The Danger of Pursuing Passive Income

Real estate investing has given my husband and me a great deal of freedom to do what we want with our lives. Whether we decide to putter around the yard, go mountain biking, or focus on our Internet business, we are making money from our properties. Many would say we’re earning passive income, but we no longer do.

The problem with pursuing “passive income” is that you’re telling yourself you don’t have to do any work to make that money. Keith Cunningham, author of Keys to the Vault says, “The label becomes the experience. Using the word passive for anything means that you are going to do the least to get the most.” Trying to build wealth through passive income is like trying to get six-pack abs without working out. It isn’t going to happen.

When you buy a property, hire a property manager, and then do nothing more than deposit the rent money into your bank account, you’re setting yourself up for trouble. We know! As I mentioned in my articles “The Problem with Fire and “An Easy to Prevent Scam, “we had a property manager steal rent money from us, we were featured in the newspaper as owners of “local crackhouse,” and we were fined in court for fire code violations. All of these things happened to us early in our real estate investing career because we had been in pursuit of passive income. We worked hard to find the properties, bought them, and then passively let things fall apart!

Now, my husband Dave reviews all the bills and talks to our property managers on a regular basis, and we both carefully track and monitor the money that gets spent on each building.

Listen, I’m not saying you have to treat real estate investing as a full-time job. It really doesn’t require a lot of time and attention. It takes us less than five hours a month to actively measure, monitor, and adjust to maximize our profits and minimize our struggles. And since we stopped considering real estate to be a passive income stream, we’ve been sleeping better… and making more money!

Comment on this article

  • Anne

    Active to me means being involved in the day to day workings of your business like a 9 – 5 job, passive is being involved at a distance letting others do the work while you oversee it. Passive is good!

    Thanks I heartily agree with you.

  • Karen

    This is a fantastic point!! The words you use can play a big part in what happens in your life … Law of Attraction theory.

  • Great points Julie

    There is no such thing as passive income in real estate. I know this one only too well. However, there is such a thing as “Leveraged income” as Keith would say. You might not be heavy in the day to day but you are still ALWAYS involved. That is leverage NOT passive. Unfortunately, a lot of courses I took years ago told me that all I would have to do is check my mailbox every month for money….wouldn’t that be nice? It would… but it’s not the truth.