants, do not make the mistake of thinking that real estate is passive income. Like any earning occupation, landlording takes attention to detail, the ability not to procrastinate, and people skills. Unlike most occupations, landlording will bring you into contact with some of the worst people the planet has to offer, under what has to be the worst possible set of circumstances. If you want to lose your faith in humanity, I encourage you to take up landlording.
There are easier ways to live rent-free, unless, as I say, you have the personal skills to ride herd on grown children or if you are lucky enough to own your property in an area where normal people rent, and you can find good tenants on a regular basis.
>Unlike most occupations, landlording will bring you into contact with some of the worst people the planet has to offer, under what has to be the worst possible set of circumstances.
I suggest rephrasing to
>Unlike most occupations, landlording may bring you into...
I've had a rental property now for many years. It's in an evolving, urban Boston neighborhood and the property generates ~$1000 more than the mortgage, taxes and insurance per month. I have 5 tenants who are all recent college grads. My agent did credit checks on all of the original tenants and many new ones have cycled through over the years. Aside from replacing a couple of appliances (which consisted of ordering them online and coordinating delivery with a tenant) I've had zero issues. In fact, the last 3 years, I've given each tenant $100 off of December's rent to let them know I like having them as tenants. I have about $80,000 out of pocket invested so without even considering the equity I'm building in the house, I'm getting around a 15% rate of return (granted at a higher tax rate that a capital gains...)
Nice touch offering the December rent break. I guess it's just like offering incentives to good employees to generate loyalty and keep them around for the longterm. I am sure there is great worth in offering this small incentive to a tenant you want to keep, even if you could be charging more to a new tenant. Aside from the cost and effort of finding a new tenant, knowing that you have a consistent, paying renter that will take care of your investment is ideal.
My parents have a small, older rental house that they charge less than market rate for, as they have never increased the rent for the current tenant who has lived there for several years. They have had renters trash the place before, and they know getting a little less from a good renter is a preferred scenario.
On the other hand, interacting with landlords as a tenant has already made me lose my faith in humanity. For how much any landlord I've rented from has cared, it was pretty much passive income for them.
Or pay someone else to manage the property for you. They are not cheap but with the super low interest rates now (along with house purchase and rental markets) you can likely find some workable solutions this way. It isn't passive, but with a property manager it is much closer to passive.
My parents run a property management business and they generally charge $100 of rent after the first month. You have to have a pretty high mortgage or a pretty undesirable property (i.e. have to take low rent) for that to cut into your positive net; In other words, likely if it's a old property you can't get rid of, but unlikely if it's an investment property.