Are you wondering how to make money in real estate? Do you have capital and are looking for the best way to invest money? Passive investments could be the best way to make money for you! Making money without much effort is what all real estate investors look for.
The real estate investing dream is to be entirely financially dependent on your real estate investments without having to worry about work. There are several great passive income strategies you can use to make money without the headache. Passive investment is the best way to make money when you have capital but not the time or energy to be an active investor.
Why Look for Passive Income Strategies?
Using passive income strategies in real estate investing has many benefits. The first being the diversity of locations you can choose to invest in. Since you will not need to see or even be near your real estate investments, you can buy properties in pretty much any location you desire. For example, if you live in an area where renting out on Airbnb is not a profitable endeavor, you can choose to buy a property in another more profitable location for this type of rental. Passive income strategies also give you peace of mind since you are not managing your investment property.
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Pitfalls of Passive Income Strategies
There are a few issues with passive income real estate investments. Real estate investors looking for passive income know that making money in real estate does not come without some risk. If you choose to hire a property manager for an investment property, you might find that you are losing money. Or, at least you may not be making as much as you thought. Property managers need salaries, and that will either come out of the rental income or out of your pocket. You may find that the rental expenses along with the salary of the project manager are too much to handle. This is a fundamental issue to think about before embarking on hiring a professional property manager.
Passive Income Strategies: Airbnb/Short Term Rental Properties
One of the best and fastest ways to make money in real estate is to invest in short term rental properties followed by renting out on Airbnb. This type of rental will allow you to have positive cash flow in no time. Usually, this type of investment is not passive and actually requires a lot of work to be successful. You can, however, turn this rental into a passive income strategy by hiring someone proficient in professional property management. The property manager will be in charge of your property from A to Z. Everything from setting rent, to finding tenants, and even budgeting for repairs will be handled by your property manager. The only thing you need to take care of is paying your property manager, which is why you might need more substantial capital to start with. This is also an investment strategy for making money quickly as short term rental properties often offer higher rental income in a shorter time frame than long term rentals but with less assurance. You can use an Airbnb calculator to find out how much you can earn in terms of rental income from your Airbnb property.
Related: The 8 Best Places to Invest in Real Estate for High Airbnb Rental Income in 2018
Passive Income Strategies: Long Term Rental Properties
Investing in long term rental properties is probably the best way to make money in real estate. This traditional rental strategy is also one of the many great passive income strategies. With long term rental properties, you have the ability to hire an expert in professional property management. The property manager will be able to find the right long term tenant as well as check on the investment property. Your property manager will also be collecting rent, handling repairs, and dealing with eviction issues. All you have to do for this type of investment is collect the checks.
Passive Income Strategies: Real Estate Investment Trust
Real estate investment trusts basically allow you to buy real estate stocks. A real estate investment trust is a company that owns and rents out many real estate properties whether they be commercial or residential properties. This is a great passive investment that will bring in positive cash flow with minimal risk. All you need is a little bit of capital to buy a share of the company and wait for the dividends.
Related: What Is REIT and Is It a Good Real Estate Investment Strategy?
Passive Income Strategies: Buy and Hold
Making money in real estate historically involved buying low and selling high. If you have good capital, as well as the ability to pay a mortgage for a few months, you can try buy and hold investing. Traditionally, buy and hold investing involves buying an investment property and using it either as a traditional rental or an Airbnb rental until the price of the property rises. When the price is high enough, the real estate investor can sell the property and make a profit. If renting out the investment property is not of interest to you, and you can afford to pay the mortgage for a few months, then you can simply hold the property until the market prices rise. However, you would need to buy investment property in a real estate market with a very high appreciation rate to truly benefit in this way.
Passive Income Strategies: Rent Out Rooms
Rather than having your investment property be very far away, try bringing it close to home for it to be passive in a different way. Try renting out rooms in your own house! There are many benefits to this type of investment. The first benefit is the passive nature of the rental. When you bring in someone to live in your home, you won’t have to do extra work or visit another rental property to maintain it. You simply manage your own home. Furthermore, renting out rooms often brings in higher rental income than renting out an entire investment property to one tenant.
Related: 13 Reasons Why (and Why Not) You Should Consider Renting Out Your Property on a Room By Room Basis
Before you make any investment, be sure to research the property you are looking to invest in well. Mashvisor allows you to view the most up to date property analytics in the country to make your investment safer and more profitable.
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