Active Income Vs. Passive Income
Learn how to use your active income from real estate or your W2 to become a passive investor and create the freedom you want. This newsletter covers the difference between active and passive income, and how to use both to your advantage. Invest your active income in income-producing assets such as apartment buildings to eventually exceed your active income and achieve financial freedom.
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People don't get into Real Estate for Toilets, Tenants, and Trash. They get into Real Estate for Freedom. Unfortunately, they tend to end up experiencing the former and not the latter. This newsletter will cover the best way to use your Active Income from Real Estate or your W2 to become a Passive Investor and create the freedom you want.
What is Active Income?
A salary earned from specific duties or services rendered according to an agreed task within a specified time frame. An example of this in Real Estate would be house flippers and wholesalers.
What is Passive Income?
Passive Income is a type of unearned Income that is acquired automatically with minimal labor to earn or maintain. An example of this in Real Estate would be someone who is a Private Money Lender, Hard Money Lender, or Limited Partner in Apartment Buildings.
How To Use Both To Your Advantage
Active Income is important because you need it to survive unless you inherited a bunch of rental properties from birth. Most people haven't but can accumulate Rental Income or Passive Income simply by investing the Active Income they receive from their wholesaling or house-flipping business.
If you flip houses or wholesale and make 6-figures a year, you should invest passively in apartment buildings to offset some of that Income. Every time you get a check, you should be looking to invest it passively to avoid paying capital gains taxes. Bonus Depreciation and Cost Segregation will give you significant tax advantages since you're in Real Estate full-time.
Summary
Active income is entirely in your control if you're a wholesaler or house flipper and can be used to your advantage if you're disciplined. You get freedom from living off a part of your income and investing the rest in income-producing assets such as apartment buildings.
The goal is freedom, and you don't get freedom eclipsing your lifestyle with your income. Every time you get a check from wholesaling or flipping a house, you should put away a part of that so that you have money to invest in an asset that will pay you passive Income.
Eventually, your passive income will exceed your active income and create that freedom you want.
Click the link to learn more about The Evolution of a Real Estate Investor.
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