What is meant by passive income in real estate?

Passive income in real estate refers to income that is generated from rental properties or real estate investments with minimal active involvement from the owner. This means that after the initial setup, such as purchasing the property and possibly making improvements, the owner does not need to be engaged in the daily operations or management of the property to continue earning income.

In this context, passive income is particularly appealing because it allows investors to earn money while dedicating their time to other pursuits. For instance, property management services can be hired to handle tenant relations, maintenance, and other operational tasks, which supports the idea of generating income without significant active oversight.

Understanding passive income is crucial in real estate investing as it highlights the potential for building wealth through investments that require less day-to-day attention. This concept is often contrasted with active income, which involves regular engagement in managing and running rental properties.