Some Say Owning a Rental House is NOT Passive - Prove/Disprove It

General Landlording & Rental Properties
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Some Say Owning a Rental House is NOT Passive - Prove/Disprove It

Michael Ealy
Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes

Landlords, BIG and small...

Here's a question for you.

How many minutes/hours do you spend every month on average doing all of the following: (per property)

1. Calling your Operating team - Property Manager, leasing agent, eviction attorney, contractor, maintenance guy, etc

2. Tracking the income and expenses of your rental, monitoring your bank account(s)

3. Calling your Support team - your accountant, bookkeeper, Virtual assistant or secretary

4. Doing the work yourself on your rental

5. Going to Home Depot or Lowes or hardware store to buy materials for your rental

6. Answering the phone from tenants, tenant-prospects, etc

7. Any other activity I did not mention above as long as it's related to owning and operating your rental property

You don't have to give a detailed breakdown.

You can just have a total for all the above - say "I spend on average about 1 hour/month per property"

I like to know the answer the question: is owning & operating a single family home as a rental a truly passive investment?

Some say owning a single family home rental is NOT truly passive. What's your definition of a passive investment anyway?

Instead of debating the answer, let's get the numbers.

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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
6y

I have 30 doors and I flip houses for a living for almost 30 years.  Never had a team, own personal homes in 3 states and play golf or ski and vacation when I want to.  Some on BP actually call it a job and not passive as that argument comes up here often.  I call it living a blessed life

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  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    I spend 10 hours or so a month on my 38 doors.  

    7Reply
  • Todd Rasmussen
    Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    4 hours a month on 7 out of state doors. (But 40 hours a month towards acquisitions / rehab)

    2Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    6y

    It's Passive |Income because the IRS says so...not because it doesn't involve any work.

    22Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    6y

    Maybe 2 hours a month on 19 doors.

    That's pretty passive.

    8Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    6y

    I have 30 doors and I flip houses for a living for almost 30 years.  Never had a team, own personal homes in 3 states and play golf or ski and vacation when I want to.  Some on BP actually call it a job and not passive as that argument comes up here often.  I call it living a blessed life

    23Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    It depends on the month.  Most of the time things are good and maybe 1 hour max.

    As for what is passive income-a savings account at a bank.

    1Reply
  • Guy Yoes
    Rental Property Investor · Springfield, MO · Member since 2017 · 266 posts · 312 votes
    6y

    If you spend more time on your day job, it is passive. Last year I qualified as a RE professional. I bought and/or  sold 10 doors in 8 months. I was only able to do so because I retired two years ago. I now manage and do maintenance on all my properties. the recent ones are located in the Branson Mo area and I live in Springfield. I spend about 3 days a weeks there. Next month I will close on my fourth duplex in the last 12 months. I totaled 1057 hours and over 14000 miles driving. 

    I'm really enjoying my new career. I'm learning how to do carpentry, plumbing and even enjoy the business side. I am taking an accounting course and learning to use QB. 

    When I owned 3 SFRs it was passive. Now it is anything but.

    7Reply
  • Allan Smith
    Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
    6y

    I don't believe there is such a thing as passive income. All streams of income require some amount of management, it is really more of a dollar per hour game. Or $ of net worth per hour. Rentals are extremely high dollar per hour.

    6Reply
  • Leonard Calvin
    Rental Property Investor · WI, GA · Member since 2019 · 13 posts · 1 vote
    6y

    I'm within weeks to make a decision to manage my own property and the threads have helped me so much. I keep thinking that how can I pay the property management company so much money and there are so many programs that help with doing it yourself. I have an out of state property company and every minute they are nickel here and a time there on my account. 

    0Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    6y

    Day to day involvement in rentals varies. You could have a stretch where you have 2 turnovers in a month to coordinate and a couple maintenance repairs come in during that time and you will be really busy. Then you can have a year or two stretch where your units are rented and there is little to do. As a whole though owning rentals is not passive, even if you hire a PM you will be managing them in most cases. 

    5Reply
  • Nick Rutkowski
    Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Michael Ealy:

    Landlords, BIG and small...

    Here's a question for you.

    How many minutes/hours do you spend every month on average doing all of the following: (per property)

    1. Calling your Operating team - Property Manager, leasing agent, eviction attorney, contractor, maintenance guy, etc

    2. Tracking the income and expenses of your rental, monitoring your bank account(s)

    3. Calling your Support team - your accountant, bookkeeper, Virtual assistant or secretary

    4. Doing the work yourself on your rental

    5. Going to Home Depot or Lowes or hardware store to buy materials for your rental

    6. Answering the phone from tenants, tenant-prospects, etc

    7. Any other activity I did not mention above as long as it's related to owning and operating your rental property

    You don't have to give a detailed breakdown.

    You can just have a total for all the above - say "I spend on average about 1 hour/month per property"

    I like to know the answer the question: is owning & operating a single family home as a rental a truly passive investment?

    Some say owning a single family home rental is NOT truly passive. What's your definition of a passive investment anyway?

    Instead of debating the answer, let's get the numbers.

    I mean...if you break it down how you have it, then all investments would be considered active. As a partner I'll still have to call my GP to see how the investments are going, go to the property every now and then to see how its preforming, analyzing monthly rental statements or quarterly reports. Regardless how "hands off" people make their investments, they'll still be spending time doing something for them.

    1Reply
  • Ronan DonnellyPro Member
    Investor · New York City, NY · Member since 2012 · 332 posts · 385 votes
    6y

    @Michael Ealy, for me the most passive investments in real estate are investing via a syndicate. These investments do require upfront work to verify the market, sponsor, deal, management company etc but once that is done it is completely hands off.

    Owning rental homes is more passive than working a full time corporate job but they do require hands on involvement, even with a management company.

    I like to think of it in terms of how much leverage do I get from my most scarce resource, time. Multifamily syndication has allowed me to gain the most leverage. Good luck!

    [email protected]
    3Reply
  • Zoé Effa
    Member since 2020 · 4 posts · 9 votes
    6y

    @Michael Ealy Passive income doesn't really exist absolutely, but the passivity here is relative to the deal of hours you put in to have money rolling in. In comparison to an employee, who exchanges 40 hours per week for a salary, if you exchange 3 hours per week to oversee or operate your properties, then you are more passive than active.

    5Reply
  • Jermell Shavers
    Member since 2019 · 295 posts · 159 votes
    6y

    @Michael Ealy. I may spend like 1 hour talking to my PM OOS approving work orders and looking for deals other than that not much more. Most of the time it’s less than that

    1Reply
  • Spence Rodman
    Investor · Olive Branch, MS · Member since 2016 · 20 posts · 18 votes
    6y

    @Michael Ealy

    We own 10 rentals properties and take care of about 15 others for my in-laws and dad. On a regular basis my wife and I spend about 3 hours a week “managing” those properties. We probably spend another 7 hours a week managing rehabs in new acquisitions. So in a typical month that’s about 40 hours a month between us. My full time job is in education and requires about 50 hours a week. I consider our real estate income highly passive and the best way I know how to build wealth.

    4Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Greg H.:

    I have 30 doors and I flip houses for a living for almost 30 years.  Never had a team, own personal homes in 3 states and play golf or ski and vacation when I want to.  Some on BP actually call it a job and not passive as that argument comes up here often.  I call it living a blessed life

    to me real estate is a lifestyle.. however there is no doubt that in the rental world the quality of the asset will dictate the time spent and risk's involved.  IE  Hood rentals are going to be quite a bit more hands on than median price point and higher end of the rental rates in a given market is my experience. with both types.. IE C D and new Construction A . 

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    3Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    6y

    I spend some time every weekend working on real estate matters however it’s still waaayy more passive than punching a time clock for 50 hours a week making someone else wealthy .

    3Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y
    Originally posted by @Joe Villeneuve:

    It's Passive |Income because the IRS says so...not because it doesn't involve any work.

    Exactly.

    As far as work, I'm normally a 10x Napper, but am also willing to put in hours on a new acquisition or turnover.  Time is money and I'm faster than waiting on 'professionals' to finally show up. 

    The times I've gone 'passive' and stroked large checks to pros I've had to clean up after them anyway. Overrated.

    5Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    6y

    @Steve Vaughan why aren’t you a 10x napper anymore ?

    2Reply
  • Clifford Paul
    Rental Property Investor · Member since 2018 · 483 posts · 956 votes
    6y

    As long as I don't have to put down my cigar it's all passive to me. 🤑

    1Reply
  • Travis C.
    Investor · Jamestown, ND · Member since 2017 · 32 posts · 32 votes
    6y

    About 2-3 hrs a month on 6 properties,  I self manage but do very little work myself on maintenance/repairs. 

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y
    Originally posted by @Caleb Heimsoth:

    @Steve Vaughan why aren’t you the 10x napper anymore ?

    Not sure, Caleb.  I was just stripped of my title one day without warning.

    To be fair, I don't deserve the title lately.  A new project hasn't afforded me a solid afternoon nap this year and Id be living a lie😎 

    2Reply
  • Frank Wong
    Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
    6y

    Does it really matter? LoL. It's another stream of income that requires very little time. I get paid every month and while I am sleeping. Anything that pays me while I am sleeping is passive to me. 

    0Reply
  • Meir Greenblatt
    Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
    6y

    @Michael Ealy

    Texting my tenant to pay rent once or twice a month ~2 minutes.

    Putting the same income and expenses in the spread sheet: 2 minutes once a month. Logging in to the mortgage company account to make sure the auto pay went through 2 minutes once a month. = 6 minutes a month + 1 time visiting the place to sign a 2 year contract 2 hours every 2 years. Its pretty passive.

    3Reply
  • Tony WooldridgePro Member
    Rental Property Investor · Walla Walla, WA · Member since 2016 · 480 posts · 346 votes
    6y

    @Caleb Heimsoth GR8 question! (why aren’t you a 10x napper anymore ?) I have been wondering the same thing.  

    @Steve Vaughan, the truth will always set you free!  

    1Reply
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