Passive income is going somewhere, and getting pay for not doing anything, when things are in place. I can be anywhere in the world, and spend as much time there, without going to work, while my tenants (my employees are taking care of me on vacation for six months, to a year ) Man, you have love RDPD, and passive income.
Of course, if it is done correctly, then it is automatic!
What is with these guys pushing something called “Passive Income”. I read it in Robert Kiyosaki’s book and was giving it some thought. Managing rental property is NOT passive income. Ask any property manager they will tell you it can take a lot of work. Repainting between tenants, advertising for tenants, collecting rent from tenants, what part of that is Passive?
Earnings derived from a rental property, limited partnership, or other enterprise in which the individual is not actively involved.
Therefore, passive income does not include earnings from wages or active business participation,
nor does it include income from dividends, interest, or capital gains.
There are three main categories of income: active income, passive income, and portfolio income.
For tax purposes, it is important to note that losses in passive income generally cannot offset active or portfolio income. Another way to put it would be: The money that is left over after the Mortgage and neccessary expenses have been accounted for, this income is passive and not taxable.
I guess it is passive income if you want to give all your earnings to a property manager. Considering it costs between 30% and 40% just to cover maintenance, taxes, legal fees and the times the place is empty. Then add to that the cost of property management. The only place for any profitability is hoping the value of the place goes up.
My wife’s grandpa would read the financial papers cover to cover every day while investing in the stock market. I didn’t see anything passive about that (managing stocks) either!
Let’s get the definition straight. Passive income is income recieved from real estate which is treated more favorably tax-wise because it is not subject to FICA, FUTA, NAFTA, PRAVDA, and Medicare. It is unearned income, and you need a lot of it in order to quit your 9 to 5 J.O.B. Remember, the higher your W-2 salary, the more gets siphoned off with icky taxes.
If you can find a better way, fine, but I’d rather stay with what works (while I drink umbrella beverages).
Re: Whats the deal with Passive income - Posted by Don Henderson
Posted by Don Henderson on May 21, 2004 at 16:48:38:
Excuse me - it is passive income compared to the work of building and running your own business. Plus, if you’ve done your math correctly, you should have built in a cost for property management services that you don’t have to provide yourself.
Well HouseTycoon, what a great answer. I can see you put alot of thought into it.
By passive income they are implying that you don’t have to work for it. Well when your tenant calls you at 2 in the morning because your pipes broke while they were partying, Then come back and tell me how passive that is. There is always property management but then you give away most of your profits and have to depend almost totally on your home appreciating to make a profit.
*income for the rest of your life (if you’re units are full, If not, then you have less for the rest of your life) Also, that is Ron Starr’s style never sell, b/c income for life! That is your SSI, you created. Also, you can increase your SSI, like no other SSI can.