What Is Passive Income?

Have you ever wondered how the Buffetts and Besos of the world built such extraordinary net worths? 

The idea of doing nothing and earning money may sound too good to be true—but in reality, that’s how some of the wealthiest people around the world have been able to build such substantial wealth. 

Money you earn without exchanging your time or services is called passive income, and it’s one of the benefits of investing. In fact, being able to help our community of private investors enjoy secure and stable income is one of the reasons why we chose to focus on the self-storage space.

If you’re unfamiliar with the benefits of passive investing, here’s a deeper dive into what it is and how it helps investors achieve their greater goals (including financial independence).

Understanding Income

When you hear the word “income,” what comes to mind? Most people picture the money they earn in exchange for working or selling goods. This is considered active income.

Yet, there’s a different type of income, called passive income (or unearned income), that when used successfully, helps investors build significant wealth and time freedom. Some people like to say passive income is the money you earn in your sleep (since you’re not actively involved in exchanging your time or services for it).

At Belrose, for example, we help our community of investors earn passive income by investing in self-storage facilities.

Why Is Passive Income Necessary for Wealth Building?

When you’re able to earn passive income from your investments, your actively earned money can stretch even further. Essentially, passive income can help you fast-track your way toward achieving your financial goals.

The Limitations of Active Income

If you only ever earn active income, you’re inherently limiting your wealth-building potential.

Even the highest earners (think doctors, lawyers, financial professionals, etc.) only have so many hours in a week to work. Plus, you’re impacted by your age and experience level, health status, and company pay scales or promotion policies. If you simply have a manager who’s hard to please, your performance-based bonuses or promotions may be limited—at no fault of your own.

Ultimately, no matter how good you are at your job, the market dictates how much others will pay in exchange for your time, goods, or services. Though you may be a high-earner or high-performing employee, your active earning potential is still limited.

By comparison, passive income does not have those limitations. It isn’t impacted by your age, health status or physical ability to work, market demand for your skills or services, or a set pay range. Rather, how much passive income you earn is based on what you choose to invest your capital in (and sometimes, how much initial time and effort you place into the investment). 

Remember, Not All Passive Income Is Created Equal

We’re passionate about helping investors discover the benefits of self-storage investing because it’s a fairly unique opportunity to make a truly passive investment in commercial real estate. 

Other types of real estate investing, such as earning income from a vacation or rental home, is considered passive investing—yet it often involves more time and energy than investors initially realize.

Even if the property is managed by a third-party professional, you’re still responsible for finding and vetting properties, reviewing financial statements, making big decisions regarding repairs or renovations, and more. While you may be able to outsource the day-to-day management, marketing, and maintenance of the property, you still have to be looped in at a high level.

When you work with a real estate sponsor like Belrose, we take all responsibility off your plate, so you can spend less time worrying about the operations of your investment and more time doing what you love.

Interested in Investing with Belrose?

Passive income is like a “secret weapon” you can use to build wealth. It’s not limited in the same way active income is, since it doesn’t rely on your continued involvement. In short, passive income helps you work smarter, not harder. 

If you’d like to learn more about how self-storage investing helps investors earn truly passive income, join our inner circle today.