How to build passive income

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
dodgersummer
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How to build passive income

Postby dodgersummer » Tue Jan 10, 2017 3:02 pm

What is the best way for someone to build passive income with about $30,000 in cash savings that is 32 years old? I want to build wealth instead of getting the 1 percent interest in my saving account. I'm leaning toward a rental property.

Rodc
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Re: How to build passive income

Postby Rodc » Tue Jan 10, 2017 3:39 pm

Being a landlord can work out very well if you buy at a good price in a good location and get good renters.

But being a landlord is not passive when a renter calls to have you fix the plumbing on Sunday afternoon while you are watching football (or at 2am).

Or when you have to interview several people to select your next renter.

You can hire someone or some company to run your property but that really cuts into profit. And then you have to manage the manager, so you are not completely off the hook.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

harikaried
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Re: How to build passive income

Postby harikaried » Tue Jan 10, 2017 3:48 pm

dodgersummer wrote:I want to build wealth instead of getting the 1 percent interest in my saving account.
If 1% is not good enough, what rate is good for passive? What risk do you want to take and how much access to the money do you need? You can now get over 2% with 5-year CDs.

dodgersummer
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Re: How to build passive income

Postby dodgersummer » Tue Jan 10, 2017 3:53 pm

"If 1% is not good enough, what rate is good for passive? What risk do you want to take and how much access to the money do you need? You can now get over 2% with 5-year CDs."

Locking up money for 5 years for only 2% seems like a long time to tie up money that likely will not even keep pace with inflation or am I way off on this?

Sandtrap
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Re: How to build passive income

Postby Sandtrap » Tue Jan 10, 2017 3:58 pm

dodgersummer wrote:What is the best way for someone to build passive income with about $30,000 in cash savings that is 32 years old? I want to build wealth instead of getting the 1 percent interest in my saving account. I'm leaning toward a rental property.


purchase a duplex, live in one, rent the other.
purchase a triplex, live in one, rent the other two
purchase a fourplex, live in one, rent the other three

Control all expenses by doing everything yourself, everything. *IE: screen tenants, unplug drains, collect rent, fix appliances, change water heaters, clean up abandoned units and repaint yourself then rerent.
Do not pay others to do what you can do yourself.
Live cheap, save every dime.

Repeat.

JGoneRiding
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Re: How to build passive income

Postby JGoneRiding » Tue Jan 10, 2017 4:04 pm

Dont go higher than a fourplex though. Most states have special rules/laws governing four amd under with owner occupancy that make things like renter selection and eviction easier/less restrictive. For example you could legal exclude children and all pets (service included) in my state if you wanted to and lived in one of the units.

I agree that LL isn't passive and isn't for everyone but enjoy it.

Jack FFR1846
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Re: How to build passive income

Postby Jack FFR1846 » Tue Jan 10, 2017 4:20 pm

Redneck bank. 1.25% megamoney account. It's not much more than 1% but it's 25% more and it's "where bankin's funner".

https://redneck.bank/
Bogle: Smart Beta is stupid

jf89
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Re: How to build passive income

Postby jf89 » Tue Jan 10, 2017 4:34 pm

Jack FFR1846 wrote:Redneck bank. 1.25% megamoney account. It's not much more than 1% but it's 25% more and it's "where bankin's funner".

https://redneck.bank/


That cannot be serious. 1.25% is the best I've seen... I wonder if they have to offer that to entice people to give them their money.
"Save as much as you can, diversify diversify diversify, and you can't go wrong with tech stocks" | -First investing advice I recall from my parents in the 90's (two outta three ain't bad)

Minou33
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Re: How to build passive income

Postby Minou33 » Tue Jan 10, 2017 4:36 pm

I'm curious about this too. Are there other options besides rental properties?

dbr
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Re: How to build passive income

Postby dbr » Tue Jan 10, 2017 4:40 pm

Well, traditionally, especially on this forum, the discussion would be about how much to invest in stocks. If you are asking about this, is it me or you that is missing something obvious?

mcraepat9
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Re: How to build passive income

Postby mcraepat9 » Tue Jan 10, 2017 4:41 pm

dbr wrote:Well, traditionally, especially on this forum, the discussion would be about how much to invest in stocks. If you are asking about this, is it me or you that is missing something obvious?


+1

dodgersummer
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Re: How to build passive income

Postby dodgersummer » Tue Jan 10, 2017 4:46 pm

"I'm curious about this too. Are there other options besides rental properties?"

I'm open to anything that will generate the best passive income for me. My thinking is a rental property but I'm open to any suggestions (stocks, bonds, etc).

huntertheory
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Re: How to build passive income

Postby huntertheory » Tue Jan 10, 2017 4:52 pm

The only ways to generate "passive" income are:

(1) do a bunch of work to build/create something that then will throw off revenue streams in the future. The obvious examples for this are things like write a very popular book, create popular music, or some other work that results in intellectual property and then an ongoing royalty stream, though it can also include certain web or internet related incomes (there are lots of websites dedicated to "passive income" on the web). Creating a business and then removing yourself or selling your equity investment or somehow ceasing to have control might result in "passive" income. But the up front effort is usually anything but passive, and often involves risk.

(2) Creative "passive income" from money you already have, which includes things like buying financial assets (stocks, bonds, funds, etc) that result in either capital appreciation or dividends or interest payments, or buying rental or other real estate properties. (And, I suppose, you could buy other assets that generate income like buying intellectual property -- David Bowie famously sold "Bowie Bonds" backed by his music catalogue.) If you have substantial assets you can also generate passive income by purchasing entire businesses; this is fundamentally what Warren Buffett does now.

The upshot is this forum is mostly focused on option (2), which focuses on investing your savings in financial assets (mostly index funds) and to a lesser extent there is discussion of things like income properties and things like that. (1) is how most super wealth is ultimately created, but there is certainly no roadmap for creating things like a supremely successful business or writing the next bestseller of a book -- and obviously a lot of risk involved too.

And, maybe most importantly, the beauty of the Boglehead way is its one of the most truly "passive" ways out there, as all of the other options are not truly passive, either requiring massive upfront effort or cost or some level of ongoing oversight (like being a landlord)

Rodc
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Re: How to build passive income

Postby Rodc » Tue Jan 10, 2017 4:54 pm

dodgersummer wrote:"I'm curious about this too. Are there other options besides rental properties?"

I'm open to anything that will generate the best passive income for me. My thinking is a rental property but I'm open to any suggestions (stocks, bonds, etc).


Ok.

Stocks and bond then. :)

Buy index funds. Buy some with every paycheck. Set it up for automatic buys. Then sit back and slowly make money.

Nothing passive is going to make money quickly.

Being a landlord if you work hard and smart will build income more quickly but it is not at all passive.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

The Wizard
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Re: How to build passive income

Postby The Wizard » Tue Jan 10, 2017 5:01 pm

dodgersummer wrote:"I'm curious about this too. Are there other options besides rental properties?"

I'm open to anything that will generate the best passive income for me. My thinking is a rental property but I'm open to any suggestions (stocks, bonds, etc).

Many folks don't want or need additional income during their prime working years due to increased taxes. What they want is additional wealth accumulation to fund their early retirement.
But rental properties are accumulated wealth, so you need to ponder all that...
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MichaelRpdx
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Re: How to build passive income

Postby MichaelRpdx » Tue Jan 10, 2017 5:14 pm

dodgersummer wrote:"I'm curious about this too. Are there other options besides rental properties?"

I'm open to anything that will generate the best passive income for me. My thinking is a rental property but I'm open to any suggestions (stocks, bonds, etc).
You want income instead of growth? What is the objective here?
Be Appropriate && Follow Your Curiosity

Sandtrap
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Re: How to build passive income

Postby Sandtrap » Tue Jan 10, 2017 5:22 pm

dbr wrote:Well, traditionally, especially on this forum, the discussion would be about how much to invest in stocks. If you are asking about this, is it me or you that is missing something obvious?


+1
:oops:
that's funny. Thanks.

huntertheory
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Re: How to build passive income

Postby huntertheory » Tue Jan 10, 2017 5:27 pm

One way to think about it is a lot of what this forum and retirement is about is you begin your working life generating income, with almost none of it falling in the category of "passive." By the time you retire, however, the goal is for all of your "income" (or proceeds, or however you want to characterize what you live on) is 100% passive -- you're retired. Social security is "passive income," as is bond interest and as is selling stocks or index funds that have appreciated in value.

On the one hand there are a million ways to generate income, but on the other there are really only a few categories. And as said above, many so-called "passive" income streams are anything but passive (because there's no free lunch) and that's when you get into tradeoffs of time, energy and money.

Sandtrap
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Re: How to build passive income

Postby Sandtrap » Tue Jan 10, 2017 5:29 pm

Rodc wrote:
dodgersummer wrote:"I'm curious about this too. Are there other options besides rental properties?"

I'm open to anything that will generate the best passive income for me. My thinking is a rental property but I'm open to any suggestions (stocks, bonds, etc).


Ok.

Stocks and bond then. :)

Buy index funds. Buy some with every paycheck. Set it up for automatic buys. Then sit back and slowly make money.

Nothing passive is going to make money quickly.

Being a landlord if you work hard and smart will build income more quickly but it is not at all passive.


+1
Being a landlord is a full time 24/7 career. Maximum safety and return = self managed, self repaired, incl. unplug drains, fix all appliances, work personally with every tenant from screening to check in to check out, etc. Like most things, you really have to have a passion for it to do really really well at it. Property m'gt will skim, resident managers will . . . . , maintenance crew will . . . . supplies, plumbers will change an entire valve instead of a washer, etc, etc.
Listen to expert Bogleheads here (not me) as they have great advice based on decades of real world experience. :sharebeer

22twain
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Re: How to build passive income

Postby 22twain » Tue Jan 10, 2017 5:46 pm

Rodc wrote:Buy index funds. Buy some with every paycheck. Set it up for automatic buys. Then sit back and slowly make money.

Don't forget to reinvest the dividends. :wink:

This shows my retirement account balance and accumulated contributions. (Don't ask about the vertical scale.) It's a bit out of date. Right now the green line is a bit above the top edge of this graph.

This is for what most people here would consider a very conservative allocation, during the accumulation phase (which has just now come to an end :D). Contributions have always been 50% to a stock fund and 50% to a stable-value fund (fixed income, returning at least 3% but not much more).

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The Wizard
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Re: How to build passive income

Postby The Wizard » Tue Jan 10, 2017 5:48 pm

I owned a vacation condo that I rented out some years ago, 1200 miles away, so local property mgmt company.
Renter would complain about unbalanced washing machine or sliding glass door off track and they'd send a guy over to fix it.
And they'd charge me a fee. I forget how much, since I sold the condo a while back...
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Ace$
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Re: How to build passive income

Postby Ace$ » Wed Jan 11, 2017 4:27 pm

As an alternative to your traditional rental property, what about buying vacant land that can generate income from grazing cattle, allowing harvesting of hay or timber, keeping of horses, etc. It seems there would be minimal upkeep, low taxes, and land is a finite resource.

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KlingKlang
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Re: How to build passive income

Postby KlingKlang » Wed Jan 11, 2017 4:51 pm

Ace$ wrote:As an alternative to your traditional rental property, what about buying vacant land that can generate income from grazing cattle, allowing harvesting of hay or timber, keeping of horses, etc. It seems there would be minimal upkeep, low taxes, and land is a finite resource.


I thought that the following article made some good points http://retipster.com/truthaboutlandinvesting/

Not mentioned but the first thing that I thought of - unless you can actually see your property out of your window with a pair of binoculars how do you keep other people from grazing cattle, harvesting timber, or bringing in a trailer without bothering to inform you about it?

Ace$
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Re: How to build passive income

Postby Ace$ » Wed Jan 11, 2017 5:09 pm

KlingKlang wrote:
Ace$ wrote:As an alternative to your traditional rental property, what about buying vacant land that can generate income from grazing cattle, allowing harvesting of hay or timber, keeping of horses, etc. It seems there would be minimal upkeep, low taxes, and land is a finite resource.


I thought that the following article made some good points http://retipster.com/truthaboutlandinvesting/

Not mentioned but the first thing that I thought of - unless you can actually see your property out of your window with a pair of binoculars how do you keep other people from grazing cattle, harvesting timber, or bringing in a trailer without bothering to inform you about it?


Fantastic article - thanks for the link.

I would be partial to owning rental property of any type within a short drive primarily to address any problems like the ones you bring up. Obviously, the situation you present is trespassing. Unfortunately, it's probably one of those things a prospective land owner would need to consider before going this route.

batpot
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Re: How to build passive income

Postby batpot » Wed Jan 11, 2017 5:17 pm

jf89 wrote:
Jack FFR1846 wrote:Redneck bank. 1.25% megamoney account. It's not much more than 1% but it's 25% more and it's "where bankin's funner".

https://redneck.bank/


That cannot be serious. 1.25% is the best I've seen... I wonder if they have to offer that to entice people to give them their money.


you must've missed the 1.25% 11 month CD, with no early withdrawal penalty from Ally.
viewtopic.php?t=205734

that redneck bank is insane...who would give that company their SSN?

jf89
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Re: How to build passive income

Postby jf89 » Wed Jan 11, 2017 5:25 pm

batpot wrote:
jf89 wrote:
Jack FFR1846 wrote:Redneck bank. 1.25% megamoney account. It's not much more than 1% but it's 25% more and it's "where bankin's funner".

https://redneck.bank/


That cannot be serious. 1.25% is the best I've seen... I wonder if they have to offer that to entice people to give them their money.


you must've missed the 1.25% 11 month CD, with no early withdrawal penalty from Ally.
viewtopic.php?t=205734

that redneck bank is insane...who would give that company their SSN?


I did miss that... essentially a savings account (sort of), but it looks like that promotion has ended. We're down to 0.87% on the 11 mo. no EWP.
"Save as much as you can, diversify diversify diversify, and you can't go wrong with tech stocks" | -First investing advice I recall from my parents in the 90's (two outta three ain't bad)

Hockey10
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Re: How to build passive income

Postby Hockey10 » Wed Jan 11, 2017 5:47 pm

I was a landlord of a triplex for 11 years. I would definitely not consider this to be passive income. The first couple of years were not too bad as I lived in 1 unit and rented out the other 2. So if there was a problem with the building, I was there anyway. But after I moved 10 miles away to the suburbs, and started having kids, a simple problem became a real pain in the neck to deal with (like the time there was a leak in the ceiling due to snow melting in a stopped up gutter). Climbing on a roof at 9 PM on a Tuesday night in the winter is not my idea of fun.

My portfolio is split between two different strategies for passive income: dividend growth investing and the Boglehead index 3 fund method. Both have been successful over many years. :moneybag And it is a lot more relaxing following my investments on a computer instead of dealing with tenants and the problems that crop up from time to time in a rental property. :D

NDfan27
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Re: How to build passive income

Postby NDfan27 » Wed Jan 11, 2017 5:57 pm

jf89 wrote:
Jack FFR1846 wrote:Redneck bank. 1.25% megamoney account. It's not much more than 1% but it's 25% more and it's "where bankin's funner".

https://redneck.bank/


That cannot be serious. 1.25% is the best I've seen... I wonder if they have to offer that to entice people to give them their money.


My local credit union has a checking account that offers 2.26%... Of course, there are a few strings attached. It's only up to $25k and it requires you to check you account online and use the debit card 10 times to get the interest each month. I don't have a lot of extra cash and the requirements are easy to meet so it works well for me.

It also refunds ATM fees up to a certain amount with is pretty awesome too. I always hated using ATMs because of those fees. I assumed this was just a promotional deal but they've kept it going for quite a while now.

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MastersChampion
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Re: How to build passive income

Postby MastersChampion » Wed Jan 11, 2017 6:17 pm

Hockey10 wrote:I was a landlord of a triplex for 11 years. I would definitely not consider this to be passive income...

My portfolio is split between two different strategies for passive income: dividend growth investing and the Boglehead index 3 fund method. Both have been successful over many years. :moneybag And it is a lot more relaxing following my investments on a computer instead of dealing with tenants and the problems that crop up from time to time in a rental property. :D


For any landlords reading this, care to try to characterize what kind of return your property investment made? For comparison with other savings vehicles mentioned.
Whenever I read about landlording, the discussion often turns to the downsides of it (time, tenants, etc.). But what is a reasonable expectation of return?

dbr
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Re: How to build passive income

Postby dbr » Wed Jan 11, 2017 6:19 pm

MastersChampion wrote:
Hockey10 wrote:I was a landlord of a triplex for 11 years. I would definitely not consider this to be passive income...

My portfolio is split between two different strategies for passive income: dividend growth investing and the Boglehead index 3 fund method. Both have been successful over many years. :moneybag And it is a lot more relaxing following my investments on a computer instead of dealing with tenants and the problems that crop up from time to time in a rental property. :D


For any landlords reading this, care to try to characterize what kind of return your property investment made? For comparison with other savings vehicles mentioned.
Whenever I read about landlording, the discussion often turns to the downsides of it (time, tenants, etc.). But what is a reasonable expectation of return?


Added to that needs to be the reasonable expectation for how variable or uncertain that return is, aka risk.

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yangtui
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Re: How to build passive income

Postby yangtui » Wed Jan 11, 2017 9:45 pm

dodgersummer wrote:What is the best way for someone to build passive income with about $30,000 in cash savings that is 32 years old? I want to build wealth instead of getting the 1 percent interest in my saving account. I'm leaning toward a rental property.


How passive and how much risk do you want to take? Real estate, as others have said, is not really passive.

leonard
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Re: How to build passive income

Postby leonard » Wed Jan 11, 2017 9:58 pm

Being a landlord is far, far from a passive activity.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

renue74
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Re: How to build passive income

Postby renue74 » Wed Jan 11, 2017 10:13 pm

MastersChampion wrote:
Hockey10 wrote:I was a landlord of a triplex for 11 years. I would definitely not consider this to be passive income...

My portfolio is split between two different strategies for passive income: dividend growth investing and the Boglehead index 3 fund method. Both have been successful over many years. :moneybag And it is a lot more relaxing following my investments on a computer instead of dealing with tenants and the problems that crop up from time to time in a rental property. :D


For any landlords reading this, care to try to characterize what kind of return your property investment made? For comparison with other savings vehicles mentioned.
Whenever I read about landlording, the discussion often turns to the downsides of it (time, tenants, etc.). But what is a reasonable expectation of return?


I have 4 rental properties, but I've purchased them, rehabbed them and then got cash out refi's on them to the point where I may only have about $15K invested in all 4. The rest is leveraged at the higher appraisal rates after I rehab them.

Out of the 4 properties, I typically NET about $30K earnings before taxes. (After prop taxes, mortgage payments, maintenance, insurance) I self-manage, so there are no property management fees and I'm in the south...so no snow removal, trash fees, etc.

The key to making money in rentals...choose decent low-maintenance tenants, buy super low and my area...don't expect any property appreciation. Here..that just doesn't happen on rental property.

I agree...landlording is far from "passive," but it does afford me to have a nice side gig. I enjoy handyman type stuff and constantly learn new building techniques, etc.

BTW...my profit from landlording, I invest back into my Roth and then taxable account.

sunny_socal
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Re: How to build passive income

Postby sunny_socal » Thu Jan 12, 2017 12:27 pm

dodgersummer wrote:What is the best way for someone to build passive income with about $30,000 in cash savings that is 32 years old? I want to build wealth instead of getting the 1 percent interest in my saving account. I'm leaning toward a rental property.


Is that cash in addition to your Emergency Fund, or is it your EF? If it's the latter, perhaps you should leave it alone and start saving up another lump.

dodgersummer
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Re: How to build passive income

Postby dodgersummer » Thu Jan 12, 2017 12:47 pm

sunny_socal wrote:
dodgersummer wrote:What is the best way for someone to build passive income with about $30,000 in cash savings that is 32 years old? I want to build wealth instead of getting the 1 percent interest in my saving account. I'm leaning toward a rental property.


Is that cash in addition to your Emergency Fund, or is it your EF? If it's the latter, perhaps you should leave it alone and start saving up another lump.


The $30 is my Ef, but it is high considering it's about 10 months of after tax salary for me. Should I bring it down to about 6 months of after tax salary and invest the rest in index funds? I'm hesitant to invest in stocks due to be at record highs.

fishmonger
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Re: How to build passive income

Postby fishmonger » Thu Jan 12, 2017 12:53 pm

My wife and I bought a 3 family as our first home (we sold it in 2015). While I would agree that it is not a passive activity, in my experience some here are overstating the amount of time required. The big caveat is to put in the work upfront: buy at the right price, and if you can afford it, buy a quality place in a good location that does not have years of deferred maintenance. Same thing with choosing tenants - invest your time in selecting quality tenants with good references who will likely stay for a few years.

Do those two things and your time spent managing day to day should be minimal. It's when you buy a fixer-upper and rent to college kids that it becomes closer to a full-time job

dodgersummer
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Re: How to build passive income

Postby dodgersummer » Thu Jan 12, 2017 1:01 pm

fishmonger wrote:My wife and I bought a 3 family as our first home (we sold it in 2015). While I would agree that it is not a passive activity, in my experience some here are overstating the amount of time required. The big caveat is to put in the work upfront: buy at the right price, and if you can afford it, buy a quality place in a good location that does not have years of deferred maintenance. Same thing with choosing tenants - invest your time in selecting quality tenants with good references who will likely stay for a few years.

Do those two things and your time spent managing day to day should be minimal. It's when you buy a fixer-upper and rent to college kids that it becomes closer to a full-time job


Thanks. I currently have a 3 bedroom house and rent out two or the rooms, so even though there are issues and stress to deal with at times, I consider their rent money "passive" income. (I know it's not truly "passive" but I don't consider being a landlord as bad as some I guess).

investingdad
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Re: How to build passive income

Postby investingdad » Thu Jan 12, 2017 2:07 pm

The OP has the feel of somebody that has read the numerous "advice" columns on how "millionaires" build wealth by doing these seven things.

One of which is, invariably, developing multiple streams of income. That and getting a mentor.

But short of that, very little additional information is given because I suspect the writer doesn't have any answers either.

Jack FFR1846
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Re: How to build passive income

Postby Jack FFR1846 » Thu Jan 12, 2017 2:13 pm

Steve Martin had a simple 2 step system to become a millionaire and never pay taxes.

1) get a million dollars
2) when the tax man comes to the door and asks why you've never paid taxes, you simply say "I forgot"


And just for the doubters.....I've been pretty happy with my Redneck Bank account and it has entertained me countless times by turning up the volume and letting my family hear the horse on the home page.

I learned about Redneck on Bogleheads.....
Bogle: Smart Beta is stupid

hirlaw
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Re: How to build passive income

Postby hirlaw » Thu Jan 12, 2017 2:21 pm

As for real estate, Vanguard REIT index currently pays over 4% (and no plumber or bad tenants to deal with!)

Caduceus
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Re: How to build passive income

Postby Caduceus » Thu Jan 12, 2017 2:44 pm

I don't think being a landlord counts as generating "passive" income. Dealing with bad tenants, problems with buildings, etc.

Not sure what your industry is, but you could try building a business with the goal of hiring people to do most of the operational work later, but that's a long term project.

Writing books in a field that you have knowledge of would be the ultimate in passive income. You could write it once, self-publish, and earn royalties on it forever.

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flossy21
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Re: How to build passive income

Postby flossy21 » Thu Jan 12, 2017 2:53 pm

Create a blog about something which you have a passion about. If you collect enough hits then advertisers will come to you and want to pay to get space on your site.

Here's an example of a Physician who does this successfully -- http://whitecoatinvestor.com/. He also posts here regularly.

Here's the how to from one person's perspective -- https://www.smartpassiveincome.com/how-to-really-profit-from-your-blog/

Sandtrap
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Re: How to build passive income

Postby Sandtrap » Thu Jan 12, 2017 3:08 pm

investingdad wrote:The OP has the feel of somebody that has read the numerous "advice" columns on how "millionaires" build wealth by doing these seven things.

One of which is, invariably, developing multiple streams of income. That and getting a mentor.

But short of that, very little additional information is given because I suspect the writer doesn't have any answers either.


I can't remember how it went. . . . "no such thing as 'Easy Money'" . . . . Is "Passive Income" the same as "Easy Money"?
Last edited by Sandtrap on Fri Jan 13, 2017 11:31 am, edited 2 times in total.

avalpert
Posts: 4670
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Re: How to build passive income

Postby avalpert » Thu Jan 12, 2017 3:10 pm

flossy21 wrote:Create a blog about something which you have a passion about. If you collect enough hits then advertisers will come to you and want to pay to get space on your site.

Here's an example of a Physician who does this successfully -- http://whitecoatinvestor.com/. He also posts here regularly.

Here's the how to from one person's perspective -- https://www.smartpassiveincome.com/how-to-really-profit-from-your-blog/

How exactly is actively maintaining a blog a way to generate passive income?

rattlenap
Posts: 240
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Re: How to build passive income

Postby rattlenap » Thu Jan 12, 2017 3:17 pm

These are some great ideas. Thanks!

MarkNYC
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Re: How to build passive income

Postby MarkNYC » Thu Jan 12, 2017 3:31 pm

Some have commented that interest and dividends from stocks, bonds and mutual funds will provide "passive income" but that rental income from being a landlord is not really "passive income" because there's work involved. Logically this seems correct but in the world of taxes it's actually just the opposite.

"Passive income" is income from a trade or business in which the taxpayer does not materially participate. Rental income, however, is treated as "passive" whether or not the taxpayer materially participates. There are certain exceptions (eg RE professional). Passive losses can generally only be deducted to the extent of other passive income.

Interest and dividend income is portfolio income not passive income and cannot be used to offset passive losses.

So while both are ordinary income and unearned income, one is passive income and the other portfolio income. To some this may seem unnecessarily technical, but it makes a difference in understanding and complying with certain tax laws.


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