The ultimate finance dream of every person is to create a genuine passive income. We all picture the day where we’ll be sitting under the cool summer breeze, enjoying a cup of ice cold lemonade and watching our kids grow up. The problem is we are so attached to our 9 hours, 5 days a week job that we forget how fast time is moving by. If only we can appreciate how lucky we are when we are young and use this time wisely to look for passive income investments, maybe then we would be able to live financially freer when we are older.
Many investors claim that real estate investing is an active form of investment. Yet if it’s worked with time and effort in the beginning, it can become a great form of passive income investments in the long run.
Related: The Best Passive Income Investments in Real Estate
Passive Income vs. Active Income
Let’s begin by discussing the difference between active income investments and passive income investments. It’s important to understand both before moving onto further explanation.
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Passive income investments
In simple words, passive income investments are rental properties that generate passive rental income. Passive rental income is the money that real estate investors make without putting in much effort. How? Well, these types of investment properties are usually managed and maintained by another person (maybe a professional property manager), while the investor receives his/her rental income without any work involved.
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Active income investments
Active real estate investing is the complete opposite of passive income investing. Here, a real estate investor is the one in charge of the property, the one who manages the property and maintains the whole process. This type of investing is not for everyone because it requires good knowledge about real estate investing and investment properties.
While both are unique in their own way, our main focus is passive income investments as they are the ones that provide for us the future of our dreams- a future of financial freedom!
How to find passive income investments
Passive income investments are all about achieving a peace of mind and stability in the future. The question worth asking is how to find these types of investments.
1. Find passive income investments through real estate companies
The job of a real estate company is to find for you a property that you can rent out, while they do all the management as you sit back and receive the income. When we speak about real estate companies, turnkey investment properties come to mind. These types of properties are great passive income investments because the management duties fall upon the company, not on you. Turnkey properties are rental properties that have already been renovated and may be rented out as well. So basically, you buy the property as it is with the tenants.
2. Find passive income investments through real estate partnerships
If you have the money but don’t have the time to put in any active effort in investing, then investing with a partner is the answer! Real estate partnership has become a popular way to passively make money in real estate. You provide the financial funds while your partner provides the effort. By dividing the tasks among yourselves, you and your partner can generate positive cash flow from your passive income investments in no time. As the funder, you buy the property while your partner is the one who chooses the best investment strategies and manages the property. To learn more about real estate partnerships read: What You Need to Know about Real Estate Partnerships.
3. Find passive income investments through real estate crowdfunding
Real estate crowdfunding is a form of raising funds for real estate investment projects. It has become a very appealing form of passive income investments among investors because you can take part in it despite the amount of money you invest. Also, real estate crowdfunding lets you get into real estate syndication where you can pool your financial resources with a real estate syndicator. The real estate syndicator is the one who will manage the property and perform all the day to day work. This is a great way for you to receive passive income without getting actively involved.
4. Find passive income investments through real estate investment trusts (REITs)
Real estate investment trusts (REITs) are companies that invest in income properties which are not limited to only residential real estate. These are one of the best real estate investments for producing passive rental income for both long-term investments and short-term investments. All you have to do is invest in the purchase and REITs will maintain and manage the property for you. Simply start your search for REITs and agree on all the terms and you will start earning passive income easily.
5. Find passive income investments from out of state investment properties
Out of state real estate investing is another great form of passive income investments. Finding the right property out of the area can lead to high rental income and positive cash flow. The only problem is managing the property. You will need to hire a professional to take care of the property management. By doing this, out of state property investments become passive. To make your property search easier, use Mashvisor’s property finder tool to find the best properties all over the country. With our tool, you can find both traditional and Airbnb properties with the highest cash on cash return and cap rate.
Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!
6. Find passive income investments through rental properties
Investing in rental properties is a great way to be making money in real estate. There are two options to choose from: you either invest in long-term rental properties or short-term rental properties. Each investment strategy has its own way of becoming great passive income investments. These types of investments come with low risks and generate a stable rental income. Here is a list of rental properties that are great for passive income investments.
Short-term investment strategy: Airbnb rental properties
Airbnb rental properties are short-term rentals that are rented out for a short period of time. Investors can turn their Airbnb properties into passive income investments. An Airbnb rental can simply be a spare room you have that you rent out to people on the go. This is a great way to get passive rental income from the room next door! If you are renting out an Airbnb rental that is not close by, you can still turn it into passive income investments by hiring a professional property management company to manage your property while you receive the rental income.
Long-term investment strategy: Single-family homes
It may sound impossible to turn single-family homes into passive income investments, but there is a way and that’s by hiring a professional to manage your property. The downside to single-family homes is the services tend to be pricey and most property management companies charge 10% of the rental income. But hey, if you have the extra capital, why not use it to generate yourself a passive income?
Of course, the key to a successful single family home is the LOCATION! You can use Mashvisor’s rental property calculator to locate income properties that have a high return on investment. This will ensure you have the capital to pay for professional property management from the property itself.
Related: Location Location Location: What Makes for the Best Place to Invest in Real Estate?
A final thought
So do passive income investments really exist? The answer is YES! There is a way to secure your future and reach financial freedom. All you have to do is invest your money wisely and sit back and relax. Please feel free to leave any comments below and feel free to share any personal experiences you may have so we can all benefit and learn from each other.