When I started investing in real estate in 2001 I had two main objectives: get my money working hard for me so I didn’t always have to work hard for my money AND create multiple streams of passive income.
Holding rental properties seemed like such a simple way to create passive income. Buy a house, put a tenant in there, and collect rent. Easy as making a pie. Or so I thought.
And, you know what? It actually is pretty simple. And it’s definitely enabled myself and my husband Dave to enjoy a lot more freedom than any job ever could. We are making money from our properties each and every month and each property grows our wealth a little (and sometimes a lot) each year. Once upon a time we would have said we are earning thousands of dollars each month in passive income, but we no longer do.
The problem with pursuing “passive income” is that you’re telling yourself you don’t have to do any work to make that money.
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.”
That might sound like a great idea but the problem is that trying to build wealth through passive income is like trying to get six-pack abs without working out. It isn’t going to happen. You can’t do nothing and expect to get positive results.
When you buy a property, hire a property manager, and then do nothing more than deposit the rent money into your bank account, you’re setting yourself up for trouble. We know! As I mentioned in my articles Could your property manager rob rent money from you? and Manslaughter and a Crackhouse I shared some of the hard lessons we learned when we did just that.
We worked hard to find the properties, bought them, and then passively let things fall apart!
Now, my husband Dave reviews all the bills and talks to our property managers on a regular basis. For the properties we manage ourselves, we do regular walk-throughs and monitor any bills that are sent our way. We both carefully track and monitor the money that gets spent on each building.
Doing this is far from a full-time job. It really doesn’t require a lot of time and attention. When things are running smoothly it takes less than an hour or two a month for each property to measure, monitor, and adjust to maximize our profits and minimize our struggles and expenses. We no longer believe it’s a passive income source – one could call it leveraged and it definitely has a very high return on time invested – but we do not call it passive. And since we stopped considering real estate to be a passive income stream, we have less problems and we make a whole lot more money!