Investing in real estate

What is ACTIVE income?

• Active income is the money you earn for your time. Ex: You work 40 hours a week for a salary of $60,000 a year. (For an employee)
• Self-employed persons also exchange their time for money. In this situation, the salary is in the form of a commission or contract.

 

What is PASSIVE income?

• Passive income is the one you earn without having to continuously exchange your time for money.
• Example of an investment in an investment portfolio.You invest $20,000 in a TFSA, which is invested in an investment portfolio, and earns you either interest or dividends. In this case, your money works for you. You invest money for money without having to invest time.
• No notion of time. In the case of a real estate investment, the time allocated to your project can be done outside the hours devoted to your full-time job (active income). This time, commonly called secondary time, is what will help you create passive income. This will bring you 4 different sources of income.
• Example : You invest in a rental property. You collect rents, which pay for your mortgage and related expenses such as municipal and school taxes. After paying your expenses, the difference is your profit. This is the first source of income. Over the years you create equity in your property with your mortgage payments. Equity is your second source of income. Then you have the increase in the market value of your property. This should increase overall, especially if you take care of your property. Give it some love. This is the third source of income. Finally, there are the tax deductions and benefits you get when you invest. So you have created an ongoing passive income.