Suggesting Investing: 15 Ways to Make Money While You Sleep in Real Estate
Would you like to make money while you sleep? Sounds too good to be true, right? But it's not! Passive income is a great way to make money without having to work very hard.
We could all use a little additional cash in our life, whether it's to pay down debt, fund retirement or put money up for college. You can benefit from additional income through passive real estate investing without having to put in any more effort.
Any revenue you receive from long-term renters, transient tenants, and other real estate investments is considered passive income from real estate. While some passive real estate investing plans call for active participation from you, others can be started with little more than a financial commitment.
Whatever your objectives, there is a passive real estate investing plan that is ideal for you. Here's how Real Estate Investing can generate passive income.
BEGIN BY POSING INQUIRIES
The range of commitment you have as an investor is one of the numerous advantages of generating passive income from real estate investments. Your real estate income streams can be passive, active, or a combination of the two, unlike when investing in individual stocks or mutual funds, where you or your financial advisor place your money and—hopefully—watch it grow.
This brings up the initial query you might need to ask:
How committed do you want to be in your real estate investments?
Real estate investors who are active are those who are personally connected with their properties. These investors oversee their rental homes, home renovation projects, and other investments. Being a passive investor or an active investor with passive management are your two primary alternatives if you want to earn passive cash flow.
Passive investors pay someone to do labor in exchange for money.
Rental properties are researched and purchased by active investors with passive management, who then choose a property manager to take care of the rest.
Should You Join a Research Investment Group or Work Alone?
Both of these choices have advantages and disadvantages:
Working independently: Unless you opt to join a potent team, you have complete autonomy. A real estate agent, general contractors, bankers, other investors, etc. may be on that team. Although it often involves greater risk and demands more time and investigation, it may be quite profitable.
Working with a research investment company will give you expertise and access to properties for investment in developing and lucrative markets.
Where Do You Want to Invest?
Which areas have a strong rental market? Do the following research:
Upcoming and Recent developments
Ratio of Tenants to Owners
Statistics on Crime
Which Do You Value More: Appreciation or Cash Flow?
Your investment approach will be strongly impacted by the kind of passive income you receive. Focus on flipping houses if appreciation is your top priority. To generate rental income, you should buy and hold properties if you prefer monthly cash flow.
Here are 15 METHODS to use real estate investments to generate passive income.
# 1 Real estate investment trusts listed on public markets (REITs)
REITs, or real estate investment trusts, are another option for generating passive income from real estate. REITs are companies that own and manage a portfolio of properties. When you invest in a REIT, you're essentially buying shares of the company. This can provide you with regular dividends, as well as the potential for capital gains if the value of the REIT's portfolio increases.
The simplest and most economical way to invest in real estate is sometimes thought of as REITs that are publicly listed on the stock market. REITs own a total of more than $3.5 trillion in gross real estate assets in the United States alone. They're an excellent source of passive income because they must pay out 90% of their profits in dividends to maintain their tax-favored status.
There are more than 200 publicly traded REITs available to you, and the majority trade for less than $100. Similar to normal equities, many REITs target certain markets, such as residential, industrial, retail, and office, and they can be bought and sold through a brokerage account.
# 2 Private REITs
Private REITs are bought through investors, financial advisors, or direct-to-consumer websites like Realty Mogul, as opposed to publicly traded REITs. Private REITs often have lower volatility because they cannot be bought or sold on a whim. Though fewer commonly, they also typically produce bigger returns. Private REITs typically offer quarterly or annual passive income rather than monthly income.
#3 Exchange-Traded Funds for REITs (ETFs)
Mutual funds are comparable to REIT ETFs. With REIT ETFs, you can invest in numerous REITs at once rather than just one, which lowers your chance of losing money. Purchasing REIT ETF shares is a fantastic, affordable method to start investing in real estate if you're a beginner.
#4 Property Crowdfunding
Despite being relatively new, real estate crowdfunding is undoubtedly one of the most well-liked passive real estate investment strategies available. By pooling your money with those of other investors, real estate crowdfunding enables a third party sponsor to buy and maintain an investment property.
The investment opportunity and organizational structure your sponsors choose will determine how frequently you receive passive real estate revenue. You can choose from a variety of crowdfunding possibilities and niches, just like REITs. The only work required of you, just like REITs, is choosing which crowdfunding opportunity you want to invest in.
#5 Single-Family Units
Buying a single-family home is sometimes the most popular place to begin if you're hoping to actively invest in properties and employ a property management firm to handle them.
Condos or single-family residences with just one occupant or family are referred to as single-family apartments. Every month, you'll receive passive income in the form of rent (less the costs your management firm charges for maintaining the rental property), which you may use to pay off the mortgage and other debts while increasing your equity.
However, keep in mind that you won't make money from the unit if it is vacant.
#6 Multifamily Units
Duplexes, triplexes, and fourplexes are frequently found in multifamily housing. They function similarly to single-family homes, but you'll generate more than one passive income stream from them. Although having more flats also means having more renters to manage, you won't suffer as much financially if one of the units is vacant.
#7 Apartment Buildings
Apartment buildings are by definition defined as real estate with five or more units. Before selecting a property management company to look after the building, you should conduct a thorough search because these properties need more rigorous care.
Real estate investors in apartment buildings can apply for a commercial loan rather than a residential one, which could result in a greater passive income stream.
#8 Short-Term Rental Properties
In places with a high population density, a lot of tourists, or well-liked vacation destinations, short-term or holiday rental properties make excellent investments. Short-term rentals normally charge by the night rather than having renters occupy the space for months or years at a time.
A short-term rental property can increase your income by 2-3 times, but it will also take more work from you in terms of scheduling, cleaning, and cancellations. Fees charged by companies that manage rental properties often range from 20% to 50%, yet they may be very worthwhile.
#9 Commercial Buildings
You'll typically benefit from lengthier lease terms with the businesses that inhabit commercial properties, as well as more consistent passive real estate income streams. You must, however, be ready for the fact that commercial properties are more specialized and frequently empty for extended periods of time.
A business property's location is crucial, just like it is for residential real estate. Your chances of keeping it occupied are better the more desirable the location.
#10 Industrial Complexes
Your thoughts may immediately turn to shopping when you think of commercial properties. There are a lot of different commercial sectors to take into account, such as the industrial one, where buildings for production, storage, and warehouse can provide passive revenue with little management needed. Industrial complex owners can benefit from longer leases but may also face protracted vacancies, much like owners of other commercial buildings.
#11 Lease Options
Lease options are another way to make money from real estate. This involves giving someone the option to buy a property from you at a set price in the future. In exchange for this, the buyer usually agrees to make regular payments to you (known as option payments) and may also agree to give you a portion of the profits if they eventually sell the property.
#12 Rent to Own
Rent to own arrangements are another way to generate passive income from real estate. With this type of arrangement, you agree to sell a property to a tenant at a set price in the future. The tenant then agrees to make regular payments to you (known as option payments) and may also agree to give you a portion of the profits if they eventually buy the property.
#13 Mobile Home Parks
Investors in mobile home parks frequently own the property and charge the people who relocate their mobile homes rent. If housing rates are soaring in your area or you are someone who is under financial duress, these properties are a good option.
Typically, you purchase a mobile home park as a fund or alongside other investors.
#15 Mortgage Lending
If you have some extra cash, you can also generate passive income from real estate by lending money to other investors. This is done by providing loans for the purchase of properties. The interest you earn from these loans can provide you with a regular stream of income. However, it's important to carefully vet any borrowers before lending them money.
#14 Tax Lien Investing
If you're looking for a more high-risk/high-reward way to make money from real estate, you can invest in tax liens. When a property owner doesn't pay their property taxes, the government can put a lien on the property. If the property is then sold, the investor who holds the lien will be paid first. This can be a great way to make money, but it's important to understand the risks before investing.
Mistakes a Passive Real Estate Investor Should Avoid
Unfortunately, all investments have some level of risk. Even if real estate has historically been the most reliable investment, you still run the risk of losing money.
Here are a few short suggestions to lower your risk:
Mistake #1. Before making a purchase or investing in a fund, do extensive research on the type of investment you're looking to make.
Mistake #2. Before employing a property management business, do some research on them.
Mistake #3. Always conduct tenant screenings, or work with a property management company that does.
Mistake #4. Never borrow more money than you can manage.
Mistake #5. Consider all the possible costs that can be involved in keeping up an investment property.
These are just a few of the many ways you can generate passive income from real estate. If you're looking for a way to make money without having to work, real estate investing may be the perfect option for you.
JACOBS & CO. REAL ESTATE, LLC.
12923 Fitzwater Dr. Nokesville, VA 20155
(703) 594-3800 | jacobsandco.com