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On this episode of The Money Guy Show, we tell you the truth about passive income and give you three ways to actually make money!
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I can't help but feel you're being very dishonest about real estate, and then pushing the stock market. First of all, I don't claim that real estate is 100% passive, but it's not nearly as terrible as you make it out to be. Your claim that only 7/10 tenants are going to be good is very much a lie. 10% of my tenants aren't building engines in the living room either… You don't use uncommon anecdotes to create a blanket rule for all of real estate investing.. if 3/10 tenants were no good, you wouldn't make any money. Part of real estate investing is filling vacancies, which includes background checks, credit checks, income verification, etc… Another dishonest comment was regarding maintenance and vacancy ruining your returns. While it's true that they cost you money, TRUE cash-flow takes into account vacancy, maintenance, etc.,etc. – this is what real estate investors do. A typical cashflow calculation might look like this:
Rent income: $2000
Mort: $600
Taxes: $200
Insurance: $100
Utilities: $50
Maintenance: $250
Vacancy: $200
Cashflow: $600 And this is what you use to calculate ROI.
So, while maintenance issues and vacancies do occur, you should be setting aside a conservative estimate to cover these costs when they do happen (preserving your cashflow).
Also, if you do have 3/10 tenants that suck, you're probably buying in class D areas… don't do that unless you really know what you're doing…
Another problem with owning many rentals is what happens when you're gone. Now your heirs have to deal with mortgage payments, tenants, maybe evicting tenants before the properties can be sold, plus finding cash to make the properties salable – and this is assuming they left a will. If it has to go though probate there's that delay. If the heirs don't live nearby then they'll have to take off work and spend money traveling to deal with these properties.
Sometimes as people get older they get taken advantage of by tenants perhaps due to dementia setting in or being bullied. A cousin lost a lot of the value of his inheritance home when after his mother died the tenants of the other half of the dublex showed them a rent-to-own agreement that gave them the house at substantially less than it was worth. He hired a lawyer but it turned out the contract was solid – his mother had signed over her home to strangers at a much too low price. He insists they bullied her into the contract and had to control his temper to avoid prison. "Let it go…"
I had to protect my elderly mother from all types of scammers including neighbors. One said she would do the yard work including raking the pine needles. She'd collect the cash from my mom then not do the work (my mom was house bound so had no idea). When I moved back to take care of her I raked over 60 tightly-packed large bags of pine needles that had built up over the past few years plus had a lot of weeding to do. This lady I later discovered had been grooming my mom to get the house – saying us kids didn't care about her.
And vacation rentals are a lot more work and cost than regular rentals – I ran an Airbnb for two years and it was a huge amount of work. Hiring housekeepers only works if the income from the rental is high enough to make it cost effective, and even so, they don't always do a good job or may call off work so you have to do it on perhaps short notice or risk a bad review that can ruin your business. You'd be shocked at the amount of dirt and damage vacationers can do to a property in only a couple of days. They made my life hell – am so glad I'm out of that business.
I can't help but feel you're talking down real estate and content creation, then talking up the stock market, because you're investment advisers.
100% passive is only State pension
Wait, i thought it was "money for nothing, Chex for free".
Didn't know you could sing so well…😁
You should change the name of the show to The Money Guys.
and there are commercials that interrupt you.
You MISSED one of the best rental markets around the country, vacation rentals. I have a friend with two $350k condos in Florida that he rents weekly on the internet making huge cash flow. This alone will make him a millionaire. It is still work and get rich slow. They are doing so well he is thinking of adding another.
Airbnd may also be very promising but I have not tried it.
I make $13k in passive rental income in the Dallas area. I bought two more mobiles yesterday that will eventually generate me $1400 a month more. Looks like by by end of 2021 I will be at $16k. It is definitely a job. Nothing is free. I do have one guy that works for me full time so it is not really a 9-5 thing. If you add a six figure IT job then you can do the math. It gives you options and freedom. In the Dallas area I can take an IT contract any time or just "retire" early with passive income.
There are a few channels that promote covering your nut with rental income like Graham Stephan. His YouTube channel income is doing more than $1M a year. People into FIRE movement may want to take a look at passive income, house hacking, and other techniques to meet their goals. The key here seems simple but WRITE DOWN YOUR GOALS. Not everything will be right for everyone.
1/10 will be a meth lab lol
Are you guys going to mention Charles Schwab allowing fractional shares for stocks & ETFs?
Holy smokes, i was just looking into this. What great timing! Money guys, sprinkle your wisdom down on us! Lol