Every extra cent earned could be used toward buying a home
When the going gets tough, the tough get passive income streams. At a time of eroding home affordability, the idea of having multiple income streams toward achieving homeownership is gaining traction.
Loan originators are increasingly advising their clients to find other ways of making income in an age of inflation and soaring interest rates. Seattle-based Frances Nguyen (pictured left), of NEXA Mortgage, sees the tactic as akin to having three pillars to one’s financial foundation.
“One of the things I believe is having multiple income streams,” she said. “Having multiple income streams is crucial just in case something happens to one of them. I believe at the very least having three pillars,” she added. “Think of it as a stool. If a stool is able to stand, then you know you’ll be OK because you’ll know you have the other incomes backing you up.”
There are two streams of income
Nguyen noted the two types of income streams: Active and passive. The former is derived from one’s regular job – known as the “W2 job”, in reference to the Internal Revenue Service tax form used in the US to report wages paid to employees and the taxes withheld from them.
“The first income stream is active income,” she said. “This would be a W2 job or having some sort of high-earning income such as being a realtor or a lender.” Nguyen has personal experience in the latter with her work as a real estate investor through her eponymous Frances Nguyen Group, as she told Mortgage Professional America in a previous interview.
In addition to her work as a loan officer for NEXA Mortgage, Nguyen is also a real estate investor – with a focus on multifamily housing. She places effort in educating others in such wealth-building tactics via monthly meetings with community members.
Then there are passive forms of income, Nguyen said. “Passive income can be cash flow from your real estate investment properties or some sort of residual income, such as having passive income through revenue share. Some real estate companies have an opportunity for revenue share where you can get a portion of their revenues.”
Mortgage mentor espouses the side hustle
Rebecca Richardson (pictured right), a mortgage loan originator with UMortgage in Charlotte, N.C., is a strong proponent of the “side hustle” toward achieving other income streams. She has advised clients on finding an ancillary job toward saving up for a down payment on a home.
“Every dollar you earn in your spare time through a side hustle or part-time job could go toward a down payment,” the self-described “mortgage mentor” said. The value of a side job is heightened given higher costs spurred by inflation, she said.
“With the average down payment and closing costs around $20,000, how does the average person save up enough when everything is costing more due to inflation?” she asked rhetorically. “While some programs don’t require down payment or you may be able to get down payment assistance, most buyers need at least 5% for their down payment and closing costs.”
Find out how much are closing costs and who will pay for these in this article.
Enter: The side hustle. “What about turning your spare time into a down payment on a new home? With a part-time job or side hustle you can do just that. Whether you’re working evenings, weekends or just a few hours here and there, every extra dollar that you earn gets you closer to your goal of being a homeowner.”
Uncertain times all but require side income, broker suggests
Nguyen sees the value of extra income as a buffer against the vicissitudes of time. “Having multiple income streams allows you to have a backup plan in case something happens,” she said, noting the layoff waves that have swept over multiple industries, most notably the tech sector. “You need some sort of backup plan to not only ride through the wave but also to help you qualify for properties in case something happens to your job.”
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