![]() ![]() Many real estate investors have an initial period of time before the property becomes profitable. Rental income is considered passive income because it is not directly tied to the time the landlord spends working, but not all rental income is residual. This can include income from investments, such as stock dividends or interest on a savings account. Passive income is any income that is not directly tied to the time you spend working. While some people use the terms residual income and passive income interchangeably, there is a difference between these concepts. Passive Income: Differences and Similarities Advertisements Any money left over after the investor pays the costs of owning and operating the property is considered residual income because the investor receives a net profit without ongoing effort. Real estate investors can also earn residual income from rental properties, especially if the investor hires a property manager to take care of the property. For example, a musician may continue earning money from royalties on a popular album after paying all costs and completing all the work of album production. Residual income is the money earned from an investment or business activity after the costs of the investment are paid, and the initial work is done.
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