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Michael Quan had a desire to retire early after watching some of his relatives achieve financial freedom at a young age. After building an IT company and selling it to a private-equity firm, he retired at age 36. He took his earnings and invested them in ways that would continue to generate passive income.
“My daughter was 1 at the time. So I decided, you know, this is a perfect transition to take an early retirement, be really present with my family. And that was a primary motivator, was to really be present with my family and enjoy her younger years at home,” Quan told Insider.
Quan, now 44, has set up his finances to allow him to live off his net worth, continue growing it, and collect passive income. He shared the top three passive-income streams that continue to bring him revenue year after year.
1. His main source of passive income is real-estate investments
In 2020, Quan earned $59,000 from real estate, making up 78% of his passive income. He owns three properties — two single-family homes and one condominium — in Nevada. The first two properties bring in a consistent cash flow each month because they are rented to long-term tenants. The third is rented out through Airbnb, allowing him to collect more income.
Additionally, Quan is part of a family-owned real-estate investment company that owns a property with multifamily units in Venice, California. Any revenue collected from it, such as rental income, is divided among the owners.
His fifth investment is a property in San Antonio: a large apartment complex that Quan invested in through a real-estate development firm. This allows him to collect additional income from rent.
2. He collects dividends from his investment portfolio
Last year, Quan collected about $13,000 from dividend payments, making up 16% of his passive income. He holds exchange-traded funds, mutual funds, and individual stocks.
Instead of withdrawing the income, Quan reinvests his dividends in his portfolio so that his assets and dividend payments can increase over time. This process is called the DRIP method.
His highest-paying dividends for last year came from three ETFs in the following order:
“Essentially I’m choosing a blended combination of growth and dividend ETFs. So in terms of passive income, to be honest, a lot of the dividends can vary from year to year [in terms of] which sector performs the best,” Quan said.
He holds other ETFs that add growth and balance to his portfolio.
“My general approach to ETFs is that I want a mix of growth and dividend ETFs so that I have a balanced approach within the portfolio. Because sometimes dividends are very nice to have, but other times growth is taking off …….