September 23, 2021

10 advantages of passive income investments

What would you do if someone says you can make a considerable amount of money, (almost) risk-free, and without having to work (too much)? Well, the good news is that it might be true! Kaylee McMahon explained all about passive income investments in her last webinar at Real Estate IQ, “Passive investing and what it can do for you.”

The Residential Real Estate Broker offered a crash course to understand its perks compared to active investment. In her experience, the biggest problem she saw was that no one could do it all when actively investing. Thus, people end up damaging most of their return on investment, while they could have protected it by choosing passive income investments.

Working in commercial real estate, for instance, is a full-time job. It involves finding and analyzing good apartment deals, negotiating, inspecting, raising money, managing, and so on. Projects can take a minimum of five years, so, at this level, it’s not a hobby anymore. You’re running a company. Hence, McMahon assures that no one can do it all.

Real estate events.

Another problem if you want to invest actively is that you have to start over. You need to learn again the operations process, plus financial modeling and property management software. Also, you end up spending your time project managing and driving without family. You need to be available, and that means less time for hobbies,” she reflected.

Therefore, she encouraged attendees to take a moment and analyze the decision of transitioning from single-family to whichever next step they considered. “It’s essential to evaluate your life and your priorities in every area to see if your professional plans fit your expectations or if they’re actually on their way,” McMahon observed.

But don’t worry: discovering that the demands from this new stage in your business are too much doesn’t mean you need to stay where you are, and it certainly doesn’t imply that you can’t make more money, either. “The solution is passive income,” assured the broker.

10 advantages of passive income investments

McMahon pointed out that passive income investments allow people to receive strong returns while getting their life back. It’s a way to earn money, and at the same time being able to focus on your mission and your why. “You can choose to do it through a sponsor, so you make sure they are the ones doing all the work,” she added.

Sponsors – like herself – make money as a team. When you invest with them, they are the ones that find deals, negotiate, fundraise, secure loans, manage tenants and projects, and basically run the investment. For that reason, you must make sure they have enough experience before picking them. Another way to attract passive income is to invest in a company or become a part of an Affiliate Program (like ours!).

Become a part of our Affiliate Program! Click here.

Passive income investments have many perks, some of them unexpected. To exemplify them, McMahon listed the following ten pros, when compared to active investing:

  1. You grow your portfolio without having to do a lot of work.
  2. You just collect checks and watch your money grow.
  3. You take advantage of the downturns because you have more units or properties to spread the investments across.
  4. You build a reliable stream of passive income investments without taking on too much risk.
  5. You save money on taxes by ensuring you don’t make passive income in the higher tax bracket.
  6. You get passive income without risking too much of your capital.
  7. If you invest through a sponsor in physical assets, they can provide the desired level of passive income and less risk when compared to a stock or bond investment.
  8. With commercial real estate (such as apartments or office space), there’s potential for higher returns due to multiplying units and income. 
  9. You have (almost) zero liability as a limited partner.
  10. You can invest tax-free with your retirement account.

As you can see, passive income investments involve less work and more diversification than active investing. And you can use your retirement account, cash, crowdfunding platforms, or even cryptocurrency to do so. Moreover, the capital you invest can go further and provide you a better return on your investment compared to people who don’t use passive investments. The bottom line, you can be involved in more projects simultaneously if you’re not the one doing all the work.

Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.