Unpacking passive income misconceptions

Most people misunderstand what passive income is. A person has two choices in earning an income:

1. Earn “Active Income” 
As an employee or business owner work to get paid i.e. Exchange Time for Money 

2. Earn “Passive Income”
Earn money while reading a book or sitting on the beach, i.e. Income is earned while you are not present. 

The harsh reality is that there is no direct route to earning passive income unless one is fortunate to inherit or be given a large lump sum of cash. One must follow the active road to passive income by either working hard and when income exceeds expenses, saving and investing the difference or build assets that earn passive income. For example, write a book or create a Youtube video that people will pay for. Over time, with either route, you can build sustainable passive income streams 

Earning passive income through property

The mainstream passive income generators are real estate, equities and bonds. We shall focus on real estate as this is the most popular form of passive income and the foundation of “serious wealth.”  

Rental from property provides protection against inflation, is taxman friendly, has a low-risk profile and often one can use the bank’s money (loans) to reach your passive income goals “quicker”.  

table of destruction of rand

Destruction of the Rand

“Howeverthe Emerging Country Passive Income Trap catches many, says Costas Souris of Quality Group.   

Since 1970 the rand has depreciated by more than 7% per annum when compared to the US Dollar. In 1970 R1-million was worth $1,4-million. Today the sad reality is that R1-million is now worth $69 000!   
 
Emerging market economies import various goods and services. Cars, mobiles etc including fuel which is priced in US dollars. Every time petrol goes up it sets off a chain reaction of price increases. “The farmer must transport his wheat to the flour mill; from there transport to the bakeryfrom there to the local Pick and Pay, and then you must drive to buy bread from the retailer. Protection not only against local inflation is required but most importantly against imported inflation because of local currency depreciation. 

Can a soft currency like the rand appreciate? Of course, but sustained economic growth, coupled with clean government and low unemployment begins the foundation! Invest in hard currency with Passive Income generated by property. 

table of investment in property and rentals

Preferred passive income

Property generates rentals and rentals are the preferred passive income route (versus other passive income vehicles). 

With low inflation in hard currency and let’s assume that Euro rentals remain level. Illustrating 5% per annum depreciation in the rand, your standard of living and retirement is assured.  

There is also the threat of an emerging country meltdown. One can combine Investment, Golden VISA PR and Protection for the Family and Preservation of Wealth by investing in EU Cyprus.

Explore EU Cyprus and why it is rated the 5th Best Relocation Destination in the World by Knight Frank. View our HOT Properties designed for producing hard currency passive income www.qualitygroupsa.com/property/ 

These properties provide freehold title, guaranteed rentals in Euro, with long term leasebacks and the best and most value for money Golden VISA PR for life program evolving into EU Citizenship or immediate EU Citizenship and passports for life, the only European program of its kind in the EU. Enquiries info@qualitygroupsa.com  

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