renting

I was at an investor’s meeting not too long ago talking with a young, idealistic, newbie investor who brushed off one of my real estate suggestions and told me he was looking for passive income. He wanted -in short order- to work only 4 hours per week. Ahh, yes, the fabled four-hour workweek, I’ve heard of it so many times yet I’ve never actually known anybody who had one, not anybody making any money at least. I think it must be next to the pot of gold at the end of the rainbow.

I admit, I’m going a little overboard with the pot of gold bit, but it’s for a much-needed theatrical effect. To be fair, real estate is like any business and there are some investors out there who have worked hard, became successful and were able to build a system that they could back away from a little and turn more operations responsibilities over to others. Make no mistake, however, it took a lot of work to build that system.

When they say passive income they are usually talking about rental properties. They tell you to go buy a property. Rent out said property to a tenant who pays the mortgage and expenses and you keep the difference. Easy right? Maybe if your Donald Trump and you start out with a million dollars to put down and pay management.

Lets analyze a more realistic scenario.