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Imagine the potential to make a lot of money by putting in minor work. Sounds like a dream, doesn’t it? You have the power to make this a reality through real estate passive income.
For the past two centuries, globally, approximately 90% of millionaires have created their wealth by investing in real estate. This statistic alone speaks volumes about the fact that real estate passive income can work, and it can work for you.
Now, you must know where to start. Here, we have eight ways that will help you achieve real estate income. Time is money, so let’s get the ball rolling.
1. Traditional Rental Property
The traditional approach to property rental involves becoming a landlord. As a landlord, you own a property—whether it’s a single-family home, a multi-unit building, or even a small apartment complex—and lease it out to long-term tenants. Each month, the tenants pay rent, which (ideally) covers your expenses, such as mortgage payments, property taxes, and maintenance costs, with some profit left over.
Being a landlord can be rewarding, but it’s not without its challenges. You’ll be responsible for managing the property, marketing it when it’s vacant, screening tenants, and handling repairs and maintenance. For example, you might need to address issues like leaky faucets, broken appliances, or late-night emergency calls.
To mitigate this workload, some landlords choose to hire property management companies to handle day-to-day operations in exchange for a percentage of the rental income. Typically, the cost to hire a solid property manager is the first month’s rent, plus 8-10% of the ongoing rent for residential properties.
You can also manage properties yourself, and save yourself some money in the process, as long as you don’t mind taking on the extra work.
2. Buy and Hold
This is another strategy for building wealth in the long term. It is exactly as it sounds. You buy a property and keep it in your portfolio as a real estate investment.
You hold it until the value will significantly appreciate. You want to sell a property for much more than what you purchased it for, making a good chunk of profit.
The key to maximizing this type of investment is by choosing the right location. Check to see where there is an expectation for a major increase in the value of homes.
3. Invest in Turnkey Real Estate
A great investment strategy for a beginner, turnkey real estate refers to a property that is already 100% ready to be a rental and house a tenant. This is typically a situation where a house is fully renovated or is a home that is new construction. From day one, all the amenities and features are ready to go for a renter.
Sometimes turnkey real estate will come with a tenant already. Usually, they are single-family homes, but there are other types in the market too. Turnkey real estate is typically a long-term strategy for earning passive income.
4. Partnerships
If you would prefer to team up with a partner, there are real estate investment strategies that involve partnerships. This can come in a few forms. Here are a few examples:
- RELP (Real Estate Limited Partnership)
- GP (General Partnership)
- LLP (Limited Liability Partnership)
For real estate partnerships, the legal form depends on how many partners there are, each person’s role in the investment, each partner’s rights and responsibilities, and the laws according to the state they are in. These are a few factors, among others too.
When you invest with a partner, one advantage is that you can begin with a little money and still earn passive income.
5. Syndication
This is an ideal type of partnership for real estate passive income. Syndication is headed by a sponsor (also referred to as syndicator). The syndicator has the most active role.
The sponsor will find the investment properties and then pull together financial resources from the investors. This can be a rental property, managed by a professional company. As the investor, all you need to do is invest your money for financing and then you will get passive real estate income.
6. Rent a Room in Your Home
If purchasing an investment property, or even part of a property, is too much right now, but you are still highly interested in the concept of real estate passive income, renting a room in your home can be a good starting point. You are already managing your home. When you have a renter for a room, they should not add a significant workload for you if they are reliable.
This could get you a few hundred dollars monthly. You can rent a room on a long-term basis or choose something more short-term. Depending on the regulations that govern short-term rentals in your area and the demands of the market, it’s up to you what duration you want.
7. Crowdfunding
If you want to invest as little as $500, this can be the best passive income strategy for you. It’s a new and hot way to make investing accessible to those with limited capital to spend. With crowdfunding, hundreds of real estate investors worldwide can come together and invest in real estate.
8. REITs
The acronym REITs refers to Real Estate Investment Trusts. Here, it is a lot like investing in the stock market. A REIT will finance, own, and/or operate real estate that is income-producing.
As a starting point for earning real estate passive income, you can purchase shares of REITs. A REIT must regularly distribute its shareholders 90% of its taxable income, by law.
Earn Real Estate Passive Income
There are some great ways to earn cash without having to quit your current job. Rental properties, purchasing properties, partnerships, crowdfunding, and REITs are all great ways for earning real estate passive income.
We hope this article is valuable to you. For more money-making insights and suggestions, explore the Finance Section of this blog.