Rental income is the best passive income. Buying a rental property falls under the umbrella of a passive income investment.
Whether you choose to invest in a short term rental strategy for Airbnb or buy a long term buy and hold real estate property is solely up to, you, the real estate investor, given your resources and business plan. But one thing is certain: real estate investing requires lots of planning and studying your prospective investments to maximize your returns and diversify your portfolio to build sustainable wealth.
The Best Passive Income Strategies
People will always need a place to live and real estate investing will never go out of style. However, to make money in real estate has prerequisites and much due diligence to capitalize on real estate opportunities reaping long-term financial rewards.
Single Family Homes for the Best Passive Income
If you can secure a 20% down payment on a loan, choose to invest in a single family home for the best passive income, especially if you are starting out in real estate.
Pro: Tenants rent longer
If you choose the right tenant from the get-go, you won’t have to worry about high tenant turnover.
Pro: Higher resale value
Given the right location and favorable macro conditions, a single family home resells at a much higher profit margin because of the accumulated real estate appreciation on the house.
Pro: Tenants pay down your mortgage
By choosing the right tenants, landlords/real estate investors won’t have to worry about paying the mortgage payments out of their own pockets.
Pro: Lower property taxes
Compared to multi-family homes, landlords pay less property tax on a single family home.
Con: Vacancies hinder profit potential
Unlike multi-family homes, renting a single family home is only one source of passive income. If landlords incur vacancy for a longer duration of time, they are at a higher risk of defaulting on their mortgage loans and severely damaging their credit score.
Multi-Family Homes for the Best Passive Income
Multi-family homes are the second best passive income strategy in real estate investing. Here is why.
Pro: More units, more rental income
Managing multiple units reaps investors multiple sources of income to diversify overall real estate risk and mitigate vacancy.
Pro: Multiple units in one big property
With multi family homes, real estate investors are managing one big property with multiple units in one location as opposed to separate investment property units in dispersed locations.
Con: High tenant turnover
Unlike a single family home, multi family homes have shorter lease terms and are more prone to higher tenant risk and lower occupancy rate.
Con: Higher maintenance costs
With multi family homes, multiple units are harder to manage compared to one single unit. Hence, it is crucial to hire a professional property manager to take over in this case.
Airbnb Short Term Rentals for the Best Passive Income
Airbnb is another great strategy for the best passive income in real estate investing.
Pro: Faster cash flow returns
As an Airbnb host, you have the full autonomy to increase your rental income and achieve the best passive income so that your rental property has high occupancy and earns you faster cash flow returns.
Pro: Set your own price
An Airbnb business model is a much faster pace than the traditional real estate investing strategy, but one with passive income nevertheless. You can set your own pricing strategy to maximize your rental income, respective to the season.
Con: One bad review can hinder the business
Owning an Airbnb rental property is a tricky business because Airbnb hosts are exposed to online customer reviews (the good and the bad). In this business, customer satisfaction is very important to grow your Airbnb business.
Con: High tenant turnover
Unlike traditional real estate, tenants or Airbnb guests will come and go fairly quickly, which puts hosts at a much higher risk of vacancy and fluctuating occupancy rates.
REITs for the Best Passive Income
If you don’t want to get involved in the nitty-gritty of buying, managing, and renting out an investment property, opt for buying shares of a real estate investment trust (REIT) for the best passive income.
Pro: Hassle free
You don’t need to do any work involving your real estate investment and you forgo your role as a landlord in this case. You invest in real estate without being involved in the hassle of actually buying, managing and selling property.
Con: You are not the decision maker
Buying REIT shares means relinquishing the control over your investments to someone else.
Real Estate Crowdfunding for the Best Passive Income
The last strategy for the best passive income is investing in real estate via an online crowdfunding platform.
Pro: You are a decision maker
Unlike REITs, real estate crowdfunding gives investors the ability to choose real estate properties they want to invest in and/or exclude.
Pro: Minimum capital to invest
Investors don’t need a lot of money to invest in a crowdfunding real estate campaign. This means that investors can own a stake in a real estate project without having to put down a large sum of money.
Con: You play a passive role
Investors do not have the full discretion when it comes to managing their real estate investments.
Still looking for the best passive real estate investment strategy for you? Watch the video below to learn about 8 different strategies.
6 Key Success Factors To Earn The Best Passive Income
- Location: Capitalize on a prime location and a good neighborhood for the best passive income.
- Cash Flow: Choose positive cash flow properties from the get-go to reap the best passive income.
- Tenants: Have a proper screening process when it comes to choosing your prospective tenants.
- Vacancy Rate: Mitigate your vacancy risk to safeguard the best passive income.
- Property Condition: Maintain your rental property in tip-top shape for the best passive income.
- Managing the property: Landlords must be proactive in managing their real estate business. Otherwise, hire a property manager if you cannot meet your obligations as a landlord.
It goes without saying that real estate is the best passive income strategy hitherto and henceforth. Never be hasty in making investment decisions if you want to grow your real estate business. And always consult in professional advice and mentors to speed your learning process and enhance your business decisions.
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