Passive Income overview 9/5/18

Passive Income is all the rage these days, with ecommerce blowing up, YouTube, podcasts, blogs, investing etc. there are lots of reason why it should be something to think about. Let’ s dive into it and see what it is all about!

Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it. (Wikipedia)

That sounds amazing! Minimal to no effort and receiving cash from it, but its not quite that simple. Passive income often requires either initial upfront energy, effort, and time or initial upfront cash.

My expertise is with the initial upfront cash portion, so we’ll get into that. I have been collecting data on my passive income for over a year now. I currently receive passive income in the form of interest payments from Lending Club, my savings account, stock dividends, stock interest payments, and I guess money saving apps as well. I won’t go into that last one in depth as I am saving that for an article in the future. Hopefully if you’ve been following me for awhile or are at all familiar with investing you understand what a stock dividend is. Essentially you own a dividend paying stock a every quarter or for every month you receive a little gift from the company in the form of a monetary payout for being their stockholder. I also receive some interest payments from my stocks when people short the stocks I own. Between my savings account interest, stock interest, dividends from both Robinhood and Stash I have received $186.37 this year. Not too shabby most would say, but this does come at a price to the tune of ~$12,500 invested in the above-mentioned platforms. The other vehicle I use for passive income is Lending Club. Currently I have received $233.74 in interest payments this year through that platform and that is to the tune of about $4,000 ish invested. A little calculator work later and we are at $420.11 this year in passive income, or about $46.68 per month.

I’m proud of that number to say the least but there’s more to come and in fact my goal for 2018 was to make $1,000 in passive income this year. There is still along way to go to reach that $1,000 mark and less than 3 months till the ball drops and we are standing in 2019.

My plan to get there is already in the works, I have a sizeable position building in Lending Club, in fact there is quite a lot of notes (loans) that haven’t paid me yet because they are so new. When that all comes clicking together and I continue to add to that platform I expect my interest payment payouts to sky rocket. I think I’ll put in another $1,000 into that platform or so and will be reinvesting the principals and interest payments to snowball that passive income stream and make it larger.

The other side of the coin is my stocks and etf’s I own. I have added around $750 into my stash positions and most of those pay dividends. I’ve also added $1400 to my robinhood portfolio and a decent chunk of that has gone to dividend stocks. I plan to continue to add to both and make profits on my positions to reinvest into dividend stocks as well as reinvest the dividends back from where they came from.

The goal for this is to reach financial freedom. There are various definitions to this but for my purpose it is to create passive income streams that are greater than my active income (the money I make from working). When you reach this and assuming you account for inflation, cost of living increasing etc. you can effectively retire. Now of course I don’t plan to retire super early and go live on a beach or anything like that, my mission is much bigger than that, however that is the ultimate plan.

You might be taking a look at this and scratching your head like, “Brandon, you’ve got a long way to go to replace your standard income if you aren’t even at $1,000 a year yet” and you are absolutely correct. My stock portfolio currently yields around 3%, for a modest $40,000 a year to live on my portfolio would have to be around $1.3 million at that same yield to produce that. That’s a lot of motherfucking money to reach financial freedom if you ask me.

That’s why I am looking into investing in real estate when I build my capital up. With real estate’s monthly cash flow and leverage assuming a modest 5% return not accounting for increasing rents or refinancing or anything like that an $800,000 property would yield $40,000 a year and with a 25% down payment of $200,000 you could control that. That looks much more attainable to me.

Using Grant Cardone’s 40% rule, profits from my investments, and existing passive income streams that will grow that should be attainable within a few years if all goes right.

As Warren Buffett said, “If you don’t find a way to make money while you sleep, you will work until you die.”

Now are these passive income streams passive, no. I actively invest in the stock market, I do research on the positions I take, I check lending club frequently and hand pick my loans that I invest in etc. But all in all they are pretty passive. Real estate on the other hand isn’t very passive until you get to the big leagues and can afford a property manager.

Grant’s new real estate investing book is in route to my door in STL and I will be giving that a read very soon and I plan to implement his plan and to go big on my first deal. We’re talking 24-32 units costing $1.4- 2.0 million requiring a down payment in the neighborhood of $500-700k. Like I said large upfront capital or large up-front work, time, energy.

I should also mention what I am doing right here follows that other method that I haven’t gone over. This blog while it does not produce any income and actually never has produced any income for me may be able to one day. Consider how much time I’ve spent (10 months, 60 blog posts, advertising, Instagram etc.) to get it to this point and still haven’t made a dime with it. That’s what I am talking about in terms of up front time, energy, and effort.

It will not be easy whatever passive income route you choose, but with a good strategy and the work you need to put into it the prize is pretty frickin nice.

Let me hear your passive income journey!

B^2

Tell me what you think!