I had the pleasure a few weeks ago of hanging out with Robert Hammond, a real estate investor who bought 74 investment properties in less than two years; accumulating $2.5 million in equity and $22,000 a month cashflow!

Everyone wants to know how the heck he did it… well, he started with around $40,000 and flipped two houses to bring that up to around $80,000. With $80k, he bought 10 houses, which is the Fannie Mae limit for single-family homes. He went to real estate mentor Del Walmsley to ask what he should do next.

Del advised him to start taking on partners. He found 6 partners to put up cash and credit for the next 64 houses!

Robert is truly and inspiration to all aspiring entrepreneurs. I am certainly fascinated by his success and have befriended him as a mentor. It will be exciting to see what he does next. Will he keep building his house portfolio, or will he move into apartment complexes?

Last month, I got the chance to hang out with real estate investor Josh Allison at his 106-unit apartment complex in Austin, Texas. It was pretty inspiring to see someone who just went out there and did it.

Josh started out as a multi-family property appraiser who invested in single-family rental properties on the side. When he appraised an apartment complex for Lifestyles Unlimited lead investor Trey Stone, Trey challenged Josh to buy his own.

One interesting thing about this deal is that he turned an old storage area into an additional unit that now brings in $900 a month, adding $10,800 to their bottom line each year.

It’s interesting: many of the multi-family lead investors that I meet at Lifestyles Unlimited are not like I imagined them to be. I guess I had images of older men in suits running these properties, but many are young, energetic, and casual. It really goes to show that anyone can do it if they put their mind to it.

I just released my first production for Lifestyles Unlimited, the real estate investor and mentor group.

It’s a video case study of real estate investor Karen Davis and her 6th rental property. Karen is one of the mentors in the Houston office of Lifestyles Unlimited. This property will add $40,000 in equity and $300/mo. cashflow to her portfolio.

I shot, directed, and edited the piece.

Please check it out, and subscribe to the podcast.

Your next move played a pivotal part in the escalation of the conflict and said more about your character than any email could ever describe.

The Pivotal Moment

Did you:

A) Snap off an even more heated email, with everyone in the company CC’d including the CEO?

B) Go into damage-control mode by crafting a very detailed email in a level-headed, yet firm tone explaining the conflict to everyone attached to the email chain.

C) Take a lunch break to cool off and resolve the issue by picking up a phone.

Technology and Civility

Here are two of my major frustrations with the onset of technologies like email, text messaging, and Facebooking:

1) Lack of Non-Verbal Communcation

2) Lack of inhibiting factors

The Downfall of Non-Verbal Communication

If you’ve ever taken a communications class, one of the first principles you were taught is that (depending on the source) 70-95% of communication is non-verbal. You can literally say the same sentence an infinite number of ways and communicate an infinite number of meanings.

Here’s an example from an article about how your brain interprets what your ears hear at The National Institutes of Health website:

Try changing the emphasis on a different word and see how it changes the meaning of this sentence:

The blue fish is too big for that tank. (Meaning: The blue fish is too big, but fish of other colors are the appropriate size.)

The blue fish is too big for that tank. (Meaning: The blue fish is too big, but other blue creatures are the appropriate size.)

The blue fish is too big for that tank. (Meaning: The blue fish is too big for that tank but may be the appropriate size for some other tank.)

Add voice tone, facial expressions, hand motions, eye contact, etc. and you can see how easy it is to make mistakes in communication. It’s amazing that we can even communicate at all.

Digital Emotions

That’s why I try to make all important or emotional communications by voice; preferably in person, but at least over the phone.

Think about a simple message such as: “Are you going to get that project done, or are you really busy?” Let’s say you were in a hurry and you decided to send it in a text-message. You sent it with a smile, in a caring tone, as if to offer help.

But think of all the ways that message could be interpreted. The person who reads it might imagine you to be crossing your arms with a snarky tone. They might imagine a smirk on your face as if to put you down. They might see you rolling your eyes in a condescending way.

You have no way of controlling how your message is interpreted, because you are not there to add your non-verbals and view the reaction.

Feedback Corrections

When you’re face-to-face with someone, you have the luxury of instant feedback in order to make course-corrections. If something didn’t come out as you intended, or if someone gets offended, you can instantly backtrack, or clarify your position.

With electronic communication, if your recipient is offended, they might stew on on it or bring other people into the conversation before you have a chance to react.

Lack of Inhibitions

People are simply more civil to each other face to face. If someone cuts you off with a grocery cart you’d probably bite your tongue and force a smile; but when you get home you might scream at the wall to release your frustration. The potential consequences of a conflict inhibited you from screaming at the person face-to-face.

Behind your computer screen at home, the consequences of offending someone else seem far away, almost non-existent. It’s much easier to tell someone “what you really think” in the heat of the moment, even if you’ll regret it later.

It doesn’t take any guts to confront someone from behind your computer. This is what cowards do, they hide behind someone or something else and yell insults.

Grow a Pair

Today, it seems like everyone wants to use email and text messaging for their dirty work. Breaking up, firing someone, canceling a date… It drives me crazy. Do you realize how little toughness it takes to fire someone over email? Grow a pair. (Yes, this actually happened to someone I know.)

People want to hide behind the digital divide and lob missiles. They say things that they never would face to face. Toughen up. Here’s a good rule of thumb: If you can’t say it in person, don’t say it at all.

The Last Time I Succumbed to Temptation

Early in my professional career I had a rocky relationship with a co-worker, let’s call her Sally. Sally had been around the job awhile and held the same position that I held. We reported to the same person; but, for one reason or another, she thought that it was their business to tell me what I could and could not do at work.

About twice a week, I would get a very detailed email from her listing what I had done wrong. I held my tongue every time it happened because I wasn’t going to lower myself to this sort of argument.

I simply ignored her and continued on with my day. My supervisors were very happy with my work and I didn’t see the problem.

One day, her frustration with me must have hit critical mass. Sally gathered all the emails she had ever sent me, pasted them into one huge email, added a few more things and emailed it. Not only did she send it to me, but to our boss, our boss’ boss, and about 5 other people who had nothing to do with anything.

My Test

I promptly drafted up the most scathing email I could write, CC’ing everyone I could think of who would support me, and sat staring at the “send” button. The email draft explained how she constantly rode me (when it wasn’t her place); furthermore, it went on to criticize everything else about her I could think of at the time.

I knew I shouldn’t send it, but in a moment of weakness I clicked…

I immediately felt remorse, but there was no turning back. The deed had been done. If I had just left it where it was; spoke to my supervisor and Sally in a civil way, she would have looked like the idiot. Instead, I went down into the mud where she lived.

The email did what it was intended to do. She had a sit-down with the supervisor and stopped the behavior, but it wasn’t worth the unintended consequences. The tension in the office made working together a problem and I was moved to a different department. I never worked it out with her and I regret it to this day.

The CC is the New Tattle-Tale

CCing your boss is really the same as telling your mom on someone. Come on. Are we still in Kindergarten?

Count to Five

Before you click “send”, force yourself to do these five things:

1. Wait 24 Hours.

Things never seem as bad 24 hours later… The emotions of the moment cloud your judgement. You might even realize some fault.

2. Don’t Make it Personal

In business, emotions can get you in trouble. Think about what you want your results to be and stick to what will get you there. Don’t play he said/she said and possibly risk much more. Just solve the problem.

3. Talk to The Most Rational Person You Know

Immediately, call a trusted friend who can talk you off the ledge. Try to avoid emotional or irrational personality types. Call the most level-headed, non-emotional person you know for some advice. You’ll almost always find that there are much simpler ways to resolve your problem.

4. Check the Ego

It’s tough to conceive, but you might actually be wrong. If you are wrong, fighting back might just make it worse. Have the courage to accept fault where deserved and move towards solving the problem. Don’t make this about destroying the other person. Make it about a mutual solution.

5. Pick up a Phone

Have some integrity and pick up the phone. Stop the CC email madness and cut to the chase.

Your counterpart will probably be so shocked that they will drop their guard. At the very least, you will get their respect. Even if they hate you for it, they will respect you because you had the integrity and guts to face your problem head on.

A Mastermind Group

In Napoleon Hill’s research on dozens of the world’s wealthiest people over 100 years ago (and most influentially Andrew Carnegie), he found that the concept of a mastermind group was a top priority of the rich. When I first read this, I thought, “Hmm, that sounds good,” and then continued reading without doing anything about it.

Napoleon Hill writes in the 1st chapter that the secrets in the book will only be revealed to you when you are ready to hear them. This was one of those secrets for me. Even though it sounded like a nice concept, I didn’t finally “get it” until the 2nd or 3rd time I read the book. I took action and found an investor group in one of my homes, Texas.

Why Smart People Have Trouble Getting Rich

At one of the 1st meetings, a concept smacked me so hard across my head, it’s still wedged somewhere behind my ear. I struck up a conversation with a man who had been a member for a couple of years and had accumulated a few dozen single family homes; enough to pay all of his bills.

As you know, I love books and theories on creating wealth, so I asked him what he had been reading to get where he was. His answer blew me away and explained to me why smart people have such a hard time creating wealth.

He hadn’t read a single thing.

How could this possibly be? Here I was, a guy who had dedicated his life to reading the literature of the wealthy. I had created some passive income, but not yet enough to retire.

This guy had been at it for about the same time I had and, without reading a thing, had created enough passive income to retire. To be honest, I kind of ticked me off at first until I let it soak in and teach me what I needed to learn.

Stop Reinventing the Wheel

Have you ever noticed how the people who get rich aren’t necessarily the smartest? Think of the people you grew up with. The A students all went on to get 2 and 3 degrees and ended up working some technical job for a C student. The C student had no idea how to do the things the A student did, but he knew well enough not to try and do it on his own.

That’s not to say that no smart people ever get rich; but I would propose that they did so because they learned a lesson from the C students: “Stop reinventing the wheel.”

Smart people are tremendously talented, but often at a cost. Just because you can do many things doesn’t mean you always should. C students realize that they can’t do it all, so they find smart people to do it for them.

I picked up every book in the world on passive income and real estate, trying to invent some ground-breaking new technique on real estate investing; but only had 1 investment property.

This guy realized that he needed help and went and got a mentor. The mentor told him how to do it and he went out and did it! Duh.

Find a Mentor

It makes so much sense now. Simply go out and find someone who has done it and imitate them.

The lesson is that the education is important, but no where near as important as finding a mentor.

Knowing what I know now, it’s hard to believe that I thought I could do it on my own before. My ego must have had something to do with it. I wanted that title “Self-Made Millionaire”; but really there is no such thing.

It turns out that one of the qualities required to build wealth is humility. Who knew? The common perception is that the rich are selfish.

Quantum Leaps

Once I let my ego down and started asking questions of the mentors at Lifestyles, I started making quantum leaps in my understanding of real estate investing. Even though I had read everything out there on investing, I still was still facing little problems that were holding me back.

Why can’t I make the numbers work?
Why can’t I find properties that cashflow?
Why is it taking so long to rent my property?
Why is maintenance and vacancy eating up my cashflow?

By talking to people who were actually doing it successfully in my market, I got simple, “ah-ha!” answers to these questions that I never found in a book.

My Mentors

I hit the mentor jackpot when I joined Lifestyles. The founder is Del Walmsley, a multi-millionaire who retired himself with real estate at the age of 34.

He now owns something like 5 apartment complexes and is closing on 2 or 3 more this year. Del has been mentoring since 1990 and Lifestyles has grown to over 8,000 members.

The 1st office was in Houston, where Del’s students now own over 400 apartment complexes. That’s almost 1/3 of ALL apartment complexes in Houston. Isn’t that amazing?

Del now works about an hour a day on his radio show where he answers questions about real estate, and once a month, he teaches a 2-day seminar detailing his methods for creating wealth in real estate.

Steve Davis was one of Del’s 1st students. He is now a partner in over 3000 units and is the Vice President of Lifestyles Unlimited.

Steve also has a radio show 6 days a week where he talks about creating passive income through real estate and takes calls from listeners. He was actually the reason I found Lifestyles Unlimited.

I was driving around Austin on my vending route and I came across his show on the radio. Once I learned more about him, I found Del’s show and started streaming them on the internet. They now have all their shows available on iTunes (click here).

In addition to Del and Steve, Lifestyles now has dozens of mentors to service all the members.

Expanding

Lifestyles opened up a 2nd office in Dallas in 2006 and just opened a 3rd in San Antonio. One of the great things about this particular investment group is their hands-on approach. Members have unlimited question and answer with mentors who are currently investing in their area.

As I got to know the company more, I started to share what I had created in the realm of passive income and the internet. We found that we had a lot in common and I ended up getting a job!

The Best Job Ever

I often talk down working 9-5, but it’s really hard to call this working. I get to do two things that I love every day: create content for the internet and talk about passive income.

My job is basically a two-parter. First, I re-invented their website and turned it into what I know very well: a blog. LifestylesUnlimited.com

Second, I teach an introductory class on real estate investing in San Antonio twice a week. If you’re in town, please stop by to see me. You can find the schedule here.

The best part about the job is that I get to hang around with a bunch of wealthy real estate investors all day and talk passive income. I’ve got to tell you, this sure beats sitting in my office and reading all day.

Rui is the guest today. He is a real estate investor living in Southern California with two single family homes under contract in Houston, each with over $300 cashflow per month.

Music By:
Big Head Todd
PodShow PodSafe Music Network

Send questions to mail@geniustypes.com. Please include your City/State/Country.

Blue vs. White

Here’s one you may not have considered: Is it better to be a working stiff or a suit if you’re an entrepreneur who’d rather be working for himself than the man anyway?

Entrepreneurial types tend to gravitate towards management (suit), but does that really serve their greater goal? Managers tend to spend long hours on the job and usually get paid on salary (which means no overtime). Where’s the time to make yourself rich?

My Prism

I see the business world divided into two groups: working stiffs and suits. “Suit” doesn’t necessarily mean they wear a suit to work every day; it’s a metaphorical term for someone who makes the decisions and delegates work to the stiffs.

Under my definition, an airline pilot is a stiff, the same as a coal miner. Each does the job they were hired to do with little say over the larger decisions, such as which routes to fly or where to dig.

“Stiff” Characteristics

Hourly Pay
Overtime
Repetitive Tasks
Supervise Few or No People
Make Local Decisions
Gets Delegated to
Limited Upward Mobility

Stiffs:

Bartender
Airline Pilot
Flight Attendant
Construction Worker
IT Professional
Film/TV Editor

“Suit” Characteristics

Salary
No Overtime
Varied Tasks
Supervise Several People
Make Global Decisions
Delegates
Expanded Upward Mobility

Suits:

Restaurant Manager
Airline Supervisor
Construction Manager
IT Supervisor
Film/TV Producer

Risk and Reward

The decision of which path to choose is a big one. If you’re a GeniusTypes reader, you probably have high expectations. Anyone who is looking for passive income obviously wants bigger and better things. If you choose to be a stiff and the passive income thing doesn’t work out, you risk being a stiff for the rest of your life. If you choose to be a suit and never have time to create passive income, you risk working for “the man” for the rest of your life.

Even more powerful are the sociological beliefs that we and our peer groups have about our career choices. If you come from a family of college graduates, you might be expected to pursue a white collar career. Conversely, if you come from a blue-collar family, being a “suit” might be looked down upon.

To get where you want to go, it’s important to get past your beliefs about career issues and choose the path that serves your goals the best.

Restaurants

A lot of creative types work in the service industry as waiters and bartenders. In New York, LA, and Austin (all of which I’ve spent time), when someone says they’re an actor; it’s usually followed by a tongue-in-cheek “which restaurant do you work at?”

Service jobs fall under the “stiff” category, which serves artists well. The jobs are flexible, the pay is relatively decent, and the job doesn’t require much responsibility. An actor or writer can pay their bills with a bar job and spend the rest of their time creating art (which probably doesn’t produce much income).

I’ve been around the bar/restaurant scene long enough to see many artists face the same dilemma: after several years in the service industry, without much success as an artist, they’re given the opportunity to go into restaurant management.

It’s usually a tough decision. Their friends and family have been pressuring them for years to get a “real job,” and management looks much better on a resume. On the other hand, managers spend endless hours at the restaurant which leaves less time to pursue their art.

To complicate matters, entry-level restaurant managers often make less than waiters and bartenders on an hourly basis. The trade off being they have more power and the chance to eventually become the General Manager of their own restaurant: a job that pays pretty well.

In my experience, choosing restaurant management means the end of their dream as an artist. This can be a good or bad thing depending on your perspective. If they weren’t ever going to make it as an artist, perhaps it’s a good thing.

Entrepreneurship as an Art

Entrepreneurs are creative types with a little more business sense than the average artist (notice I said “little”). Therefore, entrepreneurs face many of the same challenges as artists. The rewards for their passion can be massive, but the risk is great.

In the restaurant example above, you could easily exchange “real estate investor” or “bulk candy vending entrepreneur” for “artist”.

Film/TV Business

A similar thing happens in Hollywood. Everyone’s first job is always PA (production assistant), which is definitely a “stiff” job; but after that you have to choose if you want to start on the path to producer (suit) or specialized labor (stiff).

It’s an interesting dilemma, and your choice will depend on either your personality or objectives. Producers get to call the shots. They have all the power in Hollywood, but they don’t necessarily have all the money. Think about it: who gets paid more, actors or producers? In most cases, actors do. Until you get to Jerry Bruckheimer’s level and you own the joint, you won’t make as much as a highly specialized stiff.

Being a paid actor might just be the greatest “working stiff” job on the planet. They get paid ridiculous amounts of money to have fun all day, but they don’t get to call the shots… producers do.

On a lesser scale, the same thing happens with other specialized jobs. In post-production, editors get paid much more than producers. I’ve worked in edit bays where the editor is getting paid over three times as much as the producer, but the producer is controlling the editor’s every move.

Some producers do it because they love the power. They would gladly give up the money as long as they can boss people around all day. I’m just the opposite: I’ll do anything you want, as long as I’m getting paid three times as much as you.

Editors get paid a certain amount of money because the art of editing is a specialized skill that few people possess. They need to have the technical skills of an I.T. professional AND the creative skills of a storyteller. The “suits” hire the editors for an hourly rate and tell them what to do. If an editor works more than 8 hours in a day, they get paid overtime. If a producer works more than 8 hours, they may not.

That’s not to say that there’s anything wrong with choosing the producer route; it just depends on your objectives. If you plan on running the studio some day, then producer is where you want to be.

Airline Business

The same thing happens at airlines. Airline pilots have a specialized skill that few people have and they get paid for it. I once knew a pilot that made $500 an hour.

It’s a high-paying profession, but it’s still a “stiff” job. Most of the pilots I’ve talked to say it’s actually pretty boring. After you take off, the plane flies itself (it will even take off by itself if you want). On a seven hour flight to Europe, pilots kill time by reading the newspaper and turning a little dial every once in awhile to change course.

Pilots punch the clock like any other stiff… they just get paid more.

An Interesting Idea

Consider your objectives when choosing a career path. If you’re an entrepreneur who hopes to create passive income streams in your spare time; your only criteria for getting a day job might be this: the one that pays the most for the least amount of time spent.

You need to make enough to have some left over to invest, so stay away from minimum wage “stiff” jobs. There are plenty of specialized labor jobs that pay well. Think bartender, pilot, editor, etc. Even construction workers make a rather decent hourly wage.

If you choose this path, it’s important to stay focused. If you forget to put money away to invest in your entrepreneurial ventures, then maybe you would have been better off as a suit. I know more than a few actors/waiters who never found time to act. It’s a pretty crummy feeling to have spent many years in a “stiff” job without anything to show for it.

Check the Ego

When I was starting out in the career world, I had a mental block towards “stiff” jobs. I worked at an airline for awhile and briefly considered going to flight school. I ultimately decided that I wouldn’t be happy as a pilot because I wanted more control. I saw myself as more of an executive type who told the pilots what to do. (is that crazy or what?.. for $500 an hour, I could have controlled just about anything I wanted).

That’s the thing about life experiences: they make you who you are. Because of that experience, I didn’t make the same mistake the next time around. I joined the TV/Film industry four years ago and was told that I could pursue any career path I wanted. It was tempting to take the producer route… but I chose the path to editor.

Reader Beware

Be careful when you read Kiyosaki, Robert Allen, or any of the army of gurus preaching that passive income will end all your troubles. The overall concept of “Rich Dad, Poor Dad” is profound, but it doesn’t tell the whole story. Don’t quit your day job yet.

When I first read Kiyosaki, I was immediately hooked on the concept. I read all the books and they blew my mind. I bought the game Cashflow 101 and hunted down every last friend and family member who was still brave enough to donate a few hours to reliving their financial failures in a board game.

Young Passive Income Warrior

I went out and started my portfolio. The economy was on still on a real estate bender, so I was able to buy a rental house with no money down, no proof of income, and no credit. I stuck in a tenant who paid me $100 more than I paid to the mortgage company and thought to myself: …damn I’m good.

My girlfriend had the brilliant idea to start a bulk candy business for passive income. We bought ten machines and placed them in ten restaurants in Austin. Just like that, we added $250 a month to our passive income.

When we were ready to move to LA to give the entertainment industry a shot, I started scanning the internet for bulk candy vending businesses in Southern California. I found a guy who was willing to let go of 40 machines in decent locations for next to nothing. I almost covered the acquisition cost on my first day in LA. Just like that, I added another $500 a month in passive income.

I thought… damn I’m good.

King of the Anthill

At this point, I pretty much decided that I had made it. All those suckers moving to LA, struggling to pay the massive cost of living increase had nothing on me. I had $850 a month in passive income. What did they have? …a crappy job? Kiyosaki taught me that jobs were for suckers.

Hero Fallen

I went to see Kiyosaki once at the Real Estate Wealth Expo in New York City. It was an event where hundreds of real estate gurus all got together to give speeches, sell books, CD’s, and boot camps. Robert was one of the headliners and I could hardly contain my excitement to see him.

With my girlfriend at my side, I proudly stood up to greet him along with hundreds of others in the auditorium as he entered the stage. My perma-grin turned to puzzlement as he put his right hand on his forehead in the shape of an “L”. “Losers!” he yelled and the crowd cheered.

“What is he talking about?” my girlfriend asked. I wasn’t sure, so I continued to listen as he explained to the crowd that working a 9 to 5 job was the mark of a loser. Over and over again, he stuck his hand to his forehead and repeated the chant: “Loser!, Loser!, Loser!”

Wait a minute, I thought. I bet 95% of this audience has a 9 to 5 job… and they’re cheering.

Steady Ahead

The experience had taken Kiyosaki down a notch in my eyes, but I still believed strongly in his concepts. To me, he was a brilliant “big picture” guy who left something to be desired in the category of tact, humanity, and details. I didn’t need him to be a good guy to know that passive income was for me.

I found sporadic work in Hollywood producing small-time pieces for TV and internet, but never pursued full-time work. Why would I? 9 to 5 was for suckers (but not losers).

Soon after, I started GeniusTypes and added another $750 a month to my cashflow. My passive income streams were over $1500 a month. I thought: …this just keeps getting better.

The First Sign of Trouble

Life should have been good. I had done everything the books had taught me. It was almost as if everything I touched turned to gold. I had money coming into my bank account even as I slept… Big pimpin’ …right?

As I explained all of this (with great pride) to my girlfriend, something weird started to happen. I was telling her how great everything was and somehow, she was ticked off!

I don’t remember the exact conversation, but it went something like this:

Her: Your stupid “passive income” isn’t helping us pay the ridiculously high cost of living here!

Me: What are you talking about? I make that money in my sleep!

Her: Who the hell can live on $1,500 a month in LA?

Me: But it’s passive!

Her: That’s the freakin’ problem: you need to get your butt into action!

Me: But it’s passive…..?

Her: (shut down)

Something had gone terribly wrong.

Starting Over

Now you have the long version of why I stopped posting on GeniusTypes. I went out and got a job… Actually, I got two. I worked 60 to 80 hours a week in order to make up for the long period of time that I was quote/unquote “self employed” (which really means unemployed). It was the antithesis of everything that Kiyosaki had taught me.

I also went looking for guidance. Instead of believing in authors and trying to do it on my own, I found people who had achieved the success that I wanted. I found some mentors.

The Right Map

The first thing they taught me was something I didn’t want to hear. I wouldn’t have bought their book if they were selling it like Kiyosaki because it kind of sucked…

They agreed that passive income was the ultimate, but everyone needs money to survive. If I couldn’t pay for my monthly expenses with passive income, then I must do the next best thing: get a job.

…But Kiyosaki says jobs are for Losers!

…Who’s more of a sucker: Someone who works full time and supports their family, or someone who quits their job and gives all of their remaining money to Kiyosaki fpr books, CD’s, and boot camps?

Wow. That was kind of harsh.

Leverage Your Time

I re-learned the concept of leveraging time. Kiyosaki had taught me that passive income was a way to leverage other people’s time in order to free up more of my own. He was accurate in that assessment, but he left out a crucial detail:

When you don’t have enough passive income to pay your bills, the best way to leverage your time is to get a job.

Think about it. If you have no money, is it better to spend your time chasing passive income or to get a job? The answer is to get a job… but the advanced correct answer is to get a job and use your nights and weekends to build passive income.

Large in the Margin

The ultimate goal is to get enough passive income to cover your bills; but in the meantime, it’s important to view passive income as a marginal profit center. This means that passive income should be above and beyond your regular operating income and expenses.

Everyone has a minimum cost of living. No matter where you live in the U.S., it costs several thousand dollars a month to stay afloat. If you have no money, your only option (if you want to remain independent) is to get a job. Passive income would only help you if you had enough to cover your basic expenses.

Believe it or not, a job is the best way for a broke person to leverage their time. Think about it: what activity will yield me the greatest number of dollars for forty hours of work a week? If you have no money to invest, the answer is to get a job.

After the hours you need to spend to pay for your basic cost of living, the next highest leverage activity is to gather passive income. Any passive income you make from now on will be in your profit margin. When I was making passive income without a job, I had no profit margin. I was taking a net loss every month on my basic expenses.

Passive income is most beneficial when it’s in your profit margin. $1,500 a month in passive income won’t pay your bills, what if it was extra? That’s $18,000 a year that you could use to invest in real estate. Do you see what a tremendous difference it makes when you take it from primary to marginal income?

Your Credit

Another great reason to get a job when you’re broke is your credit. If you want to accumulate passive income-generating assets, you’re going to need the help of a lender. The wealthiest people I know are in real estate. In order to purchase real estate, a bank wants to know that you have steady income. If you are quote/unquote “self-employed” with no real income, the bank isn’t going to budge.

Check Your Ego

It was a bit of a reality check when I realized I wasn’t above working for the man. In fact, working for the man was the only way that I stood a chance to succeed.

Creative types are highly intelligent (which comes with a little bit of ego). It’s hard for a really smart person who thinks they know it all to realize that he can’t break the laws of nature. You might have the greatest idea in the world, but great ideas alone don’t pay your rent.

Build a Foundation

You can’t fight for financial independence until you have a foundation. Even though there are many ways to create passive income with little money, everyone needs a minimum amount of money to survive.

Furthermore, the best ways to create wealth (real estate) require money. If you don’t have any to start with, the best way to get some is to work. Work enough to pay your expenses and put away some to invest. That’s what my mentors taught me. It’s boring, but it’s proven.