💵 Passive income: the truth

Hey, you!

When I decided to build a location-independent lifestyle 6 years ago, my curiosity naturally extended to another often-related concept: financial freedom.

That’s why I’m super excited for this week’s newsletter. 

I invited financial whiz-kid Nate Weintraub to share his journey toward financial freedom and give us all an inside look at what it actually means to build passive income.

Besides being my primary source for the latest Gen-Z trends, Nate is like a little bro to me. Over the years, he's been instrumental in guiding me through the realm of personal finance (you know, all the things they didn’t teach you in school). For example, he’s not only shown me how to track my net worth but has also de-mystified the world of REITs, IRAs, and other finance acronyms that I used to know nothing about.

But most importantly, he’s taught me that you don’t have to be a financial genius to be financially free.

Let’s dive into his story.

Hey, this is Kelsey, and you’re reading the SiteSee newsletter. Think of me as your Big Sis when it comes to travel, inspiring you to keep going places. You can expect an email from me every Friday filled with nomad stories, tips for living a location-independent lifestyle, and the gear to get you there.

Travel Story ✍️

I was getting sweaty. Like, really sweaty. There was sweat on the floor, on my hands, even in my eyes. 

It was 2020, right in the middle of the COVID-19 lockdowns. Fortunately for me, my roommates at the time had just built a gym in their garage a few years earlier. So while everyone else was at home trying to curl vases and not fall off their yoga blocks, I was finally (finally!) able to get some proper exercise.

During my garage-gym sweat sessions, there was only one thing I could listen to that would keep me going: the BiggerPockets Real Estate Podcast.

On this gem of a show, the young, the old, and everyone in between would convene weekly to share stories about how they quit their jobs, found financial freedom, and started making "passive" income through real estate. Some owned rental properties, others raw land. Some had self-storage facilities, and some others even owned vending machines.

At the time, I didn’t care. I just wanted an exit plan.

Even at the beginning of my working career, I realized early that if I didn’t develop another income stream, I would be trapped—my boss would have complete control over me, and there would be nothing I could do. 

I was not okay with that.

So I made it my mission to own at least three properties by the time I turned 25. (Bear in mind, I was just 22 at the time.) 

Fast-forward to one month before I turned 25: I owned 1 rental property, 1 primary residence, and 1 self-storage facility. 

I did it! I had accomplished my dream. I’d successfully found a way to wriggle out of my employer’s grasp.

So here’s my advice: Don't do what I did.

Why? Because I was believing a lie (a lie that so many others still believe). I truly thought that having “passive” income could set you free. 

But that’s a bunch of bullsh*t. 

Let me explain.

You need two things to make money: time or money. You may be saying, "Wait, you forgot about experience!" Experience IS time. Because you only get experience by putting in time.

The rosy idea of "passive" income means all you have to do is sit back and collect money. BUT to even be in the position to make said "passive" income, you first have to put in the work. 

A lot of work.

Yes, you can passively invest in stocks. But without at least $1,000,000 invested, your returns won’t be enough to fund even a modest lifestyle. 

Okay, next. What about "passively" investing in real estate? Well, you need to put down between at least 5 and 20% before buying anything—and then you’re always just one tenant phone call away from your “passive” income suddenly becoming a huge headache. 

Next. You could try investing in self-storage, like I do. Doable. But it took us 1.5 years to find our first facility. That's 1.5 years of cold-calling owners. 1.5 years of scrubbing property owner lists and sending mailers to owners asking if they'd be willing to sell. 

How passive is that?

So here’s my point: "Passive" income is never passive. And even the most "passive" income you can make can only be fueled by first putting in a MASSIVE amount of your hard-earned “active” income, i.e, working more at your job or saving a ton of money by severely cutting back on expenses. 

This was my mistake. I came to believe that "passive" income was the most important thing. Period. So instead of building active-income-producing skills, I spent my time learning how to invest in real estate. 

Make that A LOT of my time.

I bought a rental property—the cheapest one I could find. I jumped in because it seemed like it had high passive-income potential. Little did I know…

Since then, I've had to deal with (and pay for) 2 second-floor toilet floods, many pipe problems, 1 water heater replacement, 1 broken furnace, too many tenants who can't pay on time, and countless sleepless nights. I was so blinded by the idea of making "passive" income that I forgot I was already making 4.5x more money than I spent.

So what should I have done instead? Ignore the allure of "passive" income and focus on something better: long-term wealth.

Instead of buying the cheapest house in the cheapest area, I should have saved, waited, and spent my money on a more expensive house in a great area. One that might not have had cash flow. Or sent me "mailbox money" every month. But one that could have made me hundreds of thousands of dollars in equity—not just a few thousand in rent profits.

In hindsight, I shouldn’t have sacrificed so much time from growing my active income (i.e., my business and my desk job). I shouldn’t have been so hung up on making as much of my income as “passive” as possible. Because in the end, my rental last year (after repairs) only made me about $2,500. Getting another client would make me tens of thousands more.

Speaking of clients. 

Remember that podcast, BiggerPockets Real Estate Podcast? Not only did I end up becoming the head copywriter for their entire podcast network shortly after buying my first rental, but I was even featured on an episode of their Real Estate Rookie podcast, where I talked about my love of self-storage and my not-so-much-love for rentals. 

So. Here’s my advice to myself (because I'd never give you financial advice): Focus on your active income. Grow your skills. Take risks with big payoffs. And double down on what actively matters. 

Don't be so quick to leave something that's making you money. And when the opportunities for “passive” income do come around, only make the moves that work for you and will TRULY help you move the needle without sucking up all your time. 

What does all this advice look like? For me, it’s been like this:

1. Take on new projects that allow you enough flexibility to outsource work: Basically, this ends up forcing you to build a business instead of having yet another job. (Still working on this one!)

2. When investing, think of the ACTUAL return on investment: It’s a lot easier to reduce your expenses than increase your income. So here’s what I did: Moved from San Diego, California, to Sarasota, Florida. Bought an affordable house and rented out the rooms I don’t use. This saves me and my girlfriend $1,600/month (on average) and is A LOT easier than finding an investment property that could make me $1,600/month.

3. Divert your active income to the most passive of the active investments: I take the money I make from my business and put it into two places:

   1. Index funds (this is as passive as you’ll get when investing)

   2. Self-storage facilities (this is the most passive yet profitable real estate investment I’ve found)

Bottom line: Don’t waste the financial firepower you have. 

Cut your expenses. Move to a cheaper state or country. And invest the rest. Then, build a business that can fuel your investments—instead of your inflated lifestyle. 

And most importantly, until you've excelled at producing active income through a skill that makes money, don't worry about "passive" income. It doesn't really exist, anyway.

– Nate Weintraub

If you’d like to connect with Nate, you can reach out to him at his content marketing agency here.

Gear Check🧳

Like Nate, we should be all cutting down our expenses to work towards financial freedom. BUT. On the off chance you’re looking for some retail therapy … (cuz aren’t we all, from time to time? 😬) I’ve got just the thing.

I’ve been seeing the crescent bag trend all over Cape Town. And I’m loving it. If you’re also welcoming this Y2K trend with open arms, then I recommend you check out this cool Nylon Crescent Bag from BAGGU. It comes in loads of different prints and colors. Better yet? This baby is machine-washable. Just toss it in the machine after your adventures and you’ll be on your way looking fresh in no time. 

Airport Reads🗞️

• It's so motivating to witness individuals doing incredible things for a greater cause. Take a look at this video of Lewis Pugh swimming beneath Antarctic ice to help raise awareness for more environmental protection in this often-forgotten part of the world.

• Check out the winners of the Travel Photographer of the Year awards. Then tell me which photo is your fav.

• I started listening to another Tony Robbins book. This one is called Money: Master the Game. Not gonna lie, it’s dense, but there are plenty of hidden gems that you can easily apply in your day-to-day life.

Last Thing✨

I've started the habit of jotting down a few things I'm thankful for each morning. There's a magic in genuine gratitude that seems to attract more positivity into your life. For me, this gratitude is like a source of growth energy.

Michael Singer puts it perfectly in his book, The Untethered Soul:

Thanks for being here! I’m grateful for you :)

Onwards,

Kelsey

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