How to Make Passive Income in Real Estate
When people ask how to make passive income, they tend to forget that real estate offers a lot of options. Yes, it is just one industry, but the opportunities are endless. Although it can be risky, you can cut losses and maximize profit if you know what to do. Here are some of the best ways to generate passive income in real estate.
How to Make Passive Income in Real Estate: 7 Streams You Can Explore
In this article, you’ll learn about:
- Residential Rentals
- Real Estate Investment Trusts
- Commercial Rentals
- House Flipping
1. Residential Rentals
Rental properties are the most common sources of passive income in real estate for good reason. People invest in rental property because it gives them a good source of passive income. Of course, you have to know what type of property to invest in. And you also have to consider the most important thing: location, location, location.
2. Real Estate Investment Trusts
Real estate investment trusts, or REITs, are the mutual funds of real estate. You pool your investments into a single fund along with other investors. Then a fund manager maximizes all those investments into different types of properties. The best thing about REITs is it minimizes risks and loses. You have experts handling your investments. Plus, you’re sure your portfolio will be diverse.
3. Commercial Rentals
If you are starting out, you might want to stick with single-family homes. But commercial rentals are also a great way to make passive income in real estate. Their advantage is the more active cashflow. You’ll almost always have bigger income with commercial rentals. The catch is, of course, it is harder to manage commercial rentals.
4. House Flipping
Flipping houses is not one of the common ways to generate passive income. This is because the process itself is more hands-on than other strategies. But once you get the hang of it, it will be easier to manage your investments. In fact, we recommend that you flip houses alongside other ways of making passive income. When cashflow is not regular, you have fast profits from flipped homes to look forward to.
Since Airbnb has changed the travel industry, real estate investors have been quick to cash in on it. Don’t make the mistake of thinking that travel is seasonal and won’t do good to your income stream. It’s best to find the right property and location. This way, your Airbnb can serve as a tourist’s pad and a place to stay for business travelers. Business trips now happen all year round, so you don’t have to worry about losing your income for half the year.
Some sources of passive income come in the wake of other properties. If your properties increase in market value, you can make money by accessing equity. Keep in mind that you need a good number of properties for a couple of years before you can access equity.
Finally, you can also generate passive income by making partnerships in real estate. You do not always have to start investing from scratch. Sometimes, finding the right connections can make your money grow, especially if you and your partner are in the same place in the industry. It is not uncommon for more than one person to own the same real estate investments.
Making passive income in real estate is about strategy and research. But what many investors fail to see is that it is also about resourcefulness. From an outsider’s point of view, real estate is an industry dedicated only to homes. But if you know where to look, you will never run out of ways to make passive income.
Do you have any other tips for making passive income in real estate? Let us know in the comments below.