"Passive income means your money works for you, not you working for money. True financial freedom is achieved when passive investments cover your living expenses, allowing you to become 'job optional' and gain time freedom. Remember, investing wisely is the key to earning without active involvement."

Rise Capital Investments

Most of us think of earning money by getting a job or starting a business and “going to work” each day to earn a paycheck.

We see passive income as sitting on a beach with a cold drink in hand.

But when we get into it, we need to do a lot of work to identify, fund, and monitor our deals.

So is any income really passive?

Since there is not official financial definition for the term "passive income," it's important to get clear on what you think it is so your lifestyle design doesn't disappoint you!

What Passive Income IS

Passive investing is when your MONEY is WORKING for you instead of YOU spending your TIME WORKING.

Financial Freedom is when your income from your passive investments covers your living expenses.

We understand that to retire (whether before or after age 65) there must be a continued source of income received while NOT working. This income is generated by investing money into businesses that other people spend their time to run using money investors provide.

The concept of passive wealth where we do not trade our time for money is important, and from the stocks and other public markets, we are accustomed to investing money and watching it grow passively or receiving small dividends from that money that we earned without working.

No matter how much work we put into due diligence on a business or deal, none of that work on our parts contributes to the performance of the business.

The same is true with real estate. You can passively own part of a property by providing the capital to purchase and run it that other partners provide their time actively manage for the entire group.

This means you OWN EQUITY IN A BUSINESS OR ASSET WITH ZERO OF THE MANAGEMENT OR LIABILITY OF OPERATIONS.

Other people you trust as operators manage the transaction and day-to-day management of the business, while the passive investor collects their portion of the profits as “mailbox money.”

A person can stop working if they need or desire to at any time after financial independence is reached to become “job optional” and have time freedom.

Tax implications for "earned" and "unearned" income gives us some direction here. Dividends/distributions are taxed at the lower rate, so maximizing this type of passive income is key to earning money without working for it.

What Passive Income is NOT

Going with a team of dedicated business operators who buy, manage, and sell real estate using your money to fund the purchase and construction is necessary to have truly passive income from real estate.

It might not be as easy as enjoying cold drinks on the beach for the rest of your life, but it is a lot easier than managing a business on your own.

Don't get fooled into believing that any business you own yields passive income. Even in the most "hands off businesses" by hiring others to do the actual work, the final responsibility lies with you.

The only truly passive income is earned by investing money, and where any time you put in does not directly impact the performance of the business