One of the main reasons why many people stay away from real estate investing is the erroneous assumption that making money from investment properties requires lots of time, energy, efforts, and hard work.
To correct this misunderstanding, in this article we will show you 3 strategies how to make passive income with real estate investment. They all require different amounts of initial investment as well as different sets of skills and knowledge, so we are confident that you will be able to find the best passive income source for you.
To learn more about the top passive real estate investment strategies, watch our video:
Investing in Rental Properties (The Best Source of Passive Income from Real Estate)
Have you always thought that buying a rental property is as active of an investment strategy as it gets? You are partially right. Becoming a landlord of a traditional rental property or being an Airbnb host of a vacation home rental leads to massive amounts of work.
First of all, you need to conduct real estate market analysis and perform investment property analysis to choose the best income property within your budget which will generate the highest rate of return. This process alone requires at least 3 months of real estate research, investment property search, and rental property analysis. Once you’ve bought your investment property, you need to market it to tenants or Airbnb guests, deal with renters, and maintain the property to assure a continuous stream of rental income. As you can imagine, this is as far away from passive income as possible.
So, how to make passive income with traditional and Airbnb rental properties?
To begin with, you need to get access to the top real estate investment tools as these will facilitate and accelerate the process of buying an investment property. Mashvisor’s real estate investment software platform has turned 3 months of research into 15 minutes.
With our heatmap, you can easily and quickly find the best neighborhoods for long term rentals or short term rental properties in any US housing market. You can conduct neighborhood analysis based on:
- Median listing price
- Traditional rental income
- Traditional cash on cash return
- Airbnb rental income
- Airbnb cash on cash return
- Airbnb occupancy rate
Moreover, with the help of Mashvisor’s real estate app, you can expand and deepen your neighborhood analysis in real estate investing by looking at the most important real estate data figures for any area that catches your interest during the heatmap analysis. You can see exactly how much smart passive income you can expect with an average rental property in each neighborhood, whether you run it as a traditional rental property or an Airbnb income property.
Once you know on which area to focus your investment property search, you can use Mashvisor’s rental property calculator to conduct in-depth investment property analysis on all listings there to find the best passive income streams for you.
As mentioned above, this entire process will take no more than 15 minutes and can be conducted from the comfort and safety of your own home or office.
So now you know how to find the best investment property passively.
But how to generate passive income from your new rental property?
That’s just as easy. All you have to do is to hire a rental property management company. A professional property manager will take care of all the aspects of owning a rental property on your behalf.
Recent decades have witnessed a massive increase in the number of both traditional and short term rental property management companies in the entire US housing market as more and more real estate investors strive to make passive income from their investment properties.
Importantly, like many other beginner investors, you shouldn’t worry that hiring a property manager will compromise your return on investment. To the contrary, property managers are real estate professionals who know exactly how to find the best tenants or Airbnb guests, minimize vacancy rate, maximize the occupancy rate of your rental property, decrease rental expenses, and ultimately optimize your traditional or Airbnb rental income. This means that both your cash on cash return and cap rate will go up.
Additionally, investing in rental properties is not only one of the best passive income ideas in the short run but also one of the top passive money making ideas in the long run. With real estate appreciation, you can rest assured that you will make money from real estate investments in the long term. Regardless of temporary real estate market slowdowns, home values always pick up and go up.
Yet another major advantage of rental property investing is that it can easily be turned into multiple streams of income. You can start saving up the money that you make from your first rental property for a down payment on a second investment property. Once you have two income properties, you can save the return to buy a third one. The more rental properties you own, the easier and faster it gets to grow your real estate investment portfolio. This is known as the snowball effect in real estate investing.
Real Estate Crowdfunding
If you think that investing in rental properties is not the answer to your quest how to make passive income with real estate, you might consider crowdfunding real estate. This is one of the newest and most passive real estate investment strategies for beginners.
Wondering how to invest in real estate through crowdfunding?
The idea is quite simple and straightforward to implement. All you need to do is to conduct some online research to find one of the best crowdfunding sites, familiarize yourself with the specific rules and terms, and decide on how much exactly you want to invest. What makes this strategy particularly appropriate for beginner real estate investors is that some crowdfunding websites allow you to invest as little as $500. For comparison, investing in rental properties requires significantly more initial capital as you need to put a minimum down payment of 20% of the property price (with a conventional mortgage loan) as well as to cover numerous other closing costs.
Once you have selected a real estate crowdfunding platform and how much money you want to invest, you can start expecting to make online income from the real estate properties owned and managed by the platform. That’s one of the best ways to make passive income from real estate as you will not need to be directly involved with searching for investment properties, buying real estate properties, or managing properties.
In addition, similar to investing in rental properties, you will make money in the long term as well through capital gains.
REITs
If you are interested in how to make passive income with real estate in a more traditional way, you can choose a real estate investment trust (REIT). REITs are the classical prototype of real estate crowdfunding platforms. Once again, your funds get pulled together with the money of numerous other real estate investors by the trust in order to buy and run commonly owned real estate properties.
Investing in REITs is among the best passive income opportunities as you make money on a regular basis through dividends. Moreover, just like with investing in a traditional or Airbnb investment property and with real estate crowdfunding, you also make money in the long run through capital gains.
This is how to make passive income with real estate in 3 different ways. Which one is the best for you depends on your budget as well as your skills, goals, and aspirations as a real estate investor. We’d highly recommend buying an investment property because of the easy scalability. If you make smart real estate investment decisions, in a few short years you can be the proud owner of an entire investment portfolio of rental properties which are entirely yours and not shared with hundreds of other investors whom you don’t even know.
If you decide that traditional or Airbnb rental properties are the right choice for you to make passive income, sign up for a 7-day free trial of Mashvisor to start analyzing real estate markets and investment properties for sale like a pro.