Is an Investment Property Actually Passive Income?

Investment Properties are not for everyone. Many professionals will say it’s “Passive Income” but it isn’t that simple.  

“Passive income is a type of earning generated by up-front investment rather than actively trading time for money. It's called passive because it doesn't require any additional input to keep money coming in. You can create passive income by investing time, money, or a combination of the two.” - Ownr.com

To make an investment property truly passive income you would have to hire a property manager and for one just starting out, this probably isn’t feasible.  

If passive income is defined as “a type of earning generated by up-front investment rather than actively trading time for money” then being a landlord without a property manager is not passive income. Landlords are responsible for their investment. This takes time and you are essentially trading that time for money.  

Landlords are responsible for  

• Maintaining a good state of repair & Maintenace  

• Complying with health and safety standards  

• If something no longer works due to normal wear and tear or because it breaks or wears out, the landlord must repair it so that it works properly or replace it. 

• Providing smoke detectors and carbon monoxide detectors and checking them once a year.  

• Find tenants to occupy the unit, background checks, credit checks and calling references 

• Creating or filling out and meeting to sign rental contracts 

That means that the landlord must spend time calling and setting up repairs and paying for whatever needs to be done, checking the units' detectors, checking unit if there is a complaint. If something must be replaced the landlord has to take the time to price out options and schedule between provider and tenant for a good time to replace or deliver whatever it is.  

If the landlord does not fulfil these obligations, tenants won’t have to pay rent and may move out.  

Although owning a rental property without a property manager would not be considered a full-time job, it also doesn’t quite fall under the passive income definition. It definitely has the potential to be passive income with time, practice and building relationships with preferred vendors.  But it can be done!