Is Real Estate Passive Income? Lessons From Owning Seven Rentals

Originally published 24 August 2024 · Updated 20 October 2026

When I decided to pursue different income streams, I asked myself a few questions first. How much money was I willing to invest? How much could I afford to lose? And how much of my time was I willing to give up to make it work?

People tend to see the financial potential and chase it. I did some of that myself. You also have to look at what you will be doing every week to earn that return.

I co-owned seven rental units with the bank. By that, I mean they had mortgages. They were a combination of commercial and residential properties, and I was hands-on with just everything, meaning I did everything myself, adn with no help.

I was constantly dealing with tenant issues, problems with a property, finding new tenants, and everything else that came with being a landlord. I was barely making money for the time and effort I was putting in. Eventually, I decided it wasn’t worth carrying on, and I sold them.

Is being a landlord a lot of work?

It was for me.

When I was a landlord, I dealt with tenant and building issues, neighbour and township complaints, and the other jobs that needed doing. If something needed attention, it usually ended up being my problem.

I could have hired a property management company. But they are also in business to make money, and their bill did not fit in with my numbers numbers.

That’s why I have a problem with calling every rental property a passive income stream. There may be income coming in, but someone still has to do the work. If that someone is you, decide how much of your time you are happy to spend on it, and then double it.

What is left after everything is paid?

The rent amount looks nice on paper. Then you have to pay the expenses.

There are the mortgage payments, property taxes, insurance, maintenance, repairs, and any service charges. There are also costs when a tenant vacates a property. There may also be management, accounting, and legal bills.

And the property won’t necessarily be occupied every month of every year.

Before buying, I would want to see what was left after allowing for all of that, including money for larger repairs. Then I would look at what happened if a tenant left and something expensive needed fixing at the same time.

If the numbers only work when nothing goes wrong, I would keep looking for another property to purchase.

Can a management company make it more passive?

Yes, paying someone else can reduce the amount you have to do yourself. It doesn’t remove every responsibility that comes with owning the property.

Ask what the company actually does for its fee. Who finds the tenants? What repairs can they approve? Are there extra charges? How often do you receive a report? What happens when the rent hasn’t been paid?

You need local quotes and a clear agreement. There isn’t one percentage I can give you that will tell you what a manager should cost for every type of property.

It may be a good arrangement for you. Just include the cost before deciding how much money the property will make.

Using equity to buy more property

I used equity and financing when building my portfolio. This let me buy more properties than I could have bought using only cash.

But the bank still expected its payments. Buying another building meant taking on another set of obligations, as well as the possibility of more income.

You can’t assume refinancing will be available whenever you want it. Approval, property values, interest rates, and your own finances can change. Equity in a building isn’t the same as money sitting in an account ready to spend.

Paying cash removes mortgage payments, but it doesn’t remove the building’s other costs. You still need to decide whether the return is worth the money and time tied up in it.

What about investing through a REIT?

A REIT is a real estate investment trust. It is a company that owns or finances income-producing real estate. You buy an investment rather than manage a particular property yourself.

That is one way to get exposure to property without doing the landlord’s daily jobs. It is still an investment with risks. Look at the fees, the assets, how it is managed, and how easily you can sell your investment.

The Investor.gov explanation of REITs covers the differences, including the difficulty of selling and valuing some non-traded REITs. An attractive distribution doesn’t tell you everything you need to know about the investment.

I also need to correct something from my older article. I mixed REITs and annuities together. They aren’t the same thing. An annuity is an insurance contract, and its terms, costs, and risks need their own review.

Selling a rental property

I used rent-to-own when selling properties from my portfolio. You can read more about my rent-to-own experience here.

It isn’t automatically the best selling method. The agreement, costs, legal position, and buyer’s ability to complete all matter. You also need to understand the tax position where you own the property.

Nor is an eventual sale guaranteed to make up for years of poor income. Values can fall. What you keep depends on the sale price and what you have spent and still owe.

Look at the life you are buying as well

For some people, owning rentals works well. They may enjoy the work, have a suitable team, or be happy with the return they receive.

I wanted fewer demands on my time. The properties I owned weren’t giving me that. I had to admit that something could help build my net worth and still be something I no longer wanted to look after.

Before you commit money, learn as much as you can. Have the financial, legal, and tax details checked for your situation. Then ask yourself whether you want the work that comes with it.

I asked that question about more than my rental properties. It also became part of why I chose to live smaller.