Passive income is the hallmark of a successful real estate investor. Having a steady stream of passive income can not only bolster your savings but fuel your other investments. This Passive income guide will help find the next investment to build passive income.
As a real estate investor, you know that there are endless options for investments. Thankfully there are many options for real estate investors to build passive income.
This guide covers the 3 most common passive income investors real estate investors like you are using to create passive income streams.
Rentals
Why Rentals? Rentals fuel passive income and can be great in nearly every market. That is why rentals are a staple of a real estate investor’s passive income guide. Whether it’s short-term rentals, vacation, or even long-term, rentals provide can provide a steady cash flow. There are many ways you can get started with rentals, but the most common types are:
Passive Income Rental Types:
- Short Term Rentals: This can include vacation rentals, Airbnb, or even just monthly term rentals. These can be dedicated rentals for the sole purpose of weekend stays, or longer (week to a month). These can vary from houses or even rooms like Airbnb Rentals.
- Long Term Rentals: With long-term rentals with a minimum of a month to up to a year these are perfect for passive income. With a long-term tenant, you can expect monthly passive income, While screening tenants is the most important way to generate passive income, a well-managed rental can be easy to generate passive income.
Rentals do require maintenance, especially if you do not outsource work to a management company and serve as the sole landlord of the rental home. This maintenance can be anything from repairs to the property, tenant relationships, and marketing your rental. To summarize the steps to building a passive income stream with rentals:
Steps to Start Generating Passive Income From Rentals:
- Research: Be up-to-date on rental laws and requirements, as well as your current rental market to see what the best options for tenants and rent prices would be. Before purchasing a property find your rent amounts and your breakevens.
- Property: Find, Purchase, Repair the right property for a rental, and make sure to price accordingly.
- Tenants: You can easily market your rental on many online sites, such as Apartments, Criagslist, or Even Facebook Marketplace. Interview tenants to make sure you pick the best one for your rental. It’s important to keep a good relationship with tenants and a clear stated rental agreement.
Rentals are the tried and truly passive income generator found in any investor’s playbook. Rentals can be the answer for any real investor that is willing to put in the work and see benefits for years to come.
Real Estate Investment Trusts (REITs)
Renting may not be for everyone, which is why the variety of passive income streams is nearly endless. If you are more interested in a hands-off approach to your real estate – REIT’s may be a great option for you.
So what is a REIT? A real estate investment trust (REIT) is a company that owns, operates, or finances income-producing properties. Real Estate Investment Trusts or REITs are often large commercial investments (such as apartment buildings), but can be found in any niche (medical buildings, offices, residential, etc.
Most REITs are publicly traded like stocks, which makes them highly liquid (unlike physical real estate investments). This unique real estate investment offers minimal risks, minimal capital, and promises steady returns. REIT often pays out dividends at the 5-year mark, which can be reinvested, or even traded or sold before that time for other investments.
REIT offers a more liquid approach to a physical asset. REITs have a variety of passive income options. REITs are a staple of any passive income guide for real estate investors.
Note Investing
Note investing is one of the top ways to build passive income from real estate without tenant management. With monthly note payments, you can receive steady passive income that can fule your other investments.
What is note investing? When a property is purchased, buyers sign a promissory or mortgage note. Lenders or banks can sell these notes to increase their cash flow and equity. Note Investors can purchase these notes and receive the interest from these loans, and can purchase them at a discount from the lenders. Some note sellers offer to service, making it even easier to profit from this investment.
Advantages of Investing Mortgage Notes:
- High Yield Returns – Rates of return that are higher than the bank’s traditional low yield bonds; and higher than most stock dividends.
- Monthly Income – If you are looking for additional monthly income for retirement, for living expenses, or to build your savings account, we can help.
- IRA Friendly – This investment provides investors with a way to put to use their self-directed traditional IRA or Roth IRA. We can recommend several custodian companies that handle the paperwork and hold your IRA while the funds are invested with us.
- Rollover Option – Option to automatically roll over your investment so you don’t miss out on earning interest or future investment opportunities.
Mortgage Note Investing or Real estate note investing is a way to generate passive income with minimal costs, higher returns, and minimal maintenance. Without the hands-on nature of property investment, you can easily generate income from the monthly payments from the servicer of a note.
Summary:
Passive income is the ace for any real estate investor. By leveraging passive income for current or future investments you can quickly build a successful real estate portfolio. No matter if you choose to be a hands-on or off investor you can be built passive income quickly and easily.
Real Estate Investors Passive Income Guide
- Rentals
- REITS
- Note Investing
How will you start building passive income?
