Doing Real Estate the Easy Way
It is VERY POSSIBLE to make money in real estate passively. Passive income, is the idea that you can receive a paycheck month after month with minimal work. This alluring concept is appealing to investors of all ages and all points of their lives. This is not a pipe dream, it is very realistic with proper planning and a little bit of luck that you will achieve your goals.
There are two common ways of earning passive income are through real estate investment and stock market investment. The main differences between the two are there are inherently more risk with trading stocks that yield much lower ROI compared to real estate. Real Estate will normally produces much higher cash on cash returns.
Let’s take a look on some strategies on how to gain passive income from Real Estate.
- Purchase a property and hire a property manager.
The most hands off an passive approach in real estate is to purchase a property and hire a property manager to manage the property for you. If your property is producing excellent cash flow, it means that there is still a solid amount of money left after paying off taxes, maintenance, and insurance with the collected rent, you have made a good investment. The property manager will check up on the property regularly, collect rent, and deal with tenants. The only drawback for the investor is that the property manager will be paid from the rental income, usually between 8–12 percent of it. Please be careful with calculating your cash flowing property and consult for help if you need it.
- Consider out-of-state investing
Investing out of state becomes very possible with the help of a great property manager or company that will take care maintenance and tenant interaction. This allows you to look into areas with excellent cash flow, low income taxes and gives you the freedom to look nationwide and not just in your vicinity. This is a huge advantage, since you can select from a variety of properties and markets to invest in. Key things to be aware of is that the best areas to invest have low unemployment rates, strong local economies, and rental markets with high occupancy rates.
- Invest with partners
Find a suitable partner or partners. Working with a team will give you the advantage of formulating different perspectives and plans while leveraging each other’s experiences. Partners can help provide suggestions and advice on whether or not you should invest into a particular neighborhood. The best advantage of working with partners is risk aversion and dividing the cost of purchasing a property. It is very important to find people who you are most compatible of working with and will make up for skills/traits you are lacking.
- Invest in turn-key rental properties
Turn-key properties that are already rehabbed and rent ready. A great property management company will take care of the rent collection, damage investigation and repair, and management costs. This is an excellent way to build equity in your investing portfolio.
- Invest in Real Estate Investment Trusts
The simplest way to make into larger investment opportunities such as multifamily, skyscrapers, malls, strip malls, commercial properties is through leveraging real estate investment trusts, or REITs. What’s great about REITs is that they are legally required to allocate 90% of its dividends to the linked investors every year. There are many REITs in your local area, please do your due diligence before progressing forward.
- Invest in real estate crowdfunding
Real estate crowdfunding is the middle ground of active and passive real estate investment. It is active in the sense that the investors decide on the property they invest in, rather than having a company dictate the property. But other than that, it is passive in many respects. For instance, an investor can invest small amounts, say, $5,000, and still high returns. Also, the investor is not in charge of management and rent collection. Another advantage of real estate crowdfunding is that the investor receives tax advantages because of property ownership, unlike in REITs. Crowdfunding provide a great and creative way on how to make money in real estate passively.
- Invest in multiple properties
Investing in multiple properties while performing less labor on each property will help generate high returns. This can be applied to every previously mentioned way on how to make money in real estate passively.
Making money in Real Estate passively is very very possible! Please be mindful that each investment will be risk, it is up to you to do the proper due diligence before moving forward. Passive earnings from real estate can be an extraordinary way to generate income, prepare for retirement, and pay off debt.