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Investing in Cashflowing Rentals can be as Passive as you Choose

ivesting in cashflowing rentals

Summary: Investing in cashflowing rentals can be extremely lucrative. However, there are many who’ve never explored investing in rentals because they perceive it as too much work. In this article, we explain how fear likely plays a large role in creating this perception. We will demonstrate how investing in cashflowing rentals can be as passive as you choose.

There is a common perception that owning your own rental properties is a lot of work. 

You hear it all the time: 

“I don’t want to be woken up in the middle of the night to fix a broken toilet.” 

“Well, I don’t want another job.” 

“I don’t want to deal with tenants.” 

However, what if I were to tell you that these perceptions aren’t true and that investing in rentals can be as passive as you want it to be? What if I said that the things you hear about rental properties being too much work are playing on your natural instincts to be afraid of anything new or anything you don’t understand?

In this article, I’m going to show you how to make investing in rentals passive. But before I do, let’s first talk about fear. 

Every one of us has a fear brain. It’s the fight or flight response allowing humans to survive by avoiding anything new and potentially dangerous. It’s what keeps us out of trouble. 

The problem is, in modern society, when there are no sabretooth tigers lurking around the corner, it can keep us from trying anything new. Fear keeps us from achieving our true potential. 

There’s nothing wrong with fear itself. It’s our response to the fear that is a problem. When it comes to rental properties, those responding to their fear brain shut down, and fall back on the usual stereotypes of the “leaky toilet” or that “it’s just another job.” They stop exploring what’s possible. Those who acknowledge the fear but don’t let it keep them from taking action, start exploring the possibilities and, as a result, their mind and world expands. 

It’s like in the movie Croods. Fear kept the father in the movie from straying very far from the cave. The father’s world and possibilities expanded, but only after he was forced out of the cave.

Many go through their entire lives completely ignoring investing in rental properties as a possibility. Their fear keeps them from exploring an entire investment class that forms the basis of much of the wealth in our society. 

Nobody is going to force you “out of the cave,” so if you are going to expand your world of possibilities, then you’re going to have to make that choice yourself. 

In the meantime, it might help to hear the common perceptions about the work required to invest in rental properties is simply untrue. 

In this article, I’m going to show you how to make investing in cashflowing rentals as passive as you want it to be.

Buying rentals

This is the obvious first step! 

So how do you buy rentals passively? You can use a turnkey company. Turnkey companies sell you properties that already cashflow. They acquire them, they fix them up, they rent them out, and then offer them for sale to you. 

Now keep in mind that turnkey companies won’t help you achieve financial freedom very quickly, it is one way to passively acquire rentals. You can read more about the downsides of turnkey companies here

In this article, for the sake of proving to you that investing in cashflowing rentals can be passive, we mention them as one way to acquire properties passively. 

Managing rentals

So this is really the core of the misperceptions you hear about rental properties. These are the day-to-day “headaches.” 

This is again where controlling your fear is so important. 

You have to overcome the presumption that there is no way to manage rentals passively.

This is where property managers come into play. A property manager is who you pay to answer the late-night emergency calls, not you. 

Some might argue that you have to manage the property manager. This also isn’t an absolute. My parents have owned rental properties for years and they rarely step in to manage the property manager. The property manager handles all of the day-to-day affairs. In the case of my parents, they even handle many of the major decisions. 

I’m not recommending that you completely hand over major decisions. I am using this example to show you that managing rentals can be completely passive if you want to be.

Handling repairs

When you own a rental, it’s inevitable that things will break down over time (the leaky toilet example).

Your property manager answers the call in the middle of the night but does that mean you have to roll up your sleeves, put your tool belt on, and find yourself face-to-face with a toilet bowl?

Of course not! 

You can hire a handyman to do that for you!

And even better, your property manager can be authorized to handle most day-to-day repairs without checking in with you. You get to make decisions on authorizing repairs. You establish an expectation in which the property manager can go ahead and make the repair without checking in with you. 

Sounds pretty passive to me!

Bookkeeping/Tax preparation

One of the most important aspects of running any business is maintaining proper books. Owning a rental property is like owning a mini-business.

This is so important that we’ve developed a course dedicated to teaching you how to correctly set up your books and how to do the bookkeeping. 

But you aren’t interested in that course because this article is about making your investment passive.

So what do you do to make bookkeeping passive? You hire a bookkeeper!

The same goes for tax preparation. 

You will want to hire an accountant who specializes in real estate to make sure that you take advantage of the unique tax benefits that real estate has to offer.

Even though you’re investing in real estate passively, there are still tax benefits available to you. A typical accountant may not know about them. 

In other words, you don’t have to be a Real Estate Professional to gain tax benefits from owning real estate. 

Conclusion

So there you have it.

I’ve shown you how you can buy rentals, handle the day-to-day management, make repairs, and do all of the bookkeeping and tax preparation passively. 

The purpose of this article is to show you that you can invest in real estate passively. However, it’s important to point out that if you take a more active role in your rental properties, you can achieve better returns and even greater tax benefits.

If you are active to the point of achieving Real Estate Professional status, you can even shelter your W2 or 1099 income in addition to collecting cashflow from your properties. 

If you learn to acquire properties on your own, you can Fast FIRE your way to retirement.

So what do you do if you’ve acknowledged your fear of investing in rentals, and you’ve decided you aren’t going to allow your fear to keep you from exploring opportunities outside of the cave?

We’d recommend getting an education. Learn how to invest in cashflowing rentals the right way. There are many ways to learn about cashflowing rentals but if you want to learn from us, we’d recommend taking our Zero to Freedom Through Cashflowing Rentals course.

If you aren’t sure yet and want to learn more, take Ignite Your Journey: Crash Course in Cashflowing Rentals to understand the true magnitude of the investment returns you can get from cashflowing rentals versus traditional investments or your 401(k).

Interested in learning more about how to build a portfolio of cashflowing real estate? Be part of the conversation! Follow our general Semi-Retired MD Facebook page and then join our physicians or professionals group! After that, don’t forget to sign up for our Waitlist for the next Zero to Freedom course!

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.

Do you want to learn how to creatively fund your real estate portfolio and achieve financial freedom? Join the conversation! Follow our Semi-Retired MD  Facebook page and join our Doctors or Professionals  group!

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.

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Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

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