Generating an Income While Not Drawing a Salary

This Often Overlooked Asset Class Can Be the Key to Financial Independence

A couple of days ago The Information ran an article highlighting a number of high profile tech execs who are currently in between gigs — “The First Free Agents of 2017”. I have been fortunate to have worked with several of these super-talented people and it got me thinking. Of course the handful of “mid-career” execs mentioned in the article are not alone. There are lots of great people who have done very well professionally as well as financially and at some point in their career, find themselves in similar situation.

In the same vein, Silicon Valley is full of people who have decided to take some extended time away from work. There are even those who have chosen to take “a permanent sabbatical”, as one fortunate former tech worker put it. And there’s those who are part of the 4-Hour Workweek movement.

Lastly, I’ve met many successful entrepreneurs who, after having their company acquired, have turned around and launched their next thing — usually forgoing much in the way of salary especially at the start.

Whatever the circumstance — the one thing all these people have in common is that they are no longer seeing a steady pay check from work. After I left Google in 2007, I experienced this myself. As an angel investor, I was making speculative bets on outcomes that would not be realized, if at all, for 7–10 years. Safer investments in public equities (stocks) were an even longer-term buy and hold strategy. And my fixed income investments (bonds) were producing very little income indeed.

My search for greater fixed income yields led me to learn about an asset class many investors overlook: real estate. Most investors’ real estate holdings are limited to their personal residence. The real estate I’m talking about is different. It’s what’s referred to as multi-family real-estate (as in large apartment complexes). What many people are unaware of is that these properties can be invested in passively through firms that specialize in acquiring and managing this type of asset.

One of the most attractive aspects of multi-family real estate investments is that they can generate strong annual income — typically in the 6–10% range if invested with the right firm. What’s more this income can be off-set with depreciation, which means that in the short-term investors are not paying taxes on this income. (These taxes are deferred until the property is sold and then taxed along with any long-term gains on the property).

In addition to annual income, there are a number of other advantages real estate offers investors — like healthy diversification for a portfolio of just stocks and bonds. But for investors who are looking to generate consistent meaningful income from their capital real estate can play a big role.

If you’d like to learn more about multi-family real estate and/or social impact investing you can reach me at David at OpenPathInvestments.com

A couple other posts that I think you will like:

“My Next Google: A perspective from employee 75”

“Real Estate’s Long Boom: Experts See Decades of Opportunity”

Note: OpenPath investment opportunities are for accredited investors. It is always advised to speak to your accountant regarding your specific tax situation.

*The good news is that with OpenPath there are also social and environmental benefits.