Passive Income: A unicorn or a Horse with a horn

 The concept of passive income in the property industry has gained significant popularity in recent years, fuelled by the allure of financial independence and the dream of making money effortlessly. However, a critical examination reveals that true passive income, aside from the rare scenario of winning the lottery and living off the interest, is largely a myth.

Passive income is often defined as earnings derived from ventures in which an individual is not actively involved. Common examples include rental income, dividends, interest, and profits from businesses in which one has limited involvement. The idea is that money flows in without continuous, active effort on the part of the earner.

Most sources of so-called passive income require significant upfront effort and ongoing maintenance. Whether it's setting up a rental property, creating an online business, or investing in stocks, the initial groundwork demands time, resources, and active participation.

Any Investments, are subject to market fluctuations. Economic downturns, industry changes, or shifts in consumer behaviour can impact returns, necessitating ongoing monitoring and, at times, active decision-making.

Property in itself is a volatile industry, with trends in property strategy changing regularly as well as being forced by social impacts. Focusing on one type of property method to create so-called passive income can leave those desperate for effortless returns struggling to meet demand or left high and dry when their chosen tactic is no longer the popular choice.

All investments carry an inherent level of risk. From market risks to business-specific challenges, the idea that income can be entirely passive without exposure to these uncertainties is completely unrealistic.

Managing rental properties or running a property business involves adhering to legal and regulatory requirements. Staying compliant requires ongoing attention and can hardly be considered entirely passive. Any venture that involved the management of people will never be completely hands off regardless of how systemised you think your business model is. Customer service requires input as does the need to be compliant.

Life circumstances change. What might seem passive at one point may require active involvement later on. Businesses evolve, properties need maintenance, people require levels of expectation, and financial landscapes shift.

The Lottery Anomaly:

One exception to the rule is winning the lottery and living off the interest. However, the probability of winning the lottery is infinitesimally low, and relying on such an unlikely event for financial stability is not a practical or advisable strategy.

While the allure of passive income is enticing, it's crucial to dispel the myth that it comes without effort or ongoing involvement.

Realistic expectations, coupled with a proactive approach to wealth-building, are essential for financial success. Rather than seeking a truly "passive" income, individuals are better off focusing on diversified income streams that align with their skills, interests, and long-term goals.