The Truth About Passive Income: Is it Ever REALLY “Passive”?

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What is passive income? It’s very important to find the answer to this question because there are many myths attached to it. Many real estate gurus have taught their students that “passive income” means there will be no work involved. They won’t have to get their hands dirty, and the profit will just magically and consistently come in every month without having to lift a finger.

I would like to dismiss this myth by telling you that every successful investor in any industry will always be doing certain amount of work. It might involve overseeing of the investment portfolio, measuring profits or return on investment, or making adjustments.

In case of real estate investment, “passive” could be termed as something where you don’t necessarily have to do things like rehabbing the property or managing tenants. Services like turnkey investment give leverage to those investors who are looking for generating passive income without quitting their day jobs.

The thing is there is tremendous value in working with a company that has already dealt with most of the issues. They are experienced. They have been investors themselves and they are managing investment properties on a daily basis. You are actually paying for their experience, so you don’t make mistakes.

Related: Why Investing in Garages Is an Ideal Source of Passive Income

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Turnkey Real Estate Companies

With turnkey, what actually happens is that you hire a turnkey company who have investment properties for sale. You check the properties, select the one that suits your investment portfolio and buy it. Every month, you get your monthly check from the rent after the deduction of turnkey company’s fees. This is the price you pay for highly-skilled professional management, which saves a lot of your time.

Some of the tasks that a turnkey company performs are:

  • Handling phone calls, including late night emergency calls.
  • Finding good tenants, meeting them, showing the properties, answering their questions and renting them out.
  • Collecting rent from tenants every month on your behalf and disbursing funds to your bank account. If the tenant fails to pay rent on time, collecting the payment, including late fees.
  • Providing you with an itemized statement showing income and expenses related to your turnkey investment property.
  • Taking work orders, contacting contractors and getting repairs done.
  • Working with county and other government entities.
  • In-house property maintenance services.
  • Working with housing authority, lawyers, contractors, dealers, agents, cable guys, phone companies, gas and other utilities.
  • Arranging home inspections.
  • Marketing/Promotions

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

Conclusion

The fact is that generating passive income is possible if you can find the right people to support you and for that, you need to do some work. You will have to get out there, meet people, look at their portfolios and once you are satisfied, you can rely upon them. Just make sure that you are doing your part right. It might not require your time on a daily basis but you’ll need to talk to your property managers on a weekly or biweekly basis.

Please share your thoughts about passive income. Do you think it’s possible?

Leave your comments below!

About Author

Mark Ainley

Mark Ainley is founder of GC Realty and Development and GC Realty Investments. Mark has been an active real estate investor since 2003. He started slowly by flipping condos and acquiring a couple of investment properties. Since 2003, Mark and his team have successfully renovated and stabilized over 200 properties.

2 Comments

  1. I like the idea of turnkey companies that handle the work on your behalf but I was wondering, are these different from “property management” companies, or are turnkey services a comprehensive form of property management?

    Also you mentioned they provide itemized statements of income and expenses, do they provide tax forms and documents at the appropriate time of year as well?

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