Do you know that there are many ways you can make passive income from real estate?
Being just a landlord is not the only way you can make passive income from real estate. In this blog post, we’ll be talking about 5 ways you can generate passive income from real estate.
Invest in Rental Property
A rental property is as its name implies, is a property you acquire for the sole purpose of putting it out for rent. It is probably best to acquire properties near a potential market; schools can be a perfect location.
Students are constantly looking for a place to live. The plus on the idea of acquiring an asset near a school is that prices can easily go up based on the high level of demand which would translate in more revenue.
Furthermore, it is usually best to start off a career in real estate investment by starting with properties you own already. Renting out rooms in your residential house or property you own already can go a long way to put you on track.
There is a common idea that renting out individual rooms earn you more money than renting out the whole apartment or building. And personally, I think it is true since you can bargain separately and earn different money based on those bargains, and of course this applies to both properties either already owned or just acquired.
Another thing to keep in mind is that buying a rental property is to ensure you have a mindset of long term gains. A rental property cannot be expected to convert and pay back the principal in the first year, you have to be patient, knowing you have made the right decisions in the course of buying the property, you can be rest assured that it will bring returns.
Choose the Right Location
Buy your investment property in the right location. Few years ago, when a friend was looking for an apartment, he spent weeks searching and I had to ask him what was taking so long, he said none of the houses he had seen were in the right location.
There are a few factors to consider before owning investment properties, you have to consider accessibility to transportation, shops and markets, good power supply and of course safety. Check most of this off the list and you can be sure you will get tenants to rent your properties.
You can use it as a competitive advantage against other properties owners.
Real Estate Wholesale
Another smart way to make passive income from real estate is through real estate wholesaling. This involves buying investment properties in bulk and selling to other real estate investor without any repairs done to any of the properties.
Even though you earn lesser than you might have earned if you rented it out, you incur less expenses as no repairs are made. This can be one of the most passive ways to make money from real estate investing.
One of the ways of making your real estate income more passive is to consider real estate partnerships. A partnership would involve two persons or more who are also interested in real estate investment.
There are many benefits that accompany this decision; the workload can be shared, specific duties can be assigned, capital can be contributed and profit and losses can be shared according to already set down profit or loss sharing ratio which would have been agreed upon by partners.
In a partnership, the partners have to set down rules and regulations to guide them. This rules and regulations are called “the deeds of partnership”.
Real Estate Investment Trusts (REITs)
This cannot go without mentioning Real Estate Investment Trusts (REITs). REITs are mutual funds where you can pool your resources with other investors, sounds familiar? I thought as much.
It is very much like a co-operative society, but in this case you and other investors pool resources and then a fund manager employs and maximizes the resources into different properties and you can be sure of a diverse portfolio.
REITs buy properties and rent, sell and lease them on your behalf. So, in a way they act like your typical stock broker, but this service of course doesn’t go without commission. In essence you can invests with REITs and sit back while they work for you.
I hope this article has covered your areas of concern. Furthermore, these are some helpful insights and tips to go on.
Always buy investment properties under market value and of course sell at or above market value. And also, always try to pick the perfect tenant by doing a background check and requesting for details of potential tenants that you could go on. You can also request a guarantor stand in for them in the case of serious damage or vandalism.