Last year I wrote a post about the power of having multiple income streams. I advocated for the compound income phenomenon, which I think is very important for building wealth. If you’re not familiar with that article I recommend reading it first. So far using multiple incomes have continuously benefited my personal finances so I’m pretty confident about this theory 😉 I wonder why I haven’t seen it written about in any economic or finance book I’ve read yet.
Since my last post I have acquired yet another source of income. Rent 😀 Buying property and then renting it out is a common way to make income for many other people. So I thought hey, why not give it a try myself. Late last year as many of you know I purchased some land and rented it to a farmer. Golly! I remember being all kinds of excited when I became a landlord, especially when I received my first rental cheque in the mail. Such a wonderful feeling to receive money 😀
You said it Mr. Krabs (~_~) With the addition of a new land investment I now have a total of 5 income streams. As I’ve illustrated previously, each of my incomes benefit one another and they all feed off each other’s synergy to create new opportunities. The newly acquired rental income is no different. I was already aware of the vast opportunities in the agriculture industry through the research I did when I bought fertilizer and farming related stocks like Potash Corp, and John Deere. Then when I saw on the news that hedge fund managers were buying land in Saskatchewan it peaked my interest. So I did some research, most of which was just reading related articles on the internet with the help of Google. In the end I decided to buy a small parcel of land which planted the seed for my next income source 🙂 If I had not been a dividend stock investor I may not have even thought about pursuing this path and would not have any rental income today.
Below is a relative chart of my after-tax income for the last several years.
Q2 2013 is where I currently am. The last two columns to the right on the chart are only estimates. The reason why rental income is higher in the last 2 quarters of 2013 is because next month (September) I may be closing on another land deal. If it goes through as planned I will have more land and my rental income should increase (^_^) Shortly after I bought my first land last year and rented it out, I got a call from an elderly gentlemen asking if I
wanted to buy his farm was interested in a land that he wants to sell at an auction. It turns out that he is the cousin of the renter on my first farm (゜o゜) Egad, he found out from my tenant that I bought the farm, and now he wants to sell his farm 🙂 I won the auction and now we’re just finaling some paperwork to complete the transaction. The more income sources we have the more hidden opportunities we can unlock. If I had not bought the first farm, I would have never gotten the phone call which lead to me buying this second farm today. There’s also the added bonus that I don’t even have to look for another tenant because the existing renter has already agreed to rent the other farm as well. So once again we see the power of compound income at work here where one opportunity naturally leads to another 😀 The total value of multiple income is clearly greater than the sum of its parts because of all the intangible benefits 😀
Making additional money can be difficult at first, but it should get easier as we discover more and more streams of income. Most of us like myself start our adult lives with just one income, a salary. But over time we all have the ability to find new income streams. Some will only be temporary like a summer job, but others will be perpetual like rental income. We must hold on to those sustainable income sources and foster them with care, because if we do they will reward us many times over for the rest of our lives 😉
Is this the third farm you will be buying?
This would be the second :0)
Didn’t you win the second farm in an auction and say you need to save 25000 by July 31? So wouldn’t want you are talking about above be the third farm (the one next to your first one).
You’re right, I won this second one at the auction so I actually shouldn’t have said I bought it. I was only thinking about the purchase agreement that we signed, which is the same as any other land transaction. Sorry for the confusion. The government hasn’t granted the seller permission to subdivide his yard site yet which should have been done in July. If his yard site get’s approved then I assume the completion date will be postponed to September, which is nice because it gives me more time to save up my $25K 😀 I was recently approved for a HELOC so that should help a lot I think. I’ll fix the post so it’s more clear. Thanks for catching that.
Is there any farm land equivalents to a HELOC?
Yup, there is the option to take out a second mortgage on the farmland once I have build up more equity in it 🙂 For example if the land goes up in value to $200K one day, and I still owe $100K on the initial loan, then I should be able to take out another $50K against the property via a secured business loan or a farm equity loan ie: FELOC
I’ve always been a fan of having multiple income sources, especially in a tough economy where your main one could dry up overnight. Sounds like you’re doing really well for yourself, great work!
I would be much more worried about my financial situation if I only had one source of income because like you say, it’s a tough economy right now. It’s like how they say when your neighbor loses his job it’s a recession, but if you lose your job it’s a depression.
I’ve always been a big fan of multiple incomes. In reality, you’re diversifying your income – if one of the streams takes a hit, you’re covered with others. If it makes sense in investing, it makes sense in income too!
I’m surprised you haven’t mentioned getting married as a way to increase your revenue streams! 🙂
Imagine if I were married and my wife also had 5 income sources. That’s 10 altogether 🙂 We could both decide to quit our full time jobs and still have 8 streams of income flowing into our household. Too bad I don’t know a lot of single women. I should socialize more :0)
I’m so happy to have bloggers like you 😀 I’m starting school (a two year course) in the fall. I have been financial planning for myself before I’m even making any serious cash 😀 started out with swing atrading educationg, starting a bit of long term inveatment planning and farmland had been on my radar. Hopefully one of my first investments when I start making money will be farmland thanks to your articles making me more confident to do so 😀 keep up the posts! I read every one of them 🙂
Thanks cardinals. Long term investment plans are best made early in life 🙂 I’m sure the world will probably present to us different investment opportunities by the time you finish school but the fundamentals of a solid financial strategy won’t change. An education is one of the best investments anyone can make for their human capital so you’re on the right path :0) Great use of smiley faces by the way 😉
This is interesting post. Congrats on being a landlord. I bet you must be excited about it. I have an itching for something like that, but this kind of business seems scary to me.
Thanks Martin. Options trading scares me in the same way. I’m curious to learn how it works though. There’s so much more to the world of investing that I haven’t learned yet.
Congrats. Are these farms local to you? Or are you buying them in another province? Ie like u mentioned the hedge funds are doing.
Thanks. I live in B.C. but the farms are near Regina in Saskatchewan. I had to buy out there because B.C. farmland was too expensive and still is. Pretty much 10 times the price over here compared to the prairies for the same land area.