The Passive Income Lie

[100k]

It seems like this guy has never read the fastlane millionaire, because if he had, he would know that you can make passive income if you have the right system. Being a landlord can be passive - if you hire a property management firm to collect the rent, manage repairs, advertise the property etc.

Last week my employee made me 5 figures (the low end) - and I worked less than 1 hour, all I did was check my stats for like 5 min. a day.

Again, passive income is real, but you need to have the right systems in place and you need to have a in-demand product that provides value.

 

[MJ DeMarco]

Watched with much trepidation, but I agree with most of what he said.

Passive income is a myth as advertised by gurus, but it does exist and in variable degrees.

The myth happens when one thinks that passive income is permanent and 100% hands off.

My idea of "passive income" is earning income 24/7/365, not set it and forget it.

 

[Solais]

Please watch this 3x if you're still looking for that perfect "passive income" unicorn.

View: https://www.youtube.com/watch?v=EFe0v49ueC8


Funny how videos like these have 1K views while your typical "Shopify millionaire/blogging/Adsense/Amazon FBA" videos have 1M views. Snicker.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[RazorCut]

Just some thoughts. There is very little that can be considered true passive income unless it is derived through something like investments, and you have to earn the money to invest in the first place (unless you are fortunate enough to have inherited it).

If our goal is to maximise our free time we should be striving to build a low maintenance business where there is maximum disparity between effort expended and reward received. We need to capitalise on Pareto’s principle, the 80/20 rule.

There are many of us (including myself) who have built profitable businesses over the years but have found that we were dissatisfied with the effort/reward ratio.

I have recently shut down a business making around 80k a year because it was taking up too much of my time and I didn’t have enough free time to build something more passive.

However building a high reward low effort business takes a lot of effort. Those efforts tend to be stacked up at the front end during the start-up and establishment phase. The rewards come on the back end (hopefully).

The great thing about an internet business is that the time from start-up to established profitable business has been condensed due to lower overheads, direct access to large markets, lower cost delivery methods, and the fact that there is a wealth of knowledge available to act as mentorship in helping you avoid/reduce the mistakes you would have traditionally made.

Yes there are people out there who seem to be able to make a highly profitable, relatively low effort business overnight. However they have probably built up years of knowledge through diligent work and studies and maybe several failed businesses. They have then been able to leverage that knowledge and apply it to a new venture where all the pieces fit. Like an iceberg people only see the 10% above the surface, not the 90% that lays hidden below.

To me this failure to acknowledge that a lot of work goes unseen (perpetuated by the media that seem to love printing overnight success stories), and the desire for the magic unicorn is why you see so many people following these get rich quick charlatans.

They don’t want to hear there is hard work required to get there. Especially work that requires time and the building up of knowledge.

 

[100k]

But just the fact that you worked that hour and you are a business owner means it is not truly passive. It's a high reward/low time expenditure business. Which, granted, is as close as it gets for most business owners.

I used to have a business that required me to work 1-2 hours on a Monday morning to do the wages, and count and bank the takings. I never considered that totally passive as it wasn't even though I spent the rest of the week fishing or working on my house.

I was a business owner. I could be called on occasion when problems arose that my manager couldn't overcome. I have been called out when we had a break-in and an arson attempt. I held the responsibilities as a business owner and employer so the business was often on my mind.

All kudos to you for your highly leveraged business. How long do you think you will be able to ride that wave?

The reason I ask is that I have had several products over the years that did extremely well on the Internet. But, as always happens, trends change, competitors spring up, margins decline. In a shorter space of time than you would have liked your golden goose looks more like a dead duck, and you are left looking for the next product that will continue to bring in a healthy return. This is another reason why such businesses are not truly passive.

Come on bro... if you're working 1 hour per week its pretty much passive income. Get outta here with that mess.

I know it won't last for ever ... but I'm hoping to milk it long enough to build my dream / fastlane business that I've had my eyes on for the past 5 years but not been able to fund ... until now

So hopefully if it can last a year or 2... that would do me fine. After that, I expect my fastlane business to be able to sustain me for the long term.

I honestly still believe that you can have a passive business, IF you have the right information and the right systems in place. There's no reason why you couldn't have a passive income from an online business.

For example; let's say you and 3 of your buddies want to make some extra money... you all currently have normal 9-5 jobs... however, you have great credit and have no problem raising $25k each using OPM (other people's money / the bank / credit card company).

You now have $100k to fund a online venture, register your LLC or LLP and you hire a project manager with a proven track record to manage the new start up. You tell him, find a good "digital product studio" that can do market research and create a product for that market. The project manager does his job - you guys continue to go about your 9-5 work... the agency with the help of the project manager puts together a really great website that solves a real problem that has a real demand from the public ... however, they are not experts at running ads, so you tell the project manager to find a digital agency with a proven track record, and have them run ads for you on Adwords & Facebook. They of small, running test ads, figuring out what ads work, what audiences respond to what messages... then before you know it, they've got enough data and they tell you, with a $1k/day budget ($30k/month) we'll be able to deliver a 3x ROI on your advertising spend with confidence. You give the project manager the green light... and boom.

You now have a business that was developed using WORLD CLASS TOP TALENT (from the digital product studio) and is being advertised using world class top talent (marketing agency with a proven record) - now you're making $100k+ in profits... split 4 ways, leaving you guys to each take home $25k/month after 3 months of setting your start up.

Point is.... WITH THE RIGHT KNOWLEDGE and the right TALENT and the right SYSTEMS.

Passive income is doable.

Is it easy, No. Will most people be able to pull it off before they run out of money or steam/energy/passion.... No. But its def. possible ....

 

[minivanman]

I have a few family members who have a TRUE passive income. They sit at home and draw government assistance and have for years! I saw them just today and about 15 minutes ago I asked the lil woman.... is it ME that is doing something wrong? The family members were once again trying to come up with ideas on how to make money and as always they were saying they didn't have any money to start.... and they KNOW I won't give them any. So I waited a few minutes.... then I asked.... do you ever play those games over there (board games)? The answer was NO! They didn't suspect a thing but they know me.... they should have known it was going to lead to something! So I said.... there ya go! You can sell those games and then take the profit from those games to buy other things to sell and before you know it you can be making $100 a week. With these people you can't say some unrealistic number.... but it didn't matter anyway.... crickets..... nothin! So I asked my wife what I did wrong (this happens all the time with these people)!?! She said that she didn't see anything I did wrong but they will never get off the couch. Fair enough, I tried.... again....

On a positive note, for the 1st time ever the lil woman is thinking about doing a business venture with me. She is going to think about it on her trip to Spain but she SEEMS excited. And how does that tie in to this thread..... it should be as close to a real passive income as anything. I've been toying around with a blog the last few months and she has always wanted to make a travel blog... with a twist... it's behind the scenes of traveling with multi-million dollar art pieces around the world. We will see how it goes.

 

[RazorCut]

Last week my employee made me 5 figures (the low end) - and I worked less than 1 hour, all I did was check my stats for like 5 min. a day.

Again, passive income is real, but you need to have the right systems in place and you need to have a in-demand product that provides value.

But just the fact that you worked that hour and you are a business owner means it is not truly passive. It's a high reward/low time expenditure business. Which, granted, is as close as it gets for most business owners.

I used to have a business that required me to work 1-2 hours on a Monday morning to do the wages, and count and bank the takings. I never considered that totally passive as it wasn't even though I spent the rest of the week fishing or working on my house.

I was a business owner. I could be called on occasion when problems arose that my manager couldn't overcome. I have been called out when we had a break-in and an arson attempt. I held the responsibilities as a business owner and employer so the business was often on my mind.

All kudos to you for your highly leveraged business. How long do you think you will be able to ride that wave?

The reason I ask is that I have had several products over the years that did extremely well on the Internet. But, as always happens, trends change, competitors spring up, margins decline. In a shorter space of time than you would have liked your golden goose looks more like a dead duck, and you are left looking for the next product that will continue to bring in a healthy return. This is another reason why such businesses are not truly passive.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Startup Steve]

I guarantee President Trump is laughing all the way to the bank. He's making 400k/year as President plus he's still making billions off of his hotel/real estate companies. His companies is making him passive income. Now he's set for life with Presidential benefits such as US Secret Service 24/7. Same with his Ivanka Trump and Kushner.

I remember watching an interview with Ron Howard and how he still gets Royalty checks of 35ç from when he did the TV Show Happy Days back in the 60's. Sure it's a measely 35 cents but to still get royalty checks after nearly 60 years. Passive Income.

President Trump donates his entire salary every year. President Trump does not have active participation in any of his 515 companies he is delegated that to his children. I haven't stayed on top of what the profitability is of his various Ventures but I don't think netting billions every year.

Sent from my SAMSUNG-SM-G930A using Tapatalk

 

[million$$$smile]

Passive Income?

Er..ya, I think I have what you'd call a Passive/Aggressive Business...

I'm aggressively working my businesses now so that I can passively watch them grow without me later!

And, by the way, I love it!

 

[Santi M]

Mj wrote this in 2012 about passive income based on a money system:

How to Never Work Another Day in Your Life, The Money-System Portfolio – Fastlane Entrepreneurs

If he can do it, everyone with enough quantity of money can do it too. So I think, passive income isn't a lie. The big lie is people telling you that you can do it with a little quantity of money.

 

[Startup Steve]

I'm not at MJ's "lots of money" level, but I could do this. Do you have any guides you'd recommend for learning those ins & outs? 10% on notes sounds a lot better than the ~6% I get on my rentals after taxes & insurance, but before management fees and repair surprises, even though you'd lose the depreciation writeoffs. I've had 8-15%/yr appreciation on my properties so it's worked out well, but I don't expect that to continue much longer.

I assume it can be just as difficult to get on-time note payments as it can be to get on-time rent payments. But it would be nice not to have to worry about tenants trashing the property &etc.

First, just stay focused on making the capital...

I have had coffee and traded notes with many HNWI over the years. Seems there is a sweet spot with...

Determine an in-demand professional skill, preferably in technology. Right now its AI, BI, IoT, Blockchain.
Go out and do some independent consulting, slowing moving your individual bill rate up to $250/hr, your social proof increases and you are considered an influencer. Now hold out for billing by projects (outcome selling) $25k-$50k month per project. Operationalize your services and outsource people to do the work under your leadership and get 3 of these going at a time. Keep it small as a lifestyle business, or scale and get acquired in 3 years.

Then you become a bank and 9% is more than enough...

 

[ljean]

Buying turn-key properties out of your area you have to accept the fact you are getting all the leftover "deals" that local investors have passed up.

 

[garyfritz]

Buying turn-key properties out of your area you have to accept the fact you are getting all the leftover "deals" that local investors have passed up.

Good point. The locals are going to snap up all the good deals. Seems unlikely that there will be so many 12% properties out there that the locals don't grab them all. And if they didn't, ya gotta wonder why not.

@WJK, I've done my own management (on a small scale) for 30 years. It's getting to be more headache than I want. 11% hands-off would be a dream come true, but I suspect it's just a dream.

 

[ljean]

If you can buy property at a discount and rent at a small profit or near break-even then sell after a year or two at retail price, you can earn way more than 11 to 12%.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[garyfritz]

Buying at a discount is the trick. My traditional realtor (long-time friend) is not an expert in that area, even though she claimed she was. I could sniff around for a hungrier / savvier realtor, but that would be buying more local properties. Seems to me like you need to be tied into a market pretty well to find those bargains very often, and (critically) to flip them for retail profit.

(EDIT: Guess I could decide where I wanted to invest, and then go find a good hungry realtor THERE...)

 

[Vigilante]

After closer study, it looks like my properties net about 5.2% after PITI & HOAs. That's with me doing the management, which recently has been an expensive learning experience. If I hire a management company, the return drops to about 4.5%.

Is that worthwhile? Questionable. I can find plenty of things with little or no management headache that return lots more than 4.5%. I'm planning this as my retirement income, so I have to look at the long horizon. Real estate in my area (usually) has the advantage that rents can increase with inflation, and (sometimes) the property appreciates as well. Other investments won't have that inflation hedge, so you'd have to set aside some of your income to grow the account. Which tends to bring it back down to the 4.5% range.

The 4.5% ongoing income looks pretty good IF the property continues to appreciate. If the property decreases in value, then the 4.5% looks pretty bad. But any investment can go down in value.

Seems way too tight. One disaster away from being upside down.

 

[Deleted50669]

Software can be passive if developed and grown correctly. Just ask a lot of people in northern California.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Startup Steve]

All kudos to you for your highly leveraged business. How long do you think you will be able to ride that wave?

The reason I ask is that I have had several products over the years that did extremely well on the Internet. But, as always happens, trends change, competitors spring up, margins decline. In a shorter space of time than you would have liked your golden goose looks more like a dead duck, and you are left looking for the next product that will continue to bring in a healthy return. This is another reason why such businesses are not truly passive.

Best to develop a business and sell it right before it commoditizes, then roll that working capital into the next emerging market. Much easier to do with a services company than a product. We have only ever developed one product (software) after we had delivered services in the industry for a while and knew all the customers, partners, and vendors in the space.

For me, it is information technology professional services firms. Now I am in banking

 

[Artifax]

The beauty of this bro-marketing youtube clickbait headline inspired meme is that while you're arguing semantics and the definition of "passive", its generating passive income for all the guys regurgitating it

 

[The Abundant Man]

President Trump does not have active participation in any of his 515 companies he is delegated that to his children.

Sent from my SAMSUNG-SM-G930A using Tapatalk

Yeah, passive income. He doesn't work for that income.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Siberia]

24/7/365 ......... magic numbers ...... combine them with those of your personal net assets and evaluate how much they affect it.

Great challenge.

 

[WJK]

I'm not at MJ's "lots of money" level, but I could do this. Do you have any guides you'd recommend for learning those ins & outs? 10% on notes sounds a lot better than the ~6% I get on my rentals after taxes & insurance, but before management fees and repair surprises, even though you'd lose the depreciation writeoffs. I've had 8-15%/yr appreciation on my properties so it's worked out well, but I don't expect that to continue much longer.

I assume it can be just as difficult to get on-time note payments as it can be to get on-time rent payments. But it would be nice not to have to worry about tenants trashing the property &etc.

Even with owning a note, you still have worry about the "owner" trashing the property. You must make sure that you having a low enough LTV (loan to value ratio) in order to protect yourself. Part of the trick is to know the different risk levels on the different types of properties. You can be successful or a rotten failure. It's all in your bid, if you are buying an existing TD. If you are creating the TD, it's all about the terms of the note.

Taking care of my rentals is a full time job. Finding the right trust deed notes is also very labor intensive. Once I get the note and have it set up with a collection escrow, it's very little work -- they do the paperwork... BUT, I do still do a driveby inspection of each property every 6 months or so. My picture snapshot collection for each note, coupled with the ledger, can tell me everything that I need to know.

 

[LuckyPup]

It seems like this guy has never read the fastlane millionaire, because if he had, he would know that you can make passive income if you have the right system. Being a landlord can be passive - if you hire a property management firm to collect the rent, manage repairs, advertise the property etc.

Last week my employee made me 5 figures (the low end) - and I worked less than 1 hour, all I did was check my stats for like 5 min. a day.

Again, passive income is real, but you need to have the right systems in place and you need to have a in-demand product that provides value.

Liked your comment to push you over the $3k mark. You're welcome. ;-)

 

[Aaron_S]

That statement about "MrMoneyMustache" (in case you don't know who he is, he started a famous blog about FI/RE after "retiring" from his job and penny pinching his way to $1M...I won't promote his content here by linking to it) is also spot-on...another Slowlane preacher but Fastlane practitioner. <_<

I disagree with this. He slow laned his way to freedom from a J.O.B. with $1M saved and invested at the age of 30. The fact that he chooses to provide value now through a blog preaching financial literacy and minimalism doesn't negate that fact. From everything I have seen he continues to live the minimalistic life that he preaches even though he has a money tree spitting out mid-six figures a year further proving that the minimalism is a choice. Some people would honestly prefer maxing out their utility and grocery bill savings than owning a sports car and that is ok as long as it is by choice rather than necessity.

 

[biggeemac]

Licensing is a form of passive income. If you create something truly proprietary, protect it very well, and then license it to businesses, it would be a pretty hands-off income. Mr. Wonderful has offered countless licensing deals in the Shark Tank to people and basically gives them the opportunity to license their invention to businesses and then sit at home and collect a check.

I don't know that I have an inventors mind, so I created a service based business that I offer as a social program. My business can be outsourced to employees to a large degree, but we will never stray too far away so that we can remain active with our business. But quite frankly, our passion is there, so we really don't have any desire to be too far away for too long.

 

[MoreVolume]

I feel like people who speak against passive income are unable to create a system of their own

i heard the Shopify sale chime on my phone as I read through this thread. It's almost 2:30 am

you can't convince me it's not real

some ppl lack that certain something that allows an individual to create a passive income system
what that is depends on the person....
knowledge, creativity, guts....

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[GoGetter24]

It's not a lie; passive income is the very essence of rich.

Sure a lot of new guys think it's easier to achieve than it is (it's damn hard), but it's the only real bright outcome for a man's life.

If you're still walking into an office at 9am, Monday to Friday, when you're 50, because you simply have to, how depressing does that sound? That's profoundly depressing and dreadful -- but it's the norm.

Passive income is the only possible path by which you can avoid that scenario. Even if only 50% of your income is passive -- that's still enough to allow you to avoid that scenario.

Whether it's accumulating income producing assets like stocks & real estate, or starting a business that builds a momentum of its own, there isn't really any alternative but to aim for any sources of passive income you can get, now, if you don't want to end up a miserable old man.

 

[garyfritz]

Have you considerd mobile home park investing? A lot less work if you just want the rent checks , a lot more work if you want appreciation

Humm, interesting idea. This Forbes article makes it sound really good, but he may be aiming at deeper pockets than mine. He recommends getting 50 units or more, especially if you're looking for a passive investment and not an on-site job. At $30k or more per pad, that's stretching it a bit for one investment. I'm also wondering about the logistics of remotely hiring & managing a decent on-site manager, and how many headaches you have to deal with personally. Interesting option to consider, though. Thanks!

 

[ljean]

Houses have crummy cash flow. Especially if you get PITA tenants. A house of mine just came vacant. Its a decent 1970s ranch in a blue-collar neighborhood. Tenants always paid on time and took good enough care of the place but they were always calling complaining about wanting this fixed & that fixed. It got water in the basement this summer after an historic rain event so we had to deal with that too. It rented for $1,150/mo. The net cash flow last year after paying mortgage interest was $1,168. For the whole year. I compute my ROE when properties come vacant to decide whether to sell or not. This one works out to be 1.9% = sell. I paid $70k for it 2 years ago. I put 20% down and $10,000 upfront in improvements for $24,000 out of pocket. It should retail today for $150,000. After paying costs & realtor & mortgage I should clear about $60,000. Assuming it paid for itself over the holding period that is a 60% IRR. Way better than $97/mo cash flow.

 

[garyfritz]

I'm aggressively working my businesses now so that I can passively watch them grow without me later!

More power to ya! For myself, I've taken a hard look at myself and decided I am probably not a good match for business building. I just don't have the laser focus, energy level, and stick-to-it-iveness that you need. I've done well in a "job" situation and in a self-employed contract/consulting role, because that was a good match for my strengths and my weaknesses. But business-building needs strengths where I'm weak. If I thought I could do it, I'd be all over it. But for me, I think it's a bit like buying a lottery ticket -- with similar chances of success. Which is why I don't hang out here much any more. It's kinda discouraging.

So I'm working on making my savings work for me. I think that's the better match for me.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.