Additional passive income sources

By Josh July 26, 2018

Despite making more money at my (new) day job than I’ve ever made before in my career, I am constantly looking for other ways to add to my banking and investment accounts. This post will cover two that are easy and relatively lucrative!

Bank Account Bonuses

Every once in a while, I receive fliers in the mail that are basically advertisements for banks trying to get me to open up a new checking or savings account with them. Until the past couple years, I would toss those straight into the trash, because I already had a free checking account, had been with my then-bank for 10+ years, and didn’t want to cause any extra work for myself in keeping track of multiple bank accounts across various banking institutions, credit unions, etc.

But as part of my growing travel-hacking knowledge base, I became familiar with Doctor of Credit, which also maintains a list of bank account bonuses that are available at any given time. This list opened up a world of *free* income to me, as long as I could read the fine print and comply with all of the listed requirements.

So what type of requirements does a bank spell out in order to get the bonus? Sometimes you have to set up Direct Deposit and receive a couple deposits from your employer or a certain amount of deposits such as $500. Other bonuses require a minimum number of debit card purchases/swipes, and I’ve been known to make 5 minor transactions in quick succession to meet the minimum requirement (pack of gum, 1 gallon of gas, a bottled beverage, etc). One bonus I am currently working on achieving requires either a direct deposit OR $2,500 minimum balance, 1 debit card purchase, 1 bill-pay of a recurring bill, AND a mobile check deposit. I will receive a $250 bonus for doing each of those 4 things!  The one I received most recently was for setting up a Business Checking Account, for my Uber business, duh! 😉 This offer required a $1,500 minimum daily balance for 60 days, and a combination of 5 debit card transactions and/or ACH deposit/payments. I did 5+ of both, just to be sure! Free $300 in my account just the other day, which is basically a 20% return in 60 days for the $1,500 I parked there for a couple months.

So why do banks offer these bonuses? First, they think most people aren’t going to follow-through with all of the requirements, so they won’t have to honor the bonus. Second, they get you used to using the account for debit purchases, direct deposits and bill-pay, so they think inertia will work against the consumer and they will stay-put. Thirdly, many checking and savings accounts have monthly fees, but there are *almost always* a way to have the monthly fees waived, which usually requires a minimum balance of $1,500 in a checking account or up to $15,000 in a savings account, to remain fee-free. But I think that if I can figure out how to switch my behaviors TO this new account, I can just as easily switch FROM the account.

If you decide to proceed with going after these bank account bonuses, the best thing I can tell you is to read the terms and conditions carefully, keep a copy of those terms, and make sure you meet them within the specified amount of time. The next best thing I can tell you is that these bonuses ARE TAXABLE INCOME and will be reported to the IRS on a 1099-INT form. But I have earned $1,350 so far this year from bank account sign-up bonuses, and that’s almost 2 whole mortgage payments ($680/month) for me, so this is not an insignificant sum in my budget. And finally, beware that many of the accounts have language that the account must remain open and with a positive balance for 6 or 9 months, or the bonus will be clawed-back upon closure.

Tradelines

This next topic is a lot scarier to many people, and I spent a lot of time trying to wrap my head around it before ultimately giving it a try last December. I want to caution you, dear reader, that this is something I tried, did successfully for about 5 months, then stopped participating because I had one of my oldest credit accounts shut down without warning.

Tradelines are basically any contract you have with a banking institution for a consumer line of credit. AKA a credit card. You have a contract in place to borrow up to a certain limit, with payback terms, including interest payments per the agreed-upon terms. These tradelines are reported to the credit bureaus, and they are what make up your credit report.

So how does one make money with Tradelines? You basically “rent” access to them! There are companies out there who need a supply of tradelines to sell as inventory to borrowers with poor credit who need a temporary bump in their credit score to apply for a home or car loan of their own. The process is to add the person as an “Authorized User” on your long-standing, excellent credit account, thereby having your credit card tradeline report to the borrower’s credit report for a few months. The borrower NEVER gets any information about you, and they never receive an Authorized User card – the card (if issued at all) will be sent to you.

It generally only took me about a minute to log into my online accounts with a given credit card, click “add authorized user”, type in their personal information (first/last name, address, email address, sometimes SSN) and they would begin to receive a credit score boost within a month. At the end of 2-3 months, I would usually need to make a phone call (2-10 minutes depending on how much hold-time) to remove the authorized user. The telephone agent will ask if you can get the card back from the user (which you can do, because you’re still holding onto the card in the first place), and you tell them yes. Then you destroy the card! And you get paid anywhere from $50-75 for cards that have been open 2-5 years, and can earn quite a bit more for older cards and/or higher credit limit cards.

So why did I stop? As I mentioned before, I had one of my oldest credit cards shut down by Discover. I opened the card in 2012, because I liked the idea of 5% cashback on rotating quarterly categories. Discover actually had one of the easiest processes to add AND remove Authorized Users, so I thought things were going along really well… that is, until I tried to remove my 4th and add my 5th Authorized Users on the same day. I think that must’ve raised red flags at Discover, because my online request was denied and I had to make a phone call. “No problem,” I thought… “Discover has excellent, US-based phone agents.” I was able to talk to an agent and get the request approved. But then, a month or so later, without any digital or mailed communication, my DiscoverMore Card was shut down.

In all, I “rented” out my good credit (score over 800 on all of my recent credit card applications and using all of the free tracking apps) on 17 occasions. This earned me a total of  $1,125 in 5 months, and I probably only spent a total of 2 hours online to add, and on the phone to remove, the authorized users. But after my Discover shutdown, I didn’t want to risk having the same thing happen with Chase (my beloved travel hacking cards issuer), so I stopped participating in the program.

The Wealthy Accountant has a good write-up about Tradelines, with more details than I have provided. Check out his post if you want to learn more.

My first side hustle: Uber driver

By Josh March 9, 2018

[This is Part 1 of a 3 part series on the ups and downs of my first side hustle. I will link to Parts 2 and 3 at the bottom.]

Before I get started, I need to give a little bit of background as to why I ever considered becoming an Uber driver:

  1. I spent 8 years as a City Planner in my area, so I know the area very well.
  2. I had just started a new job, which allowed me to work from home and completely eliminate my commute. I figured I might as well put my car to good use, otherwise it would just sit in my parking spot.
  3. I was driving a BMW 525i, on which I only owed about $2,500 at the time. My thought was that I could drive Uber, make some extra cash and pay off the loan. I completed that in only 2 months.
  4. I’m don’t really get excited about going out to the bars and wasting money, but figured this might allow me to at least get out, socialize, and make a little bit of money. With the cash surplus, I maxed out my Roth IRA for the first time, and started a taxable brokerage.

I had heard about Uber maybe 6 months earlier, as my brother in law had been a driver for a while in Indianapolis. Indianapolis has major sporting events throughout the year, with the Indianapolis 500, Colts, Pacers, Big Ten championship games in various sports, etc. I live in Southwest Florida, which is a tourist destination in the winter months for people up north who are escaping cold, snowy weather in favor of beaches or golf trips.

One thing I really liked about the opportunity to drive with Uber was that I was able to make my own hours. With the Uber Partner app, I could turn on anytime I wanted to/was available to drive, and I could shut it off anytime I wanted to/needed to do something else.

Uber works based on GPS, so the closest available driver gets the first opportunity to accept or decline the ride request. We only have 15 seconds to accept, or else the request is passed along to the next closest driver. This practice provides for the ride to be provided as quick as possible to the passenger, while all-but-avoiding requiring a driver to drive across town just for a pickup. This is a major advantage over traditional taxi services in moderately-sized cities.

In the early days, there weren’t a whole lot of rides to be had, and sometimes I would have to drive 8-10 miles for a pickup, and the passengers would only be going a mile or so down the road. But because Uber needed for there to be some level of coverage throughout the area, they ran driver promotions that would pay up to $20 or more per hour guaranteed, as long as the driver stayed logged on and performed an average of one trip per hour. That lasted a few months, as Uber ridership began to grow.

In this aforementioned touristy area, lots of trips begin or end at the airport. Again in the early days, this was not a problem. We would sit in the cell phone lot and wait for a ride request to pop up. But as more drivers came along, the “game” became more competitive. Some drivers would figure out a location to park their car where they were slightly closer to the terminal for the ride request to ping them instead of the other drivers in the cell phone lot, but those locations were remote; sometimes a 15-minute drive from the terminal, which I thought was excessive to make our passengers wait that long.

I was only driving part-time, usually just Friday and Saturday nights for 4-5 hours, and I was easily bringing in $200-300 every weekend. It was much slower in the summer months because that is our rainy season, coinciding with the Atlantic Hurricane Season, so tourists don’t flock to this area in the summer months. Still, there were plenty of people beginning to use Uber to go to/from bars and the beach, especially on holiday weekends (Memorial Day, Independence Day, Labor Day weekends) so I had a slow but steady bit of business coming in.

I also seemed to do better than most drivers in terms of my driver rating and in tips. Drivers and passengers each have the opportunity to rate each other, which provides for accountability for both parties. You can’t be an awful driver and last very long on the system, because your passengers will report you to Uber. Conversely, you can’t be an annoying, loud, obnoxious, or messy passenger very often, or you will have trouble getting drivers to accept your ride requests from a 3.2 out of 5.0 star rider. I was never very good at small-talk until I was driving every weekend for Uber. Most people appreciated my knowledge of the area, or recommendations for restaurants, site-seeing or golf. It also helped that I am a single guy driving a BMW, which I kept meticulously clean. It compared well against other Uber cars, which doubled as family cars when not in service with Uber. Despite it being a 2007, I was constantly being asked if it was new, even up until a few months before I traded it in for my current car in August 2017.

I continued to push harder and harder with my Uber side hustle, but the income was limited by the amount of business in a given area at any given time, divided by the number of other drivers online and available in those areas. Because of the way the GPS-based system worked, there was no way to differentiate myself as a top driver that passengers could request in lieu of the straight-up-gambling option in the app. But one time, I had a sweet old lady of 75 years of age, who asked me for my business card so that she could contact me directly whenever she needed a safe ride to the doctor’s office, airport, or to a restaurant or wine bar. I was ashamed to admit that I didn’t have business cards for my side hustle, since I only operated on the Uber app, and it was all random. She explained that at her age and condition, she didn’t want to just trust anybody, and she has her own driver in every city where she travels and has a home. She gave me $10 and said “go to Vistaprint and get 500 cards for $9.99” so I did that and have turned her $10 into more than a few thousand by offering scheduled pickups for airport pick-ups and drop-offs. This was finally one area where I could differentiate myself from other drivers, providing a private car service with a well-groomed driver and a clean BMW sedan.

Everything was going well (except my sleep schedule on the weekend) but there was still a limit on how much I could make. And I would go through periods of being completely burnt out…

Part 2 – The downsides of Uber

Part 3 – Why I’m done with Uber

The downsides of Uber

By Josh March 9, 2018

[This is Part 2 of a 3-part series on my first side hustle. If you missed Part 1 about why I loved Uber when I got started, go back and read it here. Part 3 will be linked at the bottom.]

Throughout the first couple years (out of the 3 years that I drove Uber), I felt like I was making a steady little sum of money in my free time. It definitely wasn’t enough to get rich off of, but there were times when I would make enough to live off of the Uber money (and tips) that I could save my entire day-job paycheck. There were even a few times that I brought in enough in 1 week to pay my monthly mortgage payment!!

But all good things come to an end, and sometimes abruptly! In a side hustle like Uber, you have to have a reliable set of wheels. BMWs are known for durability, but they are probably even better known for how FREAKING EXPENSIVE they are to maintain. A set of new tires would cost $900+, same for brakes & calipers, and I don’t even want to think about the cost of the electronic water pump and those $110 oil changes. Several times, I had belts or hoses that would get all wonky, and those fixes were never cheap and rarely fast.

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Besides all of the cash flowing into the pockets of mechanics and the BMW dealership, cash seemed to be flowing out into thin air. By this I mean my poor depreciating car value. When’s the last time you ever drove 1400 miles in a week and NEVER LEFT YOUR COUNTY?? While 1400 was on the high end, I was averaging 1000+ miles a week and not leaving a 2-county area. All of those miles piled up quickly on the BMW, quickly racing from around 94,000 when I started driving Uber, all the way to 156,270 when I traded it in. Despite paying $20,000 for the car (used, I was the third owner at 55,000 miles), it dropped in trade-in value down to $500. The main reason for the low-ball trade-in value was that the air conditioner (compressor AND coils) needed a complete replacement, since I live in Southwest Florida and this was AUGUST when the whole thing went kaput! Unless you enjoy a sauna on wheels, you cannot drive a car with no A/C in the summer in South Florida, and don’t even think about putting it into service with a rideshare app like Uber. Effectively, my car was totaled when the A/C went out, because the repair was going to be nearly $3,800 while the KBB.com value was $3,400. The dealership was nice to me and bumped up their $500 offer to $1,000, which saved me a bit on sales tax.

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So I bought a new-to-me car in August of 2017, a 2015 Toyota Camry Hybrid SE that I financed for 4 years at 5.2%. They could have told me 20% but it wouldn’t have mattered much, because I was determined to pay it off ASAP. I put this car into service with Uber immediately, and watched my odometer race up from 41,547 to 53,064 in 4 short months. This was even shorter than you might think, because Hurricane Irma impacted this area on September 10, 2017, and I did not drive for about 10 days. One major benefit of this car was the hybrid motor, which allowed me to average 41.5 miles per gallon. Fuel costs are of utmost importance to Uber drivers, especially those like me who put 11.5k miles on their car in under 4 months 😉 Another benefit was that it was new enough and at a high-enough trim level to qualify for Uber Select. I averaged a couple Select rides per week, which pay approximately double the amount of UberX (low-cost option) rides, and the Select passengers were much more likely to tip, as well. UberX is basically the taxi equivalent at 40% of the local taxi company price. Uber Select fares are comparable to taxi rates, but you get the benefit of a newer, nicer ride and a driver that’s a regular person instead of [insert stereotypical image in your mind of a taxi driver].

I pushed very hard those first 3 months after buying my car, because I really wanted to pay off that car loan. Between August 14 and December 12, I completed $5026.29 (after Uber’s cut) on the Uber platform, and $1990.29 in cash rides and tips (after Square card reader fees). Coupled with some money I had saved while driving my previous car, I paid off the $15,000 car in just 86 days! A huge weight was off of my shoulders, but I lost the drive to keep driving.

Part 3 – Why I’m done with Uber

Why I’m done with Uber

By Josh March 9, 2018

[This is Part 3 of a 3-part series on my first side hustle – Uber Driver. If you missed them, go back and check out Part 1 and Part 2]

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As I documented in Part 1 of this series, my main side-hustle is being an UberX driver on nights and weekends. At the time of this writing, I have completed 2,538 trips on the Uber platform, and maintain a 4.92 driver rating. I used to drive a 2007 BMW 525i, and nearly half of my passengers first comments were always something like “I can’t believe we got a BMW” or “Is this thing new?” I’m sure that at least some of the tips I have received are due to having a nicer ride than some Honda or Kia (sorry Honda and Kia Uber drivers, but nobody gets excited about your car when you show up). I now drive a 2015 Toyota Camry Hybrid SE that qualifies for Uber Select, but half of people cancel the Select requests when they see Camry, not knowing it’s actually quite nice.

A major downside of driving for Uber is clearly the expense to maintain my car. The BMW ran on premium fuel, so even though gas prices are in the $2.40/gallon range locally, I was be paying $2.90 per gallon. Expensive maintenance and rapid depreciation were also discussed in Part 2.

I neglected to mention the “grand prize” that some drivers would talk about when we’d sit together at the airport waiting on rides. I use quotation marks on that prize, because it is definitely not the kind of thing you want to win, because it’s the “sick passenger” award. Usually some 20-something, intoxicated passenger, late on a Thursday, Friday or Saturday night, would come stumbling to your car and you decide to chance it. Most times you get lucky, but sometimes you win the opportunity to clean up a mess left by a complete stranger. Don’t forget to take pictures first, because those can be worth up to $200 when you send them to Uber to assess a cleaning fee. I was awarded the $200 cleaning fee 3 times in my BMW, but avoided those situations in year 3 with the Camry.

As I mentioned, I drive in Southwest Florida. This is a busy tourist destination from Thanksgiving to Easter, with our warm sunny beaches providing respite from cold Northern winters for millions of visitors each year. Between shuttling people to and from the airport, many trips are completed taking our tourist friends to area shopping and dining establishments, and the occasional bar or concert. Unfortunately, with the passing of Easter each Spring, the roads begin to clear up, fewer flights arrive each day, and our rainy season arrives on schedule each June. Fewer tourists mean fewer paid rides, meanwhile Uber continued to sign up new drivers as the demand waned. It was not uncommon to see hundreds of cars online, waiting for ride requests, on a Friday or Saturday night.

In addition to fewer rides, Uber also undercut the pay for its own drivers by 21% in the Fall of 2015. Just as the busy tourist season was about to begin, the per-mile rate in my market went from $1.20 to $0.95. They didn’t bother to consider that UberX rates were already 50% of the local taxi fares, Uber wanted to cut the rate further. Remember that every mile spent driving back from a drop-off is wasted fuel and time for the driver. The only way for these prices to make any sense would be for trips to be so bountiful that a driver could pick up another passenger soon after dropping off the previous one, and preferably near the same spot.

Before the two items listed above took place, I used to be able to make $500-700 per week (on the side) and $100-150 in tips. Later on, I would earn $100-175 a week and $20 in tips, if I was lucky. It’s hard to continue to pay for regular car washes, detailing, air fresheners, etc. when those costs remained constant, but my fare income had dropped by 80%.

It became difficult to rely on driving for Uber as a reliable side income, let alone sole income for many of my Uber buddies who took it on as a full-time gig. There were drivers in my area driving 2 hours north every day to drive in the Tampa/St. Petersburg area and then driving 2 hours back to Fort Myers/Naples in order to make a living. That seems like an awful lot of unnecessary wear and tear and fuel spent to get up there and back each day. To make things worse, there were drivers from Miami and Fort Lauderdale who would drive to our area, because our fares were slightly higher and they found Fort Myers/Naples to be more plentiful in rides. So much waste involved in all of this!

I probably don’t even need to mention all of the terrible headlines that Uber (corporate) made in 2017. Things got so bad that the founder and CEO got tossed. I received constant questions from passengers about what was going on in the company, and all I could say was that “I don’t really know, we’re all just independent contractors” and try to change the subject. Those fools in corporate were making millions of dollars, while us chumps who actually bring in the revenue were making $100s. I was not a happy camper.

With all of these Uber headaches, I shut it down for good on December 12, 2017. Despite not driving for Uber any longer, I have continued to drive my private clientele who contact me directly, or private car service for other drivers when they are double-booked. I’ve also continued to receive Referral fees from Uber, $5 at a time, three times so far this year. So I’ve still made $547 so far this year and have spent considerably less than that in gas and maintenance. But I only do it when my schedule is free, instead of allowing Uber to become my default option for any and all spare time. I’m happy to be in a position of owning a paid-off car with 55,000 miles and many, many years of life left. I don’t want to push this thing too hard and have to jump back into the car-buying business anytime soon.