Are you familiar with the myth? The Myth of living an easy life by getting passive income from Real Estate?
It’s a pretty common theme in many of the Real Estate investing books, but it’s not reality.
To be successful in Real Estate, especially in a landlord, you need to put time and energy into your property or properties.
Don’t get sold on the idea that owning Rental Property is entirely passive, it simply isn’t.
You need to schedule property inspections, you’ll need to show properties, you’ll need to screen tenants and you’ll need to take calls form your tenants when there’s issues. Now some folks will jump in and say that’s why I have a property manager, to do all that for me!
That’s fantastic, but now you still have to manage your manager! Just because you’ve hired someone else to look after it doesn’t mean it’s entirely passive.
You’ll still want to keep an eye on your local economy so you have an idea what’s happening with rents, you’ll still want to monitor your monthly reports from your property managers to ensure you’re getting good service, you’ll still need to prepare all your tax paperwork and receipts for tax time.
In the end it’s just not entirely passive.
Partially Passive Income From Real Estate
Now I’m not trying to say it’s not all bad. You can maintain your own rental properties or manage your property managers and get partially passive income from Real Estate.
To do this though, you’ll want to make sure you have systems, you have the right people lined up and you understand it’s not quite like you may have been led to believe.
It might require networking with other like minded landlords so you have support if you do go away, it might require having a ton of contacts for repairs and maintenance and it definitely requires the right mindset.
The mindset that even if I have to work a few hours this week on my property, it’s still generating income every minute it’s occupied, it’s still getting paid down every month I make a mortgage payment and understanding if I pay off that mortgage I have steady income flowing in each and every month.
So get over the passive part and start thinking about how you can set up your property so it runs smoothly, systematically and with minimal work by you.
Your thoughts? Is your rental property passive or do you have to still put soem time and energy into it most months? Leave me a comment below, share this on Facebook, LinkedIn or your other social networks and lets discuss how passive Real Estate really is.
It’s not as passive as stock markets. But, I found myself watching the trade markets every day when I had my money into the stock markets. At least now, I only spend time doing maintenance work and showing tenants on my rental property when needed. It takes out my stress when listening to the market news.
Hi KL,
Well even stock markets aren’t that passive unless you just put your money down and refuse to look for years at a time, which is exactly what you didn’t do!
There are a few circumstances where you can get passive income, Real Estate just isn’t one of them. Although you can get a pretty big return for the minimal amount of time invested!
Bill
You are absolutely right it is hard to generate decent returns from residential real estate unless you are a large institutional investor investing millions in multifamily, professionally managed complexes. There will nothing or little profit to be had once you are done paying the Property Manager, Letting fees, and repair and maintenance cost etc. In fact more actively you manage (for example doing your own repairs etc.) your residential property the less it will cost and you may make some profit.
Well logical, I wouldn’t say it’s that hard to generate decent returns, it’s just not as hands off as people generally like to promote.
As you pointed out, the more you do, the more you can make so it’s important to go in with your eyes wide open that while not passive, you can make money by being more active with your profit.
Bill