What is passive income and why does it matter?

Aug 24, 2023

Passive income. It’s a trendy buzzword you’ve likely heard thrown about in your favorite investing podcast or in conversation with your fellow investors. As you seek financial stability for you and your family’s future in 2024 and beyond, you should know about passive income and why it matters.

Let’s dive into how you plan to invest your hard-earned assets today in order to build passive income streams in 2024.

Defining Passive Income for 2024

Passive income refers to money earned with minimal effort or active involvement after an initial investment of time, money, or resources. Unlike ‘active income’, where you trade your time and effort for a paycheck, passive income streams generate revenue even when you’re not actively working. These income sources can be divided into several categories:

  • Rental Income: Owning certain types of real estate properties, such as triple net lease investments, and leasing them to tenants can be a consistent source of passive income. Whether it’s residential or commercial properties, the rental income can provide a steady cash flow. Keep in mind, some real estate ownership is the opposite of passive, so know the difference before you invest.
  • Dividend Stocks: Investing in dividend-paying stocks allows you to receive a portion of the company’s profits on a regular basis. This can be particularly appealing for long-term investors looking for both capital appreciation and consistent income.
  • Peer-to-Peer Lending: Online platforms enable you to lend money to individuals or small businesses in exchange for interest payments, creating a passive income stream.
  • Automated Online Businesses: Running an online business, such as dropshipping, affiliate marketing, or creating digital products, can generate income with minimal ongoing effort once set up.

As reliable, income-producing, single-tenant investments, triple net (NNN) commercial properties can be attractive to new and savvy investors, investors leaving the stock market, and those performing 1031 exchanges to get out of high-maintenance properties.

Why Passive Income Matters

The impact of passive income extends far beyond just having extra money in your pocket.

Passive income can provide you with…

Financial Security: Passive income provides a safety net, especially in uncertain economic times. If you lose your job or face unexpected expenses, having passive income streams can help you maintain financial stability.

Freedom and Flexibility: With passive income, you’re not tied to a traditional 9-to-5 job. This grants you the freedom to pursue your passions, spend more time with loved ones, travel, or engage in other activities you value.

Wealth Building: Passive income is a pathway to build wealth over time. By consistently reinvesting or expanding your passive income sources, you can accumulate significant assets and financial resources.

Retirement Planning: As traditional pension plans become less common, having diverse passive income streams can serve as a powerful tool for retirement planning because it ensures a steady income flow during your retirement years.

Creating Multiple Streams of Income: Relying solely on a single source of income can be risky. Passive income allows you to diversify your earnings, reducing the impact of potential setbacks.

Entrepreneurship and Innovation: The pursuit of passive income often drives individuals to think creatively and innovate. This can lead to the development of new products, services, and business models that benefit society as a whole.

Building Your Passive Income Portfolio with NNN Lease Properties

So, where do you invest your hard-earned capital to earn a guaranteed, contractual income for 10–20 years without inflation worries? You invest that capital into reliable, income-producing triple net lease properties.

Triple net properties leased to credit-worthy tenants are long-term, sound commercial investments with passive, reliable income, tax advantages, and few or no landlord expenses. A NNN lease investment gives you total ownership of a commercial property and reliable, passive income, potentially for decades. As the landlord, you simply collect monthly rent. You have little to no responsibility for the building or property. This is made clear through the terms of the lease, which are detailed and strengthened by customized triple net lease clauses.

NNN lease properties are typically maintenance-free, provide guaranteed passive income every month, and offer tax advantages. Take Dollar General, for example. The more sales a Dollar General location generates, the more reliable and valuable that location becomes. This increase in reliability increases the likelihood of lease renewal with rent increases.

Remember that passive income doesn’t mean “no work.” Initial effort is required to set up these income streams, and ongoing monitoring and occasional adjustments may be necessary. However, the potential rewards in terms of financial freedom and security may make these efforts well worth it if they fit your goals

Like with any financial investment, you’ll want to be circumspect with your money before you sign on the dotted line of your new NNN lease investment property:

  1. Ensure any tenants you consider are creditworthy
  2. Determine the strength of and read the entirety of your lease agreement
  3. If it’s a franchised location, ask to see recent financial documents in order to ensure the exact location is profitable as well as the franchisee itself.

To Wrap it Up — Understand Passive Investments & Plan to Add Them to Your 2024 Strategy

As you look at your investment strategy in 2024, the passive income you earn from NNN lease properties could play a crucial role in your well-rounded financial strategy. Whether you’re aiming for financial security, freedom, or wealth building, diversifying your income sources with passive income streams can pave the way for a more prosperous future.

At Westwood Net Lease Advisors, we are here to help you select the best passive real estate investment for your goals. We don’t just find a property and perform the standard contract responsibilities. We manage all the details as your personal representative – from before you begin your property search through closing and beyond. We make your investment experience worry free with our:

  • Decades of triple net lease investment knowledge and scope of transaction experience
  • Positive reputation for representing pre-qualified, reliable buyers
  • Vast, nationwide network of commercial real estate sellers
  • Proprietary tools and technology
  • In-depth market knowledge
  • Established 1031 expertise

To learn more about purchasing a NNN lease property and begin your journey, reach out to Westwood Net Lease Advisors today, without obligation. Our buyer representation is free and we are passionate about helping investors like you obtain the right net lease real estate for your goals. 314-997-5227

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