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Action Academy | Millionaire Mentorship For Your Life & Business
3 Myths About Passive Income That Are Keeping You Broke
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What's up, ladies and gentlemen, welcome back to another episode of the Action Academy podcast, Corporate America's least favorite podcast, where we help you gain financial freedom through buying small businesses and big old commercial real estate deals so that you guys can go be healthy, wealthy, and financially free. Today, ladies and gentlemen, boys and girls, we are talking about the three passive income myths that are keeping you broke. B R O K E. And I have fallen victim to each one of these three. And so today, as always, we are going to be sharing, one by one, one, these three myths, along with why they're a myth and how to overcome them. Myth number one is that more streams of passive income are better. There's this line that gets tossed around all the time, which is, millionaires have seven streams of income, passive income, namely. And if you do not have seven streams of income, you are most likely not going to become a millionaire. This is completely false. This is completely backwards. And for the rest of my life, I will be debunking this myth over and over and over again because I just don't understand why people are still talking about this myth. And so, to illustrate the story about why this is a myth, I'll be sharing a story that Mr. Brandon Turner taught to me, the previous host of the BiggerPockets podcast, and that is called the Story of Success Island. So say that you're on a shoreline and off the distance cross the water, you see Success Island. Success island is the exact life that you want to live. All of your wildest hopes and dreams are accomplished on Success Island. And the rule, the one rule of Success island is you cannot get a train to Success Island. You can't get a plane to Success Island. You must build a bridge and drive to Success Island. It is the only way to get there. So you are on land and you need to get to this island and you begin building a bridge. And as you begin building this bridge, you work and work and work. You get halfway out, and all of a sudden you start seeing your friends on the coast also trying to build bridges to Success Island. And some of them are going to be building bridges faster than you. So all of a sudden you say, huh, I should go back and build a bridge that way instead. And you go all the way back to shore and you begin building this new bridge. These bridges represent different investing vehicles. So small business investing, land flipping, mobile home parks, multifamily syndications, all these different asset classes and strategies, right? Even drop shipping or stuff like that. Index funds, stock market equities. And so you see Your friend doing mobile home parks and you start doing mobile home parks yourself. Then all of a sudden you see your friend doing luxury short term rentals, you go back to shore and you begin building that bridge, right? And so if you applied the advice, the popular advice of millionaires have seven streams of income and you use that as your path and your vehicle, right? You're going to have seven half assed unbuilt bridges that lead nowhere, just dumping you in the middle of the ocean, right? So what you want to do is you want to build one bridge to Success Island. Now something that I just recently Learned from, from Mr. Turner is that you can increase the width of your bridge. So if you have one bridge going, you can make it a four lane bridge instead of a two lane bridge. So what does this mean? It means that if you're doing luxury short term rentals, then you can also buy a property management company that manages short term rentals. That may not necessarily be a brand new bridge. It is in theory, but I would more so constitute it as a lane or an additional two lanes to the bridge that you are already building. So of course ultimately your next question is going to be, well, Brian, that sounds great, I get it now. What bridge should I build as my one bridge, my primary bridge that takes me to Success Island. And I would say, well my friend, that depends. Which do you desire more, passive income or massive income? All right, if you already have massive income, you're already making great money and you want passive income on the side, then real estate would be a wonderful bridge to build. Any real estate, just pick a strategy and just go start building, put your blinders on and build right now if you don't have that much money or you have a large salary that you want to replace asap, then you are looking for a massive income and you're going to want to build that bridge instead. And so when you're thinking about multiple streams of income, especially passive income, build the primary bridge first to Success island to where you are hitting your financial freedom numbers. And then after that you can start building ancillary bridges off of that. And you can start building a helipad to take a helicopter back and forth and you can build an airport and all the rest of the stuff once you have your primary bridge built. So one stream of income to take you to a million dollars a year or whatever your passive income goals are. One stream, one way, one modality, one method. And then you can branch off, you can earn the right to branch off later, which takes us to Number two, when we're just talking about passive income versus massive income, myth number two is that you can buy a cash flowing business that is 100% purely passive. Owner operated, got all the systems, all the processes, all the managers in place, and you can just buy one of those and you are financially free, you are good, everything's honky dory, and you guys go roast marshmallows with the previous owner around the campfires in Kumbaya. Um, to be completely honest, like in the beginning a couple years back, like, I thought that this was true again, these are all rules and all these are myths that I once believed and I've since learned. All right, so that's the one thing about documenting your journey online is sometimes you just learn stuff and you improve and you get better. And you can just put your hand up and say, hey, I was wrong. Because you just don't know what you don't know until you get your hands dirty multiple times in the pot or in the mud. But here's the kicker. We help people buy businesses in Action Academy. It is over 50% of what our members are buying. And it is the best wealth building vehicle that I believe exists. If you want to build a freaking bridge to Success island, buying a business is a wonderful bridge to buy and or build. Get it? Shout out Walker Dibel. But going into this game, a lot of the Instagram accounts and all the ads you see on Facebook are like, oh, just buy this. And it's 100% passive. Here's what I have found to be true, because we help a lot of people in Action Academy with underwriting, with diligence. Like, we get so many eyeballs on these deals. And then it goes through sba and the SBA looks at it and underwrites it. And then we have forensic accountants underwrite it and analyze it. We have multiple partners underwriting and analyzing it and conducting diligence. So I'm confident in saying that a lot of the businesses that we're buying in Action Academy, not all of them, but the vast majority are like, actually statistically and financially solid businesses. These are the businesses that we hear about when they would be presented as a passive deal where the owner's like, hey, look, man, I'm doing $2 million a year. I'm just, I'm vibing. I work five hours a week on this. I live in freaking Florida Keys. My team runs this thing in Alaska or freaking Minnesota. And, you know, I've got this office manager. We have, you know, six staff members that are doing all this stuff, like Linda takes care of all this. We have an ops manager. And that can be true, and it probably is true. But what the Instagram accounts and what frankly I in the beginning failed to underwrite for, was the 10 years of experience that the owner had, the previous owner. It sounds stupid when you hear it on this podcast, right? You're like, huh, that makes sense. So it's not like you're getting hoodwinked. Like these are still great businesses. It's just like the owner started those businesses from scratch and worked them for 10 years. Of course, they're pretty passive now. Like they built everything from scratch. And it's going to take you a little bit of time to go get your systems, go get your processes, like you get in the rhythm with your people. Like you understanding this new team, it just takes time. So passivity in business is a skill. And I can say that for a fact, because today I could go into a small business that I purchased and I know how to make it pretty damn passive because I understand what it means and what it feels like to run a company, to run a team, to set KPIs, we run EOs. It's a wonderful framework from the book Traction by Gina Wickman. Getting L10s, weekly meetings, cadences, your rocks for each employee. Each employee has one of three focuses. We can go into the strategy of how to transition, how to get employee morale, how to get buy in versus weigh in all the different leadership books. You can go read the entire John Maxwell library, right? So these are all skills that you build. So I argue that passivity in business is all skill set. It's all skill set rather than acquisition. I can go do that. But looking back, me as a 25 year old sales rep, going directly from my job into that same business that I just talked about, that I could easily transition right now. I'd have no idea what the hell's going on. So that's why I think it's funny that everyone teaches business buying but nobody's teaching business scaling. So more on that in Action Academy here coming up. That's going to be a primary focus that we do because our goal and kind of the catchphrase that I want to say over and over again in Action Academy here in the next coming years is helping people scale safely. Helping people scale safely. That is what we want to do. So it is a myth to purely buy a business and just run it on the side. But passive income, money machine, hundreds of thousands of dollars coming to you in profit while you work your job and you just kind of fade into the distance and just ride off into the sunset and you're chilling at the beach. That doesn't happen, comma. But when you properly transition a company, you properly get weigh in. You properly get buy in and morale from your team. You properly set rapport and expectations and good cadences, and you really get in the thick of it with your team for at minimum 90 days to 6 months. It can be pretty freaking passive, guys. Like. Like this last Tuesday, while I was in the. Not Dominican Republic, but Cancun for our trip, like, I had nothing Monday through Wednesday, and we made like 80, $90,000. So you do get there. It just takes skill. Which leads us to our third and final myth, which is that rental properties will provide you passive income or real estate will provide you passive income. This is not true. And anybody that's been in the game long enough knows this to be true. There's degrees and there's seasons of passivity, but even when I ran my single family rentals that were co living rentals in north Atlanta, Georgia, they were. They were pretty freaking passive for many, many years. All right? Like, everything was honky dory. I had property managers that lived in the property because with co living, no regular property managers want to take them on. And so everything was going good. Everything was going fine until I moved away. And then when I moved away, the tenant then trashed the entire house. I had to evict her. She stopped paying rent, and just all hell ensued. And then there's stuff like floods and trees going down and fricking fires and just everything. Like, my basement at my rental property flooded in three different ways. Yeah, you heard it here first, correctly. Three different ways. And you may ask yourself, Brian, how does something flood three different ways? Well, I'll tell you, my friend. Number one is the. The washing machine drain hose came loose from the wall and flooded my entire basement, which then seeped into my basement unit that I was living in. Okay, cool. That would. That'd be a shitty day, right? It gets worse. It was Valentine's night bad, right? Cool. But it gets worse. Just wait, because then I fixed it and I turned off the water and. And I told the tenant, I was like, hey, your teenage. For teenage boys. Like, all of you guys, don't mess with this. It's broken. I got to go get a new one. I turn off the water. I turned off the power of the washing machine. Don't turn it back on. And then her teenage kids just ignored it. They turned the water and the power back on and they proceeded to go flood the entire basement again and my unit again in the same day that sucked. Another way that it flooded was a water heater for flooded. So it just started leaking and flooded the entire unit. Another way that flooded was a storm came and flooded my backyard, which then seeped into my property. Oh, and a sump pump stopped working, so that also did it as well. Needless to say, all of these are four to five different ways that real estate all of a sudden didn't become as passive for me. And so at the end of the day, the way that I want to kind of crescendo this episode is that passive income is really a spectrum and how it's been sold over the last 10 years is kind of perverted. And so how I describe passivity is on the other side of profits, processes and people. So instead of thinking about investing, or rather let me say instead of thinking about, I want to build passive income through investing, right? That's been the narrative over the last 10 years. Instead, change your focus to I want to create and yield passivity through business ownership and through skill sets. Because if you know how to manage and manipulate profits, if you know how to manage and lead people, and if you know how to build and scale processes, then all of the stuff that is work that needs to be done will just be work that's done by somebody else that's not you. And that's what allows you, the owner, to be passive. All right? There is no such asset where you can just set it and forget it. In this purely passive, just popping out stuff, there's still work that must be done. The question is, who is the person that is doing the work that is not me, so that I can go do what I want, when I want, with who I want and with that. My friends, if you're enjoying this podcast, you're getting any value from it, please share it with friends. That's how we grow the show. You're helping other entrepreneurs leave corporate and make the best of their situation so that they could be the best parents, best spouses, best people that they could possibly be. And if you want help with all of this stuff, genuinely actionacademy.com this is what we do. If you want your handheld through these processes so you can not only learn how to buy the businesses, how to buy the real estate, but also how to scale it, manage it and operate it the correct way, and you have a support system of other like minded peers that are high performance just like you. Actionacademy.com. go in the show description, book a call. At least hop on with the team. I promise you it is absolutely worth it. We'll talk to you for 60 minutes, answer all your questions. Thanks, guys. Talk soon.