We have decided to invest in 2 ETFs, a multi asset allocation ETF (Fixed Inc, alts and div paying equities) and a preferred stock ETF. This will cover almost 45 percent of our deficit. We will be extremely diversified, can access the markets at a very low cost and the investments are liquid. On this pool of $, we have no plans to invade principal unless the investment grows by 20 percent, which we think is unlikely given the characteristics of the investments.
In order not to succumb to that, Flynn says it’s important to know your motivation. “Passive income is important to me not just for the financial security but so I can spend time with my family,” he says. “I’ve been able to work from home and witness all my kids’ firsts. I have a one-year-old and a four-year-old, and that's what drives me and gets me pushing through those hard times and why I keep creating new products and why I want to help other people do the same thing.”

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Investing is arguably the easiest way to make passive income.  The problem is most investments sound good in theory but don’t work out so well in practice.  And if you don’t have much experience or access to capital, let alone the time to work it all out, it can seem more or less impossible.  However, there is one smart way to invest that just might work.  Continue reading >
A planning opportunity may be available by converting a primary residence into rental real estate.  For example, Mary purchases a condo in 2010 and in 2013 decides to upgrade into a single family home.  She rents out the condo to earn some money.  Due to recent developments in the area, the condo is now worth much more and she sells it for a gain of $100,000.  Since Mary lived in the home for 2 out of the past 5 years, the entire gain is excluded from income.  The 2 year rule can occur anytime during the 5 year period and does not have to be consecutive.  Keep in mind though that if you do the opposite and convert rental property to a primary residence, the rules are more complex and the gain exclusion tends to be limited.
We’ve discussed how to get started building passive income for financial freedom in a previous post. Now I’d like to rank the various passive income streams based on risk, return, and feasibility. The rankings are somewhat subjective, but they are born from my own real life experiences attempting to generate multiple types of passive income sources over the past 16 years.
Active income means you are doing something in order to receive that income. Some kind of work. Some kind of effort. You are not hands-off. You have to exert some kind of energy and time towards earning that income. Passive income means you are earning regular income with little to no effort required to keep it coming. You are for the most part hands-off.
And real estate does more than just track inflation – it throws off income (which is important to some people and useful to most). And while your underlying asset is appreciating, the income also grows as rents increase over time. And if you make smart and well-timed purchases, both rents and asset values can increase at well above the rate of inflation.
I read about early withdrawal penalties on IRAs/401Ks very often. Almost always with a statement of “locked up” or “can’t touch” until 59.5. I’m sure you and well informed readers as well know about SEPPs in regard to IRAs/401Ks. For those that don’t SEPPs aren’t perfect but they are a way to tap retirement funds penalty free and I will be using in the future as I have over half of my equity investments within retirement accounts. South of a mil, North of a half. Let me add that I think your blog is outstanding.
The Tax Court had to decide whether the Hardy’s properly reported Dr. Hardy's income from MBJ as passive, and if so, whether they could deduct a passive activity loss carryover from previous years. It also had to determine whether the Hardy’s overpaid their self-employment tax. Finally, it had to decide if they were liable for the accuracy-related penalties.
The real value of a building lies in the tenant. If you’re the tenant and you’re a good tenant, you might as well be the owner, otherwise, you’re giving that benefit away to someone else. A few years back we bought most of our buildings from other owners after renting from them for many years. Our approach to the building owners was, “We want to own our own offices, we are willing to pay you a fair price for the building, but if you won’t sell, we’ll buy somewhere else and move. 4/5 sold to us, the one that wouldn’t sell, we decided to buy a new office building and moved. Owning your own office is typically a very safe and very good investment if bought at a fair market value and assuming you are planning on staying put at least 5+ years. If you are trying to buy the office from your current landlord, I think a fair price is somewhere between the value of a vacant office building and the value of a stable physician occupied office with a long-term lease.
Friends and family like to ask me, “I have an app idea. Do you have any advice on the best approach?”. There are a number of ways to get from point A to point B. I’ve had a few rough experiences going through the growing pains of developing my first app. Those experiences saved me a lot of time and money in the future. I’m here to share with you my top 5 tips to successfully make app passive income.

I've now only got an SF rental condo and a Lake Tahoe vacation rental in my real-estate-rental portfolio. Although I miss my old house, I certainly don't miss paying $23,000 a year in property taxes and another mortgage, and dealing with leaks and managing terrible tenants. I drove by the other day and couldn't believe how much noisier and busier the street was than where I currently live. I wouldn't be comfortable raising my son there.


Ali Boone(G+) left her corporate job as an Aeronautical Engineer to work full-time in Real Estate Investing. She began as an investor in 2011 and managed to buy 5 properties in her first 18 months using only creative financing methods. Her focus is on rental properties, specifically turnkey rental properties, and has also invested out of the country in Nicaragua.
You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. The statement must provide the name, address, and EIN, if applicable, for the activity that’s being added and for the activities in the existing group. In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules.

Sharon, you missed my point completely. If you feel you need $8000/month to live the life you want, and you get that $8000/month through passive income, you may feel financially free for a few months. However, next year, you’re not going to be wanting $8000/month + 3% inflation; you’re going to be wanting $16,000/month. This is greed 101. It’s normal. It’s natural.
Active income means you are doing something in order to receive that income. Some kind of work. Some kind of effort. You are not hands-off. You have to exert some kind of energy and time towards earning that income. Passive income means you are earning regular income with little to no effort required to keep it coming. You are for the most part hands-off.
As a private lender, you can lend to anyone in your social circle. For example, many home rehabbers need access to a source of capital they can tap into very quickly in order to fund the initial purchase of their properties. You can partner with a rehabber who uses your capital for a short-term in exchange for an interest rate that is mutually agreed upon.
As a general rule, the passive activity loss rules are applied at the individual level. Although Internal Revenue Code Section 469 was enacted to discourage abusive tax shelters, its impact extends far beyond shelters to virtually every business or rental activity whether reported on Schedules C, F, or E, as well as to flow through income and losses from partnerships, S- Corporations, and trusts. Generally, the law does not apply to regular C-Corporations although it does have limited application to closely held corporations.
In order for you to make the kind of passive income you would like you need to make sure the market segment you want to help has critical mass.  If you have the best widget in the world, but only 14 people need or want it, then you don’t have a viable business.  The great article 1,000 True Fans, by Kevin Kelly, cofounder of Wired Research, talks about if you have 1,000 people who are your customer, each paying you $100 a year, you now have $100,000 a year of passive income.  The point is that you don’t need to serve the entire human population, just enough to have critical mass. 
In February 2007, Pat Flynn was working at an architecture firm making $38,000 a year. He mulled boosting his earning power by getting an architecture license, but the process would likely take six to eight years. When he heard about getting a credential in sustainable design and environmentally friendly building called Leadership in Energy and Environmental Design (LEED), he decided to go for that, as no one in his department had it. The one problem? The exam was so challenging, just one-third of test-takers passed.
According to NOLO, “the home office deduction is available only if you are running a bona fide business.” That means any work dedicated to your passive income property from the confines of your own home can’t be a hobby. “If the IRS decides that you are indulging a hobby rather than trying to earn a profit, it won’t let you take the home office deduction.”
Similar to making a website or blog, but more passive, is creating an online course. If you have a specific skill you know you can teach and that others want to learn, you can easily create an online course. Sites like Udemy can help you do this. It requires some work to make it, but after that, users simply need to sign up for the course and pay a fee.
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I’m confused by your reference to passive income. Passive income doesn’t mean totally free money or money earned without work although you make several references to making money in your sleep without any effort. Now, I understand the concept of passive income but I have to believe that you must still work to obtain that passive investment/ income and then work to maintain it right? Owning a company, in itself, is a lot of work and is thus still considered a JOB right? It’s not till after a lot of blood sweat and tears that one can reach a point where they can say theyve achieved financial freedom with passive income. Maybe you can add a little clarity for me. I’m only in my beginning stages of real estate investing and read as much as I can to learn.
You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. The statement must provide the name, address, and EIN, if applicable, for the activity that’s being added and for the activities in the existing group. In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules.
Proof of participation. You can use any reasonable method to prove your participation in an activity for the year. You don’t have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary.
Our favorite platform for this is RealtyMogul because you get the flexibility to invest as little as $1,000, but can also participate in REITs and private placements – typically not offered to the public. Investors can fund real estate loans to gain passive income or buy an equity share in a property for potential appreciation. Their platform is open to both accredited and non-accredited investors.
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