Let's talk about passive income with Real Estate. This is a term I hear all the time online, different Tik Tok videos and Instagram about passive income real estate. The idea is that you purchase an asset and then you sit back and collect payments.

Well, this could be true, but there's really only two or three scenarios that I'm aware of, that it's actually true. The first scenario is purchasing a cash flow property. Whether it's a house that you're going to short term rent or a multifamily property that you're going to a long term lease out or a commercial building that

you're going to get a long term tenant in place. These all require work. So the only way to get passive income on an asset like that is to hire a really great property manager. And in many cases, like what we do for a lot of our clients, it works out.

We handle everything from maintenance requests. When a tenant calls up and there's an issue with the toilet that needs to be unclogged, we'll send out a plumber. We'll handle the billing for that vendor. We'll make sure the rents are collected on time.

Unlike a gross lease, which is most leases and especially residential, which means that the landlord is going to pay for the property taxes, they're going to pay for the maintenance on the property, and if the AC blows out, they're going to have to replace that.

on a plot of land. Then they actually build their facility on top. So does McDonald's. They have triple net leases on their locations. They'll build the McDonald's on top, then they'll lease out to the operator who's going to operate on top of that.

So that's one of the most passive income ways to get real estate is called a triple net lease. Now, either way you go, a triple net leases can be great, but you can get some higher returns on other types of investments, such as mobile home parks.

Short term rentals are really great right now. Question is how long is Airbnb going to last? Probably for a while. But more importantly, what are the laws in that local area that are going to be passed? L.A. Los Angeles has basically shut down Airbnb.

They passed a law that says unless you're a primary owner, meaning you live in that house and it has to be a single family home, you cannot Airbnb a multifamily property now, you can't Airbnb, a commercial property. You can only Airbnb in Los Angeles city, a single family home, and it has to be a primary residence.

And even then, you have to get a permit to do it, and they only let you do 120 nights a year unless you're doing a longer term lease, which is generally over 29 or 30 days now. Those higher income producing investments can be passive if you get a great property manager.

So how do you find a great property manager? Well, vet, the property manager asked for referrals. Check yelp to see the reviews. Look for property manager signs that are already around your area. Start calling them, talking to them.

Ask what are their rates normal property management rates, or somewhere between five to 10% of the gross rent? So if your investments bringing in $10,000, that means you're going to be paying that property manager somewhere between 500 to $1,000 for them to handle that.

Now, short term rentals and other investment vehicles that require more management effort usually charge higher. I know in Joshua Tree, for example, we're looking at some management companies out there or we may manage it ourselves, and they're charging 30% of the gross rent.

favor because it's going to make it as passive of an income as possible. Follow us for more tips and we'll do another video on how to actually do a financial analysis on these investment properties to see if it's a good deal or not.
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Robert is a licensed real estate broker in California and Virginia. This video and any other content is not financial, tax or legal advise. It is recommended to consult a licensed attorney, CPA or financial advisor to discuss your personal needs.