How to Stop Trading Your Time For Money And Start Creating Passive Income

Yes, even entrepreneurs and business owners can find themselves stuck in the familiar corporate employee quandary of trading time for money if they don’t set their businesses up right.

Imagine with me, that your workday began with the usual routine, but halfway through your morning, you received the news that your biggest clients have fired you or your income stream is compromised due to a pandemic.

For most American corporate employees, entrepreneurs, and business owners, that means zero income starting tomorrow morning. 

Now, let’s pretend that during the periods when your business was flourishing, you leveraged your money.

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 trading their time for money. But wealthy people typically earn Residual or Passive income (or both!).

Active Income

Active income is from your direct efforts and requires activity in exchange for money.  When you stop, the income stops. 

Residual Income

Residual income means you receive money after the work is done. For example, every book an author sells provides residual income.

Passive 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, while building your business. 

Since an interruption in your business, your earnings decreased, but you still have income. 

Financial freedom is achieved when your earned passive income supersedes your active income. 

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. 

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 $3,600 with a mortgage of $2,100 would net you $1,500 per month. Theoretically, 2 investments of this size could replace a $3,000 monthly income.

The total rental income plus $25,000 in additional equity (based on 5% annual appreciation) equals $43,000, or 43% return in just one year.

But I Don’t Want to Be a Landlord

The numbers look enticing, but being a landlord does not.

This is where, instead, you join a small team to acquire real estate. 

When investing $100,000 in 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 typically rises.

Upon the sale, you 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 building your business, you’re able to create passive income, you’ll be less stressed when facing fluctuations in your business income. You may even find yourself celebrating a drop-off in client work or the busyness of creating.

Want to Invest with Lisa?

If you are interested in learning more about passively investing in apartment buildings, click here https://lisahylton.com/invest/ to sign up to learn more about upcoming opportunities.

About the Author

Lisa is the CEO of Lisahylton.com, a real estate company that helps entrepreneurs invest in tax-efficient real estate investments. At Lisahylton.com, Lisa and her team focus on buying apartments with investors and shares the profits. This strategy enables her investors to build wealth and passive income through investing in conservative, high-quality multifamily assets.

Lisa is the host of the Level Up REI podcast where she interviews real estate investors, entrepreneurs, and business owners to share their stories and experiences building businesses and investing in real estate. After a decade of working in the financial services industry, Lisa found investing passively in real estate syndications and was intrigued by the business opportunity to invest in real estate while also providing the opportunity to others to do the same along with her.

You can learn more about passively investing in high-quality multifamily assets that provide cash flow and strong returns at www.LisaHylton.com.