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<blockquote data-quote="The Right Frame" data-source="post: 954570" data-attributes="member: 11780"><p>Best Long term passive income in my experience has been real estate. You can argue that it is not truly "passive" because you have to continually select/screen tenants, manage the property,deal with repairs and maintenance etc, but long term the returns are worth it and it is considered passive income on tax return.</p><p></p><p>1. You get to use leverage which is key to juice returns. No where else in the financial marketplace can individuals get access to signficant amounts of cheap debt financing outside of real estate. Try pitching a business idea to a bank or even getting a loan to buy an existing company 99/100 times they will laugh at you (not before trying to sell you a "business account" to meet their monthly quotas).</p><p></p><p>2. Inflation--becomes your friend as a real estate investor. The value of property (over long periods) goes up while your mortgage payment never changes (taxes, HOA fees, insurance will go up). However you can easily offset this with raising the rental price for your property. </p><p></p><p>3. Time is your friend---as the years go buy the price of the property goes up, rental prices go up, your mortgage payment remains the same, and you will be sitting on capital gains. You will then be able to access the built up equity with credit lines from the bank. </p><p></p><p>Risks/hurdles to this investment</p><p></p><p>1. Need large amount of capital for initial down payment plus two years of verified tax returns and good credit. </p><p>2. Need large cushion of extra contingent capital to cover the mortgage payment when rental unit goes unoccupied, major repairs and maintenance pop out of nowhere or when your perfect tenant defaults (in Cali where I am they can stretch out the eviction process for over 6 months). During this time you are 100% on the hook for the mortgage payment which can ruin your entire life if you don't have extra capital. </p><p>3. Many more risks need to be considered than I can list here---</p></blockquote><p></p>
[QUOTE="The Right Frame, post: 954570, member: 11780"] Best Long term passive income in my experience has been real estate. You can argue that it is not truly "passive" because you have to continually select/screen tenants, manage the property,deal with repairs and maintenance etc, but long term the returns are worth it and it is considered passive income on tax return. 1. You get to use leverage which is key to juice returns. No where else in the financial marketplace can individuals get access to signficant amounts of cheap debt financing outside of real estate. Try pitching a business idea to a bank or even getting a loan to buy an existing company 99/100 times they will laugh at you (not before trying to sell you a "business account" to meet their monthly quotas). 2. Inflation--becomes your friend as a real estate investor. The value of property (over long periods) goes up while your mortgage payment never changes (taxes, HOA fees, insurance will go up). However you can easily offset this with raising the rental price for your property. 3. Time is your friend---as the years go buy the price of the property goes up, rental prices go up, your mortgage payment remains the same, and you will be sitting on capital gains. You will then be able to access the built up equity with credit lines from the bank. Risks/hurdles to this investment 1. Need large amount of capital for initial down payment plus two years of verified tax returns and good credit. 2. Need large cushion of extra contingent capital to cover the mortgage payment when rental unit goes unoccupied, major repairs and maintenance pop out of nowhere or when your perfect tenant defaults (in Cali where I am they can stretch out the eviction process for over 6 months). During this time you are 100% on the hook for the mortgage payment which can ruin your entire life if you don't have extra capital. 3. Many more risks need to be considered than I can list here--- [/QUOTE]
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