Who wants mailbox money? The answer is everyone. That is unless it entails working an 80-hour per week IT job that turns your hair grayer with every middle-of-the-night cutover.

The idea behind mailbox money, also known as passive income, is the ability to earn without doing hard labor. It’s best thought of as a diversification strategy. It’s a way to create new streams of money rather than relying on one source.

Why Mailbox Money Matters

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In today’s economy, most Americans have little or no savings, let alone significant investments that produce passive income. Though many of us worker drones haven’t been let in on the secret, there are ways to earn money outside of a biweekly paycheck. In today’s uncertain job market, particularly in the IT field, workers need a backup plan.

They can’t rely on their jobs to take them through to retirement. That’s old school and security like that never really existed in IT anyway. This means we need a way to make money on our own and probably long before we’re eligible for a Social Security check.
Besides, how many of us can work crazy hours and deal with unremitting pressure for decade after decade?

If you’re like most people, there is more you want out of life than the next high-pressure contract gig that pays well but takes all your time and energy and ultimately leaves you unemployed and scrambling for the next gig once again. To achieve financial freedom and stop depending on contract gigs, we need to generate new income streams.

The good thing about IT, other than the banker’s hours (just kidding), is the high hourly rate. This leaves you with plenty of discretionary income, provided you budget and resist the urge to buy every new electronic device on the market. That discretionary income can be turned into a long-term income stream. At first, it supplements your IT income but eventually gives you the financial freedom to start your own business, change careers, become a professional investor, or retire.

What Passive Income Is and Isn’t

Mailbox money isn’t helicopter money. It’s not a freebie that magically appears to save the day. Passive income comes as a result of strategic investments made over a long period of time that eventually add up to an income stream that rivals your paycheck.

Investing is how the wealthy get so wealthy. As we in IT know, the human body is only capable of working so many hours per day. This limit, which most of us surpass regularly, puts a cap on how much we can earn from working. As our careers advance, higher income taxes and less room for raises results in diminishing returns on our investment in work. It’s time to branch out and start making mailbox money.

Passive doesn’t mean you don’t need to do anything. Stock market investing, for example, is a classic example of passive income. However, you still need to research companies, understand how the economy works, and monitor your holdings. The difference is that your reward comes from the performance of your investment, not the hours you log in. Passive income frees you from the trap of trading your time for money.

Passive Income Through Real Estate

When it comes to creating passive income, real estate provides golden opportunities. As an IT professional with disposable income, you can start creating real estate passive income streams right away without having to even buy a property. Though you may want to become a landlord someday, chances are your schedule is pretty packed with your job, so you can start earning mailbox money through real estate in three ways.

Real Estate Investment Trusts

Known as REITs, these investment vehicles are available on the stock market. Shares of REITs trade just like stocks, so they are very liquid. By law, REITs must pay their shareholders 90% of their profits in the form of a dividend. As a result, REITs have some of the highest dividends on Wall Street. You can invest a large chunk of money and take the dividend as mailbox money while also earning capital gains if the REIT’s stock appreciates.

If you are starting small, it may be better to reinvest the dividends through a dividend reinvestment program, which allows you to purchase new shares with your dividends commission-free. With disciplined investing, you can build tremendous wealth by reinvesting REIT dividends.

Diversification is important. You should buy multiple REITs in different market segments with exposure to diverse geographic locations. If you don’t have enough money to buy a diversified portfolio of REITs, consider an exchange-traded fund (ETF) that invests in REITs. REIT ETFs provide more diversification and still pay generous dividends.

Real Estate Crowdfunding

Often, real estate developers raise money for projects through crowdfunding. This simply means that the developer opens investment to the public. Those who buy in receive shares in the project and a proportional amount of the return.

For example, a developer wants to turn a vacant downtown building into a hotel. He or she uses crowdfunding to obtain money to buy and renovate the building. The investors then get to share in the profits in proportion to their invested amounts.

Serious money can be made by investing in the right projects. As with REITs, it’s important to choose wisely and diversify. If you pick good ones, it’s worth the effort: Many crowdfunded real estate investments realize a 15% annualized return.

Be an Active Investor’s Partner

Owning rental properties builds wealth, but it’s also a second job. Assuming you don’t currently have the time and inclination to become a landlord, there is still a way to invest directly in rental properties without taking on responsibilities you have no time to keep. You can partner with a real estate investor while playing an inactive role.

In these partnerships, the managing partner handles the property while the inactive partner(s) contribute money in exchange for an agreed-upon share of the income and any profits from a sale. This can be a great way to get started in real estate. Who knows, one day you might decide to leave IT behind and become the managing partner of rental property investments yourself.

Don’t Ignore the Need for Passive Income

We can’t afford to ignore passive income if we want a secure financial future. Passive income both provides a safety net in case of changes in our circumstances and, with time, an income stream that can replace our paychecks. Getting started doesn’t require a large amount of capital. You can start buying REIT shares or invest in real estate crowdfunding with just a few dollars. With disciplined investing habits, you can multiply your money many times over and enjoy a steady stream of mailbox money that provides security and helps you achieve your dreams.

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