How Passive Do You Want Your Income To Be
January 19, 2018
Individuals seeking passive income often choose real estate investing. However, there is more than one way to achieve this goal. Discover the strategy and level of passive income in real estate that is right for you.
Passive Income & Real Estate Investing
One of the most common reasons that thousands turn to the real estate world is passive income. There are, however, substantial differences in how passive that income really is; and each investor may have differences in their aspirations, goals, and capacity. While some desire a little extra leverage and help in speeding up wealth their wealth portfolio, others simply desire to have their money working for good returns. There is also the genre seeking financial freedom and the 100% passive income that can empower them to retire.
All types of real estate investing, in some way, offer some form of ‘passive income’. From owning a real estate business to buying and holding properties to private lending, these methods may all offer the ability to leverage others. This includes other people’s money, other people’s time, and the forces of the market. Although, when most people talk about passive income investing in real estate, they are referring to buying and operating rental properties.
Becoming a Landlord
Most people become a DIY landlord as they step into this process, bringing the power of appreciation on their side. Tenants pay off their properties and put cash in their pockets every month. Depending how you set up property management and the business of acquisitions and trading properties will determine how passive this income really is. In reality, being a DIY property manager and landlord can be a lot of work. It can mean constantly being on call, out in the field fixing units, and knocking on doors for rent. If you work smart, you may land tenants that pay 6 months of rent or more in advance and never bother you. Well-screened tenants may pay their rent online and go out of their way to preserve your investment properties. However, you never know what you will get.
Professional Property Management Rentals
Landlords that enroll the help of professional third party property managers can take their investing and passive income up to a new level. Most times, good property management companies will more than pay for themselves, too. Having a management company handle all the day to day tasks means the investor can simply kick back and collect their income, or focus on finding new income properties to buy. Graduating to this level is the goal of all rental property owners.
Private lending is another alternative to generating passive income from real estate, at least for those that have capital. This can be as intensive or hands free as investors like. The down side is not directly owning the property.
Real Estate Stocks
Real estate stocks, REITs, and crowdfunding campaigns are another option. While they may not offer investors the security of direct investment in bricks and mortar, diversification from other assets, or the ability to control the value of their assets, it can potentially be a vehicle of passive income.
Own a Real Estate Business
Perhaps you aren’t a big fan of buying and holding rentals. Maybe flipping houses, wholesaling, or another niche stands out to you more. Owning a real estate business which engages in these activities may be an alternative solution. Some of the most famous billionaire real estate investors are owners of real estate companies; such as Sam Zell, Donald Trump, and Warren Buffett. The money may not be passive at first, but with time you could build a dynasty that pays off for generations.
Summary
There are many different ways to engage in real estate investing for individuals seeking passive income. For some, it is about personal preference. For others, it is graduating and climbing up the ladder as they build on their successes. Which is right for you?