When Dave and I first began real estate investing we did it with two main goals in mind. The first was to get our money working for us instead of always working for our money. The second goal was to build up passive income streams. Unfortunately, we’ve discovered that the label you put on things can create problems, so we no longer call it “passive” income.
The problem with pursuing “passive income” is that you’re telling your mind that you don’t have to do any work to make that income. Keith Cunningham, author of Keys to the Vault says, “The label becomes the experience“. Using the word passive for anything means that you are going to do the least to get the most.” Trying to build wealth through passive income is like trying to get six pack abs with passive fitness. It isn’t going to work.
When you buy a property, hire a property manager, and the only thing you actively do is deposit rent money into your bank account, you’re setting yourself up for trouble. We know! We have an entire archive of articles on our website of the problems we created for ourselves in pursuit of passive income. I recently wrote a couple of articles for the on-line ezine Early to Rise about this in “The Problem with Fire,” and “An Easy to Prevent Scam,” where we had a property manager rob rent money from us, we were featured in a local paper as owners of “local crackhouse,” and we were fined in court for fire code violations. All of these things happened to us early in our real estate investing career because we had been in pursuit of passive income. We worked hard to find the properties, bought them, and then passively let things fall apart!
Now, we constantly reviews all of the bills, call the property managers on a regular basis, and we both carefully track and monitor all of the money that gets spent on each property.
Listen, I’m not saying that you have to treat real estate investing as your full time job. You can absolutely do it with a very small allotment of time and attention. All of these tasks take less than 5 hours a month to do. But the big difference is that we no longer consider real estate to be a passive income stream. We actively measure, monitor and adjust to maximize our profits and minimize our struggles – and we sleep better and make more money from our real estate investments now!