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Sorry, But Passive Income is a Myth for Most Investors. Here’s Why.

Matt Faircloth
1 min read
Sorry, But Passive Income is a Myth for Most Investors. Here’s Why.

Are you one of the tens of thousands of people who got into real estate investing so that you could make passive income? Yep, me too. It is probably the number one reason people get into real estate investing in the first place. Ironically, most people are mistaken in thinking that it’s truly “passive.” They think that they don’t have to do anything and that the money will come rolling in as they sit on a beach sipping cocktails. Now, don’t get me wrong, this is a possibility for certain types of investors. But we have to remember that in order to make passive income, you have to do something for that to happen. No, it doesn’t have to be you personally, but there does need to be someone doing the money-making activities.

The Myth of Passive Income in Real Estate

Let me explain. One of the biggest myths about passive income is that you can make it without actual money. This is just not possible. There has to be someone’s money in the deal—whether it is yours or a private money partner’s. It is the private money partners who are the ones making real hands-off passive income, and that is because they have someone else at work investing their capital for them.

Related: 3 Real Estate Investing Strategies That Aren’t So Passive (& 4 That Are)

In the video, I go into several different options you have to implement capital for others and create passive income for them (while leveraging your time to create profit for yourself). Bottom line: The arrangement between the “money people” and the “doers” is what truly makes passive investing work. So, real estate investors are faced with a decision, do you want to be a “doer” (i.e. active investor) or “money person” (passive investor)?

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Leave some thoughts below on passive income and how it plays between money people and the doers investing money for other people.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.