Passive real estate investing, depending on which real estate investor you ask, is either a possible reality or an absolute myth of investing in real estate. Which of these descriptions of passive real estate investing is accurate? Let’s find out!
What Does Passive Real Estate Investing Mean?
While there is a lot of disagreement as to whether passive real estate investing exists or not, there’s less debate when describing what it is. Passive income strategies are methods of generating passive income without any major effort. Oftentimes these methods involve a third-party when managing and running real estate investments. Overall, passive income strategies are more “hands off” when it comes to real estate investments.
Is Passive Real Estate Investing a Myth?
So, is passive real estate investing simply a mere fairytale told to new real estate investors to attract them to the business? The answer is no…and yes. Passive real estate investing can be a reality, that’s for sure. However, it is sometimes advertised in an exaggerated manner claiming that all real estate investors have to do is purchase passive income producing assets and they will be swimming in rental income. The truth is that having passive income generating assets is possible, but it requires a considerable amount of effort to get the real estate investments started.
How to Get Passive Income Real Estate Investments
There are a few steps real estate investors must take to ensure passive income for their investment properties. The first is to, obviously, find an income property. If you’re unfamiliar with this, do not worry. Read this blog to learn how to find investment properties: “5 Tips on Researching Investment Properties.” Also click here to get yourself started with a free 14-day trial with Mashvisor to search for income properties.
Once an investment property primed for passive rental income has been purchased, the real estate investor will need to outline and research a method in which the property generates income but requires minimal effort. There are many investment strategies that can do just that.
Strategies to Make Passive Real Estate Investing a Reality
There are five passive income strategies that work best for investing in real estate: REITs, turn-keys, Airbnb, out-of-state investing, and ordinary residential income properties.
Real Estate Investment Trusts (REITs)
Investing in REITs, or real estate investment trusts, is one of the best ways to have passive income generating assets. REITs are companies that invest in residential and commercial real estate income properties. All the real estate investor has to do is pitch in the purchase and he/she will receive rental income from the REIT. What makes investing in REITs one of the best passive income opportunities is that the investor receives high rental income and does no managerial work. The REIT itself will manage the property. Most of the effort an investor will put in is when searching for an REIT and finalizing agreements. The real estate investor receives passive income once all that is taken care of.
Turn-key Investment Properties
Turn-key income properties are also one of the best passive income investments. These are properties that are purchased from companies and are immediately ready to be rented out. Turn-keys are always furnished, which lessens the burden of the real estate investor. If the investor is lucky, the company itself will also be responsible for management duties for a cost. For these reasons, turn-key investment properties are among the best passive income strategies. Want to know what the best investment strategies are? Read this blog to find out: “Top Six Real Estate Investment Strategies”!
Airbnb Investment Properties
Even short-term investment strategies can be used for passive real estate investing. Airbnb properties are particularly useful for passive income. As a matter of fact, most full-time Airbnb real estate investors started out as part-timers yearning for passive income. Airbnb allows investors to rent out their properties, or even rooms, on a nightly basis. This allows investors to prepare their properties effortlessly and rent them out as they see fit. Hiring professional property management will also make the Airbnb real estate investment more passive but at an obvious cost. Also, once an investor is experienced enough, he/she will be able to set their own price, making passive income much more possible.
Out-of-State Real Estate Investments
Out-of-state real estate investing can also act as a passive investment strategy. Better deals and more profitable properties are often located out of one’s area. This leads to high cash flow and rental income. These investments have only one problem preventing them from being totally passive: property management. Some turn-key and Airbnb properties have this issue too, sure, but it is much more compounded with out-of-state properties. The solution once again is a simple but considerably costly one: hiring professional property management.
Single-family and Multi-family Investment Properties
The typical forms of residential real estate can also fall under passive real estate investing. Both single-family and multi-family properties check the profitable box but can be questionable when it comes to property management. Like out-of-state investments, property management is significant for these types of properties. The best way to make these investment properties passive is to hire professional property management.
Where to Start Looking for Passive Income Properties
Passive real estate investing can undoubtedly be a reality. It can be your reality, too! With proper planning and research, particularly for property management, virtually all real estate investments can be passive income generating assets. We recommend REITs and turn-keys as the top passive investments, but any of the five mentioned in this blog will do just fine!
For the latter three passive real estate investing strategies mentioned in this blog, your first step will be to find investment properties. To get started on that, find low risk investments, and learn how to invest in real estate, click here!