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

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

1 min read
Matt Faircloth

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, N.J., is a developer and owner of commercial and residential property with a mission to “transform lives through real estate.” DeRosa creates partnerships to finance select real estate investments and has a proven track record of providing safe, profitable investment opportunities to their clients.

Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to hundreds of units in residential and commercial assets throughout the East Coast. Under Matt’s leadership, DeRosa has completed tens of millions in real estate transactions involving private capital, including fix and flips, single family home rentals, mixed-use buildings, apartment buildings, and office buildings.

Matt is an active contributor to the BiggerPockets Blog and has been featured on the BiggerPockets Podcast three times (show #88, #203, and #289). He also regularly contributes to BiggerPockets’ Facebook Live sessions and teaches free educational webinars for the BiggerPockets Community.

Matt authored the Amazon Best Seller Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money. The book is a comprehensive roadmap for investors looking to inject more private capital into their real estate investing business and is a must-read for anyone looking to grow their business by using private lenders and equity investors. Kirkus, the No. 1 trade review publication for books, had this to say about Raising Private Capital: “In this impressively accessible introduction to a complex subject, Faircloth covers every aspect of private funding, presuming little knowledge on the part of the reader.”

Matt and his wife Liz live in New Hope, Penn., with their two children.

Matt earned a B.S. in Industrial and Systems Engineering with a minor in Business from Virginia Tech. (Go, Hokies!)

DeRosa Group’s YouTube channel

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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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To make passive income, you have to do something for that to happen. No, it doesn't have to be you, but someone needs to do the money-making activities.