Epic Real Estate Investing - Passive Income. Everything You Need to Know in 2019 | 595

Episode Date: February 22, 2019

In this episode, we are telling you everything you need to know about passive income by giving you the ideas on how to create it. Therefore, allow yourself to spend less time working and more time enjoying! Stay with us and learn what passive income is, how to build it quickly, and how many options you have for creating it. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Hey, rock star Matt Terrio here from Epic Real Estate. And today, passive income. I'm going to give you everything you need to know about it. I'm going to show you what it is, why it's a must. And I'm going to give you several ideas for how you can make it happen for yourself so that you can spend less time working and more time living while you're still young enough to enjoy life. on today's episode of Financial Freedom Friday.

All righty, so here's the problem. The biggest fear of today's retirees is that they're going to run out of money before they run out of life. And they fear it more than death itself. That's what the studies are saying. And sadly, that fear is a reality for anyone that is following that antiquated plan of go to school, get a job, work, sacrifice, and save. I mean, it was a plan that had a shot at working 50 years ago, but life expectancy is increased by 10 years since then. So people that still subscribe to that plan, what they need to do, they need to save a bunch more

while they're working, or they need to work a lot longer. Or they can change the plan. You see, rather than focusing on saving their money for 40 to 50 years, hoping they did it right, and hoping they saved enough, they could just. kind of shift their focus a little bit to creating streams of money. And if they did that for just a few years, they would create the option for themselves to retire decades earlier knowing that they did do it right, having the confidence that their money will last indefinitely. And if you like the sound of that plan better, go ahead and do me a favor.

Smash that like button for me and then I'll know that you and I were on the right track, we're on the same page. And this is really important because that's what's available for all that shift their focus towards passive income. All right? So I've got three points that I want to touch on, and that's going to be everything you need to know about passive income to start making it happen for yourself. And then just stick around, stick around until the end,

where I'm going to give you nine simple actions that you can take today, before the end of the day even. Ready? So first, the three points that you need to know. Number one, what is passive income? And what should your expectations be? number two, why must you create passive income? And three, how many options do you have for creating passive income for yourself?

I came up with more than 30 viable options for you, but let's go ahead and start with our three points. And we'll start with point number one. What is passive income? And what should your expectations be? All right? So passive income, what it does, it includes regular earnings from a source other than an employer or contractor.

The Internal Revenue Service says passive income can come from two sources. You can come from rental property or a business in which one does not actively participate. That's the formal definition. Informally, it's income that doesn't require your time or effort. You know, like making money while you sleep. However, it doesn't mean uninvolved income. That's one of the big myths of passive income. I mean, there's so, there's just, there's no such thing as set it and forget it income that's going to last forever.

You do have to be involved. But done right, minimal management is all that can be necessary to create everlasting passive income. And to set it upright, you're going to be required to do some work, actually quite a bit of work right up front in the interest that you won't have to work much at all later. And it's funny because that actually, there lies a little bit of irony inside the world of passive income because the amount of work it takes to put yourself into a position to not work is a lot of work. And that brings us to point number two. Why passive income is a must and why must you take this on?

Why should you take on this work? Well, I guess if you enjoy what you do for a living and you wouldn't mind doing it forever, then maybe, I don't know, maybe it's not a must for you. But if you find yourself dreaming of what you'd rather be doing instead of what you do for work, then it is a must. It'll be your only means of escape. And this is what I mean. We live in a society where money is important.

You need it to function as a member of society. And you have a few options and how to generate that money. And these options have different relationships to your time. the amount of time that's involved by you or from you. So I'm going to give you three examples. And what you should be focused on really here is the time and the effort that it takes for each option, for each form of income. And I'm going to use just the median income in America to demonstrate.

And to make the math easy, I'm just going to round the median income to $40,000 per year. $40,000 per year. I'm not going to factor in taxes. I'm not going to factor in inflation. I'm not going to do that. I'm just going to use simple math to give you an idea to help you decide which road that you want to travel. All right? So again, focus on the time and effort that will be required of you in each option. Okay? So per the IRS, there are three types of income that you can earn. Per the IRS,

the first one is active income. Active income. So to make 40K a year, that equals essentially $3,333 a month. Okay? Doing it this way, you'd essentially have to work forever. Okay, for sure it's going to be indefinite, indefinite, okay? So, and what that really means is if you don't work, you don't get paid, you know, and through active income, you're exchanging your time and effort for dollars, that's what I want you to focus on.

And with this option, the time and effort that's required, it's indefinite, it's pretty much forever, okay? And this is what we call the rat race, right? Right? That's the rat race. Like I said, if you like what you do and you can see it, you know, keeping you satisfied forever, active income, it's an option. I mean, maybe you don't want to escape. That's okay. Some people just love what they do. But for most, this is why passive income is a must as it eliminates exchanging time for dollars. And it represents the escape, your access to actual freedom. And that brings us to option number two, the first type of passive income that you can earn. And that number one is portfolio. Portfolio income.

So to make the same $40K a year through portfolio income, you're going to need some money to put into that portfolio, right? To make the $40K a year. And this money that you put in the portfolio, you're never going to be able to touch it because what you'll be able to use is the income that that money creates. So as of the recording of this video, So the highest yielding savings account that I could find offers a 2.35 percent, annual

percentage yield, a 2.35 percent. That's annual percentage yield. All right? So do you have any idea as to how much money you'd need to put into this savings account, into this portfolio to produce this $40,000 a year of passive income? Well, here's how you figure this out. You take your $40,000 a year and you just divide it by the $2,000. And your answer is $1.7 million you would need to put into this portfolio to produce $40,000 a year of passive income.

And that is why this is typically not an option for most people. They simply just don't earn enough to save enough to get to an amount like $1.7 million, dollars fast enough to have much life left over but let's say you're going to get really aggressive right and you're going to be super uh discipline and saving this amount and you made the decision you're just going to reduce your lifestyle and you're going to live on 28,000 dollars and why did i say $28,000 a year because what that's going to do is going to free up $1,000 a month to save so you got $1,000 a month to save okay And let's say you found a good mutual fund.

It's a, I don't know, 5%, something that averaged 5%, the whole time that it was in there, 5%. That'd be a good one. And it averaged that 5% the entire time that you were saving to your goal. How long would it take for you to save $1.7 million? Investing $1,000 a month at 5%, how long would it take? It would take you 42 years.

So the time and effort in the portfolio income is going to take you 42 years to create. Up here, it's indefinite and potentially forever. Down here, 42 years. Now let's look at our third option. Number three, passive income. Passive income. So to make $40,000 a year from passive income, the same $40,000 bucks a year, we got $40,000 up here, 40,000 here, 40,000 here. So to make it happen through passive income, what you would need are 11 of these little

income properties just like this producing $300 a month. So 11 properties producing $300 of cash flow a month. That would generate $40,000 a year. All right, so I'm going to give you several more options for creating passive income in a moment. I came up with more than 30 of them, by the way, for you. But for this example, I'm just going to use investment-grade income-producing real estate. And the reason being is it's going to be the easiest and fastest way for the average person to do it. And for two reasons. Two reasons.

First, it is simple, right? It's simple to understand. So it's simple to understand. You see, people they need shelter to live. People pay for shelter. And if you own the shelter, then those people are going to pay you for its use. That's what makes it the easiest because it's simple. It's simple and it doesn't take really any extraordinary talent to execute.

Now second, this right here, this is what makes it fast and that is leverage. Leverage. You see, your ability to use leverage in real estate is unmatched in any other passive income opportunity. And here's what I mean. Let's say each of these 11 income producing properties you purchased, average, say they were $100,000 each. They're $100,000 each for this real estate. That would be $1.1 million of real estate. $100,000 each times 11 gives you $1.1 million.

And in this previous example, you saw how much discipline and time it would take to save an excess of $1.7 million. And we're like up here to 42 years, right? So because of your ability to use very traditional and conservative leverage in real estate, you wouldn't need $1.1 million to acquire these 11 properties. You'd only need $275. Where should I put it? Running out of room. $275,000.

So if you're going to implement the same aggressive plan in the previous example and live off of $28,000 a year, right here, while stashing away $1,000 a month, You cut your time almost in half of the portfolio route to 23 years, to 23 years when you purchase those 11 rental properties. So that right there, cut in half, that's really, that's two extra decades of life you get to live supported by passive income. Two extra decades of being able to enjoy life without having to work. That's what a little bit of effort and discipline backed by leverage can do for.

you. But here's where it gets really exciting when you add a little bit of intellectual currency to the mix. Just like Epic Pro Academy private client Corey Kendig, if you did that, you could add or acquire these 11 income properties in less than two years. That right there, that's 10xing this over here. You could do it 10 times faster than the 23 years. Real estate combined with leverage and a little bit of specialized knowledge.

can 10 times your results. Or, Epic Private Client, Josh Miller. By incorporating one simple tool, the Epic Pro Academy's three-optional letter of intent, you could 10 times it again. 10x, one more time, acquiring those 11 properties in just four months. Four months.

And, you know, it almost makes me cringe a little bit to even share Josh's story because I can almost hear you calling BS right now. I get it. I might not believe it either if I were in your shoes. I probably wouldn't. But I'm a witness. I saw it.

In fact, I was actually the catalyst. You see, I showed them how. I showed both Corey and Josh how to do this. I gave them the tools to get it done, and I was there for support and guidance when they got stuck. I mean, all credit goes to them, though. I mean, they traveled as far as they could see, and when they got there, they could see further.

And if they got stuck, they asked for help. and then they just kept on going. And both of them, they're still going. You know, as I was preparing to create this video for you, the stories and these numbers, I bounced them off of Miguel, my partner Miguel, and I asked, you know, should I even share this in public? I mean, will people even believe it?

Should I say that it took Corey and Josh much longer to do than it actually did? Just so it's actually more believable? Well, as you can see, I just opted to simply tell it like it is. And really, that's the only way that I know how. And it's not like those two are mega exceptions either. I mean, I could have mentioned Jeremiah from Kansas or Brad from St. Louis, or Catalina from California, or Tony from Texas, or Parker from Atlanta,

of which all of them, all of them too, created enough passive income in less than just a few years to sustain themselves for the rest of their lives. Now, as I suggested to do up front, I want you to compare your three options through the analysis of the time and effort required for each one. You know, all three options, all three of them require work. I mean, every person that I just named

worked their butts off to make it happen. And whether you choose to pursue active income, portfolio income, or passive income to support your time here on earth, they all require hard work. The question for you to answer for yourself is, just how long do you want to work hard? Your entire life working for active income or 42 years working for portfolio income or like Josh Miller working for four months for passive income. You see, through real estate, leverage and a little bit of specialized knowledge and a disciplined work ethic, that's what's possible. And that brings me to the third point, the third thing that you need to know.

Point number three, how many options do you have for creating passive income for yourself? If, you know, if real estate doesn't excite you, if that's not your thing, you do have options. There's other things that you can do. And then after I share these other things that you can do with you to give you, you know, different ideas for you to go out and research on your own, stick around because I've got those nine simple actions that you can take today before the day is over even, to start creating passive income and start planning your rat race escape. I mean, we're going to put it in motion with these nine action steps.

All right, so what I did is I grouped these ideas for you into four categories. So I grouped these ideas for you into four categories, all right? Four categories. Category number one, we'll just call it cat number one, the sharing, the sharing economy. Now, you could rent unused portions of your home. you know, like whether a spare bedroom, storage or parking, like, you know, through a service like Airbnb. You know, and you could rent the use of your car.

There's a service out there for that called Turro or peer-to-peer lending through a service like Prosper or Lending Club. I mean, the sharing economy has introduced multiple more options for creating passive income to today's generations than previous generations had available to them. But volume here, volume is needed for these options. to produce significant streams of passive income, of which kind of removes some of the passive from the passive income. But still, still very viable options. Category number two, investments, like index funds or dividend stocks, real estate investment trusts. You could

become a silent business partner, annuities, crowdfunded real estate, or other investment options through a site like, you know, betterment, betterment.com, all very traditional forms. of passive income, but money, money is needed and a fair amount of it at that for these options to really produce significant streams of passive income for yourself, of which can eliminate these options for most people. Then there is category number three. Business, business. Some traditional ideas, some outside the box ideas, you know, like starting a YouTube channel and creating videos, selling photographs through sites like shutter stock and I stock photo. You could write a book, whether a real book or an e-book, you can do it online or

off to sell and collect royalties. You could start a blog or buy a blog. You could create an app that solves a problem. You can create an online course on Udeme or teachable. You can sell affiliate products. You can sell your own products. You can build an e-commerce business through a service like Shopify or you can start an Amazon business through their FBA program. You could advertise with your car through a service like Carvertise or Rapify. You could design and sell t-shirts on a service like T-spring, vending machines, laundromats, automated car washes, or, I don't know, can you draw, can you paint, do you compose music, do you design stuff?

Because through a service like Patreon, patrons support creators of all types, like podcasters and YouTubers and bloggers and musicians. I mean, so much of these ideas are common fixtures in society today. But if you lived in a world pre-internet, I mean, is pretty remarkable the passive income opportunities that are available if you have the talent. Now, category number four. Have you guessed it? Yeah.

Real estate. Specifically, income producing real estate. You know, like single family residences, multiplexes, multifamily residences, multi-family residences, storage facilities, notes. And it's really here where the average person has a legitimate shot at creating enough sustainable passive income for themselves in a reasonable amount of time. in a reasonable amount of time to support themselves indefinitely. You know, each of these four categories that I shared, they're all viable options.

They all work. But unlike the sharing community where volume and a fair amount of management is needed, investments are here where a fair amount of capital is needed, and then the business ideas where a fair amount of, face it, talent is needed, real estate, anyone can do that. Okay, now you know. You know everything you need to know about passive income to go out and create yours. Now it's time to do what you know.

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