The Biggest Myth About Passive Income – Episode 980

There’s a huge misconception about passive income. Passive income isn’t actually passive, especially when it comes to real estate investing. On this episode of Investing in Real Estate, we’re diving into this real estate myth.

You’re going to learn an important distinction between passive and active income, and why passive income requires your time and attention. We’ll talk about your critical role as a real estate investor, why investing is like tending to a garden, and so much more!

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Let’s take a look at what passive income is, and see if it’s truly possible to sit back and do nothing while making money. First, we need to define passive and active income.

Active income requires you to give something in exchange. The best example of active income is going to work and collecting a paycheck – trading hours for dollars.

On the other hand, passive income can be earned while you’re lying on the beach taking a nap. It’s income that doesn’t require a swap of your time or resources. One example is a book – you write it, publish it, and collect money whenever a copy sells.

My favorite example, though, is performing assets. They’re assets that generate money without you having to perform for it.

But most passive income isn’t actually passive. That’s a huge, pervasive misconception. You might hear Internet personalities or gurus preaching about an entirely passive system, but that’s not reality. Passive income is actually a byproduct of you putting in the work.

With the book, it takes a lot of time and effort to write a manuscript, make edits, and get it published.

When it comes to performing assets like real estate, there’s also a lot of legwork up front: finding deals, communicating with property management teams, finding funding, and setting up your business. But once you’ve done the work, the passive income from rent starts to roll in. Your hard work pays off.

Now here’s where people get mixed up – even after you’ve got passive income from rent rolling in every month, you have to maintain, nurture, and – if you want – grow your portfolio. Because there’s maintenance involved, we can’t call it truly passive. But think of it like a garden. If you don’t weed it, eventually your beautiful garden will be taken over by overgrowth. No one else is going to do it for you. You have to make a maintenance plan, start the process, and do your due diligence by keeping an eye on things.

Ultimately, it’s your responsibility to pay attention to your properties and nurture your portfolio to build the life you want.

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