“Passive income is a myth for real estate investors.” This is probably a phrase you’ve come by too often when searching online for ways to earn passive income from real estate investing, especially multifamily real estate investing.
Generating passive income may not come early on in a real estate career, but there definitely are different ways to earn passive income, even in multifamily real estate investing.
Many real estate investors stick to investing in a few single family home rental properties and never make the jump to multifamily real estate investing. We can’t argue the benefits of single family home investing, but a successful real estate investor should consider diversifying his/her investment portfolio with multifamily homes. The best way to do this is to first learn how to make passive income from multifamily real estate investing.
Benefits of Passive Investing in Multifamily Real Estate Investing
We don’t need to discuss the benefits of generating passive income, but the benefits of passive income from multifamily homes need to be pointed out.
The Value of Multifamily Homes
A real estate investor who succeeds in passive investing in multifamily homes can rest assured that this success will continue, regardless of the condition of the real estate market. Why? Because the value of multifamily homes is directly connected to their net operating income. Rather than rolling the dice with a certain real estate market, real estate investors who choose passive investing in multifamily homes can rely on a business model of sorts to bring about success and make money. This means a stable and predictable return on investment with the right multifamily homes.
No Experience in Multifamily Real Estate Investing Needed with Passive Investing
The reason so many real estate investors are hesitant to enter multifamily real estate investing is because direct ownership of this type of investment property needs experience and knowledge (more so than single family home rental properties). Going the route of passive investing in multifamily homes means relying on the expertise of other professionals to take care of all the work for you. Smart real estate investors take this opportunity to even learn from these professionals the ways of multifamily real estate investing if they choose to eventually go into this area of investment property investing.
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How to Make Passive Income from Multifamily Real Estate Investing
Limited Partnership for Multifamily Real Estate Investing
A great way to earn passive income from multifamily real estate investing is engaging in a limited partnership. A real estate limited partnership allows real estate investors to benefit from the return on investment that comes with owning rental properties, while avoiding the day to day rental property management.
Typically, the professional property management will act as the general partner in a limited partnership. They handle the rental property management, while taking on an unlimited liability of the real estate investment. Real estate investors who join a limited partnership finance the investment property. In return, they make passive income in the form of cash flow from the investment property.
The big positive of a limited partnership in multifamily real estate investing beyond just generating passive income is limited liability. Real estate investors who are passive investing in multifamily homes that go south in the real estate market are only liable for no more than the amount of the investment through a limited partnership.
Turnkey Property Companies for Multifamily Real Estate Investing
Many real estate investors are already using turnkey property companies for passive investing in single family homes, but what about using them for multifamily housing? There are plenty of turnkey property companies that offer both single family homes and multifamily homes ready to be used as rental properties. Find a turnkey property company that offers rental property management on top of prepping multifamily homes, and this can be one of the best ways to earn passive income in multifamily real estate investing.
Real Estate Crowdfunding for Multifamily Real Estate Investing
Real estate crowdfunding is an up and coming way for generating passive income from multifamily homes. With the use of a real estate crowdfunding platform, income property investors can find multifamily homes that promise a good return on investment. Someone else takes care of the rental property management, and the investor earns a return on investment from the rental income.
While there are restrictions as to which real estate investors can qualify for real estate crowdfunding, there is an upside. Real estate investors can invest less cash in multifamily homes to get a good return on investment from rental income. For traditional real estate investing, you may have to put up a ton of cash to enjoy the rental income.
Professional Property Management for Multifamily Real Estate Investing
If none of the previous options for how to make passive income are appealing to you, or they don’t fit your investment strategy, you have another option: hire professional property management.
The reason this option might interest more real estate investors is simple: more control over the choice of investment property. With the past three options, someone else is choosing the investment property for you. You essentially choose from their list of multifamily homes. Instead, if you prefer more control over your property investments, do the research and find a great investment property for multifamily real estate investing.
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Then, research some more! Find reputable and reliable professional property management services. With the right person or company handling your rental property management, you won’t have to worry about the headaches of becoming a landlord of rental properties. This is one of the best ways to earn passive income without giving up control.
Don’t forget that with this option for passive income, Airbnb apartments are a great route for multifamily real estate investing. Airbnb apartments and professional property management are a combination many successful real estate investors use to make passive income. Having control over the location of Airbnb apartments is important for the overall return on investment and amount of rental income you will generate, so keeping control over this is ideal.
Can You Be a Landlord of Multifamily Homes and Still Generate Passive Income?
Becoming a landlord of rental properties is a way to generate active income, no doubt. The responsibilities of becoming a landlord can be put on a very long list. So, can becoming a landlord ever result in generating passive income? In a way, real estate investors who opt for becoming a landlord can get close to generating passive income later on in their real estate careers, once they have the capital and the experience.
It’s possible through delegation of landlord responsibilities, like to a dedicated handyman, for instance. Along with this, tenant screening will allow real estate investors thinking of becoming a landlord to avoid bad tenants who make the job difficult. There will still be things to handle for rental properties, but less so, allowing real estate investors to come close to generating passive income when becoming a landlord.
It would seem, then, that there are ways to earn passive income from multifamily real estate investing. To claim passive income is a myth in real estate investing means not looking at all the roads one can take, beyond traditional real estate investing. Real estate investing is a vast world with so many different options, and some of them truly lead to passive income.
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