How to Earn Passive Income Through Real Estate Investment
In a world governed by risk, it’s common knowledge that real estate is one of the safest, most profitable investment options. Property is an extremely stable asset, as it’s almost always in demand and offers numerous income-generating opportunities.
However, not every investor wants to play a hands-on role in managing a property, maintaining it, or handling the administration that accompanies this type of investment. Fortunately, investing in real estate and playing an active role doesn’t have to go hand in hand. You can still earn a substantial passive income through real estate investment without needing to actively manage it yourself.
In fact, there are even ways to invest in real estate without directly owning it. In this article, we’ll look at the various ways in which you can earn a stable income from investing in real estate while remaining in a passive, low-effort position.
6 Ways To Generate Passive Income From Real Estate Investments
With a high investment success rate, real estate is one of the best assets to invest in for relatively low-effort, passive income over time. And if you choose the right investment strategy, you can enjoy its financial rewards without losing focus on other projects or interests.
Here are six ways to generate passive income from real estate investments:
- Rent your property out via a third-party agency
Without a doubt, one of the simplest and most straightforward ways to earn a passive income through real estate is simply to buy property and rent it out via a third-party broker. This way, you generate a consistent monthly income with very little direct input.
The agency you hire can assume responsibility for finding tenants, arranging maintenance, and generally managing the rental affairs for a fee while you tend to your regular business. This removes any administration from your side, and you simply pay a set monthly fee for their services.
The monthly rental payments can make fantastic passive income that goes straight into your bank account for savings, tuition, healthcare, or other investments to grow your wealth.
- Invest in REITs
REIT stands for Real Estate Investment Trust. A REIT is a company or firm that owns income-generating real estate across a wide variety of property sectors. Purchasing REITs on the stock market is a popular way to make passive income through real estate.
How? Once you’ve purchased a REIT, you can earn whatever dividend that particular REIT pays out, many of which have a record of being increased on an annual basis.
This makes REITs one of the most accessible and reliable ways to generate profit from real estate without needing to directly invest in, manage it, fill the role of a landlord, or employ the services of an agency.
- Let others invest with your funding
If you’re interested in the idea of investing in property without owning it yourself, it may be a good idea to let someone else invest through you. For instance, if you have the money to invest in a property, consider lending it to a real estate investor you trust to make the purchase themselves and handle all the maintenance and administration that comes along with it.
When they do rent it out or flip it for profit, you can receive a portion of the finances, thus giving you an easy way to make an income in a passive—but still productive—way. This is a smart way to generate passive income. However, you do need to ensure that you have watertight contracts in place to ensure that your money and your future earnings are secure.
- Crowdfunding
Real estate crowdfunding may be a relatively new way of earning passive income, but it’s quickly gaining recognition as one of the most accessible and effective.
In this strategy, you may be empowered to make real estate investments that wouldn’t ordinarily be possible, such as investing in a high-rise commercial building or new development. You may also benefit from the experience and expertise of other investors who can add value to the property itself.
To make passive income from real estate crowdfunding, you can either start or participate in crowdfunding to invest in a piece of prime real estate. Then you, along with the other experienced investors, will co-manage and earn from the property.
However, it’s important to note that crowdfunding is almost always illiquid, meaning its value rarely liquidates into cash. This may be relevant to those with liquid preferences.
- Wholesaling
Wholesaling is another way to earn money from real estate investment without owning it actively yourself. This process involves purchasing a real estate contract, but then, instead of going through with the sale, you sell the contract to a buyer for a profit.
Wholesaling is a simple yet highly effective way to reap the benefits of real estate investment that doesn’t require huge amounts of investment experience. If you have a list of potential buyers or make use of real estate lead generation companies to find them, you can quickly close a wholesaling deal.
It’s not strictly passive income, but it can provide you with a substantial lump sum that can be drawn from over time instead.
- Ground leases
Ground leases are leases on land rather than buildings, which still happens to be a sought-after and fairly low-risk form of property investment. Landowners tend to rent to building owners whose buildings are positioned directly above the land they buy.
Ground leases generate relatively predictable passive income due to their consistent and lower-risk investment style. However, because of this, they do tend to have lower earning potential and can require a more substantial up-front cost in order to purchase.
Final Thoughts
Investing in real estate may be a financially fruitful endeavor, but it can also be laborious. There’s a lot of experience, knowledge, and effort required to keep a commercial or residential property in good condition to continue being profitable, and a lack of experience could lead to losses.
But there are lots of ways to go about investing in real estate, and only a few of them involve active ownership. Passive income is a great way to grow your wealth without becoming too distracted with projects outside of your career, all the while diversifying your portfolio.
Investing in REITs, creating a crowdfunding initiative, wholesaling, and lending out money to other investors can all result in generating passive income through property.
Contribution by:
Mae Franco