The Advantages of Income from Real Estate

To appreciate this, you first need to understand the different types of income starting at least to most desirable.
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• Linear income – This is exchanging your own time for money. In real estate it would be when you rehab a house by yourself for resale or you are a real estate agent.
• Residual income – This is when you rent out real estate and receive money every month regardless if you work that month or not. However, you are still on call and may have to contribute your time.

• Passive residual income – This is like regular residual income but in this case an outside management company takes care of everything for you. They rent, collect money and repair everything for you. You just receive a check every month.
• Leveraged residual income – This is when you own multiple rental units and you have many people paying you rent every month. You are doing the management yourself.
• Leveraged passive residual income –This is the same as above, multiple units but all being handled by a management company. You just receive bigger check every month.

Depending on what your skill level is, you have a choice to receive any one or all types of income. The difference between number 4 and 5 is often a personal preference. If you have, let’s say, 30 units or less, you could do everything yourself and make more money than if you hired management.

Eventually as you build bigger, if that is your goal, you will need to hire your own manager or an outside company because there aren’t enough hours in the day for one person to handle everything. There is no limit to how many units you could be receiving monthly checks from.
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So there is the advantage of possibly higher pay checks than in most professions and also, due to the type of income real estate can produce, you may gain time freedom. This means you can retire early if you want or do what you want while money continues to come in.
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Some people prefer to do everything themselves for a while to learn. That way they are in a better position to know what the manager is supposed to be doing. It also helps to understand how long things should take. This in turn can assist in evaluating homes that you are considering for purchase.

Another reason some like to do their own rehab work is purely for the satisfaction of turning a dump into a nice home. If you have the residual coming in anyway, this may be how you choose to spend your time. Not everyone cares about getting more and more money. That can’t buy happiness or contentment.
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