How To Make Real Estate Passive Income And Have Financial Peace of Mind
Most people know about and focus solely on active income. Active income buys fancy cars, expensive homes, and designer clothing, all while simultaneously being taxed at the highest rate out of any income.
Yep, read that last part again. Active income is the most heavily taxed type of income.
Why keep hustling at earning active income, only to have such a large portion taxed? The focus should also be to generate and build passive income until it equals or surpasses your active income, which is what we’re talking about in this article.
School Doesn’t Prepare Us
Unfortunately, the US school system grooms us to become cogs in the active income-generating and tax siphoning cycle. We’re taught to work and trade time for income.
Even degreed doctors and attorneys who land high-paying salaries are doomed to trade their time for money for the next 35+ years. That’s the only thing they’ve been taught – to work, earn their $16,000 paycheck each month, pay about 40% of it in taxes, and be left with $9,600 a month in earned income.
While that’s still a high income, pay attention to the tax value. How much do you pay in taxes?
In comparison, a person who earns $16,000 a month in passive income (cash flow from rental properties or other real estate), only $2,300 would be paid in taxes. Which means they can take home $12,800 each month. Which would you rather?
You Still Need Active Income
To be clear, you need to earn and save active income so that you can invest to create passive income. Maybe your goal is to work only 4 hours a week, or perhaps that sounds boring. Either way, the goal is to accumulate enough savings to invest and then continue to invest until the passive income earned matches or exceeds your active income.
Financial Peace of Mind
It used to be that you went to college, got a good job with a pension, and rode that wave until the day you retired. Things aren’t like that anymore and we’re 100% individually responsible for putting away savings SO THAT we can retire.
This may resonate with you, which is probably why you’re here right now. Most likely, you’re on the hunt for a tried-and-true method of achieving financial peace of mind. In other words, you’re interested in building multiple streams of income to cover your living expenses, whether or not you work daily.
One way of achieving the “mailbox money” of your dreams is to have multiple properties generating passive income streams. This allows you to design your time and your life instead of fearing layoffs or being concerned about having enough money when you retire.
Why Real Estate Passive Income?
Think about how you dream of spending your extra time. If you’ve wished for more time freedom to spend time with your kids or to see the world, passive income is the ticket!
You may already know that it is possible to generate passive income from the stock market. You may also know that it’s a roller coaster ride, and you would rather avoid that drama.
Real estate investing creates reliable income streams because you’re investing in stable assets. If you make $200,000 per year in income, the goal should also be to generate $200,000 in passive income from your investments.
Passive Income Ingredients
Now that you’re aware of passive income and its vital role in becoming financially free, how do you get started generating passive income?
- Focus on building your passive income until it matches your active income.
- Invest in things that increase in value and are physically tangible.
- Only invest in assets that can’t be disrupted.
Number 3 above is one of the key reasons you should invest in real estate. Multifamily properties have withstood the test of time – people always need a place to live, no matter the climate, the economy, or social status.
How to Create Passive Income In Real Estate Investing
Everyone is an investor. You’re either investing your time and energy to earn an active income, or you’re investing your money to build passive income.
As an example, a doctor treats patients and receives $150 from the insurance company. The doctor invested his time in exchange for that payment.
The trick is learning to invest your money so that it begins to earn more money without you investing your time. Because of the way we’re generally taught – to work for an income – people tend to sit on large savings accounts. This “rainy day” cash is reserved for a period of injury or unemployment, a sudden life emergency.
The downfall is that this massive pile of savings is not earning any additional money. An investment in multifamily real estate syndications could begin earning cash flow and appreciation, growing that money without the time investment.
One of the most valuable lessons that I’ve learned during my real estate investing journey is that you cannot save your way to wealth. There are just too many forces going against you when espousing that mindset. Joining forces with experienced real estate investors can start your journey to creating wealth by letting your money work for you.
To see our upcoming opportunities join our investing club by signing up here. Before you can invest with us we have to hop on a quick discovery call to make sure that investing passively in real estate is suitable for you and your goals.
Until next time, let’s MAKE IT HAPPEN!
