Updated: Apr 30, 2020
Imagine with me, that your workday began with the usual routine, but halfway through your morning, you received the news that you’d been laid off.
For most Americans, that means zero income starting tomorrow morning. Now, let’s pretend that during your employment, you leveraged your money. You invested passively so that you make money while you sleep.
"The rich don’t work for money. They make their money work for them" – Robert Kiyosaki
Three Types of Income
Most people’s income is active, which means it’s from a consistent paycheck. But wealthy people typically earn Residual or Passive income (or both!).
Active Income is from your employer and requires activity in exchange for money. When you stop working, the income stops. This is income from a "traditional 9-5". Residual Income is income that you continue to receive after the work is done. For example, every book an author sells provides residual income.
Passive Income is earned with very little effort and continues flowing even when you aren’t working. Real estate investments are one of the most stable sources of passive income.
Remember the job loss scenario? Let’s pretend you’d built passive income on the side, during employment. Since being laid off, your earnings decreased by your monthly salary amount, but you still have income from your investments.
Financial freedom is achieved when your earned passive income supersedes your active income and/or your monthly expenses.
Investing in Stocks vs. Real Estate
Historically, the stock market returns about 8% annually, which means $100,000 would produce roughly $8,000 per year. That’s only $667 per month.
To replace an income of $3,000 per month, you’d need $36,000 per year, which would be 8% of $450,000. So you would need $450,000 to replace an income of $3000 per month.
However, with real estate, $100,000 could buy a $400,000 rental home. How? The bank brings $300,000 to the table. You put in 25%, the bank puts in 75%, and you earn 100% of the profits. A $400,000 home renting for $3,000 with a mortgage of $2,000 would net you $1000 per month. Theoretically, 3 investments of this size could replace a $3,000 monthly income.
What if you don't want to be a Landlord!
The numbers look enticing, but being a landlord does not. This is where, instead, you invest passively with a company like Vidente Capital to acquire real estate.
When investing $100,000 in a real estate syndication, it’s feasible to earn $8,000 per year (8%), similar to the stock market. However, the real opportunity lies in the sale of the asset. Syndications hold the property for about 5 years. During this time, building improvements are made and the land market value rises.
Upon the sale, you can receive $160,000 ($60,000 in profit). This, plus the passive income of $8,000 per year (totaling $40,000), equals $200,000, which is a 20% average annual return.
If, while employed, you’re able to create passive income, you will build your nest egg and you’ll be less stressed when facing a layoff. The more passive income you create for yourself, you may even find yourself celebrating unemployment.
At Vidente Capital, we help you invest in real estate syndications, so that you too can build up passive income and be in a work-optional situation. Check out our website and join our investor club. #Videntecapital #passiveincome #passiveinvesting #multifamilyrealestatesyndications #realestatesyndications #Passiveinvestingmadesimple #makemoneywhileyousleep #retirement