How to Quit Your Job and Start Your Own Business
In: Advice| Business Ideas By: Brian Armstrong
14 Nov 2007
This is the final part of my series on 6 Ways To Generate Passive Income.
Today we will discuss the final (and I think best) way to generate passive income. As I stated in the first article:
The way I evaluate any claim behind a method of building wealth or generating passive income is this: how many people can I find who have used this method to accomplish what I’m trying to do?
One of the best things I ever learned about success is to simply find successful people and model what they are doing, while ignoring the advice that unsuccessful people give you.
Is real estate a reliable way to generate passive income? Lets see…
CNN says that “Forty-six percent of those surveyed [millionaires] own investment real estate”.
Economics Edge says that the “real estate industry has produced the largest number of self-made multi-millionaires”.
Best selling author Brian Tracy did the research and says that 74% of millionaires are those who started their own business (included in this is real estate, but its unclear what percent).
(Interesting sidebar: less than 1% of millionaires consist of those who made their money in show business, sports, music, writing, inventions, or the lottery combined.)
So clearly real estate is a popular means of acquiring wealth. Many others have used it successfully. And investment real estate by its very nature is passive income.
I’m sure you can validate this for yourself by thinking of the wealthiest people you know or have personally met at some point in your life. Chances are they either (1) own a business, (2) own quite a bit of real estate, or (3) both.
Let’s look at the pros and cons…
Pros
Certainly real estate isn’t without some risks. Here are some cons:
Conclusion:
What I’d like to leave you with is this: there are plenty of ways to make passive income, but we should evaluate each with a bit of skepticism. If you find yourself asking “how do I know if this will work?” the first thing you should do is question the source of the information you are getting. Has the person giving me this information actually done it themselves? Are they rich or where I want to be financially? If the answer is no, then take a step back and reconsider taking their advice.
In a larger sense we can look at how others have been having the most success, and then model it. All I an tell you is that I’ve never personally met a millionaire who made their money from trading options, blogging, day trading, buying domain names, MLM, network marketing, or info products. History and the research seem to validate this observation. I’m sure those people do exist, but I have never met one. I have, on the other hand, met a number of millionaires who own real estate. Perhaps you have met some as well who may be willing to help you get started. There is nothing magical about real estate, and it certainly caries its own risks, but overall it seems to be a solid business that reliably generates passive income.
Best of luck in your passive income endeavors!
Discussion question: Who have you personally met that is in the financial position you want to be in, and how did they make their money? Post your response below.
Breaking Free is a blog for people who'd like to quit their 9-to-5, start their own business, and achieve financial freedom. It's written by web-entrepreneur Brian Armstrong. You can read more here »
Sennait B
February 3rd, 2008 at 12:34 am
Thanks for the well written series. It is refreshing to read someone write honestly about passive income. My husband and I own 3 rentals that I manage. I don’t consider them passive forms of income though since I have to oversee the houses. I am going to be looking for other semi-passive forms of income. Perhaps starting business that I can hand off to someone in the future leaving me to just check in, collect and pay bills. It’s my first time visiting your site, I lookk forward to reading more.
Blessings,
Sennait
NELLY
February 13th, 2008 at 4:54 am
I have been looking for an honest mentor for along time but i guess i got one.Thanks Brian,and hope to learn more!
HIB
October 8th, 2008 at 4:11 pm
I’m a big fan of investing in real estate. I do know people who are where I want to be and they’ve gotten there through real estate investing.
Personally, my wife and I have been struggling to get going. We hope to be closing our first deal at the end of the month (a subject to deal). There would be very little money out of our pocket in comparison to a down payment on a REO (bank owned property).
I recently had a friend approach me about options trading and seems to be doing well. Hopefully I’ll be posting about that in the future.
All the best!
-HIB
http://happinessisbetter.com
Brian Armstrong
October 11th, 2008 at 2:38 pm
Congrats on your first deal! The first one is the hardest I think.
john
March 30th, 2009 at 1:17 am
I’d like to get into something like real estate as you’ve mentioned. After a sale takes place, is renting the best option ? & if so, do you have any advice on finding good renters?
Presently, I have a business that I also would like for it to run itself with minimal time from me & I’m trying to find ways to get that done. Doing the work myself pays pretty well, but I figured if I had some people doing the work for, it would free up my time & still generate an income ( although less of one ).
Is that waht we’ed call a semi passive income ?
Lastly, what do you think of vending machines?
Thank you
Brian Armstrong
April 6th, 2009 at 2:17 pm
Hi John, yes I think buy and hold (rent) is better because it generates passive income, while flipping means you have to go back out and keep doing it again and again.
For finding renters it was pretty easy, just posted it in “the Green sheet” (a local paper) and Craigslist. For that price point (starter home 3/2/2 less than 2000 sq. ft. there are tons of renters). All of them rented in a week or so. I also priced it $100 below market.
By hiring people you could make it more passive, but I prefer to avoid this if possible because managing/hiring/firing people who work for you is a full time job. Better to outsource it (such as property management company) or build a business which requires zero employees if possible. Hope this helps!
Antonio Rillera
September 16th, 2009 at 11:59 am
Great post and absolutely true, real estate is #1 in my mind. My friend is only 21 and controls 8 million in real estate generating passive income of $10,000+ a month. Im right behind him because of working with a mentor, I suggest everyone gets one and gets educated properly.