Do Nothing and Earn

A parrot enthusiast just came inside a pet shop and was fascinated by the three lovely and colourful parrots dangling in their respective cages.

“How much for the parrot on the left?” he enthusiastically asked the pet shop owner.

“Seventy-five thousand pesos,” was the fast reply.

“Wow!  It’s so expensive!  What does it do?”

“That parrot can make an accounting of your expenses and revenues.”

“My goodness! That’s quite something.”  Still scratching his head in disbelief, the customer asked again, “How about the parrot on the right?”

“That will be one hundred thousand pesos.”

“What?!?... seventy-five... now... one hundred... Good Lord! What does it do?

“That parrot can make a comprehensive feasibility study.”

“Wow, that’s amazing... unbelievable!”  Scratching his head again, the incredulous customer now points to the last parrot, “How about the parrot in the middle?

“That will be two hundred fifty thousand pesos.”

“What!!!?... seventy five ... one hundred ... and now ... two hundred fifty???! What does it do?”

“Well, it does nothing.”

“Nothing?  And you want me to pay two hundred fifty thousand pesos?”

“Yes, that parrot is the Boss of the two parrots!”

I heard this story while attending a productivity seminar for private employees.  Funny but I think this has strong parallelism to the passive income from real estate assets.  Both earns while doing nothing.

The normal tendency of real properties is to appreciate in value; some slowly while others shoot up  dramatically depending on the circumstances.  One thing’s sure though.  They seldom go down in value.  The increment or the positive difference in value is a revenue and in other cases, where the asset contributes a recurring inflow of cash like rentals from apartments or condominium units, is a passive income generator.

While the concept of doing nothing and still earn is something very enticing, the truth of the matter is it is never a reality.  The boss gets paid higher because he not only is held accountable for the outcome of the jobs of his two staff but also is responsible for making sure that the goals of the organization are achieved.  In real estate, the passive income is actually the result of the cash inflow being greater than the cash outflow.  In running an apartment business, it is not just about the rental income but also keeping the fixed overhead low like salary of the collector and the maintenance crew and the annual real estate taxes. And also to consider capital costs like major repairs and maintenance of the units.

Do nothing and you lose everything.