Why a Millennial Who Earns Passive Income Still Works Full-Time

  • Real estate investor Adam Masato still works full-time and rents an apartment.
  • He’s on track to retire early, but he needs to keep his W-2 job for a little bit longer.
  • His W-2 job helps him qualify for more mortgages for investment properties.

At 35 years old, real estate investor Adam Masato is on his way to living solely off passive income.

He and his wife, Diana Hernandez, make $9,500 a month from renting out their Los Angeles condo for a profit of $1,100, and from an Airbnb in Joshua Tree, California, with an average monthly profit of $8,400. The couple’s long-term goal is to retire early and support themselves with passive income.

In the meantime, Masato says, “I’m just a regular millennial with a W-2 job.”

He and his family recently moved into a rental apartment

Masato and Hernandez moved in with Hernandez’s parents in 2019, seven months before the pandemic started, with the intention of saving money for traveling. They moved out of their condo in Los Angeles and started renting it out to pad their savings even more.

The couple spent two years saving and investing their combined income of $150,000 a year, not including the rental income from the condo, while living with Hernandez’s parents. Hernandez’s family is from El Salvador, says Masato, where multiple generations living under one roof is the norm.

During the pandemic, Masato’s priorities shifted to building long-term wealth for his family and retiring early. Living with his in-laws presented some challenges, but Masato says he would do it all over again.

After their son was born, the couple decided to leave the parents’ house for “our own peace of mind,” he says. Instead of trying to buy another home in LA’s competitive market, however, Masato says moving into an apartment was the best choice for his family.

He needs his W-2 job to qualify for more mortgages

Masato said he plans to keep his W-2 job for the forseeable future. “I need it to qualify for more mortgages,” he explained. “I can’t use my Airbnb income until I have two years of tax returns.” He plans on buying more investment properties that make passive income to support his goal of retiring early.

It can be more difficult to buy a home when you’re self-employed, especially when you have been working for yourself for two years or less, as Masato has.

According to Christian Mills, head of financial advisor relations and behavioral finance expert at Reverse Mortgage Funding, LLC, any lender evaluating Masato’s application for a mortgage would be looking for two years of work history. “Lenders require a two-year history to confirm that the borrower has regular, recurring income that can be counted on,” he says. “Underwriters will review this two-year history as an established pattern that can be considered likely to continue.”

When it comes to building a long-term passive income stream, time is the most important ingredient. Mills says, “Rental property income can be leveraged to access more credit in many ways. Here’s one example: An investor buys a property worth $100,000 with a


down payment

or $50,000. Thanks to a white-hot real estate market, two years later, the property is worth $200,000. The investor can then leverage the additional equity in the property, plus the rental income, to buy another property and start the cycle over again.”

Masato is still on track to retire early

Masato says he envisions himself leaving the traditional workforce once he has two or three more rental properties. When that happens, he says, “I’ll be at a point where I can cover my cost of living and still be able to set aside some money and keep investing.”

He adds, “Having a job is just a big stressor, not because I hate my job or anything like that, but just knowing that I have a full calendar, or at any moment I could get chewed out. I envision a life that’s so much better. I’m not saving up for a mansion or a super car or anything like that. I just really want time to hang out with my family and travel — and have really low stress.”

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