Personal Development

Want to Cover Your Living Expenses With Passive Income? Here’s What You Should Know.

Expertise: Personal Development, Business Management, Real Estate Investing Basics, Landlording & Rental Properties, Personal Finance, Flipping Houses
125 Articles Written

As we have continued to build and scale our business, I have been amazed at the number of people from within our market (and all over the United States) who have come to us looking for the same thing. I hear this story in a myriad of fashions, words, and specifics at least 2-3 times a week.

“I live in ________ city and work a great full-time job. My [wife/husband/spouse/partner] works as well, and we would like to be able to get him/her working from and eventually cover their income with passive income. Eventually, I’d like to work less or quit my job as well.”

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Yes, the passive income. I love it.

This week my partner and I have spent a lot of time chatting with new investors looking for great deals, and I think a few things have really stood out to me in those conversations. There are so many different ways to get the passive income you want and ways to buy those assets that achieve it. Here are a few things we talk about all the time as you are approaching your thought process to build that stream of income.


Have a Game Plan

You want passive income? Great. Now what?

Is this to replace X dollars a month? If so, how much? Do you need $50k a year job? That's roughly $4k a month in passive income, so how many properties do we need? If we are getting $150-200 a month per property after actual expenses, cap ex, mortgage, etc., then we would need to have 20-30 properties.

If we want to have $4k a month in income and 20-30 properties, then HOW do we do that? What is our timeframe? How willing to sacrifice our current situation are we to save and put dollars into deals versus meals, heels, or wheels? (Don’t you like how all those cool things came together there?)

Related: Real Life Case Study: How One Couple Transitioned From Earned to Passive Income

What else can we do? Partner with a wholesaler? Work a second job? Find a partner to do a few flip deals? How badly do you want it?

Educate Yourself

No matter how much you want to know everything today, you can't. I have been in the real estate business for well over 10 years, done hundreds of deals and millions and millions of dollars of transactions, and I STILL learn something every day. Every day.

So if you want to be in real estate, read. Listen to the BiggerPockets Podcast. Get a mentor or coach. Learn. Chat with your friends who do real estate. Call your local trusted real estate agent. Join a local real estate investors association. Do SOMETHING. Learn and learn more.

Now, learning also has a few facets. If you want to go and buy a fixer house and rehab it yourself, then you should chat with others who are doing that. If you want to buy an apartment building, then go chat up the commercial real estate guys or investors who own them. Just because your neighbor is a real estate agent or owns a couple rental houses doesn't make them an expert. Seek out the people who are actively doing what YOU want to do (and doing it well, several levels ahead of where you are or want to be).

Take Massive Action

There is still nothing, in my mind anyway, that replaces the action. If you want to cover that $4k a month in income, how badly do you want it? Enough to give up your Starbucks? Or your luxury car lease? Or the bigger home you have wanted? Or an extra family vacation?

It’s all choices. Choices we decide to do or not do. Do you give up this one thing here to have what you want over there?

And another thing — taking massive action doesn’t mean that you get to buy all 20-30 properties this year. I mean, if you are sitting on a bunch of cash, maybe you can. Or if you want to just go bootstrap deals, get funding, and put them together yourself, you might be able to do that, too. It’s not impossible to scale up pretty quickly. But if you do want to scale on that kind of short timetable, you don’t want to be doing and learning at the same time.


Bring in the Right People

I love working with my partner. He is awesome, smart, and funny. And there is a great balance between his skills and mine. If you aren’t actively working in real estate or your skill set and education don’t match with what it is you want to accomplish, then bring in the right people to help you.

That might mean you can rehab the houses, but you bring in a great property manager. Or you might have no idea how to rehab a house, so you bring in a great contractor. Or you know how to rehab, but are terrible with colors, layout, and design, so you bring in a great designer or architect.

I have ALL of these folks on my cell-phone Rolodex. I have to. There are always things I encounter that I don’t know or am not sure about. And when that happens, I call the people who can help me.

Set Realistic Expectations

So you want the best schools, with the best neighborhoods, with $50k in equity, 70% LTV all-in, and $400 a month cash flow. Good luck! I'd love to buy that deal. As a matter of fact, I'd like to buy a whole bunch of those.

As a matter of fact, I have bought one this past year. One. Out of 60.

Believe me, I’d love to buy another 10, or 20, or 100 of those. But they are hard to find.

Make sure you understand what you are asking for and how you can get it. If you want to find a deal like that, you likely need to have the ability to buy with cash, do a large rehab, and be prepared to find the deal on or off the market with a wholesaler or via the MLS.

Related: Don’t Believe Passive Income Is Awesome? Check Out the Diary of My Week!

But if you are an out-of-state investor and are buying turnkey properties, these deals just aren't there. Know what kind of average ROI and cash flow numbers a market has and what kind of returns are realistic for your investment.


Final Thoughts

Real estate is an amazing tool. It harnesses all kinds of tax advantages. It offers passive income, is a tangible asset, and is something humans have a basic need for. It’s an incredible way to build wealth and income at the same time.

Do your homework. Dig in. Prepare. Save. Learn. Execute. Repeat. Learn. Change. And have fun doing it.

Investors: What advice would you give someone who wants to live off of passive income? Or if you aren’t there yet, what questions do you have for more experienced investors?

Leave all your comments below!

Nathan Brooks is the co-founder and CEO of Bridge Turnkey Investments, a Kansas City-based company renovating and selling more than 100 turnkey prop...
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    Aaron B. Investor from Indianapolis, Indiana
    Replied over 4 years ago
    Nathan, thanks for writing the above article. Your article’s content is a great reminder and/or introduction. Best of luck with your investing.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied over 4 years ago
    Thanks Aaron! So glad to hear that … always good to have the end goal in mind, and build accordingly!
    Joe Harper Landlord and Appraiser from Bartow, Florida
    Replied over 4 years ago
    Twice in the last month I’ve been taken out to lunch. Both times I showed them my books. The first couple had done a few turnkey deals, out of state. At least one of their properties is in Michigan. I just had to shake my head when they were thrilled to be making 8% cash on cash. The home runs are indeed out there but few of them happen in the first year. It’s all about making connections and helping each other all get wealthier. I didnt do my first deal until two years after reading Dolf DeRoos and a year after 4hww. At the time I had been a real estate appraiser for 18 years. Education is important but the mindset is crucial. I could appraise any property anywhere. I had passed three different state appraiser exams. But I had never done a deal myself. “What advice would you give someone who wants to live off of passive income?” – you don’t need more than a few grand to get started. – the goal is not a million in the bank, the goal is to cover your monthly burn as soon as possible, while you still have your health. – always get three bids until you learn prices. – go the REIA meetings anyway. – your personal relationships will suffer, make time for friends and family and your SO. (I still struggle with this one).
    Shelly Scruggs from Baltimore, Maryland
    Replied over 4 years ago
    should purchases have equity in them?
    Steve Vaughan Rental Property Investor from East Wenatchee, WA
    Replied over 4 years ago
    Great article, Nathan. Not many will choose my scorched earth, get your monthly expenses down to nothing at first plan but it worked for me. Our tastes grew with our passive income. Once we first believed we could, had motivation to change, got educated and took action we were on our way. Love your final thoughts to be willing to change and to have fun!
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied over 4 years ago
    Steve … I love that man! Awesome job, and congrats on getting to where you are. I love hearing stories like that!
    Shelly Scruggs from Baltimore, Maryland
    Replied over 4 years ago
    Inspiring and a very good read…..Question…..It takes some money to buy…i.e. closing cost, which are never rolled into the back end of a purchase. What kind of funds are needed for closing costs or is there a general percentage range to have saved?
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied over 4 years ago
    It does take some money, and they CAN be rolled into the back end of the purchase if you are able to refi all your dollars back out of the deal. This is a bit difficult in the market place right now, but I have, and it can be .. done. Best is to start saving, find people doing what you want to do, and learn/do!
    Andrey Y. Specialist from Seoul Korea | Honolulu, HI
    Replied over 4 years ago
    Why would someone want to give up starbucks, luxury car, and multiple vacations now when they are younger.. so that in 10 years (when they may be less healthy, less energetic, or dead) in order to do those same things when they are older? I ponder this often when I hear this sort of stuff.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied over 4 years ago
    Andrey … I think the point here is to do SOME of those things, but don’t go crazy. Budget and build your lifestyle under your income, and then be able to grow into your lifestyle as your passive income grows. I enjoy a coffee now and again, and enjoy traveling, etc … but I make sure that it doesn’t interfere with my ability to continue to buy more properties, adding to my monthly passive income … growing my ability to take a longer vacation, and buy more fancy coffee. Its balance… and have fun doing it.
    John Daley Real Estate Investor from Kansas City, MO
    Replied over 4 years ago
    It’s not rocket science, but it does take discipline and persistence. Great post, Nathan. I’ve really enjoyed your recent podcast and posts and would love to connect with you sometime soon.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied over 4 years ago
    Thanks John … indeed, patience/disciple/persistence … set your goals, and go get them.
    Gordon Cuffe Investor from Roseville, CA
    Replied over 4 years ago
    I would bet 100% of the people on bp want passive income and or a secure retirement. I know I do. I only know that real estate, internet marketing or building a large business can get a person passive income. If someone knows of other ways, please tell me. The right work can be rewarding but nothing beats getting away with your family on a nice vacation. ps. I am always looking into finding off market deals with internet marketing or direct mail marketing. I hope you and everybody here achieves their goals.
    David Goossens Investor from San Jose, California
    Replied over 4 years ago
    @Andrey: I’m in construction, and that career path wreaks havoc on the body long term. So that’s why I’m willing to give up the luxuries now. The older guys on the job talk about how much harder those 15 hour work days are as you age. So I’m working long days now for shorter days in the future. Like the article says, “how bad do you want it?”
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied over 4 years ago
    David … I’ve heard that over and over… and EXACTLY. There is a quote out there from the Juice Plus guys … “If you want something you’ve never had, you have to do something you’ve never done.” … I love that.