Get Real

So far in this blog I've been touting Network/Multi-Level Marketing (MLM) as the preferred method for creating passive income. It's still true that it is the preferred method--well, I prefer it because of relatively low entry cost and little risk--but it most certainly is not the only one. Today I want to discuss another potentially lucrative passive income stream, and that is real estate.

A few years back, right before the housing bubble blew up in everybody's faces--good timing, right?--I was trying my hand at investing in real estate. I had read the Robert Kiyosaki Rich Dad books and latched on to his success with real estate as a means to build income and wealth. But I didn't study his methods fully and went at it the wrong way.

Real estate investors, in a nutshell, employ two methods for generating their income: flipping, and buy-and-hold. In flipping, the investor basically acts as a dealer. He locates properties he can buy cheaply, and sells them to another investor or an end-user for a higher price. He may or may not invest in some improvements to the properties. Flipping can be quite profitable, but it does not generate passive income, which is what we're looking for in the Prosperity Convoy. In order to make more income, the flipper needs to be out buying and selling more properties. If he doesn't do that work, he gets no income.

The buy-and-hold investor, on the other hand, buys properties with the intention of holding onto it and generating income from renting it to tenants. Her focus on obtaining such properties is the cash flow they will generate; in other words, the amount of monthly income (rent or lease payments) above expenses. The cash flow from the sum of the properties in her real estate portfolio is her passive income. Once the properties are in hand and tenants in place, she can sit back and enjoy the income (assuming she has enough properties to throw off enough income to support her lifestyle). Oh, and she will have a good property management company taking care of her properties to further make that income passive, to keep her from working for that income.

Back when I was dabbling in real estate, most of my focus was on the quick-hit, big strike--flipping. I forgot about (or was too impatient for) Kiyosaki's focus on building passive income. And in those days I also met and befriended many other real estate investors, many of whom like flipping as their modus operandi. And flipping, as I mentioned earlier, can provide quite the pretty penny; some of my flipper friends are doing pretty well at it. The downside is the need to keep churning the business to earn that penny.

Buy-and-hold has its downside, too, and that is tenants. Bad tenants can be the bane of the landlord's existence, for just too many reasons for me to go into here. And let's not forget about vacancy periods, during which the landlord has no tenants occupying--and paying for--the property. No tenants, no passive income. Active outgo is more like it in that case.

Tenants and vacancies are major reasons why I prefer Network Marketing to real estate. But if they don't deter you (and you have a good property management company), buy-and-hold real estate can be a tremendous passive income stream. And if you enjoy the hunt for cheap, distressed properties, flipping may be for you. But for flippers and buy-and-holders both, you may consider adding an MLM income stream to your portfolio.

Consider what the added passive income from a good MLM can do for your real estate business. First and foremost, it can provide much more cash with which you can buy more and more properties. Secondly, if you're going the landlord route, you can introduce your tenants to the opportunity, improving their lives and their ability to pay you if they join up.

Obviously, you're not limited to any one passive income stream. The Convoy's emphasis is for you to find the one you like and to give it all you've got to build that passive income. Once you get that one up and running (supporting your lifestyle), then you can add another if you so desire. Multiple streams of passive income are a beautiful thing.

So that's my nutshell take on real estate investing. The way the market is these days, an investor can do quite well. Good properties can be found CHEAP in some markets, making good monthly cash flow quite possible, if not probable. If you decide to pursue real estate, or already do, I wish you well. Just remember to focus on that passive income.

Thanks for looking in today. Let me know what you think about all this. And I'll see you on the road to prosperity.