Income Producing Assets in Real Estate You Should Invest In

Income producing assets are different types of investments that generate steady revenue. They can pay monthly, quarterly or even on a semi-annual basis. Many income producing assets give you the best of both worlds. They give you money paid to your bank account each month, plus a price appreciation since many income producing assets rise in value.

Investing in income producing assets is an appealing concept to many. We all aim to make enough revenue from income producing assets to replace our expenses so that when the time comes, it becomes easier for us to quit our jobs and enjoy life. Having assets that produce income can break the financial chains that sadly hold most of us down.

Why do so many people need income producing assets?

If you make enough passive income from them, it can exceed your cost of living and you thus become financially free.
Before you become financially free, you can use your investment income to help offset your expenses.
You can reinvest the revenue into more income producing assets, thus joining the power of compounding interest.
Many income producing assets go up in value.

As a real estate investor, there are many income producing assets to choose from. These types of investments are a great option for investors aiming to make passive income. You need to familiarize yourself with the different types of income producing assets and choose one that best suits your goals.

1. Invest in long-term rental properties

Long-term rentals are the most common types of income producing assets among real estate investors. They are easy to operate and generate some of the highest incomes. Basically, long-term rentals are investment properties that are rented out to tenants in exchange for a monthly rent. This monthly rent is known as your rental income. You determine how much rent you want to charge on your rental property. Of course, you would have to take into consideration the real estate market and similar properties around you before setting a rental price.

NOTE: A great way to help you determine how much rent to charge for your rental property is by conducting a comparative market analysis. Mashvisor’s rental property calculator can help you perform real estate market analysis and make setting your rental price easier.

To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.

In order for your long-term rental property to generate profits, it must be occupied by tenants. To avoid having a vacant property and always obtain a high occupancy rate, you need to give enough of your time to managing your property and taking care of your tenants. Many people would think that income producing assets are passive income investments, but investing in rental properties is anything but passive. They require your full attention to manage the property and keep tenants happy.

After you’ve gained enough experience with long-term rentals, you can start to think of ways to market your rental property and attract tenants to avoid any vacant periods. Plus after some time, managing your rental property won’t be as difficult as when you first started. If you want to learn more about marketing your rental property to attract tenants, read this article: Real Estate Marketing Strategies: How to Market Your Rental Property.

2. Invest in short-term rental properties

The main difference between short-term rentals and long-term rentals is the period of time the property is rented out. Short-term rentals are rented out through a period ranging from a single night to a couple of weeks. This type of investment strategy became very popular especially after the appearance of Airbnb.

Airbnb is an online home rental website which lets you list your property and allow guests to rent it out through their website. Airbnb mainly targets travelers and tourists who are looking for places to stay that are more affordable than hotels. Airbnb rentals are becoming one of the best types of income producing assets in the real state industry. Some of these rentals may even produce more rental income and generate higher profits than long-term rentals.

The number one thing you would have to consider before jumping into this type of investment is the legal status in your location. So many regulations have been enforced on Airbnb rentals in cities all over the US. So before anything, check the Airbnb laws in your area to make sure you don’t fall into anything illegal.

3. Invest in condos and single-family homes

Investing in condos or single-family homes is a great way to make money in real estate. These types of income producing assets are the key to creating positive cash flow. When you rent out these types of properties you can use the rent you receive to pay off your rental property mortgage or any other loans you may have.

These income producing assets also go up in value so you can benefit from real estate appreciation when it’s time to sell. Of course, like any other type of real estate investment, the most important factor to ensure you make a profit is to avoid a vacancy. Other than that, investing in single-family homes or condos is a very lucrative form of investment.

4. Invest in multi-family rentals

Why have one tenant when you can have multiple numbers of tenants? Turn your investment into a duplex or even an entire apartment building. The demand for apartments is skyrocketing and investing in multi-family investment property is one of those income producing assets you should definitely consider.

These income producing assets usually require a significant amount of capital to get involved with. However, it can actually be easy to qualify for a mortgage to purchase these types of rentals. Banks will assess the value of the asset based on its net operating income and basically treat it like it’s a business. The main obstacle for you is coming up with the down payment.

Are you wondering where the best place to invest in multi-family homes is? If you are, then read: The 6 Best Cities for Investing in Multi-Family Properties in 2018.

5. Invest in real estate crowdfunding

Real estate crowdfunding comes with many benefits. Crowdfunding is when investors group up and invest in a property together. Each investor invests in small amounts and the group receives high returns on their investment. This type of income producing asset can be considered as “passive” since management and rent collection is not controlled by each individual investor. Plus, real estate crowdfunding is qualified for tax advantages since the investors own the property.

6. Invest in REITS

A REIT (Real Estate Investment Trust) is similar to crowdfunding. It takes money from real estate investors and invests this money in a real estate project to generate profit. REITs usually specialize in commercial real estate more than residential real estate. Investors get to choose the types of investment properties (office buildings or maybe shopping malls) that they want their money to be invested in. The profit that the property makes is distributed among all the real estate investors who contributed their money.

Income producing assets like REITs are considered “passive” since investors invest their money rather than investing their time or sweat equity.

7. Invest in commercial real estate

Residential real estate is not the only industry where income producing assets are found. These assets can also be found in commercial real estate. Commercial real estate is a great option to consider for investors who want to make more rental income. Investing in commercial real estate leads to higher income because businesses pay more than individual tenants.

Even though commercial real estate investing is a great way to generate immense positive cash flow, it does have more risks involved than residential real estate. The vacancy rates for commercial real estate properties tend to be higher and last longer than traditional real estate properties. You need to gain as much knowledge as you can about this field before diving into it. Start by reading this article about commercial real estate: How to Make Money from Commercial Real Estate for Rent.

8. Consider real estate investing partnerships

A great technique for investing in income producing assets is through real estate investment partnerships. An investment partnership lets you join funds with a partner to invest in a certain type of real estate. This is helpful for those investors who can’t fund an income producing asset on their own. With a real estate partner, you both will save time and effort since you would divide the tasks between you. The passive income that the investment generates will be split among the partners.

A final thought

Investing in income producing assets in real estate can be a great way for investors to make money and secure their financial future. Consider the income producing assets mentioned above and begin your journey today. Keep in mind there are still some assets that were not discussed here, so don’t let this list limit your options!

If you’re looking for the best real estate income producing assets, then start your property search at Mashvisor today!

To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.

Start Your Investment Property Search!